Foreign banks in India

CHAPTER-1 INTRODUCTION OF BANKING SECTOR

Foreign banks in India

CHAPTER-1 INTRODUCTION OF BANKING SECTOR

1. 1 what is Bank?

A bank is a profit seeking Business firm dealing in money and credit. It is a financial institution dealing in the money in the sense, that it accepts deposits of money from the public to keep them in its custody for safety. So, also, it also deals in credit, i.e. it creates credit by making advances out of funds received as deposits to needy people. It, thus, functions as mobilize of savings in the economy. ommercial banks are the main important sources of institutional credit in the money market. A bank is therefore, like a reservoir into !hich flo! the savings, the idle surplus money of households, and from !hich loans are given on interest to businessmen and others !ho need them for investment or productive uses. A bank is an important institution of the money market as it gives short"term loans to its customers.

Foreign banks in India

1. 2 INTRODUCTION TO BANKING SECTOR

$he Indian banking system has a large geographic and functional coverage. %resently the total asset size of the Indian banking sector is &S' #() billion !hile the total deposits amount to &S' ##) Billion !ith a branch net!ork e*ceeding ++,))) branches across the country. ,evenues of the banking sector have gro!n at + per cent A-, over the past fe! years to reach a size of &S' 1. billion. /hile commercial banks cater to short and medium term financing re0uirements, national level and state level financial institutions meet longer"term re0uirements. $his distinction is getting blurred !ith commercial banks e*tending pro1ect finance. $he total disbursements of the financial institutions in #))1 !ere &S' 12 billion. Banking today has transformed into a technology intensive and customer friendly model !ith a focus on convenience. $he sector is set to !itness the emergence of financial supermarkets in the form of universal banks providing a suite of services from retail to corporate banking and industrial lending to investment banking. /hile corporate banking is clearly the largest segment, personal financial services is the highest gro!th segment. $he recent favorable government policies for enhancing limits of foreign investments to 23 per cent among other key initiatives have encouraged such activity. 4arger banks !ill be able to mobilize sufficient capital to finance asset e*pansion and fund. 5

Foreign banks in India

1. . Th! Chan"in" Fa#! $% th! E#$n$&'

In 1331 the liberalization.

entral -overnment embarked on a program of economic

$his included, among others removal of governmental control,

rationalization of regulation, attracting Foreign Investment. $he government has also identified the infrastructure sector 6%o!er, $elecommunications, and $ransportation7 as a key target and is taking steps to attract investments in the area. 8ncouraged by economic developments over the past decade, the government is committed score a -9% gro!th rate 3..: by the year #));. $he fact is that the Indian economy is gro!ing faster than ever before. Bet!een #)))"#))1 and #)).")+, India<s -9% at #)).")+ has recorded a trend gro!th rate of ..2 per cent.

Foreign banks in India

Shi%t t$wa()s S!(*i#! S!#t$(

%reviously India !as primarily kno!n as an agricultural economy, but the face of the economy is changing rapidly. $he share of the Secondary and $ertiary are increasing rapidly. $he services sector contributes about 23: to total -9% and has gro!n by +..: during F=)#, compared to 2.;: in F=)1. Its share increased from 25.(: in F=31 to almost .): no!. >uarterly gro!th rates accelerated from ..( to +.2 to +.3 and (.): over four 0uarters of F=)#. $his gro!th !as backed by +.#: gro!th in trade, hotel, transport and communication and (.;: gro!th in financing, insurance and real estate sector.

Foreign banks in India

1. . KE+ POINTS OF BANKING SECTOR

S,--.' D!&an) Ba((i!(s t$ !nt(' 4i0uidity is controlled by the ,eserve Bank of India 6,BI7. India is a gro!ing economy and demand for credit is high though it could be cyclical. 4icensing re0uirement, investment in technology and branch net!ork. ?igh during periods of tight li0uidity. $rade unions Ba("ainin" -$w!( $% s,--.i!(s in public sector banks can be anti reforms. 9epositors may invest else!here if interest rates fall. For good credit!orthy borro!ers bargaining po!er is high due to the availability of large number of banks ?igh" $here are public sector banks, private sector C$&-!titi$n and foreign banks along !ith non banking finance companies competing in similar business lines

Ba("ainin" -$w!( $% #,st$&!(s

Foreign banks in India

1./. Fa#t Fi.!s $% Banks in In)ia

$he first, the oldest, the largest, the biggest, get all such types of information@s about Banking in India is described in this section.

$he first bank in India to be given an ISA certificate $he first bank in Borthern India to get ISA 3))# certification for their selected branches

Cana(a Bank

P,n0a1 an) Sin) Bank

$he first Indian bank to have been started solely !ith Indian capital

P,n0a1 Nati$na. Bank

$he first among the private sector banks in Cerala to become a scheduled bank in 132+ under the ,BI Act India<s oldest, largest and most successful commercial bank, offering the !idest possible range of domestic, international and B,I products and services, through its vast net!ork in India and overseas India<s second largest private sector bank and is no! the largest scheduled commercial bank in India Bank !hich started as private shareholders banks, mostly 8uropeans shareholders

S$,th In)ian Bank

Stat! Bank $% In)ia

Th! F!)!(a. Bank 2i&it!) I&-!(ia. Bank $% In)ia

Foreign banks in India

$he first Indian bank to open a branch outside India in 4ondon in 132+ and the first to open a branch in continental 8urope at %aris in 13(2 $he oldest %ublic Sector Bank in India having branches all over India and serving the customers for the last 15# =ears

Bank $% In)ia3 %$,n)!) in 1456 in 7,&1ai

A..aha1a) Bank

$he first Indian commercial bank !hich !as !holly o!ned and managed by Indians

C!nt(a. Bank $% In)ia

CHAPTER 8 2
;

Foreign banks in India

KINDS OF BANKS

Foreign banks in India

CHAPTER 8 2 KINDS OF BANKS

2.1.C!nt(a. Bank9 -

$he central bank of country is that institution !hich is vested !ith certain prerogative po!ers by an Act of parliament to regulate the monetary system in the country. It occupies a central position in the monetary and banking structure of country. It acts as a leader of the money market in supervising, controlling and regulating the activities of the all commercial banks and other financial institutions. entral Banking has become an entirely separate branch of banking as it is district from the function of other banks. It is very difficult to give an accurate definition of central bank as the functions performed by the central bank are multifarious. Dany authors have tried to define a central bank briefly, but these definitions are not !idely accepted as every author has emphasized one function or the other.

2. C$&&!(#ia. Banks9 As the name indicates the primary ob1ectives of the commercial banks is to earn profit. A commercial bank receives money from the depositors and lends to trade, industry and commerce. /hen a bank borro!s money from the depositors through deposit schemes, allo! interest on such deposit. Similarly, !hen the banker lend money to the industry or business by !ay of overdraft, cash credit loans and advances or by any other means, he charge interest on such borro!ing rate is his profit. $he interest rates are governed by the ,eserve Bank of India direction. 1)

Foreign banks in India $he commercial banker allo!s the customer to dra! che0ues against their credit balances and honors such che0ues and !hen they are presented in the bank. In addition to the primary functions of receiving deposits and lending to others, he undertakes a !ide variety of functions to assist their customers by performing agency services and general utility services.

