Move over Big Six, here come India's banks

Up until five years ago, the only Indian bank with a presence in Canada was the venerable State Bank of India, but that's changing.

This month, India's upstart ICICI, which is predominantly an investment bank, is planning to open its ninth Canadian branch, this time in Calgary. At least three other Indian banks are getting ready to test the water.

Not to be outdone, the Canadian branch of the State Bank of India (SBI), which has been operating here for more than a quarter century with a relatively modest asset base of just $540 million, is considering an expansion of its own — an expansion that tells its own story.

'We follow our customers. It's as simple as that.' —Sriram Iyer, president and CEO of ICICI Bank in Canada

No longer are India's banks content to come here and simply plunk down in Ontario and British Columbia to service the large ex-pat Southeast Asian communities in those provinces. Now, they are setting their sights on other markets, notably Quebec and Alberta, as well as on Canadian businesses that want to invest in the booming market that is present-day India.

"We follow our customers. It's as simple as that," says Sriram Iyer, president and CEO of ICICI 's Canadian subsidiary, ICICI Bank in Canada. "And since so many Indians are immigrating to Canada, it was an obvious choice.

"In fact, with many of our customers moving to Calgary, we have decided to open a branch there, too. We go wherever we see a market potential."

ICICI is India's second-largest bank, and it's moving quickly to expand in Canada. It entered the country in 2003 with an asset base of $25 million, but that has grown to $4 billion as of March 31, 2008.

Why Canada?

With a captive Indian market of more than 1.2 billion people and an economy that is growing by eight per cent a year, why would any Indian bank want to do business in Canada, which has a population of just 30 million?

"India has caught everybody's imagination," says Kam Rathee, president of Canada-India Business Council. "It is the flavour of the month. So, to entertain the business needs of Indian entrepreneurs doing business in Canada, Indian banks need to have a strong presence here.

"Also, the Indo-Canadian community is not only growing in numbers; they are [also] becoming increasingly prosperous. No longer are banks used to merely send remittances home. Their target audience has undergone a change, and with it, the banks have, too."

Slow to grow

For 25 years, the State Bank of India has shown little progress, functioning like a stodgy, staid public-sector undertaking in the fast-paced business environment of Canada. Its international asset base, as of March 31, 2008, may be $265 billion US — as compared to ICICI's $122 billion US  — but its share in the Canadian market is negligible.

Serving mostly landed immigrants from India who send remittances back home, SBI has been slow to penetrate the Canadian market. As a public sector entity, it is limited by its mandate to minimize its exposure to risks.

Up until now, for example, its customers in Canada were unable to access their accounts through a debit card. SBI chairman O.P.Bhatt was in Toronto Wednesday to launch the bank's first debit card in Canada.

"It's the nature of the beast: public versus private," says Rathee. "SBI has been providing the key elements of retail banking, and the debit card was needed to complete the picture. ICICI, being a private bank, has grown in leaps and bounds, and I know for a fact that their client base is 70 per cent white Canadian. They offer better interest rates on savings accounts and better services which attract people."

More on the way

Two more Indian banks are slated to enter Canada. The public sector Central Bank of India and the Bank of Baroda. The HDFC-Bank of Punjab has had a representative office in Toronto for the past three years but has not yet decided to go retail.

"The establishment of Indian banks in Canada is a natural extension of the aggressive rate of growth of the Indian economy," says Sunil Jagosia, past president of the Indo-Canadian Chamber of commerce. "Indian companies like Tatas, Birlas and Reliance are going global, [and] with them, the banks are expanding, too

Not to be left behind, Canadian banks want their share of the pie.

The Bank of Nova Scotia has five branches in India while the Royal Bank of Canada has opened a representative office in India's commercial capital, Mumbai, early this year. Two more of the top five Canadian banks have expressed interest in opening offices in India.

"Basically, they are all testing the waters," says Jagosia. "Nobody wants to be left behind in the race to globalize. As the disposable income of Indo-Canadians rise[s], there are … [more] snowbirds who winter in India. They maintain two residences — in India and Canada — and it is this segment of wealthy clients the banks are pursuing.

"While the Canadian banks have been slow to enter the Indian market, the Indians are racing ahead. It is a win-win situation for them."