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Hong Kong regulator toughens supervision on 2 Indian banks' local branches

The Hong Kong Monetary Authority has tightened its supervision on the local branches of Punjab National Bank and Indian Overseas Bank as their capital adequacy ratios as of March 31 fell below the regulatory requirement.

Both branches were required to maintain high-quality liquid assets in the city equivalent to 100% of unpledged deposits, as well as to maintain a position of "net due to" the head office, other branches, and any direct or indirect units and associates of the lenders, according to June 12 and June 13 releases.

Punjab National Bank's branch was further told to deposit such liquid assets with its sub-account opened or to be set up with the HKMA's Central Moneymarkets Unit.

In addition, the two branches were barred from proactively soliciting customer deposits, with transactional deposits being excluded from the arrangement.

As of March 31, the capital adequacy ratios of Punjab National Bank and Indian Overseas Bank stood at 9.20% and 9.25%, respectively, down from 11.66% and 10.50% in the year-ago period.

The two lenders said the toughened supervision only applies to their Hong Kong branches and will not have any material impact on their Indian and other overseas operations.

Earlier, the HKMA tightened its supervisory arrangements on Allahabad Bank's domestic branch on account of its capital position.