FOREIGN BANKS IN INDIA

AN INDUSTRY ANALYSIS
INDUSTRY INTRODUCTION
 By Banking Regulations Act 1949,
‘The accepting for the purpose of lending or
investment of deposits of money from the public
repayable on demand or otherwise and
withdrawable by cheque, draft,order or
otherwise.’
 Foreign Bank : Owned by private foreign

companies, registered and headquartered outside

India.
●
Credit Cards ●
Asset
●
ATMs cum Shopping Management
Cards
●
Bank assurance
●
Portfolio
●
Mutual Funds Management
●
CASA Services

RETAIL
RETAIL CORPORATE
CORPORATE
BANKING BANKING
BANKING

PRIVATE
PRIVATE BUSINESS
BUSINESS
BANKING
BANKING BANKING
BANKING

●
Project Financing
●
Wealth ●
Working Capital
Management
Financing
●
NRI Services ●
Trade Financing
 EXAMPLE OF SERVICE DIFFERENTIATION
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backed by a team of trained and certified counsellors.
CONTD…
 Minimum account opening cheque of Rs. 3 lakhs
required.
 (Minimum Balance Requirement - Rs 1 Lakh)
 HISTORY MATTERS…
TIME PERIOD GENERAL BANKING
The General Bank of India ,
Early phase from 1786 to 1969 Bank of Bengal (1809), Bank
of Bombay (1840) Bank of
Madras (1843) 1920, Imperial
Bank of India, 1865 Allahabad
Bank exclusively by Indians,
Banking Regulation Act 1949 ,
1955: Nationalisation of State
Bank of India.
1959: Nationalisation of SBI
subsidiaries.
1961: Insurance cover
extended to deposits.
1969: Nationalisation of 14
major banks.
FOREIGN BANKS
1842, the Oriental Banking
Corporation established the
first Anglo-Indian Commercial
Bank at Bombay, First quarter
of Twentieth Century :(1) The
Mercantile Bank Ltd.,
(2) Grindlays Bank Ltd.,
(3) The Chartered Bank and
(4) The Hong Kong and
Shanghai Banking Corporation
 INTRODUCTION CONTD..
Nationalisation of Indian 1971: Creation of credit 1979 : European Asian
Banks and up to 1991 prior guarantee corporation. Bank
to Indian banking sector 1975: Creation of regional 1980 : Bank of Oman Ltd
Reforms rural banks. 1981 : Bank of Ceylon
1980: Nationalisation of
seven banks with deposits
over 200 crore

New phase of Indian This phase has introduced The total number of FBs
Banking System with the many more products and had risen to 44 by the year
advent of Indian Financial facilities in the 1998-1999
& Banking Sector Reforms banking sector
after 1991
 INDUSTRY STRUCTURE
(DFIs)(DFIs)
Development
Finance

Non-Banking
Institutions
Development

Financial Companies
Finance

(NBFCs)
Non-Banking
Institutions

Financial Companies
(NBFCs)

FINANCIAL SYSTEM
OF INDIA

Banks
Banks
Savings Schemes
Post Office/ Small
Savings Schemes
Post Office/ Small
 No. OF BRANCHES
UBS AG 1
JSC VTB Bank 1
Calyon Bank 6
Oman International Bank 2
Mizuho Corporate Bank Ltd 2
J P Morgan Chase Bank 1
Antwerp Diamond Bank 1
Krung Thai Bank 1
Chinatrust Commercial Bank Ltd 1
Cho Hung Bank 0
Bank of Ceylon 1
State Bank of Mauritius Ltd 3
Standard Chartered Bank 90
Arab Bangladesh Bank Ltd 1
Bank Internasional Indonesia 1
DBS Bank Ltd 10
Barclays Bank 5
BNP Paribas 9
Sonali Bank 2
Societe Generale 2
Hongkong & Shanghai Banking Corporation Ltd 47
Deutsche Bank 13
Citibank 41
Bank of Tokyo Mitsubishi 3
Bank of Nova Scotia 5
Mashreq Bank 2
Bank of Bahrain & Kuwait BSC 2
Bank of America 5
American Express Bank Ltd 1
Abu Dhabi Commercial Bank Ltd 2
ABN AMRO Bank 30
 STRUCTURE CONTD… MARKET SHARE

ADVANCES MADE (in crore Rs)

ADVANCES MADE (in crore Rs)

