DBS Sees Growth Opportunity In Bad Loans-Affected Indian Banking Sector

Mumbai: Singaporean lender DBS Bank sees capital constraints in the bad assets-saddled Indian banking sector as an opportunity to grow in this strategically important market.

“As you go forward, the rest of the banking system is still likely to be capital-constrained for some more time and that should provide us competitive edge in the short-term to build a business,” DBS Group chief executive Piyush Gupta told PTI.

He acknowledged that his bank, which pumped in Rs 670 crore in FY16 for recapitalisation, has also taken a massive hit due to bad loans, making it difficult for domestic lenders to expand their portfolios in the country.

Asserting the ability of DBS, which is the largest lender in its home market, Mr Gupta said, “In the last couple of years, the capital was to clean up the problems of the past. As we go forward, the capital requirements will be growth-oriented, to support growth in risk assets and balance sheets.”

It can be noted that a massive surge in bad assets, both due to difficult environment and an asset quality review undertaken by Reserve Bank of India, has led to concerns over ability of the banking system to support the finance needs of the economy, where policymakers want to accelerate the rate of growth into double digits in the medium term.

At present, the India unit accounts for only 5 per cent of DBS Group’s total asset book of 458 billion Singapore dollars, he said, adding that the bank sees this share growing in the future. DBS India runs just 12 branches at present.

While funding requirements of large corporates will be a mainstay in the medium-term, it is also planning to develop the small business franchise with plans to open up to 70 branches here over the next five years, which will be possible once if it gets a licence to operate as a wholly-owned subsidiary from the RBI, Mr Gupta said.

It can be noted that DBS was the first operating foreign lender to go in for a wholly-owned subsidiary and had accordingly applied for the same, but it yet to hear from the regulator.

Mr Gupta said DBS sees problem in the mid-cap space with infrastructure players and will stay aware from supporting them, and also pointed out difficulties in iron and steel, and power sectors.

“We will continue to be large corporate bank. Our problems were never there, they were in the mid-cap space. We got to be thoughtful about target market there,” he said.

The bank is also focusing on the retail segment and it recently introduced a mobile-only banking savings account offering a 7 per cent interest rate, Mr Gupta said, adding that DBS wants to be seen as a “full service bank” like Axis Bank or ICICI Bank in five years.

Even though many of its foreign peers have suffered reverses in wealth management side, DBS is keen to enter the space and may also look at acquisitions in this regard, he said, adding that at times, he has found some businesses lacking in ethics.

“Singapore is a AAA-rated country, and is notorious for being ruthless (on ethics) and that is in our DNA as well. Number of times, we pass up on possible deals because we just don’t think that the business practices will fit well with our culture,” Mr Gupta added.

On the delay in getting the wholly-owned subsidiary licence even after a year of applying it, Mr Gupta said it is not surprised by the long time taken as the RBI had hinted that it would take more than a year to accord the licence.

He, however, declined to answer when asked, if regulatory actions faced by some Indian lenders in Singapore and reciprocity reasons for the delay.

DBS also sees growing trade relations between India and Singapore as a good opportunity, where it can help Indian businesses going into Singapore and also vice versa, he said, and termed Singapore as a “landing point” that can anchor New Delhi’s “Look East” policy.

“We do expect India to be a more meaningful contributor to us over time,” he said.