British HSBC to wind up private bank biz in India

Global banking major HSBC on Friday announced shutting down of its private banking business in India that offers wealth management services. “After a strategic review of our global private banking operations here, we have decided to close down the business,” a bank spokesperson said.

Some 70 people working in the division headed by Shantanu Ambedkar will now be absorbed into the retail bank, officials said. The bank made the announcement in an internal e-mail to employees earlier in the day. It comes within two months of Royal Bank of Scotland also exiting the private banking business by selling it off to a company floated by a few of its senior management personnel.

It is not immediately known how much funds the bank has been managing under its wealth management business. The spokesperson said the business will be closed down by March 2016 and select customers will be given a choice to move to HSBC Premier, its global retail banking and wealth management platform.

The British bank is also investing in HSBC Premier in India to enhance product and services suite, which can be made available to select customers, he said. The global bank’s private banking division has been mired in a black money probe after an investigation by ICIJ, a global journalists’ collective, found out that over 1,000 Indians had parked over $4 billion in HSBC Geneva till 2007. The bank officials were quick to dismiss any notion of the shutdown of the local private banking business being linked to the scandal and stressed that the controversy involves Indians’ accounts in HSBC Geneva.

The decision to close the business is also not a fallout of any cost rationalisation measures, officials said. The bank had earlier announced thousands of job cuts as part of cost rationalisation globally. India is a “priority market” for HSBC and the bank continues to invest here, a spokesperson said.

The private banking business used to offer “onshore” wealth management advisory to clients, which included investments in mutual funds, bonds, debentures and other structured products. 

Meanwhile, concerned over mounting bad loans, the government is planning to set up a high-level panel to effectively deal with the issue, said a senior Finance Ministry official.

“That was discussed at the meeting of the finance minister with the heads of PSU banks. It’s too early to get into specifics... it will certainly have a more focused look on certain sectors,” Department of Financial Services Secretary Anjuly Chib Duggal said when asked if a panel on NPAs, which is likely to be headed by Minister of State for Finance Jayant Sinha, is in the offing.

The gross NPAs of PSBs rose to 6.03 per cent at the end of June 2015, as against 5.20 per cent in March 2015. “NPA is a matter of concern and the government is vigilant in this regard. The government is looking into the problems faced by steel, aluminium and textile sectors,” she said. These are the sectors which have a high share of total NPAs of public sector banks. Earlier in the day, Sinha said: “NPAs are a result of many factors. There is not one silver bullet that is going to deal with them... It will require us to take a multi-dimensional approach.” 

On Indian Overseas Bank issue, Duggal said, “There is a mechanism already to check fraud. Fraud is clearly an issue. It’s is an area of concern.”  On financial inclusion, she said differentiated banking is very much on the cards. “Geographical differentiation is going to happen. With smaller banks serving smaller areas, trust gets better and outreach is better and personal,” she said. She stressed on the need for lowering of the cost of delivery to push financial inclusion. “We are looking at moving a little further towards lowering costs in delivery of products,” the Secretary added. On the Pradhan Mantri Jan Dhan Yojana, Duggal said it has got a very good response and deposits under the scheme have crossed Rs 27,000 crore. At the same time, she noted, zero balance accounts have come down to about 35 per cent.