Columbus may have missed India, but bankers touch shore

In 1942, Christopher Columbus, the legendary Italian explorer, sailed across the Atlantic Ocean to discover India but landed up in North America.

After five centuries, the Italian bank that financed Columbus' expedition "" Banca Monte dei Paschi di Siena SpA "" is ready to set shop in India. The Reserve Bank of India (RBI) has recently cleared its plan to set up a representative office in Mumbai.

In fact, it is one of the two new banks that have received the Indian central bank's nod to open representative offices in Mumbai before the end of financial year 2005-06. The second one is Zürcher Kantonalbank (ZKB) of Switzerland.

Incidentally, ZKB will be the first Swiss bank to have presence in India in commercial banking. The RBI has not cleared the UBS application seeking licence to start banking in India.

Founded in 1472 and based in Tuscani province of Italy, Banca Monte dei Paschi di Siena SpA is one of the world's oldest banking institutions. Listed on the Milan Stock Exchange in 1999, the bank operates through its branches in Frankfurt, London, Madrid, New York, Singapore, Hong Kong and representative offices in Moscow, Cairo, Tunis, Istanbul, Beijing, Shanghai, Sydney and Tokyo.

Incorporated 20 years before Columbus' voyage to India, Banca Monte dei Paschi di Siena SpA has a dominant market share in Italy. ZKB is the third largest bank in Switzerland and a leading financial institution in the Zurich region.

It offers a wide range of retail, corporate, and institutional banking services to over one million customers through its network of more than 100 branches in the Zurich region. ZKB is the only Swiss bank with an AAA rating from Standard & Poor's.

Going by the World Trade Organisation (WTO) norm, the RBI is required to give at least 12 new licences to foreign banks each year inclusive of the overseas players that have already been operating in India.

Last year, the RBI had given 18 licences for new branches and the year before about 20.

"This is possibly for the first time in the recent past that the Indian banking regulator has cleared the entry of two very large overseas players," said a foreign banker.

Over the last few years, a couple of small players have been given nod to set shops in India. However, applications of large players like UBS and GE have not got any favourable response. The existing RBI norms do not allow a corporate to hold more than 10 per cent stake in a banking entity.

Besides, no bank is allowed to pick up more than 5 per cent stake in an existing player except for a weak bank. These rules will come up for revision in April 2009.