. CO-OPERATI:E BANKS9 India is an agricultural country. About (): of four country@s population depends upon agricultural for their livelihood. $he Indian farmer is poor, illiterate and heavily indebted. Bon" availability of ade0uate and timely agricultural credit results in lo! productivity and makes agricultural more capital intensive. As there is no agency to supply credit, farmers are the ready victims of the money lenders and indigenous bankers !ho charges e*orbitant rates of interest. In order to protect them from economic evils moral degeneration, the co"operative movement India !as encouraged $he co"operative movements in India began !ith the passing of the operative o" redit Societies Act, of 13)2. $he Act provides for the formation of credit

societies, emphasizing on rural credit. &ltimately liability !as the rural societies. $hese credit societies slo!ly paved the !ay in the formation of co"operatives banks.

/. INDUSTRIA2 BANKS9 $he economic development of country depends on the developments of its industries. $he advanced countries like &nited Cingdom, &nited of States America, Eapan and -ermany are the %ioneer in the field of industrial development. Some countries like Eapan and -ermany started banks e*clusively to meet of industries. $he industrial bank provides long"term loans and supply fi*ed capital to industrial concern by subscribing the shares and debentures floated by the companies. As they have financed the share capital, the industrial bank plays an important role in the management and administration of the companies. $he industrial banks have acted 11

Foreign banks in India as under!riters in the flotation of ne! industrial concern. $hese banks also arrange medium"term loans. Follo!ings are the different types of banks e*isting in IndiaF

1. Nati$na.i;!) Banks

in In)ia

Banking System in India is dominated by nationalized banks. $he nationalization of banks in India took place in 13+3 by Drs. Indira -andhi the then prime minister. $he ma1or ob1ective behind nationalization !as to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. Fourteen banks !ere nationalized in 13+3. $hese Banks !ereF Before 13+3, State Bank of India 6SBI7 !as the only public sector bank in India. SBI !as nationalized in 13.. under the SBI Act of 13... $he second phase of nationalization of Indian banks took place in the year 13;). Seven more banks !ere nationalized !ith deposits over #)) crores.

4ist of %ublic Sector Banks in India is as follo!sF

Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Daharashtra anara Bank 1#

Foreign banks in India

entral Bank of India orporation Bank 9ena Bank Indian Bank Indian Averseas Bank Ariental Bank of ommerce %un1ab and Sind Bank %un1ab Bational Bank State Bank of Bikaner G Eaipur State Bank of ?yderabad State Bank of India 6SBI7 State Bank of Indore State Bank of Dysore State Bank of %atiala State Bank of Saurashtra State Bank of $ravancore Syndicate Bank & A Bank &nion Bank of India &nited Bank of India Hi1aya Bank

2. F$(!i"n Banks in In)ia

15

Foreign banks in India

Foreign banks have brought latest technology and latest banking practices in India. $hey have helped made Indian Banking system more competitive and efficient. -overnment has come up !ith a road map for e*pansion of foreign banks in India. $he road map has t!o phases. 9uring the first phase bet!een Darch #)). and Darch #))3, foreign banks may establish a presence by !ay of setting up a !holly o!ned subsidiary 6/AS7 or conversion of e*isting branches into a /AS. $he second phase !ill commence in April #))3 after a revie! of the e*perience gained after due consultation !ith all the stake holders in the banking sector. $he revie! !ould e*amine issues concerning e*tension of national treatment to /holly A!ned Subsidiary, dilution of stake and permitting mergers I ac0uisitions of any private sector banks in India by a foreign bank.

7a0$( %$(!i"n 1anks in In)ia a(!9

ABB"AD,A Bank Abu 9habi ommercial Bank 4td. American 8*press Bank 4td BB% %aribas itibank Standard hartered Bank 9BS Bank 4td 9eutsche Bank ?SB 4td

. P(i*at! Banks in In)ia

12

Foreign banks in India All the banks in India !ere earlier private banks. $hey !ere founded in the pre" independence era to cater to the banking needs of the people. But after nationalisation of banks in 13+3 public sector banks came to occupy dominant role in the banking structure. %rivate sector banking in India received a filip in 1332 !hen ,eserve Bank of India encouraged setting up of private banks as part of its policy of liberalisation of the Indian Banking Industry. ?ousing 9evelopment Finance orporation 4imited 6?9F 7 !as amongst the first to receive an <in principle< approval from the ,eserve Bank of India 6,BI7 to set up a bank in the private sector. %rivate banks have played a ma1or role in the development of Indian banking industry. $hey have made banking more efficient and customer friendly. In the process they have 1olted public sector banks out of complacency and forced them to become nore competitive.

7a0$( P(i*at! Banks in In)ia a(!9

Bank of ,a1asthan Bharat Averseas Bank atholic Syrian Bank enturion Bank of %un1ab 9hanalakshmi Bank Federal Bank ?9F Bank I I I Bank I9BI Bank IndusInd Bank IB- Hysya Bank Eammu G Cashmir Bank Carnataka Bank Carur Hysya Bank

1.

Foreign banks in India

Cotak Dahindra Bank SBI ommercial and International Bank South Indian Bank &nited /estern Bank &$I Bank =8S Bank

CHAPTER 8 CURRENT SITUATION OF BANKING IN INDIA

1+

Foreign banks in India

CHAPTER 8 CURRENT SITUATION OF BANKING IN INDIA

1(

Foreign banks in India urrently 6#))37, banking in India is generally fairly mature in terms of supply, product range and reach"even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of 0uality of assets and capital ade0uacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. $he ,eserve Bank of India is an autonomous body, !ith minimal pressure from the government. $he stated policy of the Bank on the Indian ,upee is to manage volatility but !ithout any fi*ed e*change rate"and this has mostly been true. /ith the gro!th in the Indian economy e*pected to be strong for 0uite some time"especially in its services sector"the demand for banking services, especially retail banking, mortgages and investment services are e*pected to be strong. Ane may also e*pect Dergers GAc0uisitions, takeovers, and asset sales. In Darch #))+, the ,eserve Bank of India allo!ed /arburg %incus to increase its stake in Cotak Dahindra Bank 6a private sector bank7 to 1):. $his is the first time an investor has been allo!ed to hold more than .: in a private sector bank since the ,BI announced norms in #)). that any stake e*ceeding .: in the private sector banks !ould need to be vetted by them. $he Banks in India have flourished not 1ust in numbers but also in their services, products and client base. $hey have succeeded in reaching out to ,ural India through the Dobile A$D<s, special rural branches and specialized finance options for the farmers, rural !omen and the Small"Scale Industries 6SSI<s7. $he mortgage rates and interest rates are slashed to attract the masses to the banking facilities. In the urban cities like the country capital Be! 9elhi, trade capital Dumbai, I$ capitals " Bangalore and ?yderabad, B ,<s prime cities -urgaon, Boida, Dumbai<s sister city %une and the metro cities of Colkata and hennai, all the ma1or Banks have multiple branches. %ersonalized services like Special Bank Accounts to cater to individual needs, Dobile and Internet Banking, doorstep banking and multi city or international banking have attracted customers in e*ponential multiplication. 1;

