Why Indian banks don’t figure

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: stocks in India have done very well, and yet no Indian bank has been able to acquire anything substantial abroad. Second, the Indian financial market is the fastest growing incremental revenue pool in the world. Every global financial institution is evaluating entry into the Indian market with interest. Currently, however, they look at Indian banks not as predators, but prey. Third, Indian bankers are globally well respected. They occupy top positions in many financial institutions, and Vikram Pandit has just taken over as CEO of Citibank. Finally, banks from countries smaller than India are in the top twenty of the league tables but not Indian banks.

Why is this so? There are two reasons. The first is the structure of the Indian banking market. The state-owned sector, which represents about 65% of the market field, is out of bounds both in terms of getting acquired and from acquiring. As a result, the local market is not allowing individual players to acquire any real scale through acquisition. Only SBI and ICICI have over 10% market share. There are at least another 65 players all with less than 5% share. Second, access to international capital by banks is restricted. As a result, acquisitions abroad become difficult despite high multiples. So our banks, despite being present in one of the fastest growing economies and the most attractive global banking market, are unlikely to sit on the high table of the international market capitalisation league tables. Sad, but true.