FirstRand Bank has decided to shut its retail and SME lending business in India, according to a top management executive. The South African bank will, however, continue its operations in corporate lending and investment banking in the country.
“Our decision is in line with our strategy to streamline our business in India and further strengthen our successful initiatives, namely, corporate and investment banking, Indo-Africa corridor trade and micro lending,” said Rohit Wahi, Chief Executive Officer & Country Head for FirstRand Bank India.
“Whilst the group believes that its retail and SME business lines should be in a position to compete in India in the longer term, the short- to medium-term opportunities to properly scale these businesses are limited. This is particularly so given the current competitive and regulatory dynamics in these segments,” the bank said.
In April 2012, FirstRand Bank launched its retail and commercial banking operations in India and Gary Kirsten, former South African cricketer, was appointed as the brand ambassador in India. The bank’s India operations, with a focus on corporate and investment banking, were started back in 2009.
About 86% of the bank’s revenue comes from South Africa. 10% comes from the rest of Africa and other markets including the UK. India contributes 4%.
After facing losses in the six years of operations, FirstRand Bank decided last year to focus more on SME lending and individual loans in India. It hired Ramaswamy Gopalakrishnan, Former Head of SME banking at Citibank, in May last year to boost SME lending.
In August 2015, FirstRand reported a net loss of Rs64 crore in 2014-15, down from a loss of Rs77 crore the previous year, as interest income increased to Rs106 crore from Rs86 crore. The bank also set aside a lower Rs8 crore in provisions for the year ended March 2015 compared with Rs13 crore in the previous year. After writing off two of the three non-performing asset (NPA) accounts reported last year, the bank’s gross NPAs reduced to 7.82% of the total loan book, down from 15% in March 2014.
Several multinational banks in India are in the process of reducing presence by shutting various divisions as well as branches.
20 October: HSBC is planning to wind up participatory notes (P-notes) operations in India, as tightening of regulatory framework has made the business unviable. P-notes’ attractiveness has been on the wane following tightening of the regulations and the recent double-taxation avoidance agreement (DTAA) with Mauritius.
28 September: Citibank, the most profitable foreign lender in India, might follow rival Hong Kong and Shanghai Banking Corp (HSBC) and reduce its branches in the country.
30 August: Australia’s largest lender, Commonwealth Bank, has decided to wind down its operations in India. “After careful evaluation of our India business, alongside our refocused strategy, the decision has been made to wind down and close the CBA Mumbai branch,” said a note on the bank’s website.
17 May: Royal Bank of Scotland, Britain’s largest state-owned bank, has started the process of closing its 10 retail branches in India. This move is in line with the company’s plans announced last year to shut down its banking operations in the country.
Source: Mint/ Business Standard