Foreign banks in India

$he banks offer plenty mortgage options !ith most pocket"friendly interest rates on loans " home loans for the housing needs, personal loan, auto loans for private and commercial vehicles, education loans for educational pursuits, corporate loans for business and other pro1ects and loans against property and securities. $he money deposited is safe and secure and offers prospects of gro!th to the customers. Investment Apportunities by Banks come in the form of 9eposits " fi*ed deposits and recurring deposits and mutual funds and bonds. Special services to B,I<s and senior citizens pensions and special savings accounts are also a regular !ith most banks. $he Banking Solutions itself employee a large number of people and provide numerous 1ob opportunities to many people. Finance, Banking and ustomer are are some of most preferred profile in bank 1obs. $he policies differ from bank to bank but the core remains the same " to provide the most convenient and safe banking options to the people. urrently, India has ;; scheduled commercial banks 6S Bs7 " #( public sector banks 6that is !ith the -overnment of India holding a stake7 after merger of Be! Bank of India in %un1ab Bational Bank in 1335, #3 private banks 6these do not have government stakeJ they may be publicly listed and traded on stock e*changes7 and 51 foreign banks. $hey have a combined net!ork of over .5,))) branches and 1(,))) A$Ds. According to a report by I ,A 4imited, a rating agency, the public sector banks hold over (. percent of total assets of the banking industry, !ith the private and foreign banks holding 1;.#: and +..: respectively.

13

Foreign banks in India

CHAPTER-/
FOREIGN BANKS

#)

Foreign banks in India

CHAPTER-/
FOREIGN BANKS

1 INTRODUCTION9-

FOREIGN BANK9Banks !hich are foreign in origin having their head offices outside India are called 8*change banks. $hey are also Cno!n as Foreign banks. Foreign banks operating in India are all multinational having a !idespread banking business in many countries of the !orldK 8*change banksIforeign banks have been doing business in India since 1;(). $he e*change banks have e*erted tremendous influence on the development of Indian Eoint stock banking and the gro!th of organized money market in India. $hey are primarily meant to provide finance for India@s foreign trade. $hey also financed included trade of the country. At the time of bank nationalization in 13+3, the entry of foreign banks in Indian !as banned. $he Ban !as ho!ever lifted in 13;). $he Bank of $okyo, the chartered Banks, the first Bational some of the ity Bank Af Be!

=ork, the -rind lays Bank, $he 4loyds Bank, $he Dercantile Bank In India, etc. are prominent foreign banks !hich are presently operating in India. #1

Foreign banks in India

At the end"Darch 13;(, there !ere #1 foreign banks !ith 15+ branches in India. 9uring 13+)";), the total assets of foreign banks have increased over five times from ,S.211.2 crores to ,s.#, #+1.) crores. In 13;), their assets gro!th rate !as ##.. per cent as against 2 percent in 13+..Initially these banks !ere started merely to finance India@s foreign trade. For 0uite sometime, they en1oyed a considerable monopoly in the field of foreign trade finance because the imperial bank of India did enter the field, other Indian Eoint stock banks no ade0uate means and capacity to enter and compete !ith the e*change banks. Indian banks like the Alliance Bank of Simla and $ata Industrial Bank, ho!ever did make some efforts in this direction, but ultimately failed. In recent years, ho!ever, the situation has greatly changed. /ith the enactment of the banking companies Act, 1323 and the e*ercise of effective control through this Act by reserve Bank of India, many of the defects in the functioning of foreign e*change bank have been eliminated. Besides, since !ithout approval of the ,eserve bank, no e*change bank can open a branch in India, the interests of Indian banks have been ade0uately protected. $he act also re0uires e*change banks to keep a minimum paid"up capital and reserve of ,s.#) lakhs. It also en1oins upon e*change banks to maintain their assets in such a !ay that their liabilities do not e*ceed (. percent of their assets. $his restriction puts a check on the fight of capital abroad. $he Banking ompanies 6enactment7 Act, 13+#, further re0uires that e*change banks keep an additional deposit of not less than #) percent of their profits every year !ith the reserve Bank of India to advise them on such matters as granting of loans etc. AS A result of these restrictions, there has been a marked improvement in the functioning of e*change bank in India.

##

Foreign banks in India Since Indian banks have also started participating actively and e*tensively in the field of financing foreign trade, the monopoly of e*change banks in this area has been broken and as a result, their important fields of financing of foreign trade has very much diminished.. In recent days, it has been suggested in some 0uarters that the e*change bank be nationalized but many others feel that such a step is neither an e*pedient nor feasible in vie! of the international repercussion that such a measure may trigger off. IB this conte*t, it must also be remembered that Indian banks as yet do not have an ade0uate trained staff, e*pertise or skill handling e*change business and compete !ith foreign e*change bank. ?o!ever, it !ould be advisable to allo! the e*change bank to continue their, operations !ithin the frame!ork of the restrictions imposed on them by the reserve bank in such a manner that they do not encroach upon the field allocated to Indian banks.

#5

Foreign banks in India

CHAPTER-< FUNCTIONS OF FOREIGN BANK9

#2

Foreign banks in India

CHAPTER-< FUNCTIONS OF FOREIGN BANK9

$he functions of foreign bank are as follo!sF 1. FINANCING FOREIGN TRADE9 $hey primarily finance India@s foreign trade. $hey undertake t!o"!ay operations. a7 Financing of e*ports and imports of IndiaJ and b7 Financing of movement of goods from and to Indian portsIto or from the distributing or collecting centers in the interiors parts of the country. In this conte*t, they discount or purchase foreign bills

2. BANKING BUSINESS9 $he e*change bank conducts all types of banking business. $hey accept deposit from the public, grant loans, discount trade bills and provide remittance facilities. And thus compete !ith Indian banks.

. FINANCING IN2AND TRADE9 $hey also finance trade in many up country centers, as they opened a number if branches in the main ports and trading centers of the country.

/. AGENCIES SER:ICES9#.

Foreign banks in India 4ike other commercial banks, foreign e*change bank render several agencies services to their customers.

<. 7ERCHANT BANKING9 Some e*change bank has opened merchant banking division to provide banking services. For e.g.F " $he Bational and -rind lays banks first started merchant banking services in 13+(, follo!ed by the first Bational ity bank in 13(). $he e*change banks have been doing a profitable business in the country. $heir financial ratio. I.e. %rofit"to Income ratio is more than double that of the Indian commercial bank. $heir high profitability may be attributed to their non"fund business, such as commission, brokerage, etc. Further they mostly finance multinational corporations, and their returns are higher. Doreover, they minute their risk in lending also.

#+

Foreign banks in India

CHAPTER-6 BUSINESS OPPORTUNITIES IN INDIA

#(

Foreign banks in India

CHAPTER-6 BUSINESS OPPORTUNITIES IN INDIA

India is the largest democracy in the !orld. In terms of population it ranks second in the !orld. $he policy of liberalization pursued by the government after 1331, has transformed the prospects for the Indian economy. $oday India is one of the favored destinations for global investments. $he government has come up !ith several incentives like import of capital goods at concessional customs duty 6under condition it fulfills certain e*port obligations7,natural gas, petrochemicals, po!er, services and telecommunications have !itnessed tremendous e*pansion.

