Mumbai: After a gap of a decade, Australia and New Zealand Banking Group Ltd (ANZ) is set to return to India.
The Melbourne-based lender has won approval from India’s central bank to open a branch in the country, enabling it to offer retail and wholesale banking services.
Illustration: Paras Jain / Mint
Re-establishing a branch presence in India is of strategic priority for ANZ as it pursues the objective of becoming a “super regional bank” focused on Australia, New Zealand and Asia-Pacific, the bank said in a press statement.
ANZ had exited India in 2000 after selling its Grindlays Bank unit to Standard Chartered Plc for $1.34 billion (around Rs6,140 crore today). At that time, Grindlays had a staff strength of 3,300 spread across 29 branches in 15 Indian cities.
ANZ Grindlays faced a potential legal claim of A$461 million (Rs1,910 crore today) stemming from a long-running fight with the National Housing Bank in India, which ANZ appealed against. ANZ took an A$145 million abnormal provision in 1997 for the claim and had set aside an additional A$80 million for the case.
“This is an important step for ANZ as part of a long-term commitment to progressively rebuild our presence in India.” said Alex Thursby, ANZ chief executive officer for Asia-Pacific, Europe and America.
“There is a significant and growing economic relationship between Australia and India,” he said. “India is Australia’s fourth largest export market, driven by demand for natural resources with exports totalling more than $15 billion in 2008.”
A senior official at a Mumbai-based headhunting firm said ANZ had already started the process of hiring people. “They are in talks with a few senior officials of Citibank and Standard Chartered Bank to run their India operations,” said the official, who declined to be identified citing client confidentiality.
ANZ is targeting an A$100 million pre-tax profit from India in three-four years.
“The potential and size of the Indian market is significant,” said Bobby Parikh, partner at consultancy BMR and Associates. “The Indian economy is poised to grow at over 8%, which throws up a huge potential for the banking sector. From a global perspective, a market which is to grow over 8% will be of interest to any bank looking for growth markets.”
“The Australian banks may not have the scale and size compared with their counterparts in the US and Europe, but they have been largely unaffected by the recent global meltdown,” he said.
Indeed the banking landscape in India has changed dramatically in the past decade. For instance, in 2000, the loan book of the banking sector was Rs11.05 trillion. That has risen to Rs52 trillion, but the market share of foreign banks has edged up from 7.49% in 2000 to just 8.53% in 2010.
This is because of intense competition from a set of domestic private banks that were licensed in the early and mid-1990s and early this century, and the banking regulator’s policy of not opening the sector fully to foreign lenders.
Global banks are trying to tap the potential of an economy that’s growing at a pace next only to China among major economies as firms expand and consumers buy homes and automobiles with loans. State-run banks account for around 70% of India’s banking sector.
In February 2005, the Reserve Bank of India (RBI) had laid down a two-phase road map for foreign banks. In the first phase, ended March 2009, foreign banks could set up branches or wholly owned subsidiaries. RBI was supposed to review the road map in 2009, but the exercise was delayed by the global financial meltdown that began in the previous year.
ANZ has been trying to re-enter India since 2006, when it sought to buy a stake in IndusInd Bank Ltd, but later abandoned the plan. Most recently, it bid for the Indian assets of ABN Amro Bank NV, which were acquired by Royal Bank of Scotland Plc in 2007. It decided to drop the plan as it was close to winning its own banking licence in the country.
ANZ is present in India through a wholly owned arm, ANZ Capital Pvt. Ltd, a non-banking financial company. It also runs a business process outsourcing unit in Bangalore that employs 4,500 people.
Anup Roy and Reuters contributed to this story.