Mumbai: After waiting for five years for a Reserve Bank of India approval, Qatar-based Doha Bank is now readying to start banking operations in the country.
The lender, the largest in the state of Qatar, expects to receive clearance from the Indian apex bank in the next few months to begin its commercial banking operations in the world’s second fastest growing major economy, said R. Seetharaman, chief executive officer of Doha Bank group.
“I would think so (the RBI licence to come in the next few months),” Seetharaman said. “We want a licence in India to partake in the overall economic momentum. We will primarily be a corporate bank with focus also in areas like electronic commerce and treasury investments.”
RBI has been hesitant to give a licence to Doha Bank as the regulator was looking for reciprocity in the banking sector from Qatar banking authorities, or permission to allow Indian banks’ entry into the Qatar banking industry, according to Seetharaman.
There are two banks—State Bank of India (SBI) and ICICI Bank Ltd—that have licences to operate in Qatar Financial Centre (QFC). There are currently no Qatar-based banks operating in India.
Doha Bank first applied for a branch licence in 2005 and renewed its application last year. “In my opinion, the issue (of reciprocity) has got resolved. We have one unified regulator now. So, conceptually, the issue has got resolved to promote bilateral values,” Seetharaman said. “The regulators are looking at it (allowing entry for banks) seriously.”
Under current norms, Indian banks are not allowed retail banking in Qatar, which confines their businesses mostly to funding India-based corporations. QFC, however, allows banks to deal with retail customers with net-worth of $1 million.
An SBI official said, on condition of anonymity, that Qatar banking regulators are still not forthcoming to allow Indian banks to freely operate in that market and lenders are largely confining their operations to corporate financing.
Currently, Doha Bank group is present in India through its brokerage and non-banking financial service (NBFC) businesses under its holding company Doha Brokerage and Financial Services Ltd.
The group already has an exposure of $2.6 billion in India, including the loans given to Indian firms and banks, but the lender is willing to bring in as much as $5 billion once it starts banking operations in the country, Seetharaman said.
The bank has chalked out a preliminary strategy to begin commercial banking operations, in which the primary focus is to fund large firms and small and medium enterprises (SME), he said. The bank is also betting big up on the fast growing remittance and e-commerce businesses.
India currently has 34 foreign banks which operate a total of 320 branches and control at least one-tenth of the local banking sector in terms of assets.
Early this year, RBI had come up with a discussion paper to give a larger role to foreign banks operating in India and favoured subsidiary model for such lenders saying this will enhance their commitment to this market. Under a 1997 World Trade Organization (WTO) agreement, total assets of foreign banks in India cannot exceed 15% of the total banking system. But RBI, in its discussion paper, had changed the limit in terms of capital and reserves of banks.
According to this, when the capital and reserves of foreign banks in India exceed 25% of capital of the banking system, the regulator will restrict further entry of new banks, branch expansion and will make it mandatory to get prior approval for capital infusion, RBI said. Under the WTO agreement, RBI needs to give 12 new branch licences to foreign banks every year, including those given to new entrants and existing players.
Doha Bank, however, has no plans to locally incorporate, as favoured by RBI, and prefers to operate through branch model, Seetharaman said.
Doha Bank, which was incorporated in 1978 and started banking services in 1979, posted net profit of Qatari riyal (QAR) 1.01 billion, up 13% compared with the same period last year for the nine months ending September. During the period, net loans and advances rose to QAR 28.4 billion, up 6.5% from QAR 26.6 billion last year, according to information on its website.
Analysts said the entry of lenders such as Doha Bank is unlikely to make any major impact in the domestic banking sector unless they bring in new business models.
“I do not think he entry of another foreign bank can have any material impact unless they offer new products and services to cater to the emerging client-class such as Islamic banking products,” said K.N. Rahman, deputy research head at Mumbai-based brokerage Way2Wealth Brokers Pvt. Ltd.
RBI does not allow Islamic banking in India.