Standard Chartered Bank, the largest foreign lender operating in the country by branches, has blamed onerous capital requirements for the reluctance among banks to convert into wholly owned subsidiaries (WOS).
The bank, which has 100 branches in the country, is not looking to decrease its presence as many of its foreign bank peers have done, a top official has said.
"It (converting to WOS) is very capital expensive. If you subsidiarise, the capital which is put into the country is dedicated from the tier-I capital of the parent," its country chief executive Zarin Daruwala told reporters when asked about the impediments to conversion into WOS.
She said the government has made necessary changes to the taxation structure, which was long considered as a big impediment preventing the lenders from operating as a WOS.
Daruwala, however, declined to comment when asked about the bank's strategy vis-a-vis operating as a WOS.
Converting into a WOS insulates the country operations of a foreign bank from any reverses that it may face overseas. Hence, it is the stated preference for the government and the RBI as well. A majority of the 40 foreign banks operate as a branch at present, while it is mandatory for all new entrants to operate as a WOS.
In order to tide over the issue of lack of a go-ahead for branch expansion, Daruwala said the bank is adopting digital medium as an outreach tool and making investments in the same.
It is meeting the priority sector lending (PSL) mandate by buying PSL certificates, portfolio buys and partnerships, she said.
Daruwala said her bank is focusing on the more resilient retail segment for loan growth in the country and without giving a timeline, declared that it wants to up its contribution to the loanbook to 40 per cent from the present 29 per cent.
She said the retail segment has grown 20 per cent in the last two years and the bank expects to continue with a similar trend in the future as well.
The bank's credit cards in use have grown three times in the last two years, she said, adding that it does not want to increase the unsecured book from the present 6 per cent levels.
When asked about the corporate book, where a slew of other lenders are facing reverses, she said the bank has provided aggressively against doubtful assets and does not see any further pain on the portfolio.
The bank has very few accounts in the list of 40 mandated to be resolved under the insolvency law, she said.
When asked about the impediments to the process, like the delays in the Essar Steel resolution, she explained that the lack of precedent is resulting in the difficulties but hoped that once the initial cases are resolved, it will be more smooth sailing.
She said a good number of players have come forward to bid for the big bad loans being resolved under the insolvency process and hoped for a better show on it.
To a question on whether she is switching to private sector lender Axis Bank that is now on the look-out for a chief executive, Daruwala said, "there is nothing like that on cards" and she has not been approached either.
The bank today launched a fully digital savings account and also announced Hindi movie actor and producer Anushka Sharma as its brand ambassador.
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