Foreign lenders are waiting for more clarity on new rules for foreign banks, which were unveiled by the Reserve Bank of India last month.
Doha Bank leads GCC push into India since easing of rules
MUMBAI // Doha Bank has become the first Gulf lender to move into India since the regulator eased rules for foreign banks entering the country.
It coincides with a report from PricewaterhouseCoopers (PwC) which says that India is now too important a market for overseas banks to ignore, despite the apprehensions foreign lenders face amid political and economic uncertainties.
“India continues to pose a unique dilemma,” said Shinjini Kumar, the professional services consultancy’s head of banking and capital markets for India.
Banks, she said, found it difficult to make long-term decisions regarding growth because of concerns about high inflation, lower economic growth, India’s high current-account deficit and threats of credit ratings downgrades.
“Yet, given its inherent growth potential, geopolitical relevance and its status as the largest democracy in the world, India is a difficult market to ignore,” Ms Kumar said.
She explained that foreign banks were generally taking a “wait and watch” approach to India and would “take selective opportunities as they came along to grow”.
India’s economic growth slowed to a decade-low of 5 per cent in the last financial year, and it is argued that more economic reforms are needed to attract investment. Many infrastructure projects have stalled, and with general elections due by May, the political environment is uncertain.
Foreign lenders are also waiting for more clarity on new rules for foreign banks that were unveiled by the Reserve Bank of India (RBI) last month, according to PwC.
The rules are designed to make it easier for overseas banks to open branches in India and potentially take over local companies if they set up wholly owned subsidiaries in the country. Foreign banks currently operate in India as branches rather than subsidiaries. The central bank said the framework would enable foreign lenders to be treated almost on par with local banks.
Foreign banks view India as a long-term opportunity, with the market expected to provide more business in the future once other industries in India open up to more foreign investment, according to PwC.
Doha Bank plans to open a branch in Mumbai soon, offering wholesale and retail banking, and treasury and trade finance services to customers in India. It said it would be the sole Qatari lender to offer such services. GCC banks do not have a massive presence in India; the foreign banking market in India is dominated by Standard Chartered, Citibank and HSBC. Foreign lenders account for a small minority – less than 0.5 per cent – of branches in India. Among the limited GCC representation in the country, Abu Dhabi Commercial Bank has a branch each in Mumbai and Bangalore.
Sheikh Abdul Rahman bin Mohammad bin Jabor Al Thani, Doha Bank’s managing director, said its new licence would “further enhance the niche role Doha Bank is playing and facilitate the movement of trade between Qatar and India”.
He also said India offered growth opportunities in sectors such as infrastructure.
The Qatari bank aims to capitalise on the large number of Indian expatriates and Indian companies in Qatar as well as the wider GCC region.
R Seetharaman, Doha Bank’s group chief executive, said: “Doha Bank has been supporting various Indian companies present in Qatar for their local banking needs and we wish to extend our services and facilities to the same companies for their operations in their home markets as well.”