After making a mark as an IT hub, Bangalore is hoping to evolve as a financial centre with the creation of a dedicated facility for companies in financial services. It has the software in the form skilled human resource, presence of global leaders in financial services and allied sectors and a proven capability to attract the needed resources. All that remains is to assemble the hardware – a dedicated financial city.
Such a facility will offer multiple benefits in terms of downstream development and also diversify its economic strength which is now dependent on IT.
On April 8, the Finance Minister laid the foundation stone for a financial city in Bangalore. The IFCI Financial City will come up near the international airport, at the Hardware Park on Bagalur Road.
The Karnataka Government has allotted 50 acres for this project, to be developed by IFCI Infrastructure Development Ltd (IIDL), which is to develop the facility in association with banks and financial institutions.
Explaining the financial city, Mr P.V. Srinivas, Managing Director, IIDL, says that it will be a hub where all participants in the financial system have their offices. “It will be a one-stop-shop for all those who would like to avail of financial services.”
The project will be a model for regional financial centres across the country. Space has been taken up by 16 financial services companies, including banks, insurance companies, investment companies and the Income-Tax Department.
The Financial City project is expected to be completed in three years. According to Mr Srinivas, the total investment into this project by IIDL and all participant institutions will be around Rs 1,200 crore.
Compared to Mumbai or Ahmedabad, Bangalore has not been recognised as a financial centre in the country yet, despite several home-grown banking institutions making it big from the State. It is in this context that the emergence of Bangalore as a financial hub will be interesting, as the city has already made a place for itself on the global map as a major IT/ITeS destination and a biotechnology hub.
Benefit Bangalore
“With so many banks having their head offices or operating out of Karnataka, the need to start a finance hub was felt and IFCI signed a memorandum of understanding with the State Government of Karnataka to create a Financial City ,” says Mr Srinivas.
“Developing a financial services sector in the city will help to decrease the dependence on only the IT/ITeS sector,” says Mr Naveen Nandwani, Director, South India, Cushman & Wakefield. Explaining the advantages that Bangalore as a financial city will bring forth, he says that the initiative to set up IFCI Financial City akin to the information technology parks is likely to offer new opportunities for the banking and financial services sector in Bangalore.
The city has been witnessing increasing and continuous demand from the banking, financial services and insurance sector and the financial services consulting firms. Quite a few major players, such as JP Morgan, Northern Trust, Societe Generale and Goldman Sachs, have set up their operations in the city, he points out.
Mr Nandwani adds that Bangalore has the advantage in terms of its location, talent pool availability (locally and ability to attract migrant population), climate, etc., for a financial city. “Setting up a dedicated financial city will provide a tremendous boost in realising this objective,” he says.
Mr Srinivas of IIDL says that the Financial City will help create more jobs and result in increased tax collections, create better infrastructure and consequently lead to the development of the entire region. Besides, there will be other impacts on the local market and surrounding areas such as increased employment, development of physical and social infrastructure and a boost to the local economy as a whole, adds Mr Nandwani.
According to him, this development is expected to generate and attract other developers, investors and end users, leading to increased activity in all asset classes — commercial office, residential, retail and hospitality.
A large development like this will increase the importance of the local market, and Devanahalli will no longer be known only for the international airport, says Mr Nandwani. “Many developers have land parcels in and around this location and some of them have initiated developments or are in the planning stage board on these lands,” he points out. Buoyed by the response, IIDL plans to request for additional space from the Karnataka Government to make the Financial City a bigger project.
The State Government representatives at the launch event — including the Chief Minister, Mr D.V. Sadananda Gowda, and the Minister for Large and Medium Industries, Mr Murugesh R. Nirani — offered full support for the same. According to Mr Srinivas, the company plans to ask for 25 acres more, to start with.
What the space will house
The Financial City answers the need for space required by banks and financial institutions in the region and will be developed to cater to their growth plans. Bankers that Business Line spoke to said that their initial plans were to use the space that they have been allotted as an IT centre, given that Bangalore is an IT city.
Ms Shubhalakshmi Panse, Executive Director, Vijaya Bank, says the bank plans to build a data centre or an IT centre in the two acres that they have been allotted. She points out that typically a data centre would need 10,000 sq. ft, and the bank could also house allied activities such as data warehousing and customer relationship management at this centre.
“If we get additional space, we could house a training centre at the financial city,” says Ms Panse.
Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, says the decision on the use of the two acres would depend on how other institutions plan to use their space. “If the focus of the financial hub is more on IT, then we will use the space as an IT centre. If others use the space for backend services, we would also do similarly,” he adds.
But the challenges for the Financial City remain in terms of getting adequate water and power supply, and public transport, which Mr Srinivas pointed out that the State Government has agreed to provide.