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Date : Nov 01, 2017
Survey on International Trade in Banking Services: 2016-17

Today, the Reserve Bank released the results of the 2016-17 round of the survey of international trade in banking services (ITBS) on its website. The survey provides responses on employment, core banking services (like deposit, credit) and financial auxiliaries’ services rendered by banks with cross-border presence, based on explicit/implicit fee/commission charged to customers (details of these services are given in the Annex).

The survey provides responses on functioning of 192 overseas branches and 325 overseas subsidiaries of Indian banks as well as 286 branches of foreign banks operating in India. As all commercial banks with cross-border presence responded to the survey, these results reflect a census.

Highlights:

  • The presence of foreign banks in India declined in terms of number of branches and employees during 2016-17; the number of overseas branches of Indian banks, on the other hand, increased but there was marginal reduction in their employee strength (Table 1).

  • The consolidated balance sheet of all the three categories of banks with cross-border presence (viz., overseas branches of Indian banks, overseas subsidiaries of Indian banks and foreign banks in India) contracted during 2016-17, reflecting tepid global economic activity (Table 2).

  • Credit extended by all categories of banks declined during 2016-17; lending formed nearly 60 per cent of total assets of overseas branches of Indian banks (US $ 224 billion) in March 2017 whereas credit by foreign banks in India accounted for around 42 per cent of their total assets (US $ 125 billion).

  • Aggregate deposits of foreign banks in India increased marginally during 2016-17 but it declined for the other two categories of banks; deposits accounted for nearly 36 per cent of total liabilities of overseas branches of Indian banks as compared with around 57 per cent in the case of foreign banks in India.

  • Lower interest income coupled with increase in expenditure resulted in a ‘loss’ for overseas branches of Indian banks in 2016-17 (Table 3).

  • Foreign banks more than compensated their lower interest income with increase in non-interest income, especially other non-fee income.

  • Overseas branches of Indian banks generated a major share of fee income by rendering credit related services, trade finance related services and derivative, stocks, securities, forex trading services whereas payment and money transmission services generated the highest fee income for foreign banks operating in India (Table 4).

  • Indian banks’ branches in UK generated the highest fee income, followed by those in the UAE and Hong Kong (Table 5).

An article analysing the results of the survey for 2016-17 is being published in the November 2017 issue of the RBI Bulletin.

Ajit Prasad
Assistant Adviser

Press Release : 2017-2018/1207


Table 1: Employment Distribution of Indian Banks’ Overseas Branches, Subsidiaries and Foreign Banks’ Branches Operating in India
  Indian banks’ branches operating abroad Indian Banks' Subsidiaries Operating Abroad Foreign Banks’ Branches in India
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
Total number of branches 189 192 310 325 317 286
Total number of employees 4,040 3,984 4,091 4,704 26,642 24,766
of which:            
     Local 2,549 2,520 3,616 4,194 26,487 24,602
     Indians 1,368 1,417 401 458
     Others 123 47 74 52 155 164
Notes:
1. Financial Year-end RBI Reference Rates are used for Rupee-US Dollar conversion.
2. Figures in the parentheses indicate annual growth for the item.
3. Data for 2016-17 are provisional.
4. NA: Not Applicable
5. These notes are applicable for all tables.

Table 2: Balance Sheet Items of Indian Banks’ Overseas Branches, Subsidiaries and Foreign Banks’ Branches in India (end-March)
Items Amount in ₹ billion Amount in US$ billion
2015-16 2016-17 2015-16 2016-17
Indian Banks' Branches Operating Abroad
Credit extended 8,927.4 8,661.3 134.6 133.8
Deposits mobilised 5,622.6 5,291.9 84.8 81.7
Total Assets/Liabilities 15,323.6 14,530.7 231.0 224.4
Indian Banks' Subsidiaries Operating Abroad
Credit extended 930.5 870.3 14.0 13.4
Deposits mobilised 764.3 711.0 11.5 11.0
Total Assets/Liabilities 1,347.5 1,271.3 20.3 19.6
Foreign Banks’ Branches in India
Credit extended 3,777.6 3,421.6 56.9 52.8
Deposits mobilised 4,576.9 4,640.2 69.0 71.7
Total Assets/Liabilities 8,172.7 8,075.2 123.2 124.7

