Stanchart to launch subsidiary

Competition forces rethink.

The country's largest foreign bank, Standard Chartered Bank, has changed its stance on the Indian business model and is keen to convert itself into a subsidiary.

Standard Chartered Plc Chairman Bryan Sanderson today said this change of stance is in light of the strong, growing competition from Indian banks.

"We are aware of this (competition) and need to be equipped to compete on an equal footing," he said referring to the intense competition from private sector banks. Earlier, Stanchart had ruled out exploring the possibility of taking the subsidiary route.

Foreign banks have been given the option to convert their branch licence into wholly owned subsidiaries. This will enable them to freely set up branches at a time when private sector banks are expanding their reach to second and third-tier towns.

Foreign bankers feel that the Reserve Bank of India (RBI) branch licencing norms do not allow them to set up too many branches but as a subsidiary, they will be able to expand their branch network like their counterparts in the private and public sector.

Stanchart is also scouting for acquisitions in order to grow and to retain its status as the largest foreign bank in India. "We want to stay in the number one position. This is possible with organic growth as well as inorganic growth," said Sanderson.

"We would like to be more flexible as we grow in the country," Sanderson told Business Standard. The bank has not as yet applied to the RBI for a subsidiary licence, as it is waiting for the new government to settle down at the Centre, said Sanderson.

In response to whether he was comfortable with the cap on voting rights, the global chief said: "We clearly do not fancy the 10 per cent cap on voting rights if we are to take 74 per cent or 80 per cent holding in another entity. While this will not necessarily stop us from acquiring, we do not look upon it positively."

Stanchart has all along acknowledged its intention to acquire to grow inorganically. Sanderson said: "With a lot of able-competition, we need to grow with the market or rather at a far greater pace." This is only possible with a greater branch network if Stanchart is to compete on an equal footing with other banking counterparts in the country.

Speaking on Stanchart's growth plans, Sanderson said growth will be driven more in terms of wholesale and consumer businesses while investment banking would be low on the list of priorities.