The new private sector banks led by IDBI Bank and IndusInd Bank are queuing up at the doors of the Reserve Bank of India for licences to set up overseas branches to tap global Indians.
Indian residents can invest $25,000 annually overseas. These banks want to tap this business.
Talks are on between the RBI and the Securities and Exchange Board of India to permit banks to offer more than just global deposit products.
The central bank had earlier limited banks to offer just foreign currency deposit-based products, barring them from hawking foreign mutual funds and global derivative products.
"It does not matter where we get a branch licence, be it Hong Kong, Singapore, or Bahrain, so long as we have a presence outside the country, which will enable us to mop up global deposits," said the vice president of a private bank that has applied to the regulator. Having an offshore balance sheet in terms of overseas branches also help in raising funds from abroad.
"There has been interest from our customers to invest abroad, with the pressure on the rupee, on the back of net foreign exchange outflows," said Moses Harding, executive vice-president treasury, international operations and investment banking, IndusInd Bank.
Citibank, HSBC, Standard Chartered Bank, ICICI Bank and Bank of Baroda were the first to push global deposits. Without an overseas branch, Indian banks cannot hawk foreign currency deposits.
Private banks are planning to set up branches in tax havens to ensure that these deposits will have no tax issue or double taxation.
IDBI Bank and IndusInd apart, a few other banks are also seeking board approval before they seek the central bank's approval. Among the new private banks, only ICICI Bank has an overseas presence now.
Citibank proposes to launch private banking services some time in October to cater to high net worth individuals with wealth in excess of $ 5 million.
It had not offered private banking services in the country as it could offer little value addition unless Indians were allowed to invest in overseas markets.
"We need to be ready with our product offering before the change in the guidelines," said the managing director of a private bank, which is ready to apply to RBI for a global branch licence.
Interest among smaller private banks has picked up as there has been an increased demand for global deposit products.
"With rising global interest rates, interest in global deposits is picking up," said Amit Sah, marketing director, retail bank and global consumer group, Citibank.
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