39920
37516

27589

16660

10551
8798
4805
3356 2991 3710 2723
1763 1119
137 698 700 29 287 45 148 703 10 9 10 2 458 366 11 303 0
t .
nk nk ion ank nk rica wai lon otia FJ ank ibas ank ank ank ank ank rpn ank NK ank ank ank ank ank rale ank ank tius AG
Ba l Ba rat B Ba me u e y Sc i U B ar B B i b B B o B A B B B B B ne B B uri BS
ro cia rpo nd B f A & K f C va i sh ays P P on cial Cit BS che g C ase B B hai req ate nal an Ge ali red a U
Am er Co amo A o
k i n nk o No tsub arcl BN aly er D ts kin Ch VT
u g
T sh or tio inh te
a p e S on arte of M
a
N mm g Di n ra a
B ko M
f i B C m n
De Ba gan JSC run M Cor tern Sh oci C h an k
AB Co nkin rp Ba Bah n o C om
a i o r K o n S rd B
e I
a b i Ba t w of Ba oky ru st gh P M zu h an n d a at e
ss A n k n i t
Dh n
of
T at
Sh
a J M Om St
a S
b u xpre Ba k h in
A E n C &
an Ba o ng
i c k
er o ng
Am H
 CONTD…

DEPOSIT BASE (in crore Rs)

DEPOSIT BASE (in crore Rs)

51677
49970

41802

15960
14147
12486

6023
4167 29762076 3353 3587
509 330 81 31 472 86 818 61 2 103 21 1148 187 766 825 42 372 0
t .
nk nk ion ank nk rica wai lon otia FJ ank ibas ank ank ank ank ank rpn ank NK ank ank ank ank ank rale ank ank tius AG
Ba l Ba rat B Ba me u e y Sc i U B ar B B i b B B o B A B B B B B ne B B uri BS
ro cia rpo nd B f A & K f C va i sh ays P P on cial Cit BS che g C ase B B hai req ate nal an Ge ali red a U
Am er C o am o A o n o o sub rcl N al y er D ts kin Ch VT T sh or tio inh te o n te of M
i k N B u g a e S r
N mm g Di nk ra an of i t Ba C m n
De Ba gan JSC run M Cor tern
p a
Sh oci
a
C h an k
AB Co nkin rp Ba Bah B k
n o
M
C om i o r K o n S rd B
b i Ba t w
e
of Ba oky st g ha M u h nI d a at e
a ru n P z a n
Dh ss An nk T at a J i
M Om St
a St
u xpre Ba of in Sh
b n k Ch &
A E
a n Ba o ng
ic k
er o ng
Am H
 CONTD…
PROFIT PER EMPLOYEE (in Rs lakh )
PROFIT PER EMPLOYEE (in Rs lakh )

253.63

130.00
110.85

70.76 73.0078.39 72.16

49.00 45.12
41.96 41.57 38.5834.00
34.1238.14
25.10 26.90 23.8220.00
14.00 18.00 16.06 16.87
1.96 7.50 2.79
0.62 0.00 0.00
t .
nk nk ion ank nk rica wai lon otia FJ ank ibas ank ank ank ank ank rpn ank NK ank ank ank ank ank rale ank ank tius AG
Ba l Ba rat B Ba me u e y Sc i U B ar B B i b B B o B A B B B B B ne B B uri BS
ro cia rpo nd B f A & K f C va si h ays P P on cial Cit BS che g C ase B B hai req ate nal an Ge ali red a U
Am er Co amo A o
k i n nk o No tsub arcl BN aly er D ts kin Ch VT
u g
T sh or tio inh te
a p e S on arte of M
a
N mm g Di n ra a
B ko M
f i B C m n
De Ba gan JSC run M Cor tern Sh oci C h an k
AB Co nkin rp Ba Bah n o C om
a i o r K o n S rd B
e I
a b i Ba t w of Ba oky ru st gh P M zu h an n d a at e
ss A n k n i t
Dh n
of
T at
Sh
a J M Om St
a S
b u xpre Ba k h in
A E n C &
a n Ba o ng -109.66
ic k
er n g
Am Ho
INDUSTRY ENVIRONMENT : REST ANALYSIS

FOREIGN
BANKS IN
INDIA
REULATORY ENVIRONMENT
 In February 2005, the banking regulator, the Reserve Bank of
India (RBI), unveiled a road map for foreign banks. The road map
has two phases :

Phase I: (March ●
New banks – first time presence
●
Existing banks – Branch expansion policy
2005 to March ●
Conversion of existing branches to Wholly
2009) Owned Subsidiaries

Phase II: ●
According Full National Treatment to Wholly Owned
Subsidiaries of Foreign Banks
Dilution of Stake in Wholly Owned Subsidiaries
(April 2009)
●

