India has big scope for foreign banks
Gulf Times, 28 June 2011
R Seetharaman speaking at an Indian business community meeting in Italy
Doha Bank Group CEO, R Seetharaman, addressed a meeting of global Indian business community in Naples, Italy, recently. More than 300 global industrial leaders participated in the programme, which was held under the theme “Globalising Indian firms”.

Seetharaman participated in the panel discussion on “Financial services- the view from India”. The banker said the Indian economy, which grew at 7.8% in Q1, 2011 is expected to grow between 8-9% this year. This month the Reserve Bank of India raised interest rates on account of higher inflation, which has currently exceeded 9%. In the November 2010 G20 meeting, an agreement was reached wherein India will be one of the 10 largest members in IMF. Indian rupee has got a new unique symbol in 2010. UN estimates India would contribute a quarter of addition to world’s workforce over next 10 years.

Seetharaman gave his view on regulations for presence of foreign banks in India. He said the budget of 2011-12 has plans to give bank licences to new players. Rabbo Bank has received banking licence in April 2011, Industrial and Commercial Bank of China (ICBC) was recently granted a business licence for branch in India in May 2011.

Major MNC banks and Indian players are also considering full-fledged banking operations in India. According to PriceWaterhouseCoopers (PWC), banking assets of emerging nations are likely to overtake that of G7 economies by the year 2050, with India likely to emerge as the third largest domestic banking market in the world in the next three decades. With an encouraging regulatory framework in a growing economy global and Indian players should strive to obtain new licences and also expand on new products in the coming years.

Seetharaman gave his outlook on products and services for foreign banks seeking presence in India. “India is a huge and growing economy, hence it gives ample scope for foreign banks across various segments. Industrial growth is expected to expand in the coming years. Indian trade with other foreign countries shows an upward trend. Sectors such as infrastructure have immense scope. Hence there is potential for both funded and non-funded facilities in India.”

However, the Doha Bank Group CEO said, the challenge is to determine pricing of products based on inflation trends. “India has a rising middle class population and with developments in global retailing, the potential for retail products are immense. Indian retail customers are more tech-savy and constant innovation is needed to understand their needs. Due to rising foreign trade innovative treasury and forex products can be introduced to address customer needs. Derivatives and structured products can also be designed to suit customer needs.”

Seetharaman spoke about foreign banks that are seeking opportunities in Indian financial markets. “The long-term fundamentals of Indian economy are sound, which encourages both institutional and retail investors to enter the Indian capital market through various routes. The current budget also encourages Foreign Institutional Investors (FIIs) to invest in mutual fund schemes and will lead to lot more integration of markets.

“Foreign investment also received encouragement with the recent budget increasing FII limit in corporate infrastructure bonds by $20bn to $40bn. Private banking/wealth management solutions have good potential in India.”