Group chairman of HSBC Stephen Green as in Mumbai just for a day. Shuttling between meetings and a select press meet, he found time to speak to Mint’s Gargi Banerjee on HSBC’s India plans. Excerpts from the conversations:
What lesson have you learnt from your subprime mortgage lending experience?
Our experience from this error is that a lot of customers were buying mortgage services from brokers and that’s where things went wrong. We have realized that there must be direct contact between the customer and the bank and we strengthened direct contact with the customer in the US. We had to carry out some management-level changes in the US, but now things are under control.
Do you apprehend such a situation in India?
In India, the mortgage services concept does not exist, and our experience tells us that we will not introduce it in India. Mortgage business is a perfectly good business in India and we are doing that well here.
On earlier occasions, HSBC had shown keen interest in replicating the international household model in India. Does that still remain your focus in India?
Yes. The household model is very successful worldwide and we think there is a great potential for it in India. Our consumer-finance model, which we launched through Pragati Finance eight months ago in India, has been a success story. We are already writing 10,000 loans a month to over 20 locations in India. We have access to urban unbanked, who would have earlier not thought of HSBC as their bank of choice. Our immediate focus, however, is to support the aspirations of smaller Indian companies and we will continue to focus on the small and medium entrepreneurs.
How do India and China compare when it comes to investment?
I am often asked about whether I prefer China to India (looks amused). The truth is that we are investing in both countries. We have $5 billion of investments in China compared with $1.3 billion in India. However, our employee strength in India—6,500—is much more (than China). Both countries are in a phase of rapid growth and we have long term commitments to both.
Do you feel the need to recapitalize the Indian business?
For us, India is the most important market among all emerging markets. It has our full support and there is no limit on investments when it comes to our India business. Last year, India was the fastest-growing market and we are very happy with that.
You recently tied up with Canara Bank and Oriental Bank of Commerce on the insurance side.
So far, we have signed a memorandum of understanding to form a joint venture. These banks have a loyal customer base and we have insurance expertise. Together, we felt that we could cater to the insurance needs of 40 million customer base across the country and this is a great opportunity for us. This is also one of the firsts for any foreign bank in India—the tie-up with local banks to provide insurance products to Indian customers.
Do you plan to change your strategy in the investment banking space?
No. Our policy remains consistent about providing support as much to the large corporations as well as the smaller Indian companies which are growing. We are not losing sleep over competition and are positive that our services will set us apart.
Will you consider picking up stake in local banks in 2009 when the sector may open up?
We do not have any specific plans as of now and we will cross the bridge later. We will shape our plans as the policy framework evolves. We are very clear about the fact that we are a guest in the country. We are very optimistic about the India story, and think banks like ourselves will have large part to play in the growing India story.