Foreign banks get fresh capital in organic push

Tired of waiting for an opportunity of acquiring domestic banks, foreign banks have started pumping in fresh capital and gunning for organic growth in Indian operations.

Hongkong and Shanghai Banking Corporation (HSBC) boosted its capital by $180 million in 2004-05 and will add another $63 million by July 2005.

DBS Bank injected $105 million in 2004. Citibank too has brought in fresh capital although its quantum is not known, while Deutsche Bank is readying for big splash retail launch in India.

Citibank's capital in Indian operations reached close to $1 billion in 2004. It is also spreading its tentacles to second rung cities.

It is opening new branches at Vapi in Gujarat and in Pondicherry and is extending its highly-successful "Suvidha" savings account to new cities like Kolkata and Ahmedabad. It has over one million Suvidha account holders in six cities.

HSBC is following Citibank to take over a larger slice of consumer loans business. It has decided to set up a non-banking finance company (NBFC) to overcome the regulatory impediment for expanding reach.

Citibank is using the NBFC route for mass banking through its subsidiary, Citifinancial.

HSBC too is amplifying its presence in India through branches in smaller cities on receiving permissions from the RBI. It opened its 40th branch today in Indore.

This is HSBC's first presence in the state of Madhya Pradesh. Next on its radar are cities like Nagpur and Mysore.

The US-based GE Capital has announced its intention to start a bank in India, which will supplement its well-established consumer finance operations.

Deutsche Bank also intends to widen its footprint by launching into the retail loans space.

The foreign banks' offensive follows a year of high growth, particularly in retail operations which saw their mortgage loan portfolios almost double.

HSBC's home loans rose 85 per cent to Rs 3,200 crore and Standard Chartered's portfolio similarly jumped to about Rs 5,200 crore.

The year was also good in terms of liabilities for foreign banks present in the retail space. The cost of funds for most is now below 5 per cent, which is on par with the country's bigger banks.

Foreign banks' savings bank deposits had grown by 40.1 per cent in 2003-04, against 19.6 per cent for public sector banks and 53.3 per cent for private sector banks.