Hongkong & Shanghai Banking Corporation (HSBC) is still awaiting the regulator’s nod for its proposed acquisition of Royal Bank of Scotland’s retail and commercial banking businesses in India. In an interview with Somasroy Chakraborty, Naina Lal Kidwai, country head (India) HSBC, says the unprecedented nature of the deal is delaying the approval of the Reserve Bank of India (RBI). Edited excerpts:
Has RBI raised any objection against the HSBC-RBS deal?
The deal is awaiting RBI’s approval. The nature of the deal is unprecedented. It involves the sale of a part of the bank’s book. Obviously, it is taking a lot of their (RBI’s) time. RBI is looking at it cautiously, because anything it does would set precedence for the future. Frankly, we always thought it (securing the approval) would take time.
Is there a possibility of the transaction not happening because of the delay in securing the approvals? Would this affect your growth plans in India?
At this moment, it is hard to say anything, since we have not heard from RBI. But if you look at our organic performance, we had record high growth. In any case, we would continue to grow our business organically.
HSBC has decided to exit a part of its retail banking and cards business in the US. Do you have plans to sell any of your businesses in India?
We have no plans to exit any of our businesses in India. Globally, we are committed to businesses in which we are the best. We were the best at providing connectivity. In India, for instance, we help domestic companies go abroad. We also help foreign companies to come to India. Anything built around the theme of connectivity is our strength. Being a strong credit card player in one market has very little to do with the connectivity theme. But having a credit card business is also about supporting your customers and we have it in every part of the world.
Do you favour subsidiarisation of foreign banks in India?
We are still waiting to see the final guidelines on this, and we would obviously do what is required of us. There are areas that do require clarifications. One of the biggest issues is taxation. When you convert a branch model into a wholly-owned subsidiary, there are issues around capital gain tax. It is also not clear what would be a level playing field for foreign banks, in terms of branch licensing. The third area is priority sector lending. Priority sector lending for foreign banks today is about 32 per cent, and we may have to increase it to 40 per cent (of total loans). The balance has to be made up through agriculture loans. Given our existing branch network, we are not capable of doing it. We also don’t have that expertise anywhere in the world, let alone India. The time we would get to meet this target would be important.
