BANCA POPOLARE DI VICENZA NEW DELHI REPRESENTATIVE OFFICE

BANCA POPOLARE DI VICENZA NEW DELHI REPRESENTATIVE OFFICE BENVENUTI TUTTI

INDIAN BANKING SECTOR AND SCENARIO POST 2009

BACKGROUND Ø Ø Ø Ø THE INDIAN BANKING SECTOR COMPRISES OF LARGE NUMBER OF BANKS WHICH INCLUDE: GOVERNMENT OWNED(PUBLIC SECTOR) BANKS PRIVATE SECTOR BANKS FOREIGN BANKS REGIONAL RURAL BANKS CO-OPERATIVE BANKS LOCAL BANKS

THE BANKING SECTOR IS REGULATED BY RESERVE BANK OF INDIA(RBI).

FOREIGN BANKS ARE PERMITTED TO OPERATE AS: Ø REPRESENTATIVE OFFICE Ø BRANCH Ø WHOLLY OWNED SUBSIDIARY(WOS)

NO FOREIGN BANK HAS SET UP WOS IN INDIA SO FAR Ø TOP MULTINATIONAL BANKS HAVE BRANCH PRESENCE IN INDIA AND ARE ENGAGED IN: Ø CORPORATE LENDING Ø RETAIL MARKET Ø ASSET MANAGEMENT Ø INVESTMENT BANKING

MULTINATIONAL BANKS IN INDIA WITH BRANCHES: Ø Ø Ø Ø Ø ABN AMRO BANK (Now Royal Bank of Scotland) BANK OF AMERICA BARCLAYS BANK BNP PARIBAS CAYLON BANK CITIBANK DEUTSCHE BANK HSBC STANDARD CHARTERED SOCIETE GENERALE

PRESENCE OF ITALIAN BANKS IN INDIA

NO ITALIAN BANK HAS BRANCH PRESENCE IN INDIA

THE FOLLOWING ITALIAN BANKS HAVE REPRESENTATIVE OFFICE IN INDIA: n BANCA POPOLARE DI VICENZA n n n BANCA MONTE DEI PASCHI DI SIENA BANCHE POPOLARE UNITE BANCO POPOLARE INTESA SANPAOLO UNICREDIT BANCA

INDIAN BANK IN ITALY n Only State Bank of India (SBI), has a Representative Office in Milan, Italy. n It is understood that they are actively considering upgrading their Representative Office to a branch in the near future.

Major Indian Banks in Import/Export Trade Financing n n n n State Bank of India ICICI Bank Punjab National Bank Canara Bank of Baroda Bank of India Union Bank of India n n n n Indian Overseas Bank Syndicate Bank Central Bank of India Corporation Bank HDFC Bank Axis Bank EXIM Bank

ROLE OF ITALIAN BANKS IN DEVELOPMENT OF ITALIAN BUSINESS IN INDIA

CORRESPONDENT BANKING AND TRADE FINANCE ACTIVITIES. ASSISTANCE TO ITALIAN CLIENTS TO ESTABLISH IN INDIA.

CORRESPONDENT BANKING & TRADE FINANCE Generating business of import and export trade with Italy. Liaison with local Indian correspondent banks to direct letters of credit and trade finance business to Italy. Maintenance of €uro Accounts of Indian banks in Italy. Solutions for routing/delayed payments problems. Facilitating treasury & forex trade operations. Participation in loan syndications of Indian banks.

ASSISTANCE TO ITALIAN CLIENTS Arranging for financing facilities for Italian JV/subsidiary in India in collaboration with Indian Correspondent Bank (with or without guarantee from the Head Office in Italy) Information on potential clients/ suppliers/ acquisition targets or JV partners in India Identification of potential investors in India for Italian companies looking for buyers/investors Information on rules and regulations in India

Direct contact with Indian client/JV/supplier partner at the request of Italian client. Accompanying Italian clients in meetings with Indian counterparts (especially in the case of SME clients) Information to clients on certain sectors/ products in India Identification of reliable service providers in India (law firms, consultants, chartered accountants) The Representative Office works actively with the Italian Institutions like Embassy/Consulate, Chamber of Commerce, ICE in these matters.

