Citigroup announced that it will be shutting down its operation in India.
Citigroup, one of the oldest banking entity, will stop its consumer franchises in 13 markets across 2 regions which include India due to lack of scale in the regions.
One of the largest and oldest banking entity just announced that it will be halting its consumer operations in India. This news didn’t came as surprise to the banking community. Citigroup was not able to penetrate the Indian market, one of the reason was the regulation in which banking enterprises operate. The reason for exit is said to be the low scale of customers, which were insufficient to make any significant profits.
The reason for exit is the lack of scale in some markets where either because of regulations or otherwise, the bank was not able to build scale in consumer banking. Indian banking regulators did offer a window to foreign banks for national treatment in setting up branches or acquisitions (M&As) provided they switch from the current branch model to a wholly-owned subsidiary model. In fact, only Singapore-based DBS took the subsidiary route and was also rewarded when RBI approved its acquisition of South-based Laxmi Vilas Bank.
The group grew in the early 2000s and was famous for its credit card offers. The post-2008 meltdown was a very difficult period for the bank. It negatively affected the Indian entity. “We believe our capital, investment dollars, and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” said Jane Fraser, CEO at Citi.
Citi’s India business include retail banking, wealth management, credit cards, and mortgages. Apart from retail, the bank has a presence in the distribution of financial services products, investment banking operations, and treasury and trade solutions The bank loans actually grew by 7.97 percent in 2019-20. The current deposit base of the bank is around Rs 1.57 lakh crore for 2019-20. In fact, Citi was the first bank in India to capture the salary business from the corporate sector. It came out with a path-breaking salary account proposition for corporate called Suvidha, which was later replicated by every Indian bank, especially the new generation private sector banks.
Citigroup has launched discussions to sell its credit card and wealth management divisions, two people aware of the negotiations said on Friday, a day after the group announced plans to exit its retail banking business in India as part of a global restructuring exercise.
According to CNBCTV18 report, Kotak Mahindra Bank may be a key contender to buy Citi Group’s retail operations, including the high-margin cards business. During an analyst call, Kotak Mahindra’s MD and CEO, Uday Kotak has stated that the company is looking at increasing its customer base and hinted at inorganic growth as and when opportunities arise.
