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Investment and Banking Case Study

Case Title:

Indian Retail Banking: Attracting More MNC Banks

Publication Year : 2010

Authors: J Thadamalla, S Sakariya, C Chatterjee and D Parmar

Industry: Banking, Insurance and Financial Services

Region:India

Case Code: INB0005IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
The sub-prime crisis of 2007, led to a liquidity crunch mainly in the US and Europe. The shrinkage in liquidity and limited growth opportunities in the high-income markets was forcing banks to develop a growing and sustainable retail business. Meanwhile, the Indian banking sector too was witnessing a transition from class banking to mass banking with expansion of the middle class, requiring varying banking needs. Bank credit growth, changing consumer demographics, and large segments of untapped population were the prime reason for the attractiveness of the Indian retail banking sector. Anticipating growth opportunities in India, many MNCs (multinational corporations) like Credit Suisse concentrated on the Indian retail banking sector to grab a market share. But strict licensing policy by the Indian government towards foreign banks was a prime obstacle for MNC banks entering India. MNC banks faced several challenges including rudimentary infrastructure, dynamic political environment, restrictive regulations, and operational risks, which are characteristic of emerging economies that needed attention. Industry analysts pointed out that, Indians are getting direct access to resources from the global credit market through foreign banks, and regulatory vigilance could be a big mistake. In 2009, the RBI (Reserve Bank of India) was slated to liberalise the foreign banks' licensing policy. But it needs to be seen whether MNC banks will succeed in the Indian retail banking sector, or should they wait for a longer period of time?

Pedagogical Objectives:

  • To analyse the dynamics of the Indian banking sector
  • To evaluate why India has become a preferred destination for major MNCs.
  • To understand the retail banking business environment in India.
  • To analyse the challenges that exist for MNC bankers in India.

Keywords :  Banking in India, Foreign banks licensing policy in India, Competition in Indian retail banking sector, Growth drivers of Indian retail banking, Indian banking sector reforms, Reserve Bank of India (RBI), Structure of the Indian banking industry, Unbanked population in India, Multinational (MNC) banks in India, Indian retail banking business environment, Credit Suisse, Government regulation in Indian banking sector, Dynamics of Indian banking industry, Entry level strategy, Challenges in Indian retail banking sector

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