India remains a strategically important country for foreign banks: CEOs

India remains a strategically important country for foreign banks, even as the retail banking segment is out of consideration for most of them. At the Business Standard BFSI Insight Summit, heads of some of the largest foreign banks operating in India – Ashu Khullar, chief executive officer (CEO), Citibank India; Kaku Nakhate, president & country head, India, Bank of America; Pramod Kumar, CEO, Barclays Bank PLC and head of investment banking, India, and Hitendra Dave, India CEO of HSBC, spoke to Tamal Bandyopadhyay, consulting editor, Business Standard on their priorities, their strengths and the key to success in the Indian market. Edited excerpts:

 

What is the key to success for foreign banks on Indian turf? 

  Khullar: India is probably the opportunity in the world, and Citi sees it the same way. We've been here since 1902 and have been the largest foreign bank in the country. Despite the consumer bank sale, FY23-24 RBI numbers show we were slightly larger than (HSBC) in revenue. Exiting the consumer business in India was a global decision, not about India itself. Retail banking is becoming increasingly domestic, while our institutional businesses offer sustainable competitive advantages. 

India’s growth requires foreign capital, which can come via FDI and supply chain diversification. Indian private and public banks have done a terrific job, with a low cost of capital. While consumer banking contributed less than a third of our revenues and under a tenth of our profitability, our corporate business was already dominant. We try and add value in a number of other areas such as investment banking, which we have been traditionally strong at…India remains highly strategic for Citi. 

Nakhate: You have to play in the space where you are dominant in the world. If dominant products can be adapted to India, you have an edge because innovation and structuring capabilities can be brought in as India prepares to become the third-largest economy. Capital and financing needs will increase, and growth depends on these. 

Bank of America is not in retail because globally, compliance costs for retail are very high. Competing with local banks in that space isn’t feasible, so it’s important to choose the right areas. We see opportunities as India opens up, manufacturing PLI comes in, and more people look at India for supply chain and demographic dividends.

 

Structurally, the Indian banks have gone through a transformation in the past five to six years. Why does retail banking not work in India for foreign banks?   

Kumar:  For every business corporation, you have to prioritise because of limited management bandwidth and resources. You have to play to your strengths. Unlike institutional or wholesale banking, where you have an edge as a global institution facilitating global flows of capital, retail is a very local proposition with little global differentiation. 

Domestic banks now offer the best technology solutions and good service, narrowing the edge foreign banks had 20 years ago. There isn’t a distinctive edge uniformly applied to all banks, so retail is less of a priority from a global perspective than wholesale banking opportunities. 

Dave: Our bank has decided that India is one market where we can be a very dominant corporate, payments, trade bank, and a bank for the affluent. Wealth management has also expanded. 

India has space for Citi, BofA, Barclays, and HSBC. Success depends on technology, where international banks have an advantage, and people. We invest in franchise, culture, and values, and have customers who align with this.

 

What are the new things Citi is focussing on going forward after the transaction on retail banking with a local bank (Axis) was completed?  

  Khullar: The opportunity in India is incredible. Every customer we speak to globally wants an India strategy focused on three areas: India as a manufacturing base, a market, and a talent base. 

Our focus is on growing market shares in businesses like investment banking, transaction services, markets, corporate FX, and equities. We're also growing in commercial banking for middle and emerging corporates, targeting companies needing access to global networks, foreign trade, or digitisation… India is now the third-largest in unicorns after the US and China. Our strategy is to bank them early, support them as they grow, go global, raise capital, or launch IPOs. 

 

What’s the new India story that Barclays is exploring, you are a successful banker in India when it comes to profitability alone, but in terms of the bouquet of products, is there any possibility of growing more? 

Kumar: We'll continue with the same strategy, given the opportunity India presents. Our plan is to grow our investment bank, corporate bank, and private bank/wealth management business. We've decided to focus on these areas, as the market is large enough for growth. We don't plan to launch any new businesses outside of this

 

What are the  products,  opportunities India offers to you, and how do you actually use them? 

  Nakhate: We will continue doing what we have been doing. We have a good footprint in America, and many American clients are coming here. Over the last 8–10 years, we’ve invested in products to bank them better. We’ve also entered smaller lines, like the distressed debt market, which is growing and has had good success in the last two years. Sustainable financing is another global focus, and it can grow as India progresses on ESG.

 

Mr Dave, you have a different perspective on India than the other panelists, what are the areas of possibility? 

  Dave:  Focus areas are mid-market internationalism, wealth for affluent customers, and financing through capital markets, and syndicated loan markets. As a full-service bank, HSBC handles everything from credit cards to Rs 5,000 cr loans, choosing selectively.  

Kumar: Everyone, from the global head office to the regional office to here, is convinced about the opportunity India offers. We may follow different strategies and tactics, but India has been seen as a long-term opportunity for decades. We will all be here for generations because of what India offers. 

There’s a large market, attractive demographics, and so on. We will address it differently. While we may have chosen not to consolidate or go into retail, India remains important for all of us.