Singapore's DBS charts India strategy

DBS Bank, Singapore's largest lender, will look to enlarge operations in India, already its third biggest market globally, even as it hopes for new regulations to allow it to expand in this country, possibly through the subsidiary route.

It will focus on retail banking and small & medium businesses, beside supporting investments in the infrastructure sector, to support growth of between 30 to 50 per cent this year, said its India CEO and general manager, Sanjiv Bhasin.

With a compound annual growth rate of about 50 per cent in the past five years, DBS’ India arm trails only Singapore and Hong Kong in contribution to overall business. It is expected to play a major part in the bank's plan to diversify revenue streams. India and Indonesia are likely to contribute about 30 per cent to the lender's revenues in the next three to five years, with the remainder coming from Singapore and the Greater China region.

RETAIL PUSH
DBS has already applied to the Reserve Bank of India (RBI) for opening four branches. When approved, it will take the number of its branches in this country to 16, the maximum allowed under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore. “We hope approval will come in a couple of months. We will be able to roll out the new branches immediately after that,” Bhasin said. The bank opened its first branch in the country in 1995. Its 12 branches are mostly in western and southern India.

“We will also increase the number of ATMs (automated teller machines) to 40 by the end of the year. These will be added in cities where we already have a presence,” he added. The bank hopes new regulations would allow foreign banks greater scope for expansion, through the wholly-owned subsidiary route, in line with RBI's discussion paper on the matter released earlier this year. “We are looking forward to it and are watching closely. The guidelines need to be firmed up by the regulator,” Bhasin said. Adding the proposal to treat foreign banks equitably for branch licences would aid expansion.

SME STRATEGY
After having gained a foothold in wholesale banking, DBS intends developing its small and medium enterprises (SME) customer base in India. In the rest of Asia, too, the bank has made this segment a priority.

“If you look at the SME sector, their requirements are in all segments of banking products. They need deposits, cash management, trade and pure loan products. Over the past three years, we have cultivated enough connectivity in the liability space , so we have a large client base which we can mine for other services. That gives us a little bit of head start and it will also provide us a significant opportunity in trying to understand their needs,” said Bhasin.

It has launched an exercise to identify potential SME customers, similar to research undertaken two years earlier, when it identified 630 middle-market and upward companies for its wholesale business. Of these, DBS claims, 250 have been converted into customers. “We are in the process of developing a credit approval process because, obviously, the turnaround time is very significant. We have also seen that simple foreign exchange services are a good offering to this sector. We already have a host of services for this sector. We have to expand our distribution capability to reach that segment and that's what we are building out at this point,” he added.

INFRA FUNDING
The bank also aims to support infrastructure projects in India. Last year, DBS had set up a dedicated project finance team at its Singapore headquarters to better serve infrastructure development in the region, including India.

“There is going to be a significant quantum of investment in the overall infrastructure space and within that we have identified a few sectors. One is power and the other telecom, largely because we have significant experience (of these) in other markets which we can bring,” Bhasin said.

India’s power sector is likely to require about $400 billion (Rs 18 lakh crore) worth of investment in the 12th plan period, between 2012 and 2017, given the need for substantial capacity augmentation in production and transmission.

“Energy requirements for the country are massive and, therefore, the significance of the investment there is very large and the opportunities are going to be meaningful. So, even if we are able to capture a small proportion of the market, it could be pretty large for us,” he added. In the past, DBS has arranged project financing for Reliance Petroleum, Reliance Utility and Power, and Reliance Ports and Terminals, among others.