FACTS ABOUT INDIA9$here are several factors !hich create favorable business opportunities in India. India has a huge middle class, !ith improved purchasing po!er, due to the high gro!th in the economy. Increasingly Indians have become more brand conscious, resulting in increased gro!th for the retail sector. %resence of vibrant trade links !ith South Asian Association For ,egional ooperation 6SAA, 7 nations like Bangladesh, Bhutan, Daldives, Bepal, %akistan and Sri 4anka. Improved infrastructure available for business ventures. India<s competitive advantage in Information $echnology can be used to enhance productivity in Industries. Availability of huge pool of technical manpo!er has heralded the e*pansion of manufacturing base across different industries. India is rich in natural resources and self sufficient in agriculture. A !ell established banking system consisting of public and private banks and other financial institutions. #;

Foreign banks in India

$he capital markets in India are one of the fastest gro!ing markets in the !orld, attracting huge investments from FII<s. $he economic reforms have brought in policy changes in terms of freedom of entry, investment, location, usage of technology, import and e*port. $hese changes have created an investment friendly environment. India is a !ell established democratic country, !ith free and fair 1udiciary.

In today@s L-lobal villageM, scouting around for business is no problem. In fact, !ith the touch of a button !e could be in contact !ith someone in another country and !ithin a fe! minutes !e could even close a deal. But then, such 0uick fi*es may be an elusive dream if !e are dealing !ith a ne! client, or an unkno!n country.

$he fact remains that every businessman has his eyes trained on India forJ after all, it is the, fifth largest market in the !orld in terms of purchasing po!er parity. India is one of the !orld<s most e*citing emerging markets !ith e*tensive infrastructure for doing business. India has a good legal system !hich is reputed to be among the !orld<s most independent and efficient ones. If, India is today in the ne!s, it is becauseJ it is a nation on the move. India has dealt !ith its balance of payments crisis, its e*ternal debt problems, etc., and !ith help from the IDF and /orld Bank, has left these problems far behind. $his is like a clarion call to do businessIinvest in India. $he &ruguay round of -A$$ has improved the infrastructure for cross" border and !orld trade. Further, India, in its out!ard looking" 0uest has liberalized and opened its economy to the !orld " challenging industrialists as it !ere to set up 1oint ventures or !holly o!ned subsidiaries in the field of po!er generation, infrastructure development, telecommunications, etc. %rocedures for import of capital goods, approval for setting up industries, repatriation of income, etc. have been liberalized !ith the effect that investment has flooded into India and Indian companies have been able to raise loans at very fine rates in the 8uro"dollar market. $he above development and the fillip given to e*ports have been responsible for India no! having foreign e*change reserves of more than #.# bn. dollars as on Act 51,#));. India is no! looking for technology and for e0uipment to upgrade its e*isting manufacturing facilities to meet e*acting !orld standards. It has also been shopping around for po!er generation e0uipment and telecommunication net!orks in a big !ay in order to speed up the process of industrialization.

CHAPTER-=

#3

Foreign banks in India

GUIDE2INES FOR PRESENCE OF FOREIGN BANKS IN INDIA

CHAPTER-=
5)

Foreign banks in India

GUIDE2INES FOR PRESENCE OF FOREIGN BANKS IN INDIA

$he guidelines for setting up of !holly o!ned subsidiary by foreign banks and conversion of e*isting branches of foreign banks into !holly o!ned subsidiary are given belo!F"

E2IGIBI2IT+ OF THE PARENT BANK91. Foreign banks applying to the ,BI for setting up a /AS in India must satisfy ,BI that they are sub1ect to ade0uate prudential supervision in their home country regulatorJ the ,BI !ill have regard to the Basel standards. #. $he setting up of a !holly"o!ned banking subsidiary in India should have the approval of the home country regulator. 5. Ather factors 6but not limited to7 that !ill be taken into account !hile considering the application are given belo!F a. 8conomic and political relations bet!een India and the country of incorporation of the foreign bank b. Financial soundness of the foreign bank c. A!nership pattern of the foreign bank d. International and home currency ranking of the foreign bank e. ,ating of the foreign bank by international rating agencies f. International presence of the foreign bank.

CAPITA292. $he minimum start"up capital re0uirement for a /AS !ould be ,s. 5 billion and the /AS shall be re0uired to maintain a capital ade0uacy ratio of 1) percent or as may be prescribed from time to time on a continuous basis, from the commencement of its operations. .. $he parent foreign bank !ill continue to hold 1)) percent e0uity in the Indian subsidiary for a minimum prescribed period of operation.

CORPORATE GO:ERNANCE9+. $he composition of the board of directors should meet the follo!ing re0uirementsF a. Bot less than .) percent of the directors should be Indian nationals resident in India. b. Bot less than .) percent of the directors should be non"e*ecutive directors.

51

Foreign banks in India c. A minimum of one"third of the directors should be totally independent of the management of the subsidiary in India, its parent or associates. d. $he directors shall conform to the NFit and %roper@ criteria as laid do!n in ,BI@s e*tant guidelines dated Eune #., #))2. e. ,BI@s approval for the directors may be obtained as per the procedure adopted in the case of the erst!hile 4ocal Advisory Boards of foreign bank branches.

=. ACCOUNTING3 RE>UIRE7ENTS9-

PRUDENTIA2

NOR7S

AND

OTHER

a. $he /AS !ill be sub1ect to the licensing re0uirements and condition, broadly consistent !ith those for ne! private banks. b. $he /AS !ill be treated on par !ith the e*isting branches of foreign banks for branch e*pansion. $he ,eserve Bank may also prescribe market access and national treatment limitation consistent !ith international practices and the country@s re0uirements. c. $he banking subsidiary !ill be governed by the provisions of the ompanies Act, 13.+, Banking ,egulation Act,1323, ,eserve Bank Af India Act, 1352, other relevant status and the directives, %rudential regulations and other guidelinesIinstructions issued by ,BI and other regulators from time to time.

?. CON:ERSION OF E@ISTING BRANCHES INTO A AOS9

All the above re0uirements prescribed for setting up a /AS !ill be applicable to e*isting foreign bank branches converting into a /AS. In addition they !ould have to satisfy the follo!ing re0uirementsF"

SUPER:ISOR+ CO7FORT9%ermission for conversion of e*isting branches of a foreign bank into a /AS !ill inter alia be guided by the manner in !hich the affairs of the branches of the bank are conducted, compliance !ith the statutory and other prudential re0uirements and the overall supervisory comfort of the ,eserve Bank.

CAPITA2 RE>UIRE7ENTS9$he minimum net !orth of the /AS on conversion !ould not be less than ,s. 5 billion and the /AS !ill be re0uired to maintain a minimum capital ade0uacy ratio of 1) percent of the risk !eighted assets or as may be prescribed from time to time on a continuous basis. /hile reckoning the minimum net !orth the local 5#

Foreign banks in India available capital including remittable surplus retained in India, as assessed by the ,BI, !ill 0ualify. ,eserve Bank !ill cause an inspectionIaudit to assess the financial position of the financial position of the branches operating in India and arrive at the aggregate net !orth of the branches. ,BI@s assessment of the net !orth !ill be final.