Table 3: Income and Expenditure of Indian Banks’ Overseas Branches, Subsidiaries and Foreign Banks’ Branches in India
(Amount in ₹ billion)
Items Indian banks’ branches operating abroad Indian Banks' Subsidiaries Operating Abroad Foreign Banks’ Branches in India
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
Income 457.3 436.1 67.3 68.0 647.4 671.7
  (5.8) (-4.6) (14.1) (1.0) (0.0) (3.8)
Of which;      
Interest Income 392.5 381.3 55.5 56.7 522.6 513.6
  (5.5) (-2.9) (18.1) (2.2) (4.5) (-1.7)
Expenditure 419.4 453.0 62.8 67.7 498.1 514.8
  (31.6) (8.0) (29.8) (7.8) (1.8) (3.4)
Of which;            
Interest Expenses 262.0 265.4 26.0 25.4 240.9 237.2
  (7.0) (1.3) (15.0) (-2.3) (1.8) (-1.5)

Table 4: Activity-wise Composition of Fee Income from Banking Services of Indian Banks’ Overseas Branches and Foreign Banks Operating in India
(Amount in ₹ billion)
Banking Service Indian banks’ Branches Operating Abroad Foreign Banks' Branches Operating in India
2015-16 2016-17 2015-16 2016-17
Deposit Account Management Services 1.2 3.2 1.2 1.3
Credit Related Services 26.2 28.3 8.6 6.9
Financial Leasing Services 0.0 0.1 0.0 0.0
Trade Finance Related Services 13.7 20.2 11.8 11.1
Payment and Money Transmission Services 3.3 3.1 14.8 17.0
Fund Management Services 0.0 0.0 4.5 4.3
Financial Consultancy and Advisory Services 0.7 0.4 6.8 7.5
Underwriting Services 0.0 0.1 0.5 0.8
Clearing and Settlement Services 0.5 0.5 0.8 0.5
Derivative, Stock, Securities, Foreign Exchange trading Services 20.3 19.2 13.4 11.7
Other Financial Services 20.9 18.9 8.2 10.2
Total 86.8 94.0 70.6 71.3
(-7.4) (7.7) (-13.2) (13.0)

Table 5: Country-wise and Activity-wise Banking Services delivered by Overseas Branches of Indian Banks and Subsidiaries of Indian Bank
(Amount in ₹ billion)
Country Trade in Banking Services Total
DAM CRS TFR PMT DER Other Services All Services
2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17
Indian Banks’ Branches Operating Abroad
Bahrain 0.0 0.0 1.1 1.3 1.4 0.9 0.0 0.0 0.2 0.3 1.0 0.9 3.9 3.3
Hong Kong 0.1 0.1 2.8 2.4 2.6 2.2 0.2 0.3 0.7 0.5 0.7 0.7 7.2 6.2
Japan 0.0 0.0 0.6 0.2 0.3 0.2 0.0 0.0 0.6 0.5 0.0 0.0 1.4 0.9
Singapore 0.0 0.0 3.2 2.7 1.9 1.7 0.3 0.2 0.7 0.2 0.7 0.8 6.8 5.7
Sri Lanka 0.0 0.0 0.1 0.3 0.1 0.1 0.0 0.0 0.0 0.2 0.0 0.0 0.3 0.7
UAE 0.7 0.5 3.7 3.4 3.0 2.2 0.2 0.1 0.8 1.2 0.8 0.6 9.0 8.0
UK 0.1 0.1 10.4 13.9 1.6 1.5 0.1 0.0 17.4 15.9 18.5 16.8 48.0 48.2
USA 0.1 0.0 1.5 1.0 1.1 1.1 1.3 1.4 0.0 0.0 0.2 0.1 4.1 3.7
Other Countries 0.3 2.5 2.9 3.1 1.9 10.3 1.1 1.0 0.3 0.3 0.2 0.1 6.6 17.4
Total 1.2 3.2 26.2 28.3 13.7 20.3 3.3 3.1 20.3 19.2 22.1 20.0 87.3 94.0
  Indian banks' Subsidiaries Operating Abroad
Botswana 0.5 0.0 0.1 0.0 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.8 0.2
Canada 0.1 0.2 0.4 0.5 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.1 0.7 1.0
Russia 0.0 0.0 1.1 0.0 0.3 0.0 0.2 0.0 0.3 0.1 2.1 0.0 4.0 0.1
UK 0.0 0.0 0.1 0.1 0.0 0.2 0.0 0.1 0.0 0.2 0.0 1.8 0.1 2.4
Other Countries 0.3 0.4 0.9 2.0 0.4 0.5 1.0 0.6 0.7 0.8 1.6 1.3 4.8 5.6
Total 0.9 0.6 2.6 2.6 0.9 0.9 1.4 0.8 1.0 1.2 3.7 3.2 10.4 9.3
DAM: Deposit Account Management Services
CRS: Credit Related Services
TFR: Trade Finance Related Services
PMT: Payment & Money Transmission Services
DER: Derivative, Stock, Securities, Foreign Exchange Trading services

Annex

Banking Services Covered in the Survey

Banking services include, acceptance of deposits and lending (the core banking services), and the other financial services (para-banking services) like payment services, securities trading, asset management, financial advice, settlement and clearing service, etc. With the improvements in economic integration of financial markets and activities, the international trade in banking services has significantly increased.

