Lovely thoughts, no doubt. But what beats them all, however, is that this attractive state of affairs could be yours for the asking. Many banks in India are now offering these benefits and other similarly exclusive ones. So, if you are looking for new, less hackneyed services from a bank, this might be a good time to move on and try out one of the banks that do offer such innovative services.
We are really talking about private and priority banking, relatively new concepts in Indias banking sector. Swiss banks are of course the most well known avatar of this kind of banking. Worldwide, private banks basically offer what is known as total asset management services among other privileges. What this means simply is that the bank conflates the separate services of a stockbroker, accountant and portfolio manager into one. This reduces precious effort and time required to coordinate the services of these three separate consultants. Your private bank could thus help you move from scrips when the domestic stock market is low to those in the US or German stock market, or to real estate if theres a boom there, or to buying artifacts from Sothebys the options are endless and these banks are borderless. However, no retail banking services are offered by these private banks.
The concept of private banking as it exists in India is somewhat different. It was first introduced in the country a couple of years ago by ING Bank, Banque Nationale de Paris (BNP) and Commerz Bank. But following the Harshad Mehta scam, Sebi got tough and issued laws which not only require these banks to obtain its permission for providing these services but also stipulated that the services provided have to be purely advisory in nature. Another difference is that since the rupee is yet to become fully convertible, the borderless domains of the private bank will take a while to materialise for the ordinary citizen of the country. (NRIs, incidentally, can avail of this facility.) Advice on real estate, gold buying/ selling and investment in artefacts has also similarly been deferred as this market segment is yet to develop and mature fully. This might be another reason why standard retail banking services are also provided as add-ons.
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So, what do these private banks in India really do? Kavita Hurry, head of the private banking division at ING Bank, explains, Our primary aim is not to get deposits like other retail banks do, but to maximise returns for our clients through the optimal deployment of their funds. We ensure this through our wealth management programmes these include a variety of services clubbed under investment advisory and administrative services.
After discussions with the client, these banks recommend a tailor-made investment portfolio which balances the clients return and risk requirements. The portfolio is monitored regularly and clients are provided with a valuation report as frequently as they would like. The banks also assist their clients in the execution of these investment transactions and handling the administration aspect of it. Relationship managers and customer service officers are assigned to each customer to ensure that their instructions are executed as desired, adds Vijay Venkatram, head of Commerz Banks private banking division.
The banks charge fees basically for investment and administrative services. Ambiguity on this score remains; the issue of fees is still to be fully settled and depends on parameters ranging from the type of services availed of to the value of the relationship with other bank branches or business lines. But the fees are generally fixed at between one to three percent of the value of each transaction, again depending from bank to bank.
Like with many things in life, these exclusive services have a catch: The banks usually only approach individuals with a high net worth. But this can differ from bank to bank. For instance, Commerz Bank requires a minimum relationship size of Rs 10 lakh while ING Bank and BNP have fixed Rs 40 lakh as their minimum.
Priority banking is another illustration of how the scope of the banking services in India have grown. But thats all that it shares in common with private banking. The most fundamental difference between the two is that it is usually offered as a special service by retail banks. The offer is open to all customers who have a certain average Net Relationship Value (NRV). The exact amount of the NRV differs from bank to bank, again. Citibanks CitiGold priority banking services are offered to all its customers who have an average NRV of Rs 30 lakh. Hong Kong Banks Asset Vantage priority scheme, on the other hand, requires an average deposit balance of only Rs 1 lakh.
The services provided under priority banking basically accords you with special recognition and ensures that your banking needs get priority, so to speak. They are designed so that you can choose to see as little of your bank as you want to; at the same time, you are offered complete financial management flexibility with better service to boot.
For example, with Hong Kong Banks Asset Vantage phone banking scheme, making payments to third parties, transferring funds between Asset Vantage accounts, opening time deposits and other services is just a phone call away. Similarly, CitiGold offers approximately a discount of approximately one per cent on financial products, an ATM access with a withdrawal limit of Rs 50,000 anywhere in the country, the facility to provide special standing instructions that free you from the headache of managing your payment obligations and other services.
There are many fringe benefits that you stand to gain besides the regular priority services. For instance, special rates and room category upgrades for ITC hotels are offered under ANZ Grindlays Captain Grindlays Club, and entries to cultural evenings featuring musical maestros, invites to art exhibitions and other events with Citibanks CitiGold service.
Retail banks offering priority services are also increasingly seeing the need to assign Relationship Managers and Custom Services Officers to deal with customers requirements on an individual basis. Some banks, such as Citibank, offer investment advisory services as well.
This may sound rather similar to what private banks promise to do for you. But the USP of private banking, according to those in the business, is that each customer is treated differently. As ING Banks Hurry is emphasises: Our focus is on providing highly personalised and customised solutions. So, while retail banks may be trying hard to up the level of service with their priority schemes, they dont quite measure up to those provided by private banks. Of course, once total currency convertibility gets underway and Sebi norms are liberalised private banking will enter a different stratosphere altogether.
The distinction between private banks and the retail banks offering priority services isnt water tight. Its getting fuzzier what with competition hotting up and retail banks trying to emulate private banking. And while banking in cyber-space might be the battle-ground of the future, private and priority banking have made in-roads creating what looks suspiciously like a comfortable niche market in India.
Anand Madhavan (With inputs from Abhijit Das and Debarati Roy)
What the banks are dishing up
ING Bank (Min balance Rs 10 lakh)
* Recommend and monitor investment portfolio
* Receive and execute purchase and/ or sale instructions with empanelled brokers
* Follow through trades; make/receive payments on trades; make/ receive delivery of share/debenture/ bond certificates
Commerz Bank (Min bal Rs 40 lakh)
* Advise on financial investment in debt/ mutual fund products
* Assist with executing investment transactions; handle their administration
Banque Nationale de Paris (Min bal Rs 40 lakh)
* Advise on investment
* Support debt/ equity transaction
* Facilitate custody
Standard Chartered (Minimum balance Rs 5 lakh)
* 0.5 per cent off on personal loan facility
* One per cent off on finance against shares, primary issues and car finance
* Free Gold Standard credit card
* ATM with withdrawal limit of Rs 20,000
ANZ Grindlays Captain Grindlays Club (Minimum balance Rs 10 lakh)
* Overdraft facility up to Rs 25,000
* Services of independent tax advisor
* Tie-up with ITC Hotels for special rates and room category upgrades
* Gold Card with no entrance/annual fee and credit limit of Rs 1 lakh
Citibanks CitiGold (Minimum balance Rs 30 lakh)
* ATM with withdrawal limit of Rs 50,000
* Diners Club card, Preferred Card or International Credit card with annual fee waived for first year
* Emergency cash services abroad
* Access to airport lounges at domestic terminals in major metros
Hong Kong Banks Asset Vantage (Minimum balance Rs 1 lakh)
* ATM card with cash withdrawal facility up to Rs 16,000
* Write-in facility to banks tax advisor
* Commission-free encashment of Thomas Cook Travellers Cheques
* List of services is not comprehensive, and only indicates the range of services