DBS, among the five financially strongest banks in the world in latest Bloombergranking, will expand in India raising the branch network seven fold when European rivals such the Royal Bank of Scotland andBarclays are shrinking India assets due to rising capital needs. "We have a long-term view on India," said DBS Bank Chief Executive Officer Piyush Gupta. "We are the only foreign bank positive about subsidiarisation. Every other foreign bank is lobbying that is does not happen."
Development Bank of Singapore has 12 branches and has sought RBI's permission to open four more, in step with the Comprehensive Economic Co-operation Agreement between India and Singapore, which allows a maximum of 16 branches of Singapore based banks. It may open 80 branches in a decade. "Our hope is that this wholly owned subsidiary comes true. We will look to open 70-80 branches over the next decade that we can use to build our SME and high networth individual customer business," said Gupta.
Most recently, the bank has converted its Taiwan operations into a subsidiary. It operates as a subsidiary in China, Hong Kong and Indonesia.
The Reserve Bank of India has been seeking to ringfence the Indian financial system by proposing to foreign banks which operate as whollyowned subsidiaries to incorporate under local laws that give it regulatory control.
All international banks in the country, from Standard Chartered to Citigroup, operate as branches of their overseas parents, leaving them exposed to the weaknesses of the parent company. The bank, which has been growing at over 20% over the few years, expect growth rate to slow down.
"I don't think we will not continue to grow at this rate. As the book size grows beyond a point you are more reliant on local funding and in the absence of branch network local funding is difficult," said Gupta. India has contributed 5-6% of DBS profits in the first quarter of the calendar year.
DBS does not plan to lend to retail clients which becomes difficult in the absence of local knowledge and when the local banks are strong.
"To do mass retail, we need to build base like HDFC Bank or ICICI and I don't think we have the wherewithal or capacity to do that. The only way for foreign bank to do mass retail is organic activity and right now that opportunity is closed," said Gupta.