Univer‘Citi’ Of Indian Retail Banking Heads For The Exit

Once seen by some as the “rockstar” of Indian retail banking, Citi India is letting go of its retail business. What went wrong?

A pedestrian walks past a Citibank bank branch in San Francisco. (Photographer: David Paul Morris/Bloomberg)
A pedestrian walks past a Citibank bank branch in San Francisco. (Photographer: David Paul Morris/Bloomberg)

In jest, it was called the Univer‘citi’ of Indian retail banking, says a former Citibanker reminiscing on the global lender’s long run in the Indian retail banking market as they prepare to exit it. Such was the dominance of Citi in the 1990s and early 2000s, that Indian private banks looking to grow in India went scouting for talent at the foreign lender, this banker, who spoke on condition of anonymity, said.

Indeed, if you cast an eye across the Indian financial, you’ll still find many a Citibanker and many a Citibank product.

Some who cut their teeth in the bank’s overseas operations like Aditya Puri, who went on to become HDFC Bank Ltd.’s chief executive, and others like TR Ramachandran, who headed retail for Citi, and went on to lead Visa in India.

India’s retail banking ecosystem owes a lot to Citi India, says Amit Tandon, founder and managing director of IiAS and a long time watcher of the Indian banking sector. “Many of the key people who developed the market are alumni.”

They brought with them the concept of personalised banking and relationship managers, which was unheard of here at the time, adds Anil Singhvi, chairman, ICAN Investment Advisors and a Citi retail customer since the 1980s. “Before you had this rush in digital banking, people used to call their bank on the phone to do transactions. Citi was the bank which enabled everyone to do that.”

An employee assists a customer at an automated teller machine (ATM) at a Citigroup Inc. Citibank branch in Mumbai, India. (Photographer: Vivek Prakash/Bloomberg)
An employee assists a customer at an automated teller machine (ATM) at a Citigroup Inc. Citibank branch in Mumbai, India. (Photographer: Vivek Prakash/Bloomberg)

The Past: Good With The Bad

Citi is now preparing to exit retail operations in India. As part of the decision, announced on April 15, the bank will exit retail banking in 13 jurisdictions including India.

“We believe our capital, investment dollars and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” Citi’s new chief executive officer Jane Fraser said in a statement released on the Citigroup website.

As Citi closes its India retail chapter, it will leave behind victories and defeats.

Citi had been around in India for 119 years but it started pushing for a greater role in the country’s retail banking opportunity in the late 80s.

After India’s economic liberalisation in 1991, it became a lender to affluent Indians to purchase consumer durables, homes and cars. It was an early entrant into wealth management, where it built relationships with India’s high net worth individuals as a way to garner more fee income.

A lot of growth came under the late Nanoo Pamnani who headed Citi India from 1983 to 1988 and again between 1999 till 2002. Between the years of Pamnani’s two tenures, Citi India was led by Jerry Rao. After Pamnani retired from the bank in 2002, Sanjay Nayar took over the reins of the India business.
Univer‘Citi’ Of Indian Retail Banking Heads For The Exit

Over these years, Citi went head-first into taking retail banking away from branches and closer to our phones and desktops.

It launched phone banking services in 1993, internet banking services in 1998, text message alerts in 2001 and India’s first near field communication-enabled credit card service launched in 2009, enabling tap-and-pay which the industry is now building on.

We were the “rockstars” of Indian banking in those days, said another former Citi official, who also spoke on condition of anonymity.

Between 2002 and 2008 Citi truly transformed from being a corporate client-focussed bank to a full fledged universal bank. We opened up business for small corporates and individuals on a large scale led by innovation.
Sanjay Nayar, former Citi India CEO

The good times were balanced with the bad.

In 2008, Citi’s retail business came under fire close to the time of the global financial crisis. Citi Financial Consumer Finance Ltd, or CitiFinancial as it was called, which had been launched In 1998, racked up large losses emerging from aggressive lending.

CitiFinancial posted a net loss of Rs 235 crore as on September 30, 2008, according to an article in the Financial Express. In the year ended March 31, 2009, the bank saw gross bad loan additions worth Rs 2,514 crore.

The global financial crisis had already forced international lenders to tighten their belts. Capital was scare and needed to conserved. Large, loss-making bets were unlikely to get much support from headquarters, no matter what the potential.

In early 2009, the 280-branch-strong CitiFinancial was shuttered.

The former Citi banker cited earlier said if Citi India had just absorbed the losses for a few more years after the crisis, CitiFinancial’s vast distribution network and market expertise could have given the bank a competitive edge in retail lending.

