China's largest bank ICBC opens 1st branch in India, to invest $100 million

The world's largest bank by profit, balance sheet as well as market value, the Industrial & Commercial Bank of China (ICBC), opened its first branch in the country in Mumbai on Thursday.

"The opening of ICBC's maiden branch here not only shows the bank's confidence in the prospects of India's economic development and the friendly relationships between the two countries, but also our commitment to building a commercial bridge between the two countries," ICBC Vice-chairman, President  & Executive Director Yang Kaisheng told the media here while formally launching the branch.

On the bouquet of services his bank would be offering here, Yang said, "We will be concentrating on wholesale banking and trade financing to begin with, and then move onto personal banking including wealth management and investment banking." 

ICBC becomes the first lender from mainland China to set up a shop in the country. It was given the formal permission by the Reserve Bank on September 6 this year. On the quantum of investment that ICBC plans here, ICBC India Chief Executive Sun Xiang said, "The bank would be spending around $100 million (around Rs475 crore) here." But he added that capital will not be a problem if the business grows as per the expectations.

The RBI licence to ICBC comes just ahead of proposed discussions between the two countries on "strategic economic dialogue".

"ICBC Mumbai branch, as one of the most significant parts in ICBC's service networks in South Asia, will adhere to the bank's business philosophy of 'customer-oriented services create value', and continuously improve service quality.

"We will strive to integrate into local society and build ourselves as an outstanding foreign bank that can win recognition and trust from the local regulators, customers and the public," Yang said further.

ICBC could just be the first of the four Chinese banks to enter India. China has been pressing for regulatory approval to start commercial operations on the grounds of reciprocity.

Four Indian banks -- State Bank of India, Bank of Baroda, Bank of India and Canara Bank -- have a branch each in China.

ICBC is the biggest of China's four big banks, with the others being Bank of China, China Construction Bank and Agricultural Bank of China.

New Delhi and Beijing had signed an MoU during Chinese premier Wen Jiabao's recent visit, which would allow Chinese banks to set up branches in the country.

When asked whether ICBC will be open to the idea of converting a subsidiary here as and when the RBI issues such guidelines, the bank president Yang said, "We would prefer to continue as a branch, but if the norms demand subsidiarisation, we will have to follow that. But given the choice, we will be happy with the branch model."

Yang also pointed out that in 2010, China became the biggest trade partner of India with a trade volume of USD 61.7 billion, which is nearly 20 times the amount 10 years ago, while India is also China's biggest trade partner in South Asia.

However, going by the sheer size of its liquidity, ICBC's entry will be keenly watched by the domestic rivals. "If ICBC comes to India, State Bank will be nowhere," the then SBI chairman O P Bhatt had said in Kolkata on May 12, 2007 and pointed out that the country's largest lender would be at the mercy of ICBC unless the government allowed takeovers to bridge the huge assets gaps.

Though SBI extends one in six loans and controls almost a quarter of the banking assets in India, it only ranks 69th globally, while the Beijing-based ICBC is worth more than the entire domestic banking sector.

ICBC is also known for selling its shares in the world's biggest public offering just seven years after it was set up in 1984.

When his views were sought on the lingering credit crisis in the Eurozone area, Yang said, his overall exposure in the Eurozone is only under 0.5% or $13.2 billion (as of June) of his overall assets, and that he does not hold any sovereign euro bonds and foreign currency bonds.

Yang also said his bank is not facing any liquidity pressure and the deposit growth at the bank remained strong.