●
Mergers and Acquisition of any Private Sector Bank in India
 CONTD…
 The setting up of a wholly-owned banking
subsidiary in India should have the approval of the
home country regulator.
 Economic and political relations between India and
the country of incorporation of the foreign bank
 Financial soundness of the foreign bank &
Ownership pattern of the foreign bank
 Rating of the foreign bank by international rating
agencies, International presence of the foreign bank.
CONTD..
 The minimum start-up capital requirement for a
WOS would be Rs. 3 billion and the WOS shall be
required to maintain a capital adequacy ratio of 10
%.
 The parent foreign bank will continue to hold 100
per cent equity in the Indian subsidiary for a
minimum prescribed period of operation.
 The composition of the Board of directors as per
RBI guidelines.
ECONOMIC ENVIRONMENT
 Subject to monetary environment
 Need to adhere to CRR, SLR
 Health of parent organization
 Genaral economic environment.
SOCIAL ENVIRONMENT
 As per the RBI guidelines foreign banks have to
extend 32 per cent of their lending to priority sector.
 Loans granted to agriculture, micro and small
(manufacturing and service) enterprises, micro
credit, education and housing fall under the ambit
of priority sector lending by the Indian banks. Apart
from these sectors, the export credit also forms a
part of the priority sector lending in case of foreign
banks.
 TECHNOLOGICAL ENVIRONMENT
 Modern banking is un-thinkable without
Information Technology (IT).
 Negotiated Dealing System (NDS) for Government
Securities, the Real Time Gross Settlement (RTGS),
National Electronic Funds Transfer (NEFT) and the
Centralised Funds Management System (CFMS),
Structured Financial Messaging System (SFMS)
over the INFINET, all are the products of IT in
banking.
 How swiftly and efficiently RBI over entire banking
network affects the performance of foreign banks.
INDUSTRY ATTRACTIVENESS
 Only 59% of the nearly 90 million farm
households in India have bank accounts. Only
51% have access to formal credit.
 Emerging nation , growing economy.
 Despite financial turmoil worldwide , foreign
banks in India are earning profit.
(Amount in Rs. crore)

Item 2007-08 2008-09 PERCENTA

GE
CHANGE

Net Profit 6,612 7,510 + 13.58%

INDUSTRY PERFORMANCE
 Next slide
 Bank Assets Deposits Advances Investments
Group 2008 2009 2008 2009 2008 2009 2008 2009

Nationalis
ed Banks 43.5 44.2 48.4 49.1 45.3 47.2 42.7 41.7

State Bank
Group 23.4 24.4 23.3 24.8 24.0 24.6 22.4 24.7

Other
Public 3.0 3.3 2.2 2.8 3.3 3.4 2.8 3.5
Sector
Bank
Old
Private 4.5 4.4 5.0 4.9 4.5 4.3 4.6 5.0
Sector
Banks
New
Private 17.2 15.2 15.3 13.2 16.4 14.9 19.1 16.2
Sector
Banks
Foreign 8.4 8.5 5.8 5.3 6.5 5.5 8.4 9.0
Banks
INDUSTRY FUTURE
 April 2009 has come and gone, and no foreign
banks are clamouring at the gates of RBI.
 International Finance Corporation's (IFC)
principal banking sector specialist Michael J
Higgins has said that although India will
continue to attract the attention of global banking
players, it is less likely that foreign banks will
aggressively pursue penetration or go for
acquisition of an Indian bank in future due to
severe capital constraints.
CONTD…
 But still, following are the list of foreign banks
going to set up business in India
 Royal Bank of Scotland
 Switzerland's UBS
 US-based GE Capital
 Credit Suisse Group
 Industrial and Commercial Bank of China
COMPETITIVE ANALYSIS : PORTER’S
MODEL
New Entrants Strong
( Although bargaining power
very regulated ) of supplier

Strong bargainig Different

power of foreign banks
customer in India (32)

Threat from
expanding Indian
Public & Private
Sector Banks
 STRATREGIC
Strategic Group – 1
GROUPS AS
Strategic Group - 2
OF 2008-09
Strategic Group - 3

Weak Performance Average Performance Performing Well

1. Krung Thai Bank 1.Barclays Bank 1.Bank of Tokyo-Mitsubhishi

2. Sonali Bank 2.Scotia Bank 2.HSBC Holdings
3. Abu Dhabi Commercial 3.DBS 3.Citibank
Bank 4. BNP Paribas 4.Deutsche Bank
4. American Express Banking 5.Standard Chartered Bank
Corporation 6.ABN Amro Bank
5. AB Bank 7.Credit Agricole Indosuez
6. Bank of Ceylon (Calyon Bank)
7. Chinatrust Commercial 8.Bank of America
Bank 9.Mashreq Bank
8. JSC VTB Bank 10.Bank of Bahrain and
9. Societe Generale Kuwait
10. UBS AG
11. Mashreq Bank