For foreign banks India has suddenly become the high-octane market. Reason: The Finance Ministry's push to open up the financial sector.
Foreign banks are now getting down to the very basics and are willing to move down the income pyramid, a shift from their cater-to-top-end business model. For example, the big three foreign banks in the India - Standard Chartered, Citibank and HSBC - have devised plans to reach out to small businessmen, employees, self employed, farmers, salaried or just anyone who needs money. Some of these banks are also mulling the option of microfinance. Foreign banks account for only 5 per cent of total deposits and 8 per cent of total advances in India.
They are now getting ready for a larger play in India. This follows the RBI roadmap, which will allow foreign banks to open more branches, easy mergers and acquisitions after April 1, 2009. Till then the domestic banks have the time to put their house in order.
Citigroup sees India as one of the top five priority markets. The bank is putting its financial subsidiaries to good use to reach out to customers in far off places. India is on the radar of HSBC too. The largest foreign bank in the country, Standard Chartered Bank, is also keen on shoring up its balance sheet size from Indian operations. So how is it going about it? It is attacking the mass market segment. Apart from targeting families having annual income of around Rs 70,000, the bank is aggressively growing its SME business. Simultaneously, these foreign banks are also entering into new lines of businesses. For example, HSBC is entering into life and non-life insurance business. StanChart is keen on securities broking business and may buy out UTI Securities. For the foreign banks to grow in India, they will have to take the inorganic route. So you can expect big-ticket mergers and acquisitions in this space, but only after 2009.
This article was originally published on October 01, 2006.
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