Citibank with its decision to exit retail banking operations from India became the latest entity among the foreign banks who have exited the Indian market or reduced their exposure over the last few years.

Citibank CEO Jane Frazer, on April 15, announced that Citigroup would exit retail banking business in 13 markets across Asia, the European Union, Middle East, and Africa (EMEA) including India.

Foreign banks have faced tough competition in India, from local rivals to tough regulatory compliances and high capital reserve requirements. Many banks in the past decade have exited the Indian market due to these reasons. A few other foreign players in the banking sector also curtailed their operations to reduce exposure in India.

A number of foreign banks offloaded their large exposures to Indian corporates since last year. This was a result of India's sovereign credit rating being downgraded by the credit rating agency Moody's. The downgrade came after the crisis involving non-banking financial companies (NBFC) in India following defaults at IL&FS, DHFL, Reliance, and Altico.

Even though the corporation's credit themselves were highly rated, foreign banks were eager to reduce their exposure in Indian markets.

This is not a first time occurrence.

Since 1993, numerous foreign banks have either sold off their assets or closed operations in India. One of the first banks to exit the market was ANZ Grindlays bank which sold off its assets in India to Standard Chartered in 2000.

Other major banking corporations like the UK-based Barclays left its retail operations in India in 2009. Deutsche Bank shut its credit card business in India which was acquired by IndusInd. UBS, a Swiss corporation, discarded its banking business in India in 2013.

Two banking corporations from the US, Morgan Stanley and Goldman Sachs also gave up their banking licenses in India. Bank of America-Merrill Lynch sold its wealth management assets to competition instead.

A bit later Dutch banking group ING sold its assets to Kotak Mahindra Bank, which contributed to its growing market cap in the country.

Among the foreign players, while Royal Bank Scotland (RBS), Hong Kong Shanghai Banking Corporation (HSBC) and Standard Chartered Bank have continued their operations in the country, they too have reduced their exposure by selling off assets and operations.

Most of the remaining foreign banks in India, nearly 50 of them which still remain in operations in India, have also been steadily reducing their exposure by closing private banking operations.

These banks have focused on growing markets like wealth management instead.

However, some banks like Singapore's DBS Bank are getting deep on their Indian operations. DBS Bank took over Lakshmi Vilas Bank with the help of the country's Central Bank last year.

According to a LiveMint report, other major corporations like Japan's Mitsubishi UFJ Financial Group Inc. are also interested in expanding their business to India and its growing markets.

It is hard to say if in the future more foreign banking corporations will seek an exit from India as they fail to deal with tough regulatory affairs and poor corporate returns.

First Published:Apr 16, 2021 9:04 PM IST