One more foreign bank scales down India ops

NEW DELHI: Citibank on Wednesday joined the list of foreign banks that have exited retail banking business in India.

Almost immediately after Citigroup announced its decision last year, FirstRand Bank, South Africa’s second-largest bank with $118 billion in assets in India followed suit.

Global banking majors such as ANZ Grindlays, RBS, Commonwealth Bank of Australia have scaled down their India operations for many reasons.

Foreign banks have been struggling due to increased competition from domestic players, differences in compliance guidelines and poor asset quality issues, among other reasons.

Grant Thornton in a recent write-up on the issue on its website said: “The level of compliance expectations between foreign banks and Indian banks especially around aspects on priority sector lending and taxation have always been a thorny issue.”

The Reserve Bank of India (RBI) in 2013 asked foreign banks to either operate through branch presence or set up wholly-owned subsidiaries to be treated at par with Indian banks.

“While the wholly-owned subsidiary suggestion was made with an intent to resolve this disparity, there were not many takers, because the rupee was still not fully convertible,” Grant Thornton said.

In 2012, British banking major Barclays scaled down India operations by closing a third of its branches located in the non-metro areas. In 2016, Commonwealth Bank of Australia exited India operations saying the decision was taken after a careful evaluation of its India operations alongside its refocussed strategy. The same year, RBS also decided to wind up its corporate, retail, and institutional banking business in the Indian market as it wanted to reduce its global footprint.

Australia and New Zealand Bank in 2000 wound up domestic operations here after selling its Grindlays Bank unit to Standard Chartered for $1.34 billion. However, it re-entered the Indian market in 2011, the year Deutsche Bank sold its credit card business to IndusInd Bank.

In 2013, UBS exited India operations while Morgan Stanley surrendered banking license while continuing investment banking business.

Likewise, Bank of America-Merril Lynch, Barclays and Standard Chartered scaled down their operations in 2015.

Among others, HSBC shut down two dozen branches and reduced its presence in 14 cities in 2016 and BNP Paribas shut down its wealth management business in India in 2020.