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Grows Bigger
While the foreign banks’ operations in India have a long history of over 150 years, the volume of their business as well as their presence in India, have expanded visibly in the recent years.

 More of them - a few of whom were unknown in the past - are found in a number of Indian cities, besides Mumbai, the prime financial centre in India. Indian business of a couple of foreign banks has changed hands in the recent past. Business growth of these banks, measured in terms of the profit per employee, and when compared with that of their domestic counterparts, reveals spectacular differences. The profit earned per employee is much higher and is increasing faster than that of Indian banking sector.

At present the foreign branches are permitted to employ only one expatriate officer per branch. During last November they were permitted by the Reserve Bank of India to deploy not more than four expatriates per branch. This was done to facilitate or induce the foreign banks to promote their Indian business through subsidiaries rather than through branches.


Indian presence


At present, 43 foreign banks have their presence in India having 334 branches. They are mostly concentrated in metropolitan centres, where over 75 per cent of them are operating. The credit for introducing ATMs goes to one of them for having installed the first ATM in Mumbai in 1987. These banks have 1261 ATMs, according to available published data.

Three banks - Standard Chartered Bank (100 branches) Hong Kong & Shanghai Banking Corporation Ltd (50 branches) and Citibank NA (43 branches) constituting 57 per cent of the total branches of foreign banks, have the major share of 49 per cent of  total advances made of foreign banks in India.

The business pattern of foreign banks in India is different from those of the local banks which undertake all types of retail banking business and carry the burden of distressed assets also for long. In the case of foreign banks their customers are mostly and selectively Indian bluechip corporations, cash-rich multinational companies and high net-worth individuals.


Higher staff productivity…


While measuring staff productivity for comparative analysis is a complicated process, the common indices used for reviewing their performances are the business per employee and the profit per employee. The total of deposits mobilised and credit disbursed is considered as the total volume of business. Regarding the staff employed, no distinction is made about the number of officers and clerks. The indices of staff productivity thus derived are very crude, no doubt. But they are adopted in the publications of the Reserve Bank of India. The published data relate to 2013, available in A Profile of Commercial Banks.  The volume of business handled by the staff of foreign banks has increased from Rs.128.27million in FY 2009-10 to Rs. Rs.217.33 million in FY 2013-14, while that of Indian counter parts has risen from Rs.73.98 million to only Rs.121.33 million.   

During the last five years, the net profit per staff of the foreign banks has doubled from Rs.2.54 million to Rs.4.56 million. For the Indian banks, the increase is very modest; inching up from Rs.0.55 million to Rs.0.83 million. The difference in the cost of funds is one of the factors depressing the earnings of the Indian banks. The cost of funds mobilised by foreign banks is 4.05 per cent whereas it is 6.27 per cent for Indian banks.

Interestingly, there was a reduction in the total staff of the foreign banks during this period from 29,582 to 25,384. In the case of Indian banking sector, there was an increase from 7.31 lakh to 8.66 lakh.  Having wider branch network, the Indian banks, particularly in the public sector, are having large number of controlling offices in different locations, employing good number of staff. The staff employed in such offices normally does not directly contribute to the total banking business. It is reported that one of the public sector banks is considering closure of a few regional offices.

While there are no large differences in the net NPA ratios of foreign banks as well as Indian banks, the bottom line of the Indian banks would have been affected by the larger provisions made for the stressed assets. The gross NPA ratios of most of the Indian banks have been on the increase compared to that of the foreign banks, where only a couple of banks were having higher gross NPA ratios.

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