News: Foreign banks target small businesses to push growth
(TNN 05/06/2006) Kolkata - It is a major shift in stance for foreign banks operating in India. Banks like Citibank, HSBC and Standard Chartered Bank, which have for so many years been catering to the affluent strata of the society, are now ready for offering their services to a vastly under-served segment comprising mostly of small business enterprises, mom & pop shops, salaried individuals working with government organisations, small private limited concerns and factory workers.
The reason is quite apparent: In light of an increasing squeeze in their interest rate margins, these banks have found serving this vast segment a lucrative proposition.
This is mostly a neglected segment as many of these businesses get only transactional banking services, because of their size and relatively low cash flow requirements. “Typically these are customers who do not have access to loans from private and nationalised banks based on their income,” Nicholas Winsor, HSBC India’s head for personal financial services, in an e-mailed response to ET.
While HSBC and StanChart started catering to this strata of society in August 2005 and October 2005, respectively, Citibank has announced this business initiative only recently.
StanChart is offering this service through a separate business unit called Standard Chartered Investment & Loans Ltd (Scill), currently present in 16 cities. The bank has drawn up a road map to extend Scill’s network to 60 cities by the end of this fiscal.
HSBC is offering this mass-banking service through its 21 branches in 16 cities across the country. The minimum income level required for getting a loan from HSBC is just Rs 3,500 per month for salaried employees and Rs 10,000 per year for the self employed.
This segment offers huge potential for banks. According to a survey commissioned by Citibank in November 2005, small businesses and professionals (SBP) community in India is estimated at more than 3 million, representing over 98% of business enterprises locally.
Small and medium size enterprises make up 95% of businesses in Asia Pacific and they are to be found in every market. Citibank launched ‘CitiBusiness’, a suite of business and financial solutions targeted at the SBP community.
“We are offering SBP segment the full range of banking services - current account, savings account, credit card, secured and unsecured loans, working capital loans. This is an underserved segment as many of these businesses get only transactional services,” said Mr Rajiv Jamkhedkar, Citibank’s business manager for this service.
Meanwhile, HSBC has also approached the Reserve Bank of India (RBI) for an NBFC licence, as NBFCs do not require regulatory clearance for setting offices.
“Once we get the clearance, we will expand into new markets. The NBFC will become the vehicle for expanding HSBC Group’s consumer finance business in India. In the interim, we will continue to focus on developing our existing business,” Mr Winsor said.
The reason is quite apparent: In light of an increasing squeeze in their interest rate margins, these banks have found serving this vast segment a lucrative proposition.
This is mostly a neglected segment as many of these businesses get only transactional banking services, because of their size and relatively low cash flow requirements. “Typically these are customers who do not have access to loans from private and nationalised banks based on their income,” Nicholas Winsor, HSBC India’s head for personal financial services, in an e-mailed response to ET.
While HSBC and StanChart started catering to this strata of society in August 2005 and October 2005, respectively, Citibank has announced this business initiative only recently.
StanChart is offering this service through a separate business unit called Standard Chartered Investment & Loans Ltd (Scill), currently present in 16 cities. The bank has drawn up a road map to extend Scill’s network to 60 cities by the end of this fiscal.
HSBC is offering this mass-banking service through its 21 branches in 16 cities across the country. The minimum income level required for getting a loan from HSBC is just Rs 3,500 per month for salaried employees and Rs 10,000 per year for the self employed.
This segment offers huge potential for banks. According to a survey commissioned by Citibank in November 2005, small businesses and professionals (SBP) community in India is estimated at more than 3 million, representing over 98% of business enterprises locally.
Small and medium size enterprises make up 95% of businesses in Asia Pacific and they are to be found in every market. Citibank launched ‘CitiBusiness’, a suite of business and financial solutions targeted at the SBP community.
“We are offering SBP segment the full range of banking services - current account, savings account, credit card, secured and unsecured loans, working capital loans. This is an underserved segment as many of these businesses get only transactional services,” said Mr Rajiv Jamkhedkar, Citibank’s business manager for this service.
Meanwhile, HSBC has also approached the Reserve Bank of India (RBI) for an NBFC licence, as NBFCs do not require regulatory clearance for setting offices.
“Once we get the clearance, we will expand into new markets. The NBFC will become the vehicle for expanding HSBC Group’s consumer finance business in India. In the interim, we will continue to focus on developing our existing business,” Mr Winsor said.
posted by InCar Group Press Room at 15:27
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