 "Retrospective policy change is difficult to deal with... the yo-yoing is the problem: Piyush Gupta")
The Reserve Bank of India's efforts to convince foreign banks to operate in India via the subsidiary route have not yielded results. DBS Bank is keen but wants changes in some regulations. DBS Group Holdings & DBS Bank's Chief Executive Officer, Piyush Gupta, tells Vrishti Beniwal and Indivjal Dhasmana DBS is willing to adhere to priority sector norms but is keen on doing it indirectly for some segments. Edited excerpts:
The Reserve Bank of India's efforts to persuade foreign banks to go for the subsidiary route has not borne results. What is the hassle you find in this regard?
We're probably the only foreign bank in the country which has expressed an interest in the subsidiary route. A lot of people are wary of the local board and local governance structure but we are comfortable, as we do that in every country. Also, we have a very ambitious long-term agenda in India. But we would like to understand all the regulations and their consequences (before opening a subsidiary). One of the big challenges is priority sector lending. It is not easy for us to get our hands around in the way it is envisaged. We don't know how to go for a directed lending regime which requires us to open branches in the rural heartland. There has to be a different way for us to be able to participate in the financial inclusion agenda.
The Nachiket Mor committee has talked about some possibilities. At the end of the day, your interest is to make sure that adequate financial resources reach out to the right sector of the population. This doesn't mean every bank should go and give money directly to that sector. You should figure out specialisations and banks like us should be allowed to participate in an indirect manner. If the guidelines on priority sector are limiting and we don't know how to handle these, then we obviously will change our plans.
Has your global board given its approval for the subsidiary route?
We have not taken it to the global board. It has approved our overall investment agenda into India.
In April 2012, you infused Rs 500-crore capital in DBS India to support growth needs for 18 months. The period for which the infusion was made is over. What are the plans for future capital infusion?
We have not grown our book in India in the last 12 months. Due to the whole macro environment, we have been somewhat more careful. The overall economic environment has been somewhat uncertain. It doesn't matter who wins (in the general elections) but as long as prospects of stable unified governance are there, we will have opportunities to grow. Capital is not a problem for us. Our total capital adequacy is now 15 per cent.
Would the election outcome have an impact on your expansion plans for India?
I think it will affect everybody's short-term decisions. Economics follows politics. So if we have a stable government, it makes it a lot easier for macro economic decisions to get taken. If that happens, people will feel a lot more comfortable about India's short-term prospects. India's long-term prospects are never in doubt.
What kind of uncertainty are you hinting at?
There has been some about long-term consistency. The tax regime has been well-written on and debated. It doesn't matter whether it's right or wrong; what matters is the yo-yoing. Retrospective policy change is difficult to deal with. You don't know what might happen tomorrow.
What are your expansion plans in terms of opening of branches?
We have already opened 12-six in large cities and six in small cities. We have also put in applications for four more with RBI. If we go for the wholly-owned subsidiary route, our agenda would be to get about 100 branches in 30-odd locations over the next five to seven years.
Is it the right time to expand in the Indian market, when RBI is planning to give new bank licences?
We are long-term players. So, entering now or two years later is not material. The capital need in India over the next 10-20 years is massive -- in infrastructure, in manufacturing and in agriculture. The total capacity of the banking system in India today to meet that need is just not there, with Basel-III coming in and the fiscal situation not allowing the government to have that much money to help public sector banks grow. We have some distinctive strength which comes from the fact that we can do in terms of Asia connectivity. Most other foreign banks have a Western bias. The new banks will focus on the same thing everyone else is focusing on.
Would your acquisition of the private banking business of Societe Generale have any impact on India?
Societe Generale doesn't have a private banking business on the ground in India. They do have NRI (non-resident Indians') business with some bankers in Dubai and Singapore. Many NRIs might have accounts there and we hope to be able to use that to leverage the Indian side of business. But it is not very big.
The Reserve Bank of India's efforts to persuade foreign banks to go for the subsidiary route has not borne results. What is the hassle you find in this regard?
We're probably the only foreign bank in the country which has expressed an interest in the subsidiary route. A lot of people are wary of the local board and local governance structure but we are comfortable, as we do that in every country. Also, we have a very ambitious long-term agenda in India. But we would like to understand all the regulations and their consequences (before opening a subsidiary). One of the big challenges is priority sector lending. It is not easy for us to get our hands around in the way it is envisaged. We don't know how to go for a directed lending regime which requires us to open branches in the rural heartland. There has to be a different way for us to be able to participate in the financial inclusion agenda.
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What could be that?
The Nachiket Mor committee has talked about some possibilities. At the end of the day, your interest is to make sure that adequate financial resources reach out to the right sector of the population. This doesn't mean every bank should go and give money directly to that sector. You should figure out specialisations and banks like us should be allowed to participate in an indirect manner. If the guidelines on priority sector are limiting and we don't know how to handle these, then we obviously will change our plans.
Has your global board given its approval for the subsidiary route?
We have not taken it to the global board. It has approved our overall investment agenda into India.
In April 2012, you infused Rs 500-crore capital in DBS India to support growth needs for 18 months. The period for which the infusion was made is over. What are the plans for future capital infusion?
We have not grown our book in India in the last 12 months. Due to the whole macro environment, we have been somewhat more careful. The overall economic environment has been somewhat uncertain. It doesn't matter who wins (in the general elections) but as long as prospects of stable unified governance are there, we will have opportunities to grow. Capital is not a problem for us. Our total capital adequacy is now 15 per cent.
Would the election outcome have an impact on your expansion plans for India?
I think it will affect everybody's short-term decisions. Economics follows politics. So if we have a stable government, it makes it a lot easier for macro economic decisions to get taken. If that happens, people will feel a lot more comfortable about India's short-term prospects. India's long-term prospects are never in doubt.
What kind of uncertainty are you hinting at?
There has been some about long-term consistency. The tax regime has been well-written on and debated. It doesn't matter whether it's right or wrong; what matters is the yo-yoing. Retrospective policy change is difficult to deal with. You don't know what might happen tomorrow.
What are your expansion plans in terms of opening of branches?
We have already opened 12-six in large cities and six in small cities. We have also put in applications for four more with RBI. If we go for the wholly-owned subsidiary route, our agenda would be to get about 100 branches in 30-odd locations over the next five to seven years.
Is it the right time to expand in the Indian market, when RBI is planning to give new bank licences?
We are long-term players. So, entering now or two years later is not material. The capital need in India over the next 10-20 years is massive -- in infrastructure, in manufacturing and in agriculture. The total capacity of the banking system in India today to meet that need is just not there, with Basel-III coming in and the fiscal situation not allowing the government to have that much money to help public sector banks grow. We have some distinctive strength which comes from the fact that we can do in terms of Asia connectivity. Most other foreign banks have a Western bias. The new banks will focus on the same thing everyone else is focusing on.
Would your acquisition of the private banking business of Societe Generale have any impact on India?
Societe Generale doesn't have a private banking business on the ground in India. They do have NRI (non-resident Indians') business with some bankers in Dubai and Singapore. Many NRIs might have accounts there and we hope to be able to use that to leverage the Indian side of business. But it is not very big.