Leading foreign banks like Citibank NA, Hong Kong and Shanghai Banking Corporation, Royal Bank of Scotland NV (RBS) and Barclays Bank continue to shrink their lending book and employee base in India.

According to the RBI data, as on July 2, 2010, foreign banks posted 12.8% y-o-y credit growth as against a negative 7.2% in the previous year. Private banks showed a robust growth of 21.7%, compared with 3.8% in the previous year while credit growth from public sector banks continued to be the highest and also most stable with, 22.4% y-o-y growth compared to 22%, says the RBI report.

The UK-based banks HSBC, RBS and Barclays Bank have aggressively shrunk their operations. HSBC has seen a 14.91% dip in its advances and its employee base shrank by 761 people, according to latest RBI data on profile of banks. The beleaguered British bank RBS has also shrunk its lending book by19.53% and reduced its employee base by 525 people. Barclays has cut down its lending book by 28.30% and its employee base slipped by 450 people.

US-based Citibank?s advances book and employee base has shrunk by 8.17% and 182 people for the year ended March 2010. Foreign banks have been reeling on account of the global crisis that emerged in September 2008. The profit per employee in Citibank and HSBC have slipped to Rs11.73 lakh in 2010 as against Rs16.06 lakh last year and Rs18.32 lakh from Rs 45.12 lakh. For Barclay?s and RBS, profit per employee has been negative. RBS has reported loss per employee of Rs 406.22 lakh as against profit per employee of Rs 0.62 lakh. Barclays has also seen loss per employee of Rs 42.26 lakh as against profit per employee of Rs1.96 lakh.

?Banks like Citibank, Barclays and RBS have seen a lot of pressure on their global business owing to the financial turmoil. Citibank?s exposure to the crises has been massive, leading to a drop in their advances locally. However, Standard Chartered Bank and Deutsche have focused more on grow their domestic business, so the pressure on them is comparatively lesser,? said Shefali Goradia, partner, BMR Advisors.

RBS has been selling businesses designated as non-core in select markets to raise funds even though it would continue and expand the corporate and wholesale banking activities of ABN Amro. Accordingly, in India the bank has decided to sell its retail and commercial banking operations to HSBC. It has thus cut down its consumer banking book and also the staff. HSBC has also been going slow in the consumer lending space on account of rising bad debt. Its NPA ratio as on March 2010 increased to 2.31% as against 1.42% in March 2009.

Barclays, which launched its consumer and commercial banking business in 2007, grew its book rapidly from Rs173 crore in 2006-07 to Rs10,551 crore in 2008-09. This aggressive growth affected the credit quality and NPAs of the bank rose to about 4.59% in two years. At the end of March 2010, bank NPA stood at 5.15%. The bank is now consolidating its book and realigning its business strategy and customer profile.

?Most foreign banks have shrunk their balance sheet due to the global slowdown and bad asset quality. Some foreign banks have also sold their bad assets locally and have avoided lending to certain segments. Their parents overseas have also not been doing well. For banks like Standard Chartered, they are focused on the Indian territory and hence their asset quality is better than the others,? DR Dogra, managing director and CEO at CARE Ratings.

?Citibank?s domestic operations have been heavily affected due to their heavy exposure to the crises and losses overseas. With the risk appetite coming down overseas, they had to exit clients locally and had to go in for a pruning exercise,?? said a banker.

?Banks like HSBC, Citibank will have to wait till the time the global crisis subsides. Banks like Standard Chartered, who are depending on India for their business, cannot afford to loose out domestically. 20% of the bank?s profits are from India. Deutsche Bank?s retail business is down, however it is focusing on lending to large corporates,?? he added.