The Reserve Bank of India has directed all public sector banks having overseas branches to fully comply with regulatory requirements of the foreign country, in the face of stiff penalties imposed on two overseas branches of the State Bank of India.
"RBI has advised the banks to take all possible steps to ensure that their overseas branches comply with regulatory requirements of the host country regulators without leaving any scope for adverse observations," official sources said.
The move comes after decline in profitability of some of the banks, like the State Bank of India.
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The United States regulator imposed a Civil Money Penalty of $7.5 million on the SBI's New York branch for 'perceived unsafe and unsound practices.'
This was despite the fact that no actual violation was noticed, sources said.
In another instance, German regulator had imposed a fine of 1.8 million Deutsche marks on SBI's Frankfurt branch in August 2001, for breach in exposure limits in a single group.
As a result of the fines, SBI's profits from overseas branches dipped to 0.95 million dollar in 2001-02 from $57.65 million in 2000-01.
SBI, however, posted a net profit of $12.23 million last fiscal from overseas operations.
The overall profit of eight PSU banks from overseas operations stood at $45.68 million in 2002-03, compared to $34.30 million in 2001-02 and $140.33 million in 2000-01.
Bank of Baroda topped the list with $31.95 million net profit last fiscal compared to $23.40 million in 2001-02 and $32.65 million in 2000-01.
BoB was followed by Bank of India, which posted $18.64 million in net profit from overseas operations last fiscal compared to $19.35 million in 2001-02 and $37.65 million in 2000-01.
Syndicate Bank managed to mop up $0.55 million last fiscal compared to $0.77 million in 2001-02 and $2.31 million in 2000-01.
Canara Bank posted a net profit of $0.37 million last fiscal compared to $2.22 million in 2001-02 and $2.95 million in 2000-01.
Indian Overseas Bank, Indian Bank and UCO Bank suffered losses from overseas operations the last fiscal.