The GATS framework envisages that the delivery of any commercial services can be through four different modes viz., Mode 1 – Cross Border Service, Mode 2 – Consumption abroad, Mode 3 – Commercial presence and Mode 4 – movement of natural persons. In Mode 3, the bank has a commercial presence in the territory of the service importing country and the service is delivered therein. The commercial presence can be through various investment vehicles like representative offices, branches, subsidiaries, associates and correspondents.

Banking services covered in this survey include financial auxiliary services such as (i) deposit account management services, (ii) credit related services, (iii) financial leasing services, (iv) trade finance related services, (v) payment and money transmission services, (vi) fund management services, (vii) financial consultancy and advisory services, (viii) underwriting services, (ix) clearing and settlement services, and (x) derivative, stock, securities and foreign exchange trading services. While carrying out the banking business, banks cater to the financial services needs of the residents of the country of operation as well as non-residents of that country. Keeping this in view, the survey also collected the information with bifurcation of financial services rendered to residents and non-residents separately.

Services Covered:

  • Deposit Account Management services include fees and commissions charged to or received from the deposit account holders, for maintaining deposit accounts such as fee for cheque book, fee for internet banking, commission on draft and other instrument provided, penalty for not maintaining minimum balance, etc. and any other fees charged to deposit account holders.

  • Credit related services include fees received for credit-related or lending related services like credit processing fees, late payment or default charges and early redemption charges. Charges for facility and management fees, fees for renegotiating debt terms, mortgage fees, etc. also to be reported here.

  • Financial Leasing services include fees or commission received for arranging or entering into financial lease contracts. This also includes fees received directly or deducted from the proceedings.

  • Trade Finance related services include commission or fees charged for arranging trade finance like buyers' and suppliers' credit, fees for establishing/originating, maintaining or arranging standby letters of credit, letter of indemnity, lines of credit, fees for factoring services, bankers acceptance, issuing financial guaranty, commitment fees, handling charges for trade bills.

  • Payment and Money Transmission services include fees or charges for electronic fund transfer services like SWIFT, TT, wire transfer, etc. ATM network Services, annual credit /debit card fees, Interchange charges, fees for point of services, etc. also have to be reported here. Further, charges on the customer for making remittances abroad or receiving remittances from abroad have to be reported here.

  • Fund Management services include fee or income received for managing or administering financial portfolios, all forms of collective investment management, pension fund management, custodial, depository and trust services. Commission or fees for safe custody of shares/equities, transaction fee for custodian account, communication cost or any other fees/charges related to custodian account should also be reported.

  • Financial Consultancy and Advisory services include fees for advisory, intermediation and other auxiliary financial services including credit reference and analysis, portfolio research and advice, advice on mergers and acquisitions and on corporate restructuring and strategy. Arrangement/management fees for Private placement of share/equities are also to be included.

  • Underwriting services include underwriting fees, earning from buying and reselling an entire or substantial portion of newly issued securities.

  • Clearing and Settlement services include settlement and clearance services for financial assets, including securities, derivative products, and other negotiable instruments.

  • Derivative, Stock, Securities, Foreign Exchange trading services include commissions, margin fees, etc. received for carrying out financial derivative transactions, placement services, and redemption fees. Earnings received on banks' own account as well as on behalf of customers for carrying out foreign exchange trading has to be reported under this item. Explicit brokerage fees and commissions for foreign exchange brokerage services are also to be reported. Earnings received on banks' own account for carrying out trading in derivative, stock, securities etc. should not be reported.

A Technical Group on Statistics for International Trade in Banking Services (TG-SITBS) was set up by the Reserve Bank of India including members from Ministry of Finance, Ministry of Commerce and various departments (Department of Economic and Policy Research, Department of Banking Regulation and Department of Statistics and Information Management) of the Bank.

The TG-SITBS, after examining the different data sources available in the Reserve Bank, recommended collection of activity-wise international trade in services through annual surveys and suggested that initially the data may be collected on banking services from foreign banks operating in India and Indian banks having operations abroad. The TG-SITBS also recommended that a suitable questionnaire with explanatory notes should be prepared/framed in consultation with the banks and suggested conducting annual survey for the financial year 2006-07 by June 2007. Accordingly, a survey schedule was prepared after detailed discussions with the major Indian banks with overseas presence and foreign banks operating in India.


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