Intense competition from private banks may have prompted Standard Chartered Bank to sell its personal loan portfolio to Kotak Mahindra Bank. The bank’s less extensive branch network and smaller liability franchise compared to private banks likely made it challenging to compete effectively in the personal loan market.
Additionally, private banks have become increasingly aggressive in targeting high-net-worth individuals, offering services comparable to those provided by foreign banks.
“Being a customer of a foreign bank used to carry a sense of prestige or premium value. However, there is now little difference in their product offerings compared to private banks,” a senior official of a foreign bank told FE. “With advancements in technology, the retail banking services provided by Indian private banks and foreign banks have essentially converged, making them almost indistinguishable,” he added.
Kotak Mahindra Bank announced on Friday that it would acquire Standard Chartered Bank’s personal loan business in India, which had an outstanding balance of Rs 4,100 crore as of September 30. In a joint statement, Standard Chartered Bank said that its decision to decision to divest the personal loan book was in line with the Bank’s focus to “accelerate growth in the wealth, affluent and SME segment”.
Experts see this deal as part of a broader trend of foreign banks exiting retail banking in India over the past 15 years. During this period, several major foreign banks, including Barclays, Deutsche Bank, and BNP Paribas, have withdrawn from the retail banking sector. Citi’s recent exit is another significant departure, with Axis Bank completing the acquisition of Citibank’s India consumer business for Rs 11,603 crore in March 2023.
“There is a pattern of foreign banks going out of retail banking. Kotak Mahindra Bank and Standard Chartered Bank deal is only selling personal loan book but it has triggered talks of its exit of retail banking,” said a banking analyst. “Retail banking in India has become a volume-driven business, and foreign banks simply cannot compete with domestic private banks in this area. Their high operating costs also make their business model less viable,” he added.
Competition in private banking is getting fierce with private lenders such as Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, IndusInd Bank becoming more aggressive in chasing high net-worth customers. IndusInd Bank aims to grow its wealth management Assets under Management (AuM) from the current $10 billion to $30 billion over the next three years.
The private lender is planning to add nearly 100 relationship managers in three years to drive growth in its wealth management business. State Bank of India is ramping up its wealth management efforts in response to the growing number of affluent people in the country. The largest lender in the country is planning to deploy nearly 2,000 executives as relationship managers and strengthen ties with smaller businesses nationwide.