In a recent development, American banking institution Citigroup announced that it will be shutting down retail banking operations in India, China, along with 11 other banking markets as part of its new global strategy. The company said that as a new consumer strategy, it will draw its focus to the markets of Singapore, Hong Kong, London and UAE.
No Immediate impact on employees and operations: Citi India CEO
After the announcement, Citi India’s CEO Ashu Khullar issued a statement stating there will be no immediate changes on the company’s operations and its employees in India.
“There is no immediate change to our operations and no immediate impact to our colleagues as a result of this announcement. In the interim, we will continue to serve our clients with the same care, empathy and dedication that we do today.”
Difficult to compete with current scale: Citi group Chief Jane Fraser
Stating lack of scalability as the reason of the exit, Citi group chief Jane Fraser said, “While the 13 markets have excellent businesses, we don’t have the scale we need to compete.”
The Citi Bank business in India
The bank was established in India in 1902 and has been serving Indian masses for 119 years. Citibank has currently 35 branches in India with more than `19,000 employees catering to the banking needs of Indian professionals.
As of 2019-20, Citi Bank’s balance sheet is of Rs. 2.18 lakh crores, beating its other American competitors HSBC (Rs. 2.11 lakh crores) and Standard Chartered (Rs. 1.84 lakh crores). Meanwhile, the current deposit amount of Citi Bank in India is Rs. 1.57 lakh crores.
Talking about returns, the bank recorded a return on total capital employed at 19.41%, a net interest margin of 4.86% and return on assets at 2.43%.
In FY 2020, the bank registered a profit of Rs. 4,912 crores vs Rs. 4,185 crores it showed in FY 2019. As of FY2020, its non-performing asset ratio stood at .6% vs .5% in FY2019. Moreover, the company’s total assets, including its credit extended to offshore Citi entities, stood at 2,99,250 crores.
First Bank to gain salary business through Suvidha salary account
Citi Bank was the first bank in India that lured corporate sector organizations into giving their salary business to them. The bank came out with Suvidha, the first of its kind salary account for Indian professionals.
When it was introduced, it was the only scheme which offered features such as OD facility up to 5 times the net salary, priority pricing on other Citibank products, an all-round debit card, complete 24×7 access to digital banking platforms etc. Suvidha was a salary account which was then further replicated by every other new-age private sector banks.
The company currently offers institutional banking services and complete international business support. It has its main offices in major Indian cities like Mumbai, Pune, Chennai, Gurugram and Bengaluru.
What’s on sale?
According to reports, Citi Bank’s entire Indian consumer business is up for sale, including its credit cards, wealth management, mortgage and deposit accounts portfolio.
What is the reason for Citibank’s exit?
According to the top executives of Citi, the reason for the exit is lack of scalability in some markets due to regulation issues. However, it should be noted that Indian banking regulators did give Citi a change to foreign banks to scale up by setting up branches or through acquisitions.
The only caveat was that the foreign banks were asked to change from their branch model to a subsidiary model. Singapore-based DBS bank chose this model and RBI approved its acquisition of Laxmi Vilas Bank.
Citi not the first bank to shut shop in India
One should note that Citi will not be the first foreign bank to shut its shop for consumers. In the past Deutsche Bank, Morgan Stanley, Merril Lynch, Standard Chartered, HSBC have all either shut their consumer offerings or sold part of their businesses, or exited the Indian market completely.