What are the features of the recent move by the finance ministries road map to rationalize PSU banks' foreign operations?

The episode of Nirav Modi has brought out various lapses in banking system especially while giving loans to group firms against letters of undertaking (LoUs).
For streamlining the operations of state-run banks the finance ministry has released a road map for consolidation of the overseas operations of these lenders. The rationalization of overseas branches is aimed towards cost efficiencies and synergies in overseas markets. All existing 216 operations of state-run banks in other countries will be examined to check for possible consolidation.
The rationalizations in the foreign operations would be done through

  • A mixture of closure of overseas branches, subsidiaries, representative offices and remittance centres and through consolidation of joint ventures where more than one bank is a shareholder
  • Closing of non-viable operations for cost efficiencies. 
  • Consolidation of equity holdings in joint ventures where more than one state-run bank is a stakeholder. 

Finance ministry aims to consolidate the operations of State-run banks affecting their international presence. The move is also expected to preserve capital at a time when state-run banks are struggling with high levels of debt and low levels of profitability.


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