Foreign Banks: Redrawing The Battlelines

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: Two weeks ago, Citibank kickstarted its celebrations of a 100 years in India with a party at the Taj’s Chambers’ terrace. It also unveiled a new logo. One thing became evident at the party: Citibank is girding up its loins. Developments in the days following gave further evidence of why it is doing so: the Reserve Bank of India (RBI) clarified on issues pertaining to foreign banks’ capital and foreign direct investments (FDI) in private banks. Within just a year, all eyes are now on foreign banks. A definite trend was seen in the run-up to the current situation. The top brass of Citibank’s board -- Sandy Wiell, Robert Rubin, Victor Menezes -- has consistently articulated their interests in India. Detailed media-briefings were also done by HSBC’s John Bond, Aman Mehta; and ABN Amro Bank’s managing board members, CHA Colle and Jan Peter Schmittmann.

At this point, it would be worthwhile to go over what Citibank’s chief executive officer (India), Nanoo Pamnani, wrote in a column on this page (December 3, 2001): "The recent regulatory changes (on tier-2 capital), combined to some extent with environmental factors, locally and globally, might result in a consolidation in the foreign bank segment in India. Smaller players, whose dependence was largely linked to offshore lending being counted towards their capital, will find themselves short on capital and may decide to exit rather than invest incremental capital in marginal operations. A few have already exited. Additionally, banks whose global operations have been severely impacted by problems in either their home country or other international operations may also consider consolidating their position or by going slow on fresh investments. Larger banks will use this opportunity to grow and acquire market share."