Branch expansion plans of Citi, StanChart on hold

NEW DELHI: The Reserve Bank of India (RBI) has put on hold branch expansion plans of foreign banks such as Citibank and Standard Chartered Bank in the wake of the IPO scam.

These banks had applied for setting up a large number of rural branches in the country to tap into the sharply expanding income base in these areas.

“One of the reasons for not granting licences to these banks is because they have been found to be involved in the IPO scam. This is now under investigation. It will not be easy for these banks to get licences,” a source in the government confirmed.

Citibank, for instance, has applied for 60 new branch licences, of which at least 50% are targeted at rural markets. This would more than double the branch network of Citigroup in the country from its existing 39 branches in 27 cities across India. Citigroup has already invested nearly $1bn in the country.

Speaking to ET, Sanjay Nayar, CEO, Citigroup-India, said that Citibank would like to service the rural markets through direct lending.

Standard Chartered Bank, the oldest foreign bank operating here, has also submitted applications for branch expansion, listing many under-banked locations specified by the RBI.

The RBI had imposed penalties ranging from Rs 5 lakh to Rs 25 lakh on several financial entities in the wake of some retail investors misusing the IPO route to corner shares.

The regulator had surmised that some of the banks had not adhered to RBI’s Know Your Customer norms in opening of bank accounts and in giving loans to these individuals.


The irregularities were detected by the RBI during inspections after a reference was made to it by the Securities and Exchange Board of India.

Already, foreign banks are getting into buying securitised assets from public sector banks to meet their priority sector lending targets. At present, as many as 32 foreign banks operate in India through 215 branches.

While India needs to provide permission to open only 12 branches in a year for new and existing foreign banks under WTO commitments, the government has been going beyond that. This is part of the RBI’s financial inclusion concept, to service under-penetrated markets.