4. AC>UISITION OF HO2DING IN SE2ECT PRI:ATE SECTOR BANKS9Foreign banks may apply to the ,BI for making investment in private sector banks that are identified by ,BI for restructuring. ,eserve bank !ill e*amine the application !ith regard to the eligibility criteria prescribed for foreign banks to set up a /AS vide paragraphs 1 to 2 above as !ell as their track record in restructuring banks. /hile permitting foreign banks to ac0uire stake in the identified private sector banks, ,BI may undertake enhanced due diligence on the ma1or shareholders to determine their NFit and %roper@ status. ,eserve Bank may also prescribe additional conditions in this regard as may be considered appropriate.

15. APP2ICATION PROCEDURE9Applications for setting up a !holly"o!ned banking subsidiaries by foreign banks including conversion of e*isting branches should be made to the chief -eneral Danager"in"charge, 9epartment of banking Aperations and 9evelopment, ,eserve Bank of India, /orld $rade entre, uffe %arade, olaba, Dumbai 2)) )).. $he prescribed application form !ill be placed on the ,BI@s !ebsite.

CHAPTER-?
DEFECTS IN AORKING
55

Foreign banks in India

OF FOREIGN BANK9 "

CHAPTER-?
DEFECTS IN AORKING
52

Foreign banks in India

OF FOREIGN BANK9 "

Dany complaints have been made against the functioning of the e*change bank in India. Several defects have been noticed in the !orking of the e*change banks. Some of them have been stated belo!F

1. NO 2EGA2 RESTRICTIONS9For several years in the past, they !here no sub1ect to legal restrictions or statutory obligations.

2. FOREIGN DIRECTORS9$heir directors, governing bodies and shareholders !ere entirely foreign.

. INADE>UATE CASH RESER:E9 For several years in the past, e*change bank did not maintain ade0uate cash reserve.

/. 7ONOPO2+9
$ill recently, the e*change bank en1oyed a substantial monopoly in financing foreign trade of the country. $hey e*ploited their advantage and earned high profits. $hey also forced Indian e*porters and importers to give business to the foreign shipping companies, insurance companies, !hile accommodating them. $his restricted the scope of gro!th of Indian enterprises in shipping and insurance.

<. UNFAIR CO7PETITION95.

Foreign banks in India

$hey have entered into unfair competition !ith the Indian bank by attracting deposits in India by under 0uoting Indian bank

6. DIFFERENTIA2 TREAT7ENT98*change banks give differential treatment in financing the e*port trade of the country by 9IA bills 6i.e. documents against acceptance7 and the import trade by 9I% bills 66i.e. documents against payments7.$hey, thus discriminate bet!een Indian and foreign firms. $hey give foreign importers the benefits of lo!er rates of interest prevailing in the 4ondon money markets, !hich is denied to Indian importers.

=. NO PROPER INFOR7ATION9
$hey do not provide any guidance information regarding foreign market, prices, etc. to the Indian e*porter.

?. HA7PERING THE DE:E2OP7ENT OF INDIAN BANKS9 By e*tending their business from financing of foreign trade to banking in the upcountry centers, they restrict the gro!th of Indian commercial banks.

4. SP2TTING THE 7ONE+ 7ARKET9 $he e*change bank due o their monopolistic in the financed of foreign trade have split the money market into 8uropean and Indian

15.2ACK OF INDIANISATION95+

Foreign banks in India

$ill, no! the e*change bank did not have any Indian in the higher posts, e*pects on the clerical side.

CHAPTER-4 EFFECTS OF FOREIGN BANKS ON INDIAN ECONO7+9 5(

Foreign banks in India

CHAPTER-4 EFFECTS OF FOREIGN BANKS ON INDIAN ECONO7+9 5;

Foreign banks in India

Foreign banks have brought latest technology and latest banking practices in India. $hey have helped made Indian Banking system more competitive and efficient. -overnment has come up !ith a road map for e*pansion of foreign banks in India. $here are various advantages and disadvantages of having foreign banks in India. Some of them are given belo!F"

G.$1a.i;ati$n9$he entry of foreign banks in India has made India to be at an international level. It has given India an international status. $hus India is moving to!ards globalization.

C$&-!titi*!n!ss9After the set up foreign banks in India, the banking sector in India also become competitive and accurative.

E&-.$'&!nt9As ne! foreign banks are doing business in India and the number of branches of foreign banks is increasing day by day. So it creates 1ob opportunities for many people. $hus it makes a lot of educated unemployed people employed.

In#(!as! in stan)a() $% .i*in"9-

53

Foreign banks in India As foreign banks have created 1ob opportunities the standard of living of people have improved. $hey have become a!are of the international standards.

I&-($*!) t!#hn$.$"'9$he foreign banks have brought in ne! and more sophisticated technology. $his has improved the !orking of banks and the !ork can be no! done !ithin fe! seconds.

4.2 Banks

U-#$&in" in

F$(!i"n In)ia

By #))3 fe! more names is going to be added in the list of foreign banks in India. $his is as an aftermath of the sudden interest sho!n by ,eserve Bank of India paving roadmap for foreign banks in India greater freedom in India. Among them is the !orld<s best private bank by 8uro Doney magazine, S!itzerland<s &BS. $he follo!ing are the list of foreign banks going to set up business in IndiaF R$'a. Bank $% S#$t.an) 2)

Foreign banks in India Swit;!(.an)Bs UBS US-1as!) GE Ca-ita. C(!)itS,iss! G($,In),st(ia. an) C$&&!(#ia. Bank $% China Derrill 4ynch is having a 1oint venture in Indian investment banking space "" 9S% Derrill -8 India. India<s -9% is seen gro!ing at a robust pace of around (: over the ne*t fe! years, thro!ing up opportunities for the banking sector to profit. 4ynch. -oldman Sachs holds stakes in Cotak Dahindra arms. apital apital is also having a !ide presence in consumer finance through -8

4. FACTS ABOUT FOREIGN BANKS IN INDIA9$he India chief e*ecutives of most foreign banks say capital is not a concern and that their gro!th !ill be fuelled by profits from the local operations that they !ill retain, but the numbers sho! that in the past year, their business here has slo!ed. $he gro!th, in terms of loans issued, for 5) foreign banks slo!ed to 1+.3: in the year to # Eanuary, against 5).(: a year ago, according to ,eserve Bank of India 6,BI7 data. And their year"on"year deposit gro!th shrunk to 1#.1:, from 52.1:. In contrast, the gro!th of public sector banks, in terms of loans issued, !as #;.+:, up from 13.;:, and their deposit gro!th remained stable at #2.#:, ,BI said. In the year ended 51 Darch, foreign banks accounted for about (..: of banking assets in India. A slo!do!n in gro!th !ill see them lose market share, though all of them consider India as a gro!th market. ,BS led a consortium that ac0uired for O(1 billion 6,s2.. trillion today7 9utch bank ABB Amro Bank BH in #))(. itigroup Inc. reported a ';.#3 billion 6,s2),5(# crore today7 loss in the fourth 0uarter 6>27 of #));. 9eutsche Bank A- e*pects to make an estimated loss of O2.; billion in 21