Alongside Citi lost the people key to pushing retail banking in India. In 2008, Sanjay Nayyar, stepped down to move to KKR. Till 2010, Mark Robinson headed the India operations and then Pramit Jhaveri took over, only to leave under a regulatory cloud in 2019.

Former Citibank India Chief Executive Sanjay Nayar at the World Economic Forum - India Economic Summit, in New Delhi in November 2006. (Photographer: Amit Bhargava/Bloomberg News)
Former Citibank India Chief Executive Sanjay Nayar at the World Economic Forum - India Economic Summit, in New Delhi in November 2006. (Photographer: Amit Bhargava/Bloomberg News)

In the twelve years since 2008, Citi has fallen behind in the Indian retail banking race as local competitors, who may have taken staff and ideas from the global leader, overtook it.

“After the global financial crisis, the retail market in India opened up considerably,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services. “Most private banks took the space vacated by players like Citi and grew large retail businesses. Citi, unfortunately, was limited by the problems at its global headquarters and could never build a sizeable portfolio.”

Today, Citi’s India retail loan book of Rs 20,739 crore is only a fraction of HDFC Bank’s, which has a retail loan portfolio of over Rs 5.2 lakh crore as of March 2021, or ICICI Bank Ltd.’s Rs 4.58 lakh crore retail loans as of December 2020. As of December 2020, Citi had a network of 41 branches in India and an ATM network of 507 machines.

“In India for whatever reason, Citibank it appears was unable to significantly grow its retail business in the face of competition from private banks,” said Hemindra Hazari, independent banking analyst. “The decision to withdraw from retail in many geographical areas is apparently because it does not see promising profitable growth in the face of competition.”

Indian banks have truly grown and outpaced Citi at its own game, said Tandon. “While technology might have been a differentiator at some point, most competition has caught up, leaving Citi behind, burdened with legacy technology infrastructure,” Tandon said.

After the global financial crisis there was a bit of pull back as with all foreign banks, but the franchise still is amongst the strongest in the country. Nayar said.

The Exit & Beyond

The exit from retail banking in India isn’t entirely surprising given many peer foreign lenders have chosen to wind down or completely shut retail operations while focusing on the more profitable wholesale business.

Citi’s India business had reported total revenue of Rs 17,701 crore as per regulatory disclosures, where the retail banking business contributed Rs 5,420.63 crore for the financial year ended March 31, 2020. The corporate banking business had reported total revenues worth Rs 8,795 crore during the period. Net profit for the year stood at Rs 4,918 crore, as per the disclosures.

A person familiar with the matter said that Citi will look for a buyer for its Indian operations. Timelines for the exit have not been specified.

“There is no immediate change to our operations and no immediate impact to our colleagues as a result of this announcement. In the interim, we will continue to serve our clients with the same care, empathy and dedication that we do today,” Citi India CEO Ashu Khullar was quoted as saying in an emailed statement.

Analysts expect at least Citi’s card portfolio will be coveted.

As of January 2021, Citi had a credit card portfolio of 26.45 lakh cards, where the monthly spends stood at over Rs 3,000 crore, as per data available with the Reserve Bank of India. “Given Citi’s higher mix of premium cards and corporate salary account cards, we believe there may be a lot of interest among both large players like SBI Cards And Payment Services Ltd., ICICI Bank and Axis Bank Ltd. looking to increase their share of premium cards as well as smaller issuers like RBL Bank Ltd., IndusInd Bank Ltd., DBS Bank and IDFC First Bank Ltd.,” Macquarie Research said in a report.

Macquarie also estimates mid-sized to large private banks could consider bidding for the wealth management business. Lenders like IndusInd Bank which have been growing their own wealth management business could be interested in buying the business from Citi.

There is also the retail lending book of over Rs 20,000 crore in loans and a gross NPA of 2.56% for the non-priority lending portfolio.

According to Singhvi of ICAN Investment Advisors, the state of foreign banks in India in general and specifically Citi is the outcome of their own business practices, which never let them become sizeable banks in the country.

India gave all of them (foreign banks) the opportunity to become full fledged banks here, yet they always treated their business here as a branch of the global office. Banks like Citi, HSBC and Standard Chartered had the opportunity to grow in India much before the local banks came into existence and they never took it up seriously. Local banks, to their credit, picked up the entire market share instead. 
Anil Singhvi, Founder, ICAN Investment Advisors

If Citi has decided to shut a part of its business here, we should have no feeling of “love lost” for them, Singhvi said.