The Hong Kong and Shanghai Banking Corporation on Wednesday said its plans to invest another $400 million in India would materialise only if the Reserve Bank of India allowed foreign banks to make local acquisitions.
HSBC has invested $600 million of the $1 billion it has earmarked for India. HSBC Chief Executive Officer Michael RP Smith on Wednesday said the remaining investment planned was only academic as it hinged on a favourable regulatory framework.
Smith told reporters that HSBC's 14.62 per cent stake in UTI Bank was within the regulatory ambit, but the bank would have to wait and see how the regulation took shape.
"The situation is confusing given the opaque regulations and we are waiting for clarity. There are only discussion papers," he said.
The HSBC boss said regulations were restrictive in the bank's relationship with UTI Bank as it had to seek the Reserve Bank of India's approval for every transaction that it wanted to enter into.
HSBC considers its stake in UTI Bank a financial investment and holds organic growth as the key driver for its operations in India. It would consider opportunistic acquisitions, if regulations allowed, Smith said.
HSBC India CEO Niall SK Booker said for capital to come into the banking sector, India required clarity in regulation. Smith said the $1 billion investment earmarked for India was not limiting and it could always be raised to $1.5 billion if the country offered the potential.
HSBC sees India as a country offering an opportunity in every business it is in, including asset management. "That is the beauty of the (Indian) market," Smith said.
The bank plans to make personal finance services as its focal point for growth in India and to increase the number of branches to raise its presence in the market.
Booker said HSBC would apply for permission to open 5-10 more branches in 2005. The HSBC group is also considering setting up a global investment analysis and research centre in India and its investment banking executives from London are in Bangalore.
HSBC also has plans for a fifth service centre in India, in Kolkata, to add to the two in Hyderabad and one each in Bangalore and Visakhapatnam.
Smith said India was one of the strategic markets in which HSBC had medium- to long-term interests, with India and China forming the world's largest economic bloc. "We will grow our organic business as fast as we can across all segments," he added.
Smith was in India to review and finalise the Indian operations' budget for 2005. He also met government and regulatory officials in New Delhi and Mumbai.
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