New Delhi, Jan. 15: The finance ministry will allow the State Bank of India (SBI) to merge its rump forex department in Calcutta with the main division in Mumbai.
Despite protests by Left leaders, the finance ministry has said the SBI should go ahead with a new foreign exchange management software, which allows any branch to connect on-line, negotiate rates and provide details of transactions.
The new software will initially allow 52 State Bank branches to start on-line forex dealings with the treasury located at Mumbai directly. Later, 461 authorised forex branches will be able to do the same, making the Calcutta office infructuous.
“I have written to the finance minister seeking an end to this bid to take away business from Calcutta. It’s bad commercial logic,” argued CPI MP Ajoy Chakroborty. Finance minister P. Chidambaram has been briefed about the move and was likely to explain the issue to the Left allies, sources said.
The bank had shifted its major forex dealing operations to Mumbai in 1998 as part of a restructuring exercise undertaken on the advice of McKinsey & Co. Unions led by Left leaders and the state government had raised strong objections then. The bank continued with the rump functions in Calcutta to satisfy local sentiment.
However, Left leaders argue that the shift has actually hit SBI as the profitability from the forex business has fallen. Actual profits from SBI’s foreign exchange dealings work out to around Rs 450-500 crore. This figure has not changed dramatically over the last few years, while the total volume has gone up by nearly 12 per cent.
The Left leaders also point out that the bank has a deal with its union, which says that the domestic forex business will be handled equally between the dealing room in Calcutta and the treasury in Mumbai.
The Left leaders want to retain SBI’s foreign exchange division in Calcutta as it controls a substantial amount of the total turnover in the money and forex markets.
The bank’s trading operations are “unmatched in size and value in the domestic market” and its dealing rooms provide 24-hour trading facilities.
