IndusInd Bank in Vietnam Group 3

Ashish Bhalla Bella Gautam Devang Sharma Gaurav Gupta Gaurav Sareen

Macroeconomic Scenario in Vietnam

Banking Sector in Vietnam

Total loans in Vietnam's banking system are estimated at 2,500 trillion dong to 2,700 trillion dong, the government has said. ($1=20,830 dong) Corporate lending accounts for nearly half total loans Nearly 25 % of all lenders is to manufacturing and processing sector Over 60% of all loans are less than 1 Year tenor Base rate 9%, rediscount interest rate 5%, interest rate refinancing 7% NPL in 2012 was 4.67% Credit to GDP ratio of 105% compared to 57% in India

FDI Regulation in Vietnam

FDI Incentives: Preferential CIT rate of 10-20%. Reduction & exemption of rental expenses. Losses carry forward. Licensing & regulatory process: Registration for an investment certificate. Authority for approval given to the Peoples Committee (PC). No tax on profit repatriation. Transfer Pricing: Mandatory disclosure of RPTs and guidelines on APAs

Taxation Environment
Withholding tax Country China India Indonesia Malaysia Singapore Thailand Forex Controls Strict exchange control by the Chinese govt. Full Current Acc. & Partial Capital Acc. Covertibility. Freely convertible, but with Central bank's approval for transactions over 100 mill. IDR Freely Convertible Freely Convertible Repatriation allowed freely in all currencies except the Thai Baht. Remittance overseas allowed subject to govt. approval Corporate Tax on Capital Dividends Interest Tax Rate Dividends Gains Tax 25 25 25 10 10 30 25 16.22 10 to 20 5 to 30 Nil Nil 20 Nil 20 Nil Nil 10 20 20 15 15 15

15 Nil (to non 25 residends) 17 Nil 20 20

Vietnam

25

Nil

25

Nil

Vietnam has a Double Taxation Avoidance Treaty with India.

Other Factors Affecting Investment Decision

Maturity Exchange Debt Exchange Exchange as Percentage of Rate Rate Capital Rate Fluctuation Forecast Spread Markets of GDP
INR/LKR INR/CNY INR/IDR INR/SGD INR/MYR INR/VND USD 0.63% INR/ USD2.97% Exchange0.70% Rate Depreciation Period Average 0.50% 0.87% VND/ 0.40% Historical IRP RPPP Period Low 5 yr GM 0.15% 0.00% 0.00% Depreciation Rate 0.06% 5.08% 0.00% 0.59% 0.06% 1.59%1.65% 3.72% 9.01% 17 yr CAGR Exchange Rate Period High 1.95% 10 yr GM2.65% Depreciation Rate 3.44% 3.36% 2.33% -0.11% 9.46%

RPPP does not hold for Vietnam and India

IRP does not hold for Vietnam and India

Total Market capitalization of Listed Companies (% age of GDP)

Conclusion
Vietnam not a favorable investment destination for Banking Sector because:
1. 2. 3. 4. 5. 6. 7. 8. 9. Artificial devaluation of currency Unstable inflation situation Erosion of free reserves High penetration in terms of Credit to GDP ratio compared to India High degree of Capital Outflow Control by the govt. Inability to forecast INR/VND exchange rate Illiquidity in the currency exchange market. Perennially depreciating VND Lack of well developed Capital Markets