Singapore regulators have stepped up their scrutiny of some local branches of Indian banks on concerns about asset quality, three bank executives said.
India's slowest economic growth in a decade and a weakened rupee have weighed on the balance sheets of heavily leveraged Indian companies, including those that have raised money from Indian lenders in offshore centres such as Singapore.
The Monetary Authority of Singapore (MAS) is looking more closely at the books of the local operations of some Indian banks to assess the credit quality of loans made from the branches to Indian companies, bankers said.
"There is an enhanced degree of oversight by the Monetary Authority of Singapore on Indian Banks in the recent days," S S Mundra, chairman and managing director of state-run Bank of Baroda, said.
"They are closely keeping a tab on the NPA (non-performing asset) levels and looking at the quality of assets financed."
An MAS spokesman said it "does not comment on our dealings with individual financial institutions"
The regulator has in some cases suggested that banks re-classify some loans as non-performing assets, two bankers said, speaking on condition of anonymity.
"MAS is analysing the credit exposures taken by banks and is ensuring that we steer clear from lending to Indian firms they are hearing adverse reports about," said a top executive at an Indian state bank, declining to be identified.
Singapore is a significant offshore centre for Indian finance and is the second-largest source of foreign investment flows into India, with 9.2 percent of its population of Indian origin.
Indian banks have in recent years been building up their presence in Singapore, Dubai and Hong Kong in order to serve large populations of non-resident Indians as well as Indian companies looking to raise funds offshore.
"They (regulators) perceive that risks in Indian banks' operations are higher," said another top executive at an Indian bank with operations in Singapore.
Banking sources said the intensity of MAS audits varied based on an individual bank's circumstances. Some Indian banks with operations in Singapore said they had not seen any stepped-up oversight from the regulator there.
"This is a normal inspection and MAS does it once in two years. They have covered our bank and have not made any observations. There were no concerns regarding NPAs or lending to any companies," said Vijaylakshmi Iyer, chairwoman and managing director of Bank of India.
Hemant Contractor, who heads the overseas operations of State Bank of India, the country's largest lender,