The changing business landscape of foreign banks in India

- Foreign banks operating in India do not account for even 1 percent of the total disbursed loans and deposits

The business landscape of foreign banks in India seems to be changing. Foreign banks account for about one-third of the list of listed commercial banks in India, but the business share is very small. Listed commercial banks include public and private sector banks, payments banks, small finance banks and regional rural banks and foreign banks. As of March 2022, there were 45 foreign banks with a total of 861 branches. Their number of ATMs was 1,797. Their share in banking assets was less than 6.3 percent, deposits 4.92 percent and loan accounts 3.85 percent.

In comparison, 21 private banks (both new and old) have 37,872 branches and 75,543 ATMs. Their share in assets is 34 percent, deposits 31.8 percent and loan accounts 37.8 percent. Similarly, 12 public sector banks account for 59.7 percent of assets, 63.2 percent of deposits and 58.3 percent of loans. These 12 banks have 84,256 branches in the country and 1,38,056 ATMs across the country.

Looking at the data, the assets of public sector banks are Rs 127 lakh crore, while the assets of private banks are Rs 73.3 lakh crore. The assets of foreign banks are 13.7 lakh crore rupees. Loan account size of public sector and private sector banks respectively Rs. 70.44 lakh crore and Rs. 45.63 lakh crores. The loan account of foreign banks is only Rs 4.64 lakh crore.

DBS Bank India has the largest presence in terms of number of branches and ATMs. With the acquisition of Laxmi Vilas Bank, it has a total of 592 branches. It is followed by Standard Chartered with 100 branches, Citibank with 35 (before selling the retail business to Axis), HSBC with 26 and Deutsche Bank with 17.

DBS Bank has 1,021 ATMs, while Citibank has 488 ATMs. Standard Chartered Bank, HSBC and Deutsche Bank have 167, 74 and 32 branches respectively. After this, no other foreign bank has a double digit number of branches or ATMs. Foreign banks with more than 20 branches in India are required to give 40 per cent of total credit allocation to the priority sector just like domestic banks.

The largest foreign banks in India do not account for even 1 percent of the total disbursed loans and deposits, but their share is proportionally higher when it comes to profits. What is the reason for this? They have a different business structure compared to local banks. Assets or liabilities that do not appear in the books of each category of banks, such as derivatives, bring greater clarity. The share of foreign banks in this segment is 49.7 percent while the share of public and private sector banks is 31.8 percent and 18.5 percent respectively. Although foreign banks account for less than 5 percent of deposits, they are competing with domestic banks for small current and savings accounts. Current and savings accounts of public sector and foreign banks accounted for 43.8 percent of total deposits. The share of private banks is a little over 47 percent. There has always been a hurdle for foreign banks to open branches, but after digitization it is no longer the case. Most foreign banks are looking at opportunities in institutional and corporate banking. HSBC Bank, better known for its multinational banking business, took advantage of the space left by Citibank's exit from the retail business. It is also in the mutual fund business and has a presence in joint insurance ventures. It also wants to start private banking (a part of retail banking). The Indian market is full of unlimited possibilities and international banks know this. But many people are not interested in availing these possibilities.