Easing regulations and a surge in online banking are driving the change, with several overseas lenders increasing investment plans for the country to win affluent clients away from domestic rivals.
Outsized
returns in India, besting local lenders for the first time in a
decade, are emboldening banks such as Citigroup, Deutsche
Bank and HSBC to invest more in a market that has long held
promise but tended to under-deliver.
Easing
regulations and a surge in online
banking are driving the change, with several overseas lenders
increasing investment plans for the country to win affluent clients
away from domestic rivals, senior bankers told Reuters.
Improved
performance in India and its basis in the take-up of digital retail
banking services could also offer hope for other large markets with
potential far greater than the profit so far delivered, such as
China.
"With
transaction banking going very strong and retail banking picking up
pace, a lot of foreign banks globally are now focusing on India and
registering better performance," said Sanjoy Datta, Deloitte
India financial services practice head.
"It
may pose some challenges as banks plan to expand more into the
tier-two towns but overall, foreign banks in India will continue to
grow as there are no imminent (industry-specific) challenges,"
he said, pointing to technology as a key enabler.
Lured
by a massive economy and rising middle-class income, more than three
dozen foreign lenders in India have been vying for a bigger share of
the market for decades - yet they account for just 6% of the banking
assets.
Aiding
the latest growth spurt is regulatory easing in support of
technological financial services. For instance, the central bank in
August allowed banks - under a "regulatory sandbox"
framework - to launch products and services such as digital customer
background checks and money transfer.
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