Why Are Indian Banks Expanding Overseas? ITBS Survey Revealed Shocking Facts

As Indian banks step out beyond domestic borders, their overseas operations offer insight into India’s evolving role in global finance. The Reserve Bank of India’s ITBS survey for 2024-25 indicates that Indian lenders are not merely maintaining their foreign footprints, they are expanding them, albeit in a cautiously calibrated way. 

This article examines the drivers, performance metrics, challenges, and strategic implications of this international push, and complements the RBI findings with additional data and perspectives.

Overseas Expansion: Key Metrics & Trends

The ITBS survey for 2024-25 reveals that Indian banks increased their foreign presence across multiple dimensions. Their number of overseas branches rose, employee strength grew, and balance sheets of subsidiaries expanded. The growth, however, is modest and occurs in a complex global macro context.

Branches, Employees & Balance Sheets

Indian banks’ overseas branches increased by 1.9 percent, and their subsidiaries saw balance sheet growth of 4.2 percent. Meanwhile, employee strength in foreign operations rose by 6.1 percent. Across overseas branches, interest income and expense growth moderated to 8 percent and 9 percent, respectively, reflecting both base effects and tightening global monetary conditions.

Meanwhile, foreign banks’ operations in India showed even stronger growth: their balance sheets grew by 17.5 percent. Thus, while Indian banks are expanding abroad, they face stiff competition from global banks operating inside India.

Lending & Deposit Mobilisation Abroad

The ITBS survey notes that credit extended by Indian banks abroad rose by 5.6 percent, and deposits collected overseas grew by 9.4 percent. Indian banks’ overseas branches and subsidiaries, through both fund-based and fee/auxiliary services, contributed to diversified cross-border services.

Income / Assets Efficiency: Returns under Pressure

One telling metric is the ratio of total income to assets. For Indian banks’ overseas branches, this ratio slipped to 5.9 percent in 2024-25 from a previous 6.2 percent. Subsidiaries, however, saw a slight uptick to around 7.4 percent.

Comparative Performance: Indian Banks Abroad vs Foreign Banks in India

To better appreciate Indian banks’ global push, it is useful to directly compare them with foreign banks operating in India. Below is a table summarising key comparative metrics:

Comparison of Indian Banks Abroad vs Foreign Banks in India (2024-25)

 (Figures from RBI ITBS 2024-25 survey)
 

Before this table, we introduced a comparative view between Indian banks abroad and foreign banks domestically. The table helps crystallize their relative strengths and weaknesses. Below is a short interpretive note.

From the above, foreign banks in India clearly maintain higher profitability metrics (in terms of income-to-assets ratio) and stronger balance sheet growth. Indian banks abroad lag somewhat on efficiency, but their deposit growth abroad outpaces that of foreign banks in India, indicating room for scaling. The pattern suggests Indian banks are still in a consolidation phase overseas, while foreign banks in India are well established and more efficient in leveraging local advantages.

Drivers and Strategic Imperatives of Overseas Growth

Several forces push Indian banks to look abroad. These include diversification of revenue, exposures to fast-growing markets, leveraging trade flows, and accessing foreign capital pools.

Trade & Transaction Flows

As Indian exporters and multinationals expand, banks supporting them need to follow. Fee income from trade finance, payments, and credit‐related services remain a major contributor to overseas income. In fact, over two-thirds of fee income in overseas operations comes from trade, payments, and credit‐adjacent services.

Hong Kong has recently emerged as a significant hub, overtaking the UK in fee generation, with UAE and Singapore also key nodes.

Home Market Saturation & Search for Scale

Within India, competition is fierce, margins are squeezed, and regulatory costs are high. Some lenders find that growth prospects abroad offer better risk-adjusted returns, particularly in emerging markets. Over 72 percent of India’s growth in overseas financial assets in FY25 was driven by increases in direct investment, currency & deposits, and reserve assets.

Regulatory and Risk Considerations

Expanding abroad demands careful risk management: foreign exchange risk, regulatory arbitrage, cross-border compliance, geopolitical exposures, and capital allocation burdens. Indian banks must balance the lure of higher yields with the discipline of underwriting risks in unfamiliar jurisdictions.

Challenges and Constraints

Despite the momentum, Indian banks’ global expansion is not without headwinds.

Diminishing Returns and Efficiency Pressures

The drop in the total income-to-assets ratio for branches suggests that as they scale, they face diminishing marginal returns. They may struggle to maintain profitability if credit growth slows or funding costs rise.

Market Saturation and Competition

In core financial centres like Singapore, Hong Kong, and the UAE, Indian banks confront entrenched global players. Winning share in those markets demands niche positioning or scale.

Regulatory and Capital Strain

Cross-border operations require adherence to multiple jurisdictions’ banking laws, capital buffers under Basel norms, and supervisory coordination. Capital tie-ups in subsidiaries reduce the flexibility of domestically deploying funds.

Global Macros & Interest Rate Cycles

With global monetary tightening and volatile interest rate environments, margins can be compressed. Indian banks’ moderate interest income growth abroad suggests they are already feeling that pressure.

Case Studies & Recent Developments

To ground the analysis, here are a few updated examples:
 

• EXIM Bank & Africa push: India’s Export–Import Bank is amplifying its credit support to exporters impacted by U.S. tariffs, focusing on African markets by expanding partnerships with regional lenders and offering receivables-based finance.
   
• NBFCs & overseas syndicated loans: Indian non-banking financial companies (NBFCs) tapped USD 3.67 billion via overseas syndicated loans by mid-2025, more than double the amount raised in all of 2024. This underscores how non-bank lenders increasingly use global funding.
   
• Foreign banks’ deepening in India: Deutsche Bank injected USD 607.5 million into its Indian operations in 2024 to deepen its presence.
   
• Foreign entities setting up local units: Emirates NBD has received “in-principle” RBI approval to convert its Indian branches into a wholly owned subsidiary, enabling parity with domestic banks.
   

These examples reflect the dynamic interplay of outward expansion by Indian lenders and parallel inward expansion by global banks into India.

Strategic Takeaways & Policy Implications

From the evidence, a few strategic lessons emerge:

1. Selective, stagewise expansion: Indian banks should choose markets strategically (trade corridors, diaspora hubs, underserved geographies) rather than broadly chasing presence everywhere.
    
2. Focus on niche fee and trade segments: Given margin pressures, connecting to trade, payment flows, and supply chain financing offers better returns than retail credit in unfamiliar markets.
    
3. Strengthen back-office and risk systems: Efficient cross-border operations depend on robust IT, compliance frameworks, and currency risk controls.
    
4. Harness local partnerships: Joint ventures or alliances with regional banks can mitigate regulatory, cultural, and operational challenges.
    
5. Policy support and reciprocity: The Indian government and RBI can help by negotiating banking treaties, promoting rupee clearing hubs, and encouraging outbound financial linkages.

Conclusion

Indian banks’ global expansion is a compelling narrative in India’s financial evolution. The RBI’s 2024-25 ITBS survey reveals continuing growth in branches, deposits, credit, and employee strength abroad, though efficiency metrics like income-to-assets ratios face headwinds. Compared to foreign banks in India, Indian banks overseas still lag in profitability and balance sheet growth, underscoring the challenges of scaling internationally.

Yet, the strategic rationale remains strong. Export finance, trade corridors, diaspora banking, and emerging markets offer opportunities that domestic competition cannot match. The successful entrants will be those that combine strategic selectivity with operational rigor, risk management discipline, and policy backing. In sum, Indian lenders’ overseas journey is neither a sprint nor a guaranteed win, but one of calibrated boldness, guided by macro insight and institutional maturity.

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