Friday, December 03, 2010

The Resident Non-Indians!

While HSBC was the first one in India to give its customers the freedom to break the queue in front of the cash counters by opening ATMs, Citibank moved a step ahead by allowing its customers to go cashless by introducing the concept of credit cards in the country. Their offerings in terms of specialised products and services have allowed them to go hard on Indian banks with whatever small perimeter they are allowed to operate in. Farhan Faruqui, Head-Global Banking, Asia Pacific, Citibank, says, “Our global banking structure gives us a single, unified coverage force that can deliver to our clients the best ideas, innovations, products and services in the industry.” Certainly, it’s the synergy with their parents’ global presence that allows these foreign banks to stay ahead of domestic players in terms of introducing innovative concepts, but undoubtedly it’s their efficiency, which has helped them to occupy dominant positions in individual segments like cash management services, sub-custody, dollar clearing and advising for cross border transactions et al. However, the only other area, apart from expansion of their network (thanks to the regulators), where the foreign banks are lagging behind is perhaps in promoting themselves. There is no doubt that they have done wonders in the past whenever they have attempted to communicate their presence. Take Royal Bank of Scotland (RBS) for example. At a time when people were losing confidence in it, the bank after roping in Sachin Tendulkar launched a campaign that said “Make it happen”. During that year 2008, the bank increased its ad-spend from zero to Rs.17.47 crores. As a result, today, consumers perceive it as one of the top 5 foreign banks. Even HSBC, with its “The World’s local bank” campaign, has managed to do tremendously well.

But then, the problem is that they are not consistent. And that has stopped them from surpassing larger domestic banks in the minds of the consumers. In this case, IDBI Bank can be a case study for these foreign banks. What RBS did for a year, IDBI Bank has been doing for the last two years now. As per data available with AdEx India, IDBI Bank was one of the top 5 ad-spenders both in FY’08-09 and FY’09-10. Thanks to the ongoing campaigns, its total score in the ICMR-4Ps B&M survey has moved from 79.73 last year to 86.90 this year. From here, the Indian banking sector is poised to see a spectacular rise in competition, as the government is considering issuing new banking licenses to NBFCs, which will add another line of players in the market. Moreover, the competition in the smaller space available for the foreign banks too is set to go up as the RBI has recently allowed a few more tough global banks like ANZ and Credit Suisse to enter the country.

On a positive front, the RBI is set to review its position on the issue of liberalisation of foreign banks in the country. If that happens, it would give the foreign banks an opportunity to scale up in India, but for that, they need to make their ground strong from the very beginning. So far, these banks have been operating mostly in Tier-I cities, but if they have to make it big, then Tier-II and III markets, where Indian banks have a strong hold, also need to be considered. For doing that the foreign banks need a 360 degree approach in terms of marketing and services to be able to gain ground.

Nevertheless, as Robin Roy, Associate Director (Financial Services), PricewaterhouseCoopers puts it, “They [foreign banks] have been the harbingers of best practices across businesses, sophisticated products and strong risk management skills.” But as my rambunctious colleague Manish Pandey’s story so eloquently put, unless these banks start believing in ‘sustained sincerity in advertising’, it’s highly improbable that they’ll be able to beat the horse to the lake, Now, what was that?!

Deepak Ranjan Patra
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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Arindam Chaudhuri (IIPM Dean) – ‘Every human being is a diamond’
Arindam Chaudhuri – Everything is not in our hands
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Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine

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