The growing Indian diaspora and business opportunities in Dubai have excited Indian bankers in the region. No wonder, a number of public sector banks like Union Bank of India, Indian Overseas Bank and Federal Bank have started talks with Dubai Financial Services Authority (DFSA), the independent regulator for Dubai International Financial Centre (DIFC), to commence operations there. However, the Central Bank of Dubai has not shown any keeness to give them branch licences just as yet.
“We are planning to open a branch in Dubai. There is a big opportunity for us due to the large representation of the Indian diaspora. Also, when we send people from India to work there, they find it much easier to adapt to the surroundings. Proximity to India and the time zone advantage make it a preferred destination for offshore banking,” said Abraham Chacko, executive director, Federal Bank.
There are other advantages as well. DIFC is an economic centre that allows tax-free income and profits by foreign institutions.
Dubai, which faced a huge economic crisis last year, has bounced back from it. Bankers said it had been able to retain its status of major financial hub of the region. Paul Koster, chief executive of Dubai Financial Services Authority said: “We have seen interest among Indian banks to operate in DIFC. Both private and public sector banks in India are applying for setting up branches in Dubai. There are a lot of Indian companies and there is a big business opportunity being discovered here now. We are working with the Reserve Bank of India to share information for cooperation.”
However, Indian banks are facing a regulatory hitch from the Central Bank of Dubai. While DFSA, an independent financial regulator, is looking forward to issuing DIFC licences to Indian banks, the Central Bank of Dubai has not been issuing licences to set up branches that allow more financial flexibility.
“Dubai is our second-largest trading partner and setting up a branch there will be very lucrative. However, the banking regulator is not issuing licences at the moment,” said Alok Mishra, chairman and managing director, Bank of India.
At present, Indian banks are looking at other ways to tap this market. Union Bank of India and Indian Overseas Bank, which were earlier looking to open full-fledged branches, are now planning to operate through DIFC. “We have a representative office in Dubai and have applied the regulator for a branch licence. We are hoping to get it soon. In case the licence is not issued, we will continue to operate through DIFC, as it is an oil-rich market and there is much scope for tapping the non-resident Indian segment,” said Indian Overseas Bank Chairman and Managing Director M Narendra.