Finmin tells PSU banks to expand abroad

Seeks focus on Asia, Latin America and Africa for expansion n Banks adopt cautious approach

The Finance ministry has asked state-run lenders to go aggressive on overseas expansion, especially in Asia, Latin America and Africa, but desist from competing with each other, banking sources said Monday.

The move assumes importance in the wake of India's diversification of the export market to counter the slowdown in developed nations. Apart from free-trade talks with the EU, Australia and some other developed nations, India is pursuing trade pacts with Latin American trading bloc, MERCOSUR, South African Customs Union (SACU), Gulf Cooperation Council and even some of countries in the South Asian bloc, Saarc.

Inadequate banking channels is one of the reasons deterring Indian companies from boosting trade in the emerging economies.

At a meeting with bank heads on Saturday, financial services secretary DK Mittal took stock of the overseas operations of Indian lenders and the evolving global economic situations.

"PSU banks have been asked to go for overseas expansion in a big way. The global economic downturn is a good opportunity to expand. But there should be no competition on a particular region or country," a bank chairman told FE, requesting not to be named.

While heads of PSU banks like State Bank of India, Bank of Baroda, Bank of India and Indian Overseas Bank confirmed the move, they made it clear that they were looking at countries with whom India's trade is on the rise and where Indian companies are pursuing acquisitions, and not just mindless expansion.

SBI chairman Pratip Chaudhuri said the bank was willing to expand where Indian companies are increasing their foothold. "Overseas expansion makes sense if you can mobilise deposits. Without deposits, if you just have to lend, then it does not make much sense," he said.

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