Over the years, Citibank has been facing competition from the Indian national players. The bank has gradually lost market share.
Citi’s share in the retail business has been decreasing in size and local competition has intensified reported Money control.
“If you are not among the top three players in a market, then the question is whether you want to be in that market at all,” said Sanjiv Bhasin, former India head of DBS Bank and a veteran Indian banker, in a statement of Moneycontrol.
So far as of March 2020, the business of the bank had almost 30 lakh customers in retail, 22 lakh credit cards and 12 lakh bank accounts. It had a market share of 6 per cent credit card spends in December 2020, but this percentage has declined by then now.
The bank has lent Rs 66,507 crore and deposits of Rs 1,57,869 crore. Citi’s retail revenue comprised 30 per cent of the total revenue in March 2020, while corporate composed 50 per cent.
In 2018-19, retail comprised 34 per cent while corporate contributed 46 per cent, according to the details available. The percentage of non-performing assets (NPAs) to net advances has risen to 0.56 per cent, as of March 2020 from 0.51 per cent in 2019.
Return on assets stood at 2.55 per cent from 2.57 per cent and business is taken into account individual employees improved to Rs 43.6 crore in FY20 from Rs 37.6 crore in 2019.
Interest income fell to 6.73 percent from 7 per cent during the period. Thus, quitting the Indian market makes sense for Citigroup.
Ashu Khullar, CEO of Citi India said in a statement “We will continue to deliver our innovative digital solutions, backed by our global network, and devote our resources to large and mid-sized Indian corporates and multinationals, financial institutions, start-ups in the new age sectors, amongst others. India is a strategic talent hub for Citi. We will continue to tap into the rich talent pool available here to continue to grow our five Citi Solution Centers which support our global footprint.”
It’s not only Citi. But, most foreign banks are struggling to face competition from local competitors. The RBI emphasised that foreign banks have to be wholly local owned subsidiaries to get ‘near-national treatment. After the global financial crisis and in coping with the crisis, the RBI issued a Discussion Paper in January 2011 to discuss the presence of foreign banks in India.
The privilege of ‘near-national treatment’ came in with a big “To compete in retail, you require feet on the ground. Foreign banks, due to their high-cost structure (on staff and infrastructure), couldn’t expand like local banks,” said Naresh Malhotra, former SBI banker and a senior banking consultant, in a statement to Money control.
“India’s retail banking industry is turning more competitive, more intense and more local. Foreign banks are at a disadvantage here compared to Indian banks,” said Ashvin Parekh of Ashvin Parekh Advisory Services, in a statement to Moneycontrol. “This is the right time for Citi to put their retail assets on the block or gradually wind it up,” he added.