Deutsche Bank Plans To Focus On Fee-Based Income

Deutsche Bank is planning to shift focus from lending to fee-based activities in a bid to prop up the bank's other income.

"Direct lending by banks ties up a lot of the capital. We are looking at solutions which doesn't tie up a lot of our capital like underwriting of bonds," said Deutsche Bank's chief country officer Douglas T Neilson in his first interface with the media after taking over the new assignment.

The bank seems to have drawn up this strategy, prompted by the Reserve Bank of India's revised guidelines on capital norms.

Many foreign banks which are operating in India are affected by the RBI's new capital norms which will come into effect from April 1 next year. In its April credit policy, the central bank had barred foreign banks from including their external commercial lending to Indian corporates as part of the tier I capital. Many of the banks will have to pare their exposures for single and group borrowers. The RBI has, however, indicated to the foreign banks that it would be open relaxing the new norms on case by case basis.

 

The new norms will force the foreign banks either to infuse fresh capital to maintain the capital adequacy ratio (CAR) or pare their asset base.

In case of Deutsche Bank, the single borrower limit will have to be bought down by around 60 per cent. "The RBI norms will have an effect on our lending. We will have to change our business mix in order to conform to the single borrower limit, " Neilson pointed out. The bank will restructure or reduce some of the existing facilities but does not want to strain its customer relationship.

The bank has a capital of around $100 million of which $20 million was brought in March this year. It does not plan to bring in additional capital at the moment.

Deutsche Bank offers products such as forex, derivatives, debt, investment banking and transaction banking. "We would like to deal with a smaller number of customers but offer them a wider range of services," said Neilson.

The bank is looking at concentrating on specific sectors such as media and telecom. The investment banking arm is also looking at opportunities for mergers and acquisitions.

Deutsche Bank is also looking at setting up an asset management company in India. It is currently discussing the issue with the Securities and Exchange Board of India. Neilson, however, declined to give any additional information.