Foreign banks make a beeline for India, lenders include China, Iran

The number of foreign bank branches in India fell to 288 in 2016-17 from 317 in 2015-16, according to RBI data.

Written by Sunny Verma | New Delhi | Updated: January 10, 2018 6:56:23 am
Reserve bank on India, Foreign banks in India, China banks in india, indian banks, banks in india, new foreign banks in india, Commercial Bank of China, KEB Hana Bank, banking news, business news This year could see significant increase in opening of foreign bank branches in India after last year’s sharp reduction in branches.

Renewing their interest in India, at least 14 foreign banks have applied to the Reserve Bank of India for opening branches in the country.

Four banks from South Korea, three from Iran, two each from China and the Netherlands have applied for setting up branches and wholly-owned subsidiaries in India over the last 12 months. One bank each from the Czech Republic, Sri Lanka and Malaysia have applied for opening branches in India. The RBI, government sources said, is currently examining these applications.

This year could see significant increase in opening of foreign bank branches in India after last year’s sharp reduction in branches. The number of foreign bank branches in India fell to 288 in 2016-17 from 317 in 2015-16, according to RBI data.

Two banks from Iran, Bank Pasargad and Parsian Bank, have applied for setting up their maiden branch in India, while another Iranian lender, Saman Bank, has sent an application for setting up a representative office. India imports a large quantity of oil from Iran and has committed investment of $500 million for the development of the crucial Chabahar port.

After the US lifted economic sanctions on Iran a couple of years ago, Iran is trying to restore the channels for receiving payments from India. When the sanctions were in place, India was routing its payments for purchase of oil through the state-owned UCO Bank. After Iranian banks establish their presence in India, the modes of financial transactions between the two countries are likely to change.

Among the Chinese lenders, the Industrial and Commercial Bank of China (ICBC) has applied for opening its second branch in New Delhi, while Bank of China has applied for approval for its first branch in the country, official sources said.

Chinese banks have been expanding their business dealings with Indian companies. In 2014, budget carrier IndiGo had entered into an agreement with ICBC for a $2.6-billion funding to finance purchase of over 30 aircraft. Reliance Power and Reliance Communication were one of the first companies to go for Chinese funding. With bilateral trade expected to rise, Chinese banks are keen to expand their foothold in banking in India.

Apart from Iran and China, four South Korean banks are seeking to step up their presence in India. While Kookmin Bank and Nonghyup Bank of South Korea have each applied for opening their first branch in India, KEB Hana Bank has sought permission for opening its second branch.

Another South Korean lender, Woori Bank, which had two branches at March-end 2017, sought the central bank’s permission for setting up a a Wholly Owned Subsidiary (WOS) in India by converting its existing branches into a WOS. The RBI has been encouraging foreign banks to enter India by setting by a WOS as these can be better regulated.

After shutting branches and pruning their India operations in the last couple of years, foreign banks are planning to step up their presence in India on expectations of a likely pick-up in the investment cycle in the medium-term and increase in credit growth in the coming years. A pick in international trade and global economic growth would also improve demand for trade-related finance from India.

Among the other foreign banks, Sri Lanka’s Bank of Ceylon and Netherlands’ Cooperative Rabobank UA have sought permission for opening their second branch in India. PPF Banka of Czech Republic has sought permission for setting up a WOS in India, while Netherlands’ ING Bank has applied for setting up a representative office in India. Malaysia’s Maybank has applied for reconsideration of the government’s decision to reject its application for a maiden branch in India, the sources said.

At March-end 2017, there were a total of 49 foreign banks operating 288 branches in country, led by Standard Chartered Bank with 100 branches, Citibank with 40 branches, Hong Kong and Shanghai Banking Corpn. Ltd 26 branches and Deutsche Bank AG 17 branches, RBI data showed.

In 2016-17, foreign banks significantly reduced their India operations. “The presence of foreign banks in India declined in terms of number of branches and employees during 2016-17; the number of overseas branches of Indian banks, on the other hand, increased but there was marginal reduction in their employee strength,” the RBI said in its latest Survey on International Trade in Banking Services: 2016-17.

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