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Banking Growth in India

December 27th, 2004 · No Comments

WSJ writes that the Indian government may ease banking restrictions to allow more foreign investment:

Deregulation and a burgeoning middle class are spurring an Indian banking boom that is likely to attract fresh investment from international banking giants eager to get in on the action.

India’s central bank is expected to announce new guidelines soon on how banks — both local and foreign — will be allowed to expand through acquisitions or mergers. International bankers, in particular, are hoping for relaxed restrictions on foreign ownership of banks that will allow them to cash in on the millions of increasingly affluent Indian consumers who have benefited from economic liberalization in recent years.

With millions of Indians opening savings accounts, using credit cards and taking car loans for the first time, Indian banks cumulatively reported a 13% jump in income to about $30 billion in the year ended March 31. While India’s stodgy state-run banks have been slow to innovate, privately owned domestic and foreign banks have led the way, with income growing more than 30% annually during the past five years. Income from the high-profit credit-card and consumer-loan businesses — dominated by foreign banks — has been expanding at more than 40% a year, bankers say.

“We expect an average of about 12% to 13% [revenue] growth for the next five to 10 years definitely, if not beyond,” said Neel Chatterjee, senior vice president of Standard Chartered Group in Bombay. “That’s huge compared to the developed world where banking is not growing more than 2% or 3%.”

Tags: Emerging Markets

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