BNP Paribas plans retail re-entry via stake buyout

BNP Paribas is planning to pick up stake in an old private sector bank to re-enter the retail banking space.

The French bank had exited retail operations in 2002 by selling its retail business to Bank of America. Currently the bank is a strong player in corporate and investment banking in India.

The retail finance market in India has seen a huge transformation since 2001, said Frederic Amoudru, chief executive and country manager, BNP Paribas.

"We are considering various options like acquiring stake in a bank or entering into a joint venture with an old private sector bank to re-enter the retail space," he added.

However, much will depend on how the Reserve Bank of India's (RBI) guidelines evolve, he added. Inorganic growth is a better proposition as setting up a retail network is highly capital intensive, said Amoudru.

"We would look at old private sector banks as there are very few other candidates available for joint ventures or stake acquisitions. The only problem we foresee in acquisition of an old private sector bank is labour issues and strong cultural links," he added.

The challenge according to him will be to progressively restructure organisations with good management and install modern technology platforms to suit modern banking needs.

India has emerged as a strong destination in the past two to three years. We see strong long-term potential in the Indian market hence would continue to invest in Indian operations, said Amoudru.

Currently, the policy is still being firmed up on how much stake a foreign bank can pick up in an Indian private bank. Foreign holding in a private bank is capped at 74 per cent as it stands today.

RBI's draft guidelines on ownership patterns in private banks released in July states that a foreign bank with local presence should not be allowed to hold more than 5 per cent stake in a private bank.

But about a month back, the Prime Minister, Dr Manmohan Singh announced that foreign banks will be allowed to acquire at the rate of 10 per cent a year in Indian private banks.

This would allow the foreign bank to attain majority control in 3-4 years. The legislation required to permit the same is yet to be formulated by RBI.