Foreign banks in India >2 of last year. $he -erman bank@s >2 and full year earnings !ill be released later this !eek. Among other foreign banks operating in India, Bank of America orp. has posted a net loss of '1.(3 billion in >2 of #));, but ended the year !ith a profit of '2.)1 billion. ?SB ?oldings %lc.@s profit before ta* !as do!n #;: in the first half of #));. It !ill announce its annual earnings in the first !eek Darch. Standard hartered Bank %lc., !hich made profits in the first half of #));, !ill announce its annual earnings at around the same time. Another British bank, Barclays %lc., has stuck to its forecast that its #)); preta* profit !ill be L!ell aheadM of P..5 billion, but international rating agency Doody@s Investors Service recently cut the long"term ratings on the lender by t!o notches on e*pectation that losses !ould rise due to credit related !rite"do!ns and rising impairments. Anticipating pressure on capital, foreign banks have sought ,BI@s permission to tap the local debt market for their so"called tier II capital, in line !ith Indian banks. $ier II

capital consists of hybrid debt"e0uity instruments and long"term debt, !hile tier I is the core capitalQa bank@s e0uity and reserves. Dost foreign banks operating in India have registered handsome gro!th in profits in the past year. For instance, ?SB India@s net profit for the year ended 51 Darch increased to ,s1,13# crore, from ,s;2+ crore in the previous year. Standard hartered Bank@s net profit for the year ended 51 Darch increased to ,s1,()+.#5 crore, against ,s1,5+2.51 crore in the previous year. itibank India posted a profit of ,s1,;)2.#+ crore in #));, up from ,s3)) crore in #))( and 9eutsche Bank@s profit in #)); rose 3.: to ,s(;3 crore. $he &S government has so far infused around '# trillion into its banking system and the British government has unveiled t!o rescue packages !orth P;)) billion since Actober.

2#

Foreign banks in India

CHAPTER-10 Role of foreign banks:-

25

Foreign banks in India

CHAPTER-10 Role of foreign banks:-

Foreign Banks in India al!ays brought an e*planation about the prompt services to customers. After the set up foreign banks in India, the banking sector in India also become competitive and accurative. Foreign banks play a relatively minor role in the Indian economy, $his fact is relevant right no! for t!o reasons. First, the ,eserve Bank of India is likely to open up the Indian banking market further. $!o, the global credit crisis has sho!n ho! problems in /estern banks can reverberate through financial systems in emerging markets. $he advantages of greater foreign bank participation are clearF $hey tend to increase the efficiency of the local banking system, bring in more sophisticated financial services and have the ability to nurse !eak banks back to health. $hat underlies the case for greater freedom for foreign banks. $he credit crisis has brought the dark underside into focus. -lobal banks that boast of the best practices in the !ay they allocate capital and manage risks are also prone to make elementary mistakes, partly because of the imperfect nature of regulations and partly because bankers have perverse incentives to be loose !ith other people@s money.

Be! rules announced by the ,eserve Bank of India for the foreign banks in India in this budget have put up great hopes among foreign banks !hich allo! them to gro! unfettered. Bo! foreign banks in India are permitted to set up local subsidiaries. $he policy conveys that foreign banks in India may not ac0uire Indian ones 6e*cept for !eak banks identified by the ,BI, on its terms7 and their Indian subsidiaries !ill not be able to open branches freely.

22

Foreign banks in India $he options for foreign banks in India have increased. $hey have much more fle*ibility vis"a"vis the nature of their operations in India. Banks !ill take a choice on !hat option they !ould follo! depending on their strategies and the !ay they operate in other markets. Some banks are comfortable operating as subsidiaries !hile some are comfortable !ith the merger and ac0uisition route. Some on the other hand, may prefer to stick to the branch operation route since this !ould maintain a status 0uo and not entail some of the additional burdens like increase priority sector lending and adhering to the ompanies Act. $his is the route that is likely to be follo!ed by the smaller foreign banks !ho are niche players in the Indian banking sector. It is really difficult to give an opinion about !hat to e*pect from the ne! rules for setting up subsidiaries by foreign banks. It !ill be up to individual banks to take a call on the route that they !ant to take. Assessment is that some of the bigger foreign banks in India, especially the ones !ho have indicated they may !ant to take up a 23 per cent stake in a private bank, may go in for a subsidiary. But the smaller foreign banks !ill not go in for this kind of a set"up and !ill prefer to continue operating the !ay they have been. $he option of setting up a subsidiary !ill have its o!n pros and cons. It !ill allo! foreign banks to raise subordinate debt in the local market. But it !ould also mean adhering to the provisions of the ompanies Act, changes in the 0uantum of directed lending and in the remuneration of senior bankers in tune !ith guidelines of the Indian la!. It !ill be up to individual banks to use the subsidiary option. ?o!ever, it may not affect the taking over of 23 per cent in an Indian private sector bank. Foreign bankers are of the vie! that one of the ma1or dra!s for setting up a subsidiary !ould have been the ability to set up branches !ithout re0uiring a ,eserve Bank of India 6,BI7 license 6like other Indian banks7, but no! getting a license for a branch from the central bank has also become much easier. Foreign banks in India no!, have three options before them. $he first, of course, is to continue as a branch operation !ith the necessary ,BI approvals and gro! the business organically. $his option !ould have ramifications for tier"1 and tier"# capital and they !ill have to either bring in capital or retain their profit to carry on the same level of business. Some banks may decide that it is better to be a bank in this category i.e. be a better but different bank and gro! its business. $he second option is to continue in India and then take a stake of 23 per cent in a private bank in India. But this option is not an easy option since it !ould entail t!o brands in the same country and dilute the brand e0uity. 2.

Foreign banks in India It may be a good option for a bank from outside, since it can take control of a local bank !ith an e*isting infrastructure. But the bank !ill have to take the third option is local incorporation. But a net!ork !ill still have to be build since an e*isting net!ork !ill not be present. But the bank !ill have access to capital !ith the choice of raising tier"# capital in the local market like the Indian banks. Finance minister in the Budget had allo!ed foreign banks the option to function as a subsidiary as against a branch set up in India, !hich is !hat the foreign banks have at the moment. But foreign banks !ill have to adhere to the rules and regulations !hich the private and state run banks follo!. $he operational guidelines have not yet come out and the ,BI is said to be in the process of formulating the same. Some economists are of the vie! that Foreign Banks should, not be allo!ed to operate in the country. But permission to such banks to operate in the country is unavoidable on the basis of reciprocity. $his is certainly the vie! of the ,eserve Bank of India, and it is 1ustified by the success of Indian Banks operating in foreign countries. Indian Banks have been rapidly e*panding their overseas operations. Bet!een 13(. and 13(;, the number of offices of Indian Banks in foreign countries had increased by 2;, from (( to 1#.. $his is in contrast !ith the stagnant number of Foreign Bank Affices in India. As a conse0uence, the gro!th of business of Indian Banks has been phenomenal as compared to that of the branches of their foreign counterparts in India. 9eposits and advances of Indian Banks abroad have increased by 12: and 1;: respectively, !hereas the corresponding figures of Foreign Banks in India are #;: and 5): respectively. In terms of remittances of the present banks also, Indian banks are ahead. In 13(+, they remitted ,s. 3) millions to India, !here their counterparts remitted ,s. () millions only. Indian Banks abroad are involved in many ne! banking activities. State Bank of India and Bank of Baroda, the t!o leaders in the sphere, are raising foreign currency funds, for both private and public sector concerns. In addition, these banks are funding many 1oint ventures in South 8ast Asia. For instance, SBI is funding 1oint ventures in Singapore, Indonesia and Dalaysia. $he Bank has arranged finances to the tune of ' (.) million dollars.

