India has been a highly profitable market for foreign banks in the last year.
On Monday, Citibank India announced a 78 per cent increase in profit after tax to Rs 1,859 crore for 2010-11, from Rs 1,046 crore in 2009-10.
This growth was primarily on account of increases in advances to corporate clients and to small and medium enterprises by 33 per cent and 35 per cent respectively. The net non-performing loans were lower at 1.2 per cent (2.1 per cent).
Earlier, Standard Chartered India had reported a profit before tax of Rs 5,400 crore ($1.2 billion) for 2010, which was 13 per cent higher than the previous year. India became the largest profit centre for the group.
The Indian arm of HSBC posted profit before tax of approximately Rs 3,060 crore ($679 million), up 82 per cent from a year ago. And Deutsche Bank India posted a profit after tax of Rs 630 crore for the year ended March 31, 2011, an increase of 41 per cent.
According to analysts the fact that India's GDP has grown at 6-7 percentage points over global growth has helped these banks' business. However, some analysts said that a major share of the foreign banks' incomes could be on account of treasury or trading and advisory activities for mergers and acquisition deals.
According to Mr Monish Shah, Director, Deloitte, most foreign banks have increased their exposure to India and infused capital in the country in the last few years.
“Foreign banks are getting more aggressive in their product offerings in India and looking at a broader audience than their traditional segments. They realise that growth will come from emerging markets including India,'' he said.
However, according to an analyst with a foreign brokerage, the income of foreign banks operating in India would be more on account of non-fund income especially from M&A deals and less on account of core banking.
“These banks have fewer branches than their Indian counterparts and are very choosy when it comes to lending. So, income from lending is usually not a large part of their business,'' he said.