Backed by PEs, Pandit may invest in a new Indian bank

Citigroup's former CEO, Vikram Pandit, might be joining the race to become a co-applicant for a banking licence in India. Two sources familiar with the developments said Pandit was exploring the possibility of investing in a bank backed by a clutch of private equity (PE) funds.

Pandit, who resigned from Citi in October last year, has held preliminary talks with a few private equities and Indian government officials.

The Reserve Bank of India, which recently issued final guidelines for grant of new banking licences, set a July 1 deadline for submission of applications. The sources said Pandit had spoken to a number of his former colleagues, who would help him. Another source said Pandit could easily put together a team of his ex-Citi colleagues for the operational impetus to the bank.

An email sent to Pandit on Tuesday did not elicit any response. But banking insiders said a leading corporate house had also sent a feeler to Pandit to lead its bank or invest in it.

The New York Times had reported in February that Pandit was planning to launch a PE firm, without giving any details.

Pandit has not joined any institution since resigning from Citi but remains a director on the board of the Institute of International Finance, according to Bloomberg. Filings with US stock exchanges show, he earned about $261 million during his five-year tenure at Citi.

Pandit, who had become the group's CEO in the midst of a full-blown credit crisis, is credited with turning the bank around. During the crisis, he reduced his own salary to $1. When the US government sold its stake in Citi in December 2010, his salary was restored to $1.75 million. Soon after, however, his relations with the board soured on demand for higher dividend payouts and $2.9-billion write-downs over Citi's stake in Smith Barney.

Former World Bank advisor, Percy Mistry, however, has a word of advice for Pandit if he is interested in a banking foray in India. "A new bank without legacy problems in the UK (possibly Ireland) would be less constrained and more profitable than a new bank in India is likely to be for the next 10 years, despite the anaemic growth there, compared to India. So, if he really is considering a foray into India, he should consider other geographies carefully before making what could be a serious mistake," Mistry says.