Mumbai: The Indian private banking arm of Royal Bank of Scotland (RBS) plans to raise its headcount by 50% to 120 by mid-2012, but fewer investment avenues for wealthy clients in India is a challenge for the sector, a top official said.
The unit, which plans to triple its assets under management to $3 billion in India over the next four-to-five years, sees strong long-term growth in wealth management business in the country, said Shiv Gupta, head of India private banking at RBS.
Asia, home to more than 3 million millionaires, has become a battleground for private banks as global and Asian players compete for market share in a region that is fast outpacing the United States and Europe in economic growth.
“Lot of people who are looking at India as a strategic growth market are looking at the potential of India rather than what it represents just right now,” Gupta, who has been with RBS Group for 10 years, told Reuters in an interview.
“The scale in this opportunity exists in the longer term and what we might be seeing today are signs of life in the scope of the wealth spectrum today but what you are really gearing yourself to is longer term opportunity.”
Asset under management in the sector are poised to rise to $1.2 trillion by 2014 on the back of a fast-growing economy and rising incomes, up from $780 billion last year and $330 billion in 2008, a report by consultancy firm Celent said.
Global banks such as RBS, Credit Suisse, Morgan Stanley and Standard Chartered and many local players are fast expanding their wealth management business in India, aiming to hire hundreds of bankers between them.
Barclays , which has about 130 employees in India’s private banking business, plans to raise the headcount by 20% to 25% in 2011, its India wealth unit chief executive Satya Bansal said last week.
Despite the strong growth prospects, limited investments opportunities for clients is a challenge, said Gupta of RBS private banking unit, which manages clients with at least $1 million in investible surplus.
“If you look at the alternative investment space for example, there are no hedge funds for all practical purposes. If you look at the fixed-income market on the whole, it’s pretty shallow and pretty narrow,” Gupta said.
“Those are the kinds of limitations that are born out of the regulatory environment that obviously do not allow you to widen and create greater depth and breadth off the investment offerings to clients in India.”
Wealth in India and China will increase at a compounded annual growth rate of 18% and 14%, respectively from end-2010 through 2015, faster than the 5.9% growth in global wealth, a Boston Consulting Group report showed.
Private banks are hiring aggressively in India, which has 190,000 millionaire households—small compared to 5.2 million such households in the United States and 1.1 million in China—but it is one of the fastest growing markets in the world.
“The scope of the opportunity, both taking into account where we are and the way we are expected to grow, creates for a very large pie for people to address even if you incorporate all the people who are entering the industry now,” Gupta said.
The market volatility, rising inflation and slowing growth are, however, making private bank clients cautious about their investments decisions in the short-term, Gupta, whose client base include non-resident Indians and entrepreneurs, said.
“But that doesn’t mean that there aren’t clients who are ready to make decisions from a longer term perspective as well,” he said, adding investors were now preferring short-term fixed-income opportunities due to rising interest rates.