Now that American financial services Citigroup has decided to exit India along with other 12 countries, it raises the next question and that is what will happen to the Indian business.
According to report, Kotak Mahindra Bank may be a key contender to buy Citi Group’s retail operations, including the high-margin cards business. During an analyst call, Kotak Mahindra's MD and CEO, Uday Kotak has stated that the company is looking at increasing its customer base and hinted at inorganic growth as and when opportunities arise.
Other names that are possibly looking at Citi Group’s retail business are SBI Cards, ICICI Bank and Axis Bank. Smaller players like RBL Bank, DBS Bank, IndusInd Bank, and IDFC First Bank are also potential suitors, stated Macquarie.
According to Credit Suisse note, Kotak Mahindra Bank may be a key contender to buy out Citi’s retail operations, including the high-margin cards business. The note stated Citi’s retail business may add about 6 to 10 per cent to the retail book of any bank.
It also said that it may add about 5 to 8 per cent to the customer base of the larger private banks. As the global giant is primarily focused on the affluent segment, even this relatively small business may be of interest to several banks.
As of March 2020, Citibank India serves 2.9 million retail customers, with 1.2 million bank accounts and 2.2 million credit card accounts. The bank has around 6 per cent market share of retail credit card spends in the country.
In the past, when banks exit the market they usually sell it off to other players. One most recent exit was by the Royal Bank of Scotland in 2018. The bank sold its business to RBL Bank.
What happens to customers:
- Once Citibank comes into terms with any Indian private player it will transfer its customers to that bank.
- If Kotak Mahindra takes over then it will provide services to the Citibank customers.
- After that amalgamation, the acquiring bank may either continue to offer the same services as Citibank for some time or issue a new set of services to those customers.