From UBS to Morgan Stanley, foreign banks exiting wealth mgmt biz in India

May 03 2014, 10:36 IST
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Experts say, this is because high networth individuals invest most of their wealth in real estate and gold. Experts say, this is because high networth individuals invest most of their wealth in real estate and gold.
SummaryExperts say, this is because HNIs invest most of their wealth in real estate and gold.

(HNIs) in India invest most of their wealth in real estate and gold.

According to Karvy Wealth Report, at the end of FY13, Indian individual wealth in financial assets stands at R109.86 lakh crore whereas Indian individual wealth in physical assets (gold and real estate investments) stands at R92.06 lakh crore. Out of the R109.86 lakh crore, only R26.03 lakh crore is in equity.

“It is true that a high proportion of investments tend to be in real assets due to the prevailing economic and interest rate environment but over the past few years, we have also seen considerable interest in fixed income and money market instruments across varying degrees of credit quality, tenors and investment strategies,” added Gupta. HSBC declined to comment on the story and an email sent to Citi Bank India, remained unanswered.

According to a senior wealth management executive, the businesses of these banks were anyway too small in India. Other reasons behind their exit, he said, could be that Indian HNIs invested only in low-risk portfolios, which did not earn the banks much money.

Even Indian regulations have played a part in these exits. Foreign bankers also took a hit when market regulator Sebi in August 2009 banned entry load to mutual fund distributors. through which they used to charge 2.25% of the investments up front.

“A large number of HNIs in India had their money in Swiss accounts and, after the black money issue, people got wary when these banks came to India. Their fear was if they have accounts in these banks, their money would come under the purview of the RBI which was not the case in Swiss accounts,” he said. Last month, HSBC settled a case for an undisclosed amount wherein it was alleged that the client had faced huge losses owing to the negligence of the bank in managing her portfolio. The client, had deposited R3.6 crore in MFs at the bank.

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