/e can see clearly that Indian Banks are indeed generating a lot of business overseas. At present they are operating in as many as #+ countries of !hich only eight countries have their o!n bank branches in India. $hus, the 0uestion of reciprocity does indeed have relevance, because, if !e

2+

Foreign banks in India

!ant to seek profitable opportunities overseas, !e must be prepared to open our o!n gates also. In short, the operation of foreign banks in India is fully 1ustified. It is in our national interest.

In)ia a#t,a..' %a*$(s %$(!i"n 1anks9At present, there are .) foreign banks operating in India !ith a net!ork of a number of branches and off"site A$Ds.

$he facts indicate that the regulatory regime follo!ed by the ,BI in respect of foreign banks is non"discriminatory, and is, in fact, very liberal by global standards. India issues a single class of banking license to foreign banks and does not re0uire them to graduate from a lo!er to a higher category of banking license over a number of years as is the practice follo!ed in certain other 1urisdictions. $his places them virtually on the same footing as an Indian bank and does not place any restrictions on the scope of their operations. $his is in contrast !ith practices in many other countries. Bo restrictions have been placed on the establishment of non"banking financial subsidiaries in India by foreign banks or their group companies. 9eposit insurance cover is uniformly available to all foreign banks at a discriminatory rate of premium. In many other countries there is a discriminatory regime. $he prudential norms applicable to foreign banks for capital ade0uacy, income recognition and asset classification are, by and large, the same as for the Indian banks. &nlike some of the countries !here overall e*posure limits have been placed on the foreign"country related business, India has not placed any restriction on the kind of business that can be routed through the branchesofforeignbanks. $his has been advantageous to foreign bank branches as the entire home"country business is generally routed through these branches. Substantial FII business is also handled e*clusively by foreign banks. In fact, some Indian banks contend that a certain amount of positive discrimination e*ists in favor of foreign banks by !ay of lo!er priority sector lending re0uirement at 5# per cent of the ad1usted net bank credit as against a level of 2) per cent re0uired for Indian banks. 2(

Foreign banks in India

&nlike in the case of Indian banks, the sub"ceiling in respect of agricultural advances is also not applicable to foreign banks !hereas e*port credit granted by foreign banks can be reckoned to!ards priority sector lending obligation, !hich is not permitted for Indian banks. At the end of Eune #))(, foreign banks had a +.11 per cent share in total deposits in the Indian commercial banking system and +.;5 per cent in terms of advances. Foreign banks !ere far more dominant in the off"balance sheet business !ith a market share of as high as(#.++percent. Besides foreign banks, there are also t!o large Indian private sector banks in !hich the non"resident o!nership is very close to the (2 per cent permitted, !hich is !hy they can be considered as incorporated in India but predominantly foreign"o!ned banks. $hese banks together !ith the foreign banks have a combined market share in the deposits, advances and off"balance"sheet business of 1(.2+, 1;.+. and (+.+5 per cent, respectively, !hich, by no means, are insignificant levels. Doreover, there are also about 1) large listed public sector banks 6%SBs7 in !hich the non"residentIFII shareholding !as close to the permitted ceiling of #) per cent, as at Darch"end #))(. In these %SBs, resident private shareholding !ould thus be close to 5) per cent only. In the foreign e*change market, these banks had a 21 per cent share in the total fore* turnover in #)).")+ and this rose to .# per cent in the first half of #))(");. Another dimension of the foreign banks< functioning in India is the returns generated from their Indian operations. $he net profit per branch for foreign banks in India for the year #)).")+ !as ,s 11.33 crore 6,s 113.3 million7 as against the corresponding figure of ,s).55crore6,s5.5million7 for %SBs. Further, for the year #))+")(, the ,eturn on Assets 6,AA7 of foreign banks !as 1.+. per cent !hile the ,eturn on 80uity 6,A87 !as 12.)# per cent, as against the corresponding figures of ).;# per cent and 15.+# per cent for %SBs. $hese returns need to be vie!ed in the conte*t of the international benchmarks for these parameters, !hich are generally considerably lo!er. =et another aspect of the foreign banks< operations is the authorization of their branches in India. As per India<s e*isting /$A commitments, our obligation is to permit to 2;

Foreign banks in India

foreign banks only 1# licenses per year, including ne! entrants and e*isting banks " this does not include A$Ds. 9uring the period #))5 to Actober #))(, ,BI authorized as many as (. branches of foreign banks in India, e*cluding the off"site A$Ds set up by them. In this conte*t, an illustration !ould be revealing of the ground realities. Bet!een #))5 and Actober #))(, India had granted 13 authorizations to &S"based banks, most of !hich also stand utilized. ?o!ever, during the same five"year period, the &S did not authorize any office of Indian banks in &S territory, vis"R"vis the re0uests for setting up three branches, t!o subsidiaries and nine representative offices. Some of the re0uests have been pending !ith &S authorities for more than five years. =et another aspect of foreign participation in the Indian financial sector is the foreign o!nership of BBF s operating in India. As of August #))(, in systemically important non"deposit"taking 6B9"SI7 BBF s, those !ith some element of foreign o!nership had an asset base of ,s ;(,.2# crore 6,s ;(..2# billion7 and accounted for more than #+ per cent of the total assets of this class of BBF s. Af these, the BBF s !ith ma1ority foreign o!nership had an asset base of ,s 52,)3. crore 6,s 52).3. billion7 accounting for 3.# per cent of the total assets of this class of companies. $he B9"SI BBF s, !hich are not closely regulated by the ,BI, therefore, provide in certain !ays a means of e*panding the reach of the foreign banks in India. $hus, the current policy environment enables a fair level of foreign participation even in the non"banking financial sector of the country.

23

Foreign banks in India

CHAPTER-11 HSBC A FOREIGN BANK

.)

Foreign banks in India

CHAPTER-11 HSBC A FOREIGN BANK

HSBC AN O:ER:IEA9?SB <s origins in India date back to 1;.5, !hen the Dercantile Bank of India !as established in Dumbai. $he Bank has since, steadily gro!n in reach and service offerings, keeping pace !ith the evolving banking and financial needs of its customers. In India, the Bank offers a comprehensive suite of !orld"class products and services to its corporate and commercial banking clients as also to a fast gro!ing personal banking customer base.

HSBC G($,- !ntiti!s in In)ia $he ?ong Cong and Shanghai Banking orporation 4imited 6?SB 7 ?SB Asset Danagement 6India7 %rivate 4imited ?SB -lobal ,esourcing I ?SB 8lectronic 9ata %rocessing 6India7 %rivate 4imited ?SB Insurance Brokers 6India7 %rivate 4imited ?SB Aperations and %rocessing 8nterprise 6India7 %rivate 4imited ?SB %rivate 80uity Danagement 6Dauritius7 4imited ?SB %rofessional Services 6India7 %rivate 4imited ?SB Securities and apital Darkets 6India7 %rivate 4imited ?SB Soft!are 9evelopment 6India7 %rivate 4imited

.1

Foreign banks in India

History:-

$he antecedents of the ?SB -roup in India can be traced back to Actober 1;.5 !hen the Dercantile Bank of India, 4ondon and opened offices in 4ondon, Dadras6 hennai7, hina !as founded in Bombay 6no! olombo and Candy, follo!ed by Dumbai7. Starting !ith an authorized capital of ,s . million, the Dercantile Bank soon alcutta6Colkata7, Singapore, ?ong Cong, anton6-uan cho!7 and Shanghai by 1;... $he follo!ing hundred years !ere in many !ays propitious for the Dercantile Bank. In 13.) it moved into its ne! head office building in Dumbai.at Flora Fountain. $he ac0uisition in 13.3 by $he ?ong Cong and Shanghai Banking orporation 4imited of the Dercantile Bank !as a decisive factor in laying the foundation for today<s ?SB -roup. Founded in 1;+. to serve the needs of the merchants of the finance the gro!ing trade bet!een been an international bank from its hina coast and has days. hina, 8urope and the &nited States, ?SB earliest

After the Dercantile Bank !as ac0uired by $he ?ong Cong and Shanghai Banking orporation, the Flora Fountain building became and remains to this day, the ?ead Affice of the ?SB -roup in India.

$hrough the 133)s, ?SB

has vigorously developed its role as one of the leading

banking and financial services organizations in the !orld. Its strategy of <managing for value< emphasizes the -roup<s uni0ue balance of business and earnings bet!een older, mature economies and faster"gro!ing emerging markets.

.#

Foreign banks in India ?SB in India is proud to have retained the -roup<s pioneering streak by being an

active partner in the development of the Indian banking industry " even giving India its first A$D !ay back in 13;(. $he organisation<s adaptability, resilience and commitment to its customers have further enabled it to survive through turbulent times and prosper through good times over the past 1.) years.

BUSINESS OF HSBC Bank9P!(s$na. Bankin"

?SB offers a !ide range of personal financial services, including personal lending and deposit products, through its branch net!ork in Ahmedabad, Bangalore, hennai, handigarh, oimbatore, -urgaon, ?yderabad, Eaipur, Cochi, Colkata, 4udhiana, Dumbai, Be! 9elhi, Boida, %une, $hane, $rivandrum and Hisakhapatnam. Also offered branch"!ide are international -old and lassic credit cards from HISA and Daster ard and debit cards from Hisa. ustomers have access to #2"hour banking services through an e*tensive net!ork of automated teller machines 6A$Ds7, an integrated all entre, and internet banking.

N$n R!si)!nt In)ian Bankin"

?SB <s Bon ,esident Indian Banking 6B,I7 centres located in Asia" %acific, the Diddle 8ast, 8urope and Borth America, together !ith ?SB <s offices !orld!ide, provide the international Indian 9iaspora access to a range of products and services. $hese include B,I related investment 6both international and domestic7, transactional and deposit products, together !ith a full range of personal and private banking products in India and overseas. Internet banking also provides easy access to ?SB services.

Finan#ia. P.annin" S!(*i#!s

Services include investment and custodian management and access to stock broking and insurance services, !hich are offered to resident as !ell as non" residen Indians.

.5

Foreign banks in India

C$(-$(at! Bankin"
?SB has !ell"established, long"term corporate banking relationships !ith large domestic Indian corporations and foreign multinationals operating in India. Services include term and !orking capital finance, trade facilities, corporate deposits, syndications, payments and cash management services and factoring.

B,sin!ss Bankin"
?SB <s 8*tra Dile Business Banking offers t!o types of account to small and medium"sized businesses " $he Business Account and the Business Hantage Account. Services include Business %hone Banking, Business 9oorstep Banking and Dulti Branch Business Banking.

Pa'&!nts an) Cash 7ana"!&!nt

?SB provides integrated domestic and regional transaction support to corporate clients through a sophisticated range of cash management solutions, including collection and payment services and integration !ith customer back"end systems. Aperations and client services are ISA 3))1 certified. ?e*agon, the ?SB -roup<s dedicated electronic banking service allo!s users to perform financial transactions, obtain international financial markets information, and revie! details of their domestic and international accounts, from any!here in the !orld, #2 hours a day.

T(a)! Cint!(nati$na. an) )$&!sti#D an) Fa#t$(in" S!(*i#!s

A !ide range of solutions tailored to meet customer<s re0uirements for both domestic and international businesses is offered. ?SB is also one of the leading banks involved in the bullion business through its offices in Ahmedabad, Bangalore, hennai, ?yderabad, Colkata, Be! 9elhi and is supported by the -roup<s global e*pertise in the precious metal business. ?SB is the leading provider of trade services in India and its trade centers are ISA 3))# certified.

Instit,ti$na. Bankin"
/orking closely !ith -roup offices in India and overseas, trade services, payments and cash management, treasury and capital markets, custody and clearing, and .2

Foreign banks in India correspondent and electronic banking activities are offered to banks, financial institutions, securities houses, insurance companies, asset management companies and other non"banking companies, non"government and development organizations operating inIndia.

T(!as,(' an) Ca-ita. 7a(k!ts

lients consistently rate ?SB <s $reasury business as one of the best in India. Its dealing room in Dumbai is one of the largest in the country, serving clients in Dumbai and in the ma1or metropolitan centers across the country. It provides a comprehensive range of products !hich include " foreign e*change, money market and fi*ed income products and derivatives in both rupees and ma1or currencies.

C,st$)' an) C.!a(in"

$he leading custodian in Asia, ?SB <s custody and clearing services are available in #; markets in Asia"%acific and the Diddle 8ast. /ith e*perienced staff and the latest technology, ?SB is the premier provider of sub"custodian and clearing services to foreign institutional investors 6FIIs7 in India. ?SB clients include the domestic fund management sector in both the retail and institutional segments. Institutional Fund Services launched by the bank offers a comprehensive suite of products to domestic mutual funds and insurance companies ranging from custody, fund administration services, unit distribution and ash Danagement Services.

Ins,(an#!
?SB Insurance Brokers 6India7 %rivate 4imited is licensed by the Insurance ,egulatory 9evelopment Authority 6I,9A7 to operate as a composite insurance broking company, !hich !ill function as a direct and a reinsurance broker.

In*!st&!nt 1ankin"
?SB Securities and apital Darkets 6India7 %rivate 4imited has t!o main business lines. It@s Institutional and proprietary broking business is based in Dumbai and, has seats on t!o of India<s premier stock e*changes, the Bombay Stock 8*change and the Bational Stock 8*change. It deals in Indian securities for both Indian and international institutions and for select retail clients and is backed by an e*tensive research team. $he orporate Finance and Advisory business, !ith offices in Dumbai and Be! 9elhi, offers a full range of integrated investment banking services in India and internationally.

..

Foreign banks in India

CHAPTER-12 Th! i&-a#t $n %inan#ia. an) !#$n$&i# sta1i.it'9-

.+

Foreign banks in India

.(