BS BFSI 2024: Foreign banks focus on strengths to level up India play

India heads see new opportunities as Indian economy gains ground

For foreign banks, India remains a strategically important country even as the retail banking segment is out of consideration for most of them. Speaking at the Business Standard BFSI Insight Summit, heads of the largest foreign banks operating in India said they want to focus on their strengths to continue to expand their presence in the fast-growing economy.

 

"You have to play in a space in which you are dominant globally. If any of your key global products can be adopted in India, you definitely have an edge. As India is getting ready to become the third-largest economy in the world, the capital requirement and finance needs are only set to go up," said Kaku Nakhate, President & Country Head India, Bank of America.

   

"Every business corporation has to prioritise as the management bandwidth and resources are limited. You have to play to your strengths. Unlike institutional banking or wholesale banking, where you have an edge being a global institution, retail is a local proposition. There is nothing really global that you are bringing, by and large. There is little differentiation to compete with large private banks that are now capable of offering best technology solutions," said Pramod Kumar, CEO & Head of Investment Banking India, Barclays Bank.

 

Ashu Khullar, CEO at Citibank India, also had a similar view. He said while there is no question that India is probably “the opportunity” in the world, the move to exit the consumer business was dictated by the global parent’s decision to focus on areas where it can provide differentiated value to customers.

 

"Scale is important in any emerging market, where there are going to be regulatory uncertainties. If you don't have the ability to absorb, business can become difficult," he said.

 

"What differentiates us is the breadth and depth of the platform, from investment banking to transaction services, to market custody. We see double-digit CAGR (compounded annual growth rate) opportunities, both in terms of revenues and profits growth in India," Khullar added.

 

HSBC is among the few major global banks to have retail presence in India. The bank’s India CEO Hitendra Dave said HSBC will continue to focus on every segment as "unlike other foreign banks which are prioritising segments within the banking space in India, it has prioritised the country itself".

 

"There are 1.4 billion Indians. At least, 2-3 per cent of them will have needs that only a global bank is uniquely placed to deliver. For example, someone who wants to send their children abroad to study, or has a job that involves transfers to other countries," said Dave.

 

The heads of these foreign banks agreed that they see opportunities in the investment banking services to both domestic as well as global clients as capital requirements will go up as the economy expands. Foreign banks are also betting on new segments to grow their India presence.

 

"We have good footprints in the Americas and a lot of American clients are coming here, and we definitely have invested in the last eight to ten years on products that allow us to bank them better. We have also entered the distress debt market. That's the market which will grow. The other focus area is sustainable financing," said Nakhate.

 

"Internationalism is our superpower. We want to have close to 100 per cent market share in deals involving two countries. Of course, we have competitors, who are left to make that statement much more difficult to achieve. On the personal side, we are seeing higher business from top executives, who want to have assets and investments outside India," said Dave.

 

Investment banking, market, corporate forex, and equities are the business segments that we are trying to grow more in, said Khullar. “In commercial banking, we are focusing on clients for whom we can add value, either because these names want access to global network, foreign trade, or digitalisation as a way to improve their operating efficiencies," he said.

 

On the regulatory environment, panellists flagged a few hindrances but said that overall they were not at a major disadvantage vis-a-vis domestic banks.

 

On the question of choosing to remain as a branch of foreign banks in India rather than becoming an India subsidiary, the top foreign bank chiefs said the decision was based on the benefits associated with the present structure.

 

"The advantage is not for us but for the customers. The branch structure gives you the ability to give common global documentation standards. It gives customers benefit of our parent rating, which is higher than the sovereign ceiling, which India may have. It makes it easier for us to integrate some of our tech systems," said Khullar.

 

Agreeing to the point that foreign banks don't necessarily enjoy any regulatory arbitrage or benefit per se, Kumar said: “We comply with all the obligations. There are certain markets, certain opportunities that are kind of not available to us but we decided that branch operation is the best for our customers and also for our business." 

Catch all special coverage of the Business Standard BFSI Summit 2024 here: BS BFSI Summit 2024