Commerzbank Pruning Business Lines

Commerzbank is exiting commercial lending, depository and treasury operations in India.

It has taken a strategic decision to focus on its other business such as metals distribution, corporate advisory, export credit financing etc. It is also talking to other banks in a bid to buy loan portfolios.

Commerzbank chief executive officer G Shekhar said: "We will exit from commercial lending (in Indian rupees), and depository business in India."

The bank will also close its treasury operations. "We are closing down anything that is related to corporate customers," Shekhar said.

The decision was taken after a review of the business done by the bank in India. "We have done our review and accordingly the one branch model doesn't make any sense especially in the present scenario of reducing margins," Shekhar said.

 

The bank has around 49 people in India. On the issue of retrenchment of staff, Shekhar said, "We would not like anyone of our staff to be affected. We will assist them in whatever manner possible. We will take all endeavors for a smooth transition."

According to banking sources, the bank has been in talks with other banks for selling its loan portfolio. Confirming the development Shekhar said, "A smooth transfer of business is needed so that our customers will not feel inconvenienced. However, the decision will also have to be taken by the clients."

But no time-frame has been set by the bank to exit out of these operations in India.

Sources added that the bank will find it difficult to sell its portfolio as banks are concerned of the possible effects of the downturn in the economy.

Also, with the Reserve Bank of India's revised capital adequacy guidelines, most of the bigger banks, which may already have the corporates in their portfolio, may not be interested in picking up the portfolio as their exposure limits will be crossed.

"The bank has mostly triple-A Indian companies or clients of branches of multinational companies especially from Germany. Banks have been approaching us to take over our portfolio," said Shekhar.

He added that the bank will now concentrate on precious metal distribution, corporate advisory, export and credit financing for large projects. It is also looking at bilateral lending directly from its head office at Germany.

It is also in the process of strengthening its correspondent banking relationship with other banks in India.

"On the corporate advisory front, we are looking at more cross border financing into and out of India and also FDI investments into India," added Shekhar.