A megalopolis with unlimited potential

Mumbai, the Urbs Prima in India, started gaining prominence as the commercial hub of the country around the middle of the nineteenth century. Be it the oldest stock exchange in Asia, or the country's first commodity futures exchange, or some of the earliest ‘Swadeshi' banks — all had their origin in the island-city, whose streets, proverbially, are paved with gold.

In the days of yore, the strategic location of the city on the Arabian Sea coast proved to be conducive for trade and commerce, especially involving cotton. Enterprising people of the city — the locals and the non-locals — made the most of the available economic opportunities to make it the vibrant megalopolis that it is today.

The evolution of Mumbai as the country's commercial capital happened gradually over the last 150 years or so.

Organised futures market evolved in India after the setting up of Bombay Cotton Trade Association Ltd in 1875, according to the Forward Markets Commission. In 1893, following widespread discontent among leading cotton mill owners and merchants over the functioning of the association, a separate association called the Bombay Cotton Exchange Ltd was constituted.

Futures' trading in oilseeds was introduced for the first time in 1900 with the setting up of Gujarati Vyapari Mandali, which carried out futures trading in groundnut, castor seed and cotton. Futures market in Bullion began in Mumbai in 1920. The oldest stock exchange in Asia – the Bombay Stock Exchange – was established in 1875.

To support trade and commerce, banks sprung up.

The Bank of Bombay was established in 1840 as a joint stock bank of British India. This presidency bank, according to State Bank of India's history, came into existence either as a result of the compulsions of imperial finance or by the needs of local European commerce.   

In the 1850s and 1860s, banks such as HSBC (then called the Mercantile Bank), Standard Chartered Bank (then called the Chartered Bank), and Comptoir d'Escompte de Paris (now called BNP Paribas) set up operations in Bombay.

Swadeshi banks

Fired by the spirit of nationalism and the need to become self-sufficient, spirited local businessmen and individuals started Swadeshi (of one's own country) banks — Bank of India (1906), Central Bank of India (1911), Union Bank of India (1919) and Dena Bank (1938) — in Mumbai.

Three of the earliest co-operative banks in the country – the Shamrao Vithal Co-operative Bank (1906), the NKGSB Co-operative Bank (1917) and the Saraswat Co-operative Bank (1918) – were also set up in the city.

Ever since it gained ascendancy vis-à-vis Kolkata (Calcutta) as the main commercial hub of the country in the late 1860s, Mumbai has not looked back.

Cut to more recent times. Mumbai continues to be the economic powerhouse of the country.

Nearly 20 per cent of the 8,400-odd companies listed on the Bombay Stock Exchange have their registered offices in the city. This includes blue-chip companies Tata Group, Reliance, AV Birla Group, L&T, M&M, and Hindustan Unilever.

The city accounted for about 40 per cent of the all-India direct tax collections of around Rs 4.50 lakh crore in FY2011. It occupies the numero uno position when it comes to cheque clearances, accounting for 18 per cent (or 24.82 crore) of the number of cheques cleared (137.93 crore) and 19 per cent (or Rs 19.39 lakh crore) of the amount of Rs 104 lakh crore in FY2010.

The city contributes the most to the turnover in the cash segment on BSE (about 75 per cent of the yearly turnover) and on NSE (about 55 per cent of the yearly turnover).

If one were to add up the turnover in futures and options segment on the two stock exchanges, the turnover on the two national multi-commodity exchanges, the trading in the government securities and corporate bond markets, money market, and foreign exchange market, the daily turnover in the Mumbai financial markets could easily run into a few lakh crore rupees.

About 21 per cent of the all-India ports traffic of 1,18,884 thousand tonnes in April 2010-March 2011 was through the two major ports here – Mumbai Port Trust and Jawaharlal Nehru Port Trust.

The aforementioned numbers are mindboggling, good enough to make any banker rub his hands at the prospect of growing business.

“Surging growth and employment in cities will prove a powerful magnet. Cities will be central to India's economic future,” global consulting firm McKinsey said in a study. And Mumbai aptly fits the billing.  

The Mumbai zone occupies the pride of place in every bank's balance sheet, with the city and its suburbs contributing between 10 and 20 per cent of most banks' businesses (deposits plus advances).

While banks with either headquarters or corporate offices in Mumbai — State Bank of India, Bank of Baroda, Bank of India, Central Bank of India, Union Bank of India, Dena Bank, ICICI Bank, HDFC Bank, Axis Bank, among others — have a strong foothold in the economic landscape of the megacity, the non-Mumbai headquartered banks too are a force to reckon with.

“There is no dearth of business opportunities in Mumbai,” said Mr. K.K Arvindakshan, Field General Manager (Maharashtra, Gujarat and Goa), Punjab National Bank. “Our Mumbai circle clocked 25 per cent growth in business in FY2011. This year, we have set a 30 per cent growth target. Our thrust is on expanding into new growth areas such as the extended suburbs and SME clusters.”

India's second largest public sector bank has 78 branches in the Mumbai circle, accounting for about 10 per cent of the business (deposits plus advances) of Rs 5.86 lakh crore as of March-end 2011. The Delhi-headquartered bank's large corporate branch in the city alone has advances aggregating Rs 27,000 crore.

The 57 branches in the Mumbai region accounted for about 11 per cent of the Chennai-headquartered Indian Overseas Bank's business of Rs 2.57 lakh crore as of March-end 2011.

“Our business in the Mumbai region grew by about 53 per cent last year. This year, we have set a growth target of 45 per cent. Our focus will be on mobilising low-cost current account and savings bank account deposits and stepping up credit to the SME sector,” said Mr V. Krishnaswamy, General Manager, IOB.

In the case of the Mangalore-headquartered Corporation Bank, the 39 branches in the Mumbai region account for about 25 per cent of its business of Rs 2.06 lakh crore.

“Our Mumbai circle has been split into two for administrative reasons so that growth centres such as Thane, Navi Mumbai, and Dombivli-Kalyan, which are on the periphery of the city, get focussed attention. These centres are good bets when it comes to retail deposits, retail lending as well as SME advances,” said Mr U. Balakrishna Bhat, Chief General Manager, Corporation Bank

Emphasising the fact that Mumbai is the hub for most of the financial and business activities in the country, Mr Joiel Akilan, Chief Representative of Spanish bank BBVA, said: “Most Indian private companies, groups, conglomerates and big banks, many of which are Fortune Global 500 companies, are based in the city. The old industry and the sunrise industry of BPO, IT and telecom, among others, too have a good presence here. Hence, they present a good business opportunity for banks.”

The business pie for banks in Mumbai will continue to expand.

This is underscored by the fact that the GDP of the Mumbai Metropolitan Region (or MMR, comprising the Municipal Corporation of Greater Mumbai, six other Municipal Corporations, 13 Municipal Councils and 982 villages) is projected to reach $265 billion by 2030, larger then the GDP of many countries today, including Portugal, Columbia, and Malaysia, according to the McKinsey study.

Mumbai Metropolitan Region's population is projected to rise from 23 million to 33 million, with per capita GDP quadrupling from $1,800 to $8,000, it added.

Mumbai is the undisputed gateway of commercial India. The Mumbai Metropolitan Region offers banks tremendous scope for expanding business. Bankers have to just go and get it.