HDFC eyes investment banking business

HDFC Bank, the second largest private sector bank in the country, is gearing up to enter the investment banking business. The bank has applied to the Securities and Exchange Board of India (Sebi).

Recently, Credit Suisse received a merchant banking licence from the market regulator.

Among its peers, ICICI Bank, UTI Bank and State Bank of India are the major domestic players in the investment banking space. Even the top corporate houses such as the Tatas and Anil Ambani-promoted Reliance Capital have big plans in the investment banking space.

So far this year, the total crossborder deals in India stood at $44.3 billion, said a recent report by Thomson Financial.

The Hutchison Essar-Vodafone deal valued at $18.2 billion largely contributed to India's active crossborder inbound activity. The business potential is huge and lucrative in this segment, hence, banks are rushing into this business.

HDFC Bank's close competitor, ICICI Bank "� with offices across 18 countries "� has the highest market share in the $11.5 billion foreign currency loan market.

"We have drafted a business plan and applied to the Sebi seeking its approval to enter the merchant banking business. The business will be headed by an official from the corporate banking team. We have traditionally been active in working capital financing, now the bank will set up a project finance department and will be an active player in this space,'' said a senior HDFC Bank executive.

"To complement the investment banking business, the bank will set up branches overseas. It has received RBI approval to set up branches in Bahrain, Hong Kong and London. We will now approach the local regulators in the respective geographies,'' added the executive.

The bank, in a bid to give a push to its existing retail banking business, is in the process of setting up a non-banking finance company (NBFC).

"The NBFC will set up branches in locations where the bank is not present. Our strategy is to sanction smaller ticket size loans to the tune of Rs 25,000 through the NBFC outlets,'' said the executive.