Exits, Entrances, and the New Banking Play in India

The year was 1990s.

Carrying a Citibank card or an HSBC chequebook wasn’t just about money.

It was a badge of global sophistication.

Foreign banks entered India with the promise of world-class service, plush branches, and a taste of international finance in Indian wallets.

Step into Mumbai’s Nariman Point or Delhi’s Connaught Place back then, and their presence was unmistakable.

Gleaming offices of Citibank, Standard Chartered, and Barclays weren’t just bank branches; they were symbols of India’s integration with the world.

But times have changed.

The billboards are fading, the logos are coming down.

Deutsche Bank is scaling back, Barclays has shrunk its footprint, and Citibank has already sold out.

What once symbolised India’s arrival on the global financial stage is now quietly stepping aside, opening doors for Indian banks to write the next chapter.

And every retreat is an opening bell for Indian banks and investors.

From opium and cotton to credit cards and exits

In the late 1700s, India saw cotton, indigo, and opium flowing through the ports.

British merchants were busy lining ledgers.

Then, banking wasn’t about retail loans or UPI.

It was about financing ships and railways, underwritten by foreign banks that set up shop mainly to serve themselves.

The Bank of Hindustan in 1770.

The General Bank of India in 1786.

Then the Presidency Banks of Calcutta, Bombay, and Madras by the early 1800s.

These were the ancestors of today’s banking behemoths.

Though their loyalty was firmly to the Empire.

By 1921, those Presidency Banks merged into the Imperial Bank of India, the institution that would later morph into the State Bank of India.

At Independence in 1947, India had just 1,500 bank branches for a population of 340 million.

Less than 10% of rural India had banking access.

Who dominated the scene?

Chartered Bank (the old Standard Chartered), Grindlays, HSBC—all foreign, all controlling over 70% of forex transactions by the 1930s.

They even financed the big-ticket infrastructure—railways, ports, telegraph lines—that powered colonial extraction.

The Leash Tightens: Regulation and Nationalisation

Then came 1949 and the Banking Regulation Act, followed by nationalisation of 14 major banks in 1969 and six more in 1980.

Suddenly, the homegrown banks were in charge.

Foreign banks? Reduced to playing niche games: trade finance, expat banking, high-net-worth individuals.

And with FERA (the Foreign Exchange Regulation Act) of 1973, foreign equity was capped at 40%.

Even opening a new branch needed the Reserve Bank of India’s (RBI) blessing.

Not exactly a recipe for retail domination.

But Citibank, ANZ Grindlays, Bank of America—they stayed, specialising in corporate loans and forex.

They were still relevant, just not centre stage.

The Liberalisation High: Swagger Returns

Then came the liberalisation of 1990s.

India opened up, reforms were in, capital markets were buzzing.

And suddenly, foreign banks had swagger again.

From 1995 to 2010, they expanded, built branches, and competed fiercely.

By 2010, they owned 7.12% of total banking assets, with 306 branches across the country.

Standard Chartered led the pack, with HSBC, Citibank, Deutsche Bank, and ABN AMRO right behind.

RBI even handed them a roadmap in 2005: convert to Wholly Owned Subsidiaries (WOS), scale up retail, play bigger.

But then 2008’s global financial crisis hit, RBI tapped the brakes, and Phase II of expansion was quietly shelved.

The Pullback: Too Costly to Stay

Now fast forward to FY25, and the party mood has shifted.

Foreign banks’ share of Indian banking assets is just 6%, down from 8.5% in FY18.

Big names have folded their retail tents:

Citibank’s blockbuster ₹11,949 crore exit, with Axis Bank buying its consumer business in 2022.

Deutsche Bank, now putting its India retail on the auction block.

FirstRand Bank and Commonwealth Bank of Australia, both gone completely.

Retail banking is volume-driven, low-margin, and heavy on compliance.

Without scale, you bleed.

Some foreign banks in India didn’t even manage to break even.

Meanwhile, Indian private players—HDFC, ICICI, Kotak—scaled aggressively, while public sector banks cleaned up balance sheets and began flexing.

FY25 tells the story best: Public Sector Banks (PSB) posted record profