BNP Paribas set to launch NBFC soon

BNP Paribas will launch a non-banking finance company (NBFC) in the second quarter of 2005 for providing discretionary portfolio management services to its private banking customers in India.

The non-funded NBFC will provide discretionary investment services, such as the mutual funds, to the bank's high networth individual (HNI) clients. NP is taking the NBFC route because banks are not allowed to provide discretionary portfolio management services.

The French bank has about Rs 4,500 crore of assets of HNI customers under its advisory management, but is unable to meet customer demand for active management of portfolios. The NBFC will fill the void felt in providing a seamless private banking service.

BNP Paribas country head - private banking, Sharad Sharma, said the bank has appointed a consultant for getting all the necessary regulatory clearances for setting up the NBFC. The NBFC is expected to be up and functional in the second quarter of 2005.

Mutual funds have an edge over banks in offering portfolio management services as they manage their clients' portfolios on their own. Banks can buy or sell a security on behalf of their private banking client only after receiving a written acknowledgment based on their advise.

Private banking involves wealth and investment advisory services to high networth individuals. BNP Paribas in India entertains individuals with $1 million of investible assets for offering its private banking services. As at end-2003, India had 62,000 people with investible assets of $1 million and more.

BNP Paribas private banking has $103 billion of assets under management globally and India currently contributes about 1 per cent to the total assets. It has decided to extend its global strategy of inorganic growth to India for gaining a critical size.

The growing importance of India in BNP's scheme of things was underlined by the first ever meeting of the bank's private banking central executive committee in India in February. The committee twice every year in Asia and India was chosen as the venue this year.

BNP Paribas was named by Euromoney magazine as the second best private bank in India and the best private bank for ultra high networth clients with $30 million in assets.