BackRising trade, migration attract Australian banks to India
All four top Australian banks, which command 96% of the total assets at home, now operate in India
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Mumbai: Rising commodity-linked trade between India and Australia, a large diaspora of Indian migrants and increasing number of Indians studying in that country are attracting top Australian banks to start operations in Asia’s third-largest economy.
In 2012, two Australian banks opened branches in India to add to the two that had opened shop in 2010 and 2011. With this, all four top Australian banks, which command 96% of the total assets in the home market, now operate in India.
Westpac Banking Corp. is the latest Australian bank to open a branch in Mumbai earlier this month after its Australian rival National Australian Bank Ltd (NAB) opened one in February. Earlier, Commonwealth Bank of Australia had opened a branch in 2010 and Australia and New Zealand Banking Group Ltd (ANZ) made a comeback into India in 2011 after selling its business in 2000.
Bankers say the increase in trade between India and Australia in the last five years is the main trigger to look towards India as companies here are hungry for natural resources and commodities like coal and iron ore.
India has risen to the top five among Australia’s trading partners with annual two-way trade rising to Australian $21 billion ($22 billion) in 2010-11 from Australian $6.54 billion in 2003-04. Bilateral trade is projected to rise to $40 billion by 2017.
Indians became the largest nationality of migrants to Australia in 2011-12, ahead of people from the UK and China. At least 29,000 Indians migrated to Australia in 2011-12 and 15.7% of them entered the country under Australia’s permanent migration programme.
Bala Swaminathan, president, Asia at Westpac, said India is the logical choice for Australian banks because of growing demand for Australian resources by Indian firms.
“Australia-India trade has exploded in the few years and the current thinking is that it’s going to go much higher. Australia’s core strength is natural resources, commodities and Agriculture. In the last three to five years, those sectors have contributed to the trade," Swaminathan said.
To be sure, trade with India is still very small compared with China, which traded more than $100 billion of goods and services with Australia in 2011.
Subhas DeGamia, chief executive officer of ANZ India, said the belief is that India along with China will remain at the forefront of global economics and hence have “vast potential" for growth in the years to come.
“India is a major engine for global growth," DeGamia said, adding the fact that Indian trade has increased with other countries in Asia is also behind the growing interest in this market.
“India’s trade has increased significantly not only with Australia but also with other countries in Asia like China (India’s largest trading partner) and Indonesia (where trade is expected to double in the next two-three years)which is why India is seen as an attractive market in Asia," DeGamia said.
ANZ, in fact, has made a comeback to India after exiting in 2000 by selling its Grindlays Bank unit to Standard Chartered Plc for $1.34 billion. Its global CEO Michael Smith admitted that leaving the country was a “mistake".
Since all four banks have one-branch operation, they are focusing on corporate and institutional clients with services like lending, transaction banking, foreign exchange, structured trade finance and debt capital.
In an interview with Mint after opening its branch in Mumbai in February, Cameron Clyne, group chief executive officer of NAB, said banks are just following their clients into India. “One thing Australia has is energy in a number of forms; we have a range of relationships with those companies and we will be hoping to help them. It’s not just commodities but also technology and how we can bring that in. There is a very neat opportunity here—Australia is rich in resources and an emerging country like India needs that resource," he had said.
There are other opportunities as well, according to Ravi Kushan, CEO at Commonwealth Bank which lists remittances, student and migrant referrals as its focus area.
“We are focusing on growing commercial banking and NRI (non resident Indian) business in India. We will continue to service (those) clients who have interest in both the countries," Kushan said in a email reply.
Swaminathan from Westpac refers to the $4.5 billion investment by the Adani group to develop a coal mine in Australia. “India was only importing... Now there is also investment from Indian companies in Australian assets," Swaminathan said, adding that presence in India was necessary to serve Indian clients.
Besides Adani, infrastructure companies such as Lanco Infratech Ltd, GVK Industries Ltd and state-owned miner NMDC Ltd have interests in Australia and large conglomerates such as the Tata Group and Aditya Birla Group are scouting for assets there.
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