Bank of Baroda to overhaul international business strategy

Public sector lender Bank of Baroda (BoB) is making a course correction in its strategy for overseas business. While it prides itself as “India’s international bank”, its branch presence in India’s neighbourhood has been weak.

This plan seems to be in tune with the government’s strategy to scale up economic, trade and commercial relations with all nations with which India shares its borders.

The bank is forming a “project office” to pilot changes including stepping up share in remittances and starting an international trade finance branch. In a communication to employees, Ranjan Dhawan, managing director and chief executive officer of the bank, said it is surprising that the bank is poorly represented in India’s neighbourhood. The bank should examine the possibility of having a presence at least in Nepal, Bangladesh and Sri Lanka, he noted.

Other large public sector banks such as State Bank of India (SBI) and Punjab National Bank have presence in South Asian countries. SBI operates branches in Bangladesh and Sri Lanka and has joint ventures in Nepal and Bhutan.

Delhi-based Punjab National Bank has a joint venture in Nepal — Everest Bank — with 20 per cent shareholding and 51 per cent stake in Bhutanese bank Druk PNB Bank.

During FY15, BoB’s “overseas business” contributed 32.47 per cent to its total business. The total business of the bank stood at Rs 10,45,625 crore at the end of March 2015. The overseas business had 22.98 per cent share in the bank’s gross profit.

BoB’s overseas advances grew 9.10 per cent to Rs 1,36,195 crore at the end of March 2015 from Rs 1,24,837 crore in March 2014. Of the total overseas loan book, 53.1 per cent was buyers’ credit. The syndicated loans and external commercial borrowings (mostly to Indian companies) were 23 per cent and local credit had 23.9 per cent share in the overseas loan book.

The bank’s exposure to non-India related companies was 27.4 per cent of its overseas loan-book at the end of March 2015. The bank’s international presence covered 24 countries through its 104 branches/offices.

Making the case for a re-look at the way BoB conducts its international business, Dhawan said: “We pride ourselves in being India’s international bank. However, our operations worldwide resemble a giant treasury. Only in Dubai do we have some sort of a proper banking presence. Therefore, we intend to ensure all products and services of Bank of Baroda are available globally.”

He made a strong case for broad-basing activity, going beyond banking with only ethnic Indians. In Kenya, despite having 12 branches in a full-fledged subsidiary, the bank does not have either the debit card or mobile banking facility.

“If we are to be a truly global bank, we must cater to the local population also. This year, we intend to start projects for having an international services branch to attract remittances, which should be at least 10 per cent of the country’s share instead of three to four per cent as at present,” he said.