Why Citi, BoA, JPMorgan, other foreign banks are eyeing this space in India

India is host to some of the biggest global banking majors including Citi, Bank of America, JPMorgan and Deutsche Bank among others who are known to engage with the biggest business conglomerates in the country. 
But while each of the foreign banks is busy strengthening its hold with the biggest business houses, there is another segment that is fast emerging as the hotbed of competition for these global banking majors – MSMEs.

The vibrant MSME segment has seen the entry of these banks that are offering innovative solutions to these entities to help them grow in terms of business volume and reach.

“Providing innovative trade finance solutions for MSMEs, thereby bolstering growth in this segment, is another focus area [of Deutsche Bank India],” said Kaushik Shaparia, CEO, Deutsche Bank Group, India.

Incidentally, for a foreign bank, a typical MSME would not be one that fits in the traditional definition of such entities - they would be much bigger, next only to the A-listers in size.

“Over the last three years, we have expanded our commercial banking business to serve local mid-cap companies in India, and we believe this business will scale significantly,” said Madhav Kalyan, CEO, JPMorgan Chase Bank India & Senior Country Officer.

In a similar context, Ashu Khullar, CEO, Citi India & Region Head South Asia, said that he expects the bank to expand its commercial banking practice by growing its client base by 50 per cent, by 2025.

“More players are trying to get into the MSME space. Commercial banking, which focuses on emerging and mid-sized corporate clients, which includes multinationals, MSME clients as well as digital, new-age companies, and start-ups, is a large opportunity where we are trying to double our client base,” he said.

Interestingly, start-ups and unicorns also seem to be emerging as a favourite competition ring with all the major foreign banks eyeing a slice of the lucrative market. Data from Tracxn shows that India has as many as 107 unicorns – the third-highest after the US and China – with 20 of those emerging in 2022.

Foreign banks are trying to partner with these ventures in every possible manner – cash management, M&A, payments processing and fundraising, among others.

“The competition in the start-up space [for foreign banks] will remain huge. When a good company decides to tap the market, every bank will want to be associated with it. Though you will succeed only if you have a global reach, backed by extensive distribution capabilities,” said Kaku Nakhate, President & India Country Head, Bank of America.

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