The Boston-based State Street Corporation is in talks with India’s largest private lender, ICICI Bank, for a partnership in the securities custody business. The US custodian is likely to pick an equity stake in a proposed joint venture, according to officials close to the development.
“While State Street is keen on picking a majority stake in the venture, it may settle for a significant minority stake,” said one of the officials.
State Street, one of the largest in the business globally, with $21.8 trillion in assets under custody and administration, has been looking for a foothold in the Indian market for nearly a year. Though State Street already has a global custody agreement with a foreign bank’s Indian arm, it is said to be keen to have its own presence in India. “They had earlier held discussions with a couple of players like Quant and HDFC Bank, but these talks fell through because of differences, including those on valuation,” added the official. State Street’s asset management arm was also reportedly in the race for the acquisition of Fidelity Mutual Fund, when it came up for sale earlier this year.
ICICI Bank has a share in the domestic institutional business. However, without a partnership with a global player it is difficult to make inroads into the high-stakes international custody business which involves multi-instrument and multi-currency operations, say analysts. An ICICI Bank spokesperson said, “We do not comment on market speculation.” In an emailed response, Kylie Macintosh, head of global marketing-Asia Pacific, State Street, said, “State Street does not comment on market rumours or speculation.”
Custodians are usually clearing members of the stock exchange. Custodial services include settlements, clearing, depository participant services, cash management and forex services, fund accounting services, performance measurement, registrar and transfer agency services, amongst others. They hold securities and settle trades on behalf of their clients, executed through brokers. Custodians earn a few basis points of the assets under their custody as fees. They also enjoy the float and gains from foreign exchange fluctuations.