Global, Banks, India

Why global banks are banking on India

Follow the money for a sure bet, they say -- and the world's big and small banks are doing just that in India's juggernaut economy, whose GDP now approaches $800 billion. Citigroup said last February that it will invest more than half a billion dollars in its Indian operations in 2006; in 2005, it pumped $415 million into its operations there. Others writing expansion checks in India include HSBC, Bank of America, Standard Chartered Bank and Deutsche Bank. Besides organic growth, these banks are expanding in India by buying stakes in private banks and setting up non-bank finance companies.

That India is viewed as one of the biggest growth stories among emerging markets explains only part of the attraction for foreign banks. The country's central bank has outlined the roadmap for foreign players to grow, allowing them to set up branches in rural India and take over weak banks with an investment of up to 74% -- and promises to do more in three more years. Credit off-take has grown 25%-30% annually in recent years, with most of the new action in retail consumer lending, which tends to be happy hunting ground for foreign banks.

Not everybody in the industry is happy, of course, to see bigger room for foreign banks, which some view as not adequately embracing India's developmental agenda.

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