Trailing the wealth of Indian high networth individuals has taken private bankers to small towns of Ludhiana, Coimbatore, Lucknow, Tirupur, Panipat, Aurangabad -- as they expand operations into the country's hinterland.
"We are following the wealth trail to towns which generate wealth, targeting export and manufacturing communities in Panipat and Tirupur," said Romesh Sobti, executive vice president and country representative, ABN Amro Bank NV (India).
For instance Nasik is known as the grape territory while Panipat boasts of an export market worth $ 1.3-1.4 billion. Likewise, Tirupur has a total turnover of at least $2 billion, in terms of exports.
ABN Amro Bank has branched out into new towns of Panipat (Haryana) and Tirupur (Tamil Nadu), and has plans to set up operations in Nasik (Maharashtra) and Moradabad (UP) shortly.
Small and medium enterprises are not just attracting the corporate banking sector to branch into second and third tier cities.
Of late, SMEs, many of which are cash-rich, are attracting the attention of private bankers. Tirupur, for instance, has an export turnover of about Rs 100 crore (Rs 1 billion), with many SMEs there supplying to large global textile chains like GAAP.
"Small towns have a far higher wealth potential considering that there is no competition in many of these towns," said Abhay Aima, country head equity & private banking group, HDFC Bank.
The private sector bank has doubled its private banking centres from eight to 16 and has expanded into towns such as Lucknow, outskirts of Pune, Coimbatore, Ludhiana, among other small towns.
Globally, SMEs and wealth are closely linked as many clients look at diversifying their wealth away from the classical fixed-income securities to equity investments and property rentals, among a host of investment opportunities, Sobti added.
In pursuing the wealth trail into India's small townships, bankers have found closets full of RBI tax-free bonds worth crores of rupees.
"We found this in many homes of SMEs in Panipat for instance," said Sutapa Banerjee, senior vice-president, head of private banking at ABN Amro Bank.
Relationship managers have found diamond manufacturers' preference for such investments. Huge wealth is today invested in real estate and much is often ploughed back into various businesses.
"Many of our clients in new cities are open to investment and are willing to look at different classes of investment aside from RBI bonds," Aima said.
"Clients have a lot of surplus cash, which they are willing to invest in property against which they would get lease rentals of 12 per cent," Banerjee said.
Some customers are willing to avail a loan from the same bank at rates of 10 per cent to purchase property on the condition that they are assured of cash flows through rentals.