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3%
4%
31%
Source: World Wealth Report, 2013, Capgemini & RBS Wealth Management
Figure 1
0.5
0.6
3.4
Asia Pacific
North America
3.2 Europe
Middle East & Africa
South America
3.4
Source: World Wealth Report, 2013, Capgemini & RBS Wealth Management
Figure 2
trading activity has ensured the establishment tially higher had the RBI not been so stringent
of trading relations with more countries. This about giving out bank and branch licenses.
in turn has led banks in those countries to set
up branches and representative offices in India Obstacles Facing Foreign Banks
(and vice versa), and explore the possibility of Foreign Banks looking to start operations in India
expanding into traditional banking services. are likely to face challenges that are both unique
and specific to any foreign entity that wants to
The list of foreign bank branches in India, do business in India. The difference is that the
as well as the roster of foreign banks hav- risks associated with setting up and operating a
ing representative offices in the country, will bank will be far greater than in any other type
show that expansion in trade seems to be the of business.
primary reason these banks established a
presence in India.8 Statistically, the number Regulatory Issues
of foreign banks in India has gone up from
For any bank looking to start operations in India –
28 in 2007–2008 to 43 in 2012–13, while the
foreign or domestic – compliance with stringent
number of branches has expanded from 277 to
RBI regulations is a major challenge. For example:
331 in the same period. Although this increase
may not seem overly impressive, one should
No differential licensing — The RBI does not
consider that the number of foreign banks
encourage banks whose business model does
applying for licenses could have been substan-
60% 21%
28% 27% 28% 20% 21%
27% 13% 20%
40% 25%
20%
30% 48% 32% 38% 41% 38% 42% 36% 44% 42%
0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(through July)
Inbound Outbound Domestic
Source: Doing Deals Successfully in India – Lessons from Dealmakers. KPMG report
Figure 3
Pros Cons
Less Operational
At Par With Domestic Flexibility
Banks in Terms of
Branch Expansion
Greater Corporate
ments
Raising of Non-Equity Go rnance Require
ve
Capital in India
Figure 4
Consolidation
of Banks to
Create Global
Banks
An Indic-
ative 4-tier Differential
Reorientation Banking
of the Banking License
Structure Regime
To increase
competition.
Proposed Banking
Promote efficiency of
Indian Sector
local banking system.
Banks’ Reorientation Presence of
Presence
Overseas-Local
Foreign Banks To bring in
in India sophisticated financial
Incorporation/
services and risk-
JV
management
methodologies.
Continuous Conversion Local incorporation
Licensing of of Some Urban is more desirable.
Banks - Co-ops Into
“On-tap” Commercial
Licensing Banks
Figure 5
2. www.crisil.com
3. www.financialservices.gov.in
4. www.livemint.com
11. RBI Discussion paper – “Banking Structure in India – The Way Forward,” August, 2013.
Footnote
1
http://rbidocs.rbi.org.in/rdocs/Content/pdfs/71207.pdf (source: rbi.org)
2
http://www.capgemini.com/thought-leadership/world-wealth-report-2013-from-capgemini-and-rbc-
wealth-management
3
http://www.ft.com/intl/cms/s/0/12eab212-9542-11e2-a151-00144feabdc0.html#axzz2cgOVcUBT
4
http://profit.ndtv.com/news/corporates/article-citibank-india-profit-grows-41-4-to-rs-2-718-
crore-324018
5
http://www.ft.com/intl/cms/s/0/12eab212-9542-11e2-a151-00144feabdc0.html#axzz2cgOVcUBT
6
http://eximbankindia.com/ar1213.pdf (source: eximbankindia.com)
7
http://210.212.115.113:81/Rahul%20Singh/Mexico%20ISP%20prog/4.%20India%20forei gn%
20trade.pdf
8
http://rbidocs.rbi.org.in/rdocs/Content/pdfs/71207.pdf
9
http://www.rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=713 (source: rbi.org)
10
http://financialservices.gov.in/banking/Overviewofefforts.pdf (source: financialservices.gov.in)
11
http://www.financialexpress.com/news/column-need-to-rethink-priority-sector-lending/1042131
12
http://www.thehindubusinessline.com/industry-and-economy/banking/banks-may-not-hit-priority-
sector-lending-target-for-fy12/article3381062.ece
13
http://articles.economictimes.indiatimes.com/2013-08-06/news/41131777_1_foreign-banks-parent-
banks-mnc-banks
14
http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2313 (source: rbi.org)
15
http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx
16
http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29405
Sachin Joshi is a Manager within Cognizant Business Consulting, based in Pune, India. He has over
14 years of industry experience and over 10 years of experience in business consulting and banking
product transformation programs in the Asia-Pacific region, Europe and Africa. His expertise includes
business process management, business requirement management, core banking product fitment and
GAP analysis. Sachin holds a bachelor’s degree from Pune University and is a management graduate
from the Department of Management Sciences, University of Pune. He can be reached at Sachin.joshi2@
cognizant.com.
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