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“We have stopped doing any new transactions and have already moved accounts. We expect the final clearance within the next couple of months,” a person familiar with the matter told the business daily.
Bankers are of the view that state-run bank relocations are because of multiple factors that have increased post-Covid. “Some are legacy issues like tougher regulations as the Chinese have taken full control. Others are more practical like the one-week quarantine in Hong Kong and hard lockdowns even more than two years after Covid,” a senior public sector banker told the publication.
Further, the banker mentioned that the primary reason is the weak trade financing business as flows have been channelled via Shanghai, adding that it is tough to deal with the Chinese authorities in the current geopolitics of the region.
“Many Indian banks made big losses due to the Covid-linked economic meltdown in 2020 as traders could not pay up and there is also a thinking that so many banks are not required there now,” he said.
The daily quoted AK Das, CEO of Bank of India, as saying, margins in the Hong Kong operations are very thin and it’s a very small part of our business. Like others, the bank also witnessed a rise in non-performing assets in 2020 but things have settled down now.
The bank last month applied for a licence to open a branch in Gift City in Gujarat if the approval comes, the lender will re-examine the need of the Hong Kong branch.
Worth mentioning here is that the state-owned banks relocations are in accordance with a government direction in 2016-17, which asked these organisations to ensure only one or two banks are present in these markets in a bid to conserve capital.
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