3 Reasons Why CitiBank Is Closing Down Indian Operations & Selling Off Banking Business

Finally the curtain is dropped on the consumer business of Citi Bank in India.

The largest and the oldest foreign banking entity has decided to exit across two regions from its consumer franchises in thirteen markets, one of which is India.

This means that the Bank shall be exiting its consumer financing operations in the near future.

The reasons behind the exit of the oldest foreign banking entity:-

  1. Lack of Scale in India
  2. Focus on wealth management
  3. Focus on wealth hubs such as Dubai, London, Hong Kong and Singapore

Lack of Scale in India

This can be attributed to either regulations or the inability of the bank to build its scale in consumer banking.

In order to help foreign banks in setting up branches or acquisitions (M&As), a window was provided by the Indian banking regulators, provided they switch from the current branch model to a wholly-owned subsidiary model.

As a matter of fact, the subsidiary route was only taken by the Singapore-based DBS, which was also rewarded when RBI approved its acquisition of South-based Laxmi Vilas Bank.

In the early 2000s, Citi did expand into the country through its NBFC Citifinancials and also the bank’s credit card business. However post the 2008 financial meltdown, the business was impacted.

Jane Fraser, CEO at Citi said that the firm believes that their capital, investment dollars, and other resources are better deployed against higher returning opportunities in wealth management as well as institutional businesses in Asia.

Citi Bank in India has a balance sheet size of Rs 2.18 lakh crore, whereas HSBC and Standard Chartered in India have a balance sheet size of Rs 2.11 lakh crore and Rs 1.84 lakh crore in 2019-20 respectively.

The various businesses of Citi India include retail banking, wealth management, credit cards, and mortgages. The bank, apart from the retail, has a presence in the distribution of financial services products, investment banking operations, and treasury and trade solutions. In 2019-20, bank loans grew by 7.97 percent.

For 2019-20, the current deposit base of the bank is around Rs 1.57 lakh crore. As it came out with a path-breaking salary account proposition for corporate called Suvidha, it was also the first bank in India to capture the salary business from the corporate sector. This proposition was later replicated by every Indian bank, especially the new generation private sector banks.

Technology, innovation, and digitisation have always been the focus points of Citibank. The bank which is known for its wealth management services, has a well-segmented wealth business that covers emerging affluent, and high net worth individuals. Though it could never scale up the business as big as some rivals like the SBI Cards and HDFC Bank in the last few years, Citi bank is also a leading player in the credit card business.

However when it came to the returns, with a ROCE of 19.41 per cent, net interest margins of 4.86 per cent and return on assets at 2.43 per cent of  bank did relatively well as compared to its competitors.

Citi Has Played A Key Role In India

Citi has played a key role in institution building in its long history in India. It always contributed when financial services infrastructure institutions like depositories, credit bureau, clearing, and payment institutions were set up in India. There are currently nearly 36 branches in areas like Ahmedabad, Aurangabad, Bengaluru (M.G. Road and South End Road), Chandigarh, Faridabad, Gurugram, Jaipur, Kochi, Kolkata  Lucknow, Mumbai  Nagpur, Nasik, New Delhi Pune, Hyderabad , Surat, etc.

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