CURRENCY COMPOSITION OF INDIAN FOREIGN TRADE & FOREIGN CURRENCY ACCOUNTS OF INDIAN BANKS

n n n Almost 70% of Indian foreign currency trade is in US$ and rest mostly in Euro and Jap Yen. Financial transactions are increasingly being done in Japanese Yen. The import and Export transactions are governed by Exchange control guidelines (manual) drawn by RBI in compliance with guidelines in the Foreign exchange management Act (FEMA). Commercial transaction documents for import/export are required to be routed through commercial banks.

n n n About 50 banks are authorized by RBI as Authorized Dealers (AD’s) for Forex transactions. Indian Banks maintain Foreign Currency Accounts (Nostro a/c’s) mostly in US $, €uro and Japanese Yen(¥). Other foreign currency account of Indian banks strictly for business needs are in Sterling £, Swiss Francs, Canadian $, Australian $, Singapore $ etc.

ITALIAN BANKS SETTING UP AN OPERATIVE PRESENCE IN INDIA

Regulatory Environment n n n Foreign banks require license from RBI for setting up WOS/branch/Rep. Off. Reciprocity of foreign country’s banking regulator is most important criteria for obtaining RBI’s license. Setting up a branch requires high capital requirement of Rs. 1000 million (US$25 mln) for setting first branch and Rs. 400 mln (US$10 mln) for each additional branch.

n n n High capital adequacy is required for opening more branches. Indo-Italian JV/subsidiaries in India are widely spread out in different regions in India and therefore presence by way of one branch only will not be feasible for Italian banks willing to open a branch in India. Foreign banks are not allowed to acquire more than 5% in Indian private sector banks.

Approach of Italian Banks to the Indian market n The approach of Italian banks to the Indian markets has always been cautious due to many reasons.

n n n The Italian Banks have always had a client centric approach rather than a market centric approach as they pick only indo Italian trade. The low levels of Italian investment in India leading to small volume of Indo-Italian bilateral trade, now about USD 4 billion, has not grown to its potential compared to the growth of say Indo-German trade at about USD 10 billion. The critical mass of Indo-Italian trade to justify heavy capital requirements for setting up branches, still does not exist, especially given the client centric approach of Italian banks.

n n n A small 1 or 2 branch presence in India would not yield results and it would require a network of branches at least in the major cities to yield results. Most Italian banks are concentrating their expansion efforts in Eastern Europe due to cultural and physical proximity. There are limits on how much can a bank lend for commercial purposes, out of total funds available (about 68 % ) and further restrictions on their deployment into priority sector at concessional rates of interest with higher risk factor as also to a single client as a proportion of their capital. This acts as a limitation to efficiently deploy funds in the market to earn reasonable profit.

n n n The rise of China as the manufacturing hub of the world and the consequent increase of investment and trade with that country has led to that market being seen as more attractive than India. The Italian banks still prefer to get involved in transactions where there is no exposure to Indian corporate risk and the transaction is secured by guarantees from Indian banks. The lean structure of the Representative Office in terms of human resources and capital investment fits in well with the client centric approach of Italian banks which allows the Representative Offices to focus on the needs of the clients without being under too much pressure to recover the investment being made by the Bank.

THE FUTURE SCENARIO IN THE BANKING SECTOR IN INDIA

l l In terms of WTO framework India is required to open up Financial Sector to foreign players after April 2009. We expect that even if the market is open in 2009 the regulator RBI will play an important role in approving foreign bank’s investment in Indian banks and the track record of the foreign banking regulator in their countries vis-à-vis Indian banks. We do not expect major steps from RBI until formation of new Government after the Indian National Elections in May 2009. Given that the 2009 is less than one year away, it would be advisable for Italian banks to get their India strategy in order and to start looking at possible options in the post 2009 scenario.

Vi ringrazio moltissimo per la vostra pazienza. Buonagiornata E Buon Lavoro

NEW DELHI REPRESENTATIVE OFFICE You are most welcome to contact: Mr. Pradeep Khanna, Chief Representative, Cell: +91 9810886364 Mr. Ashok R. Rao, Advisor, Cell: +91 9820208256 Banca Popolare di Vicenza New Delhi Representative Office 1510 -1512 Narain Manzil 23, Barakhamba Road, New Delhi-110001 Phone: +91 11 41524344/45 Fax: +91 11 41524346 E-mail: newdelhi@popvi. com ; mumbai@popvi. com Website: www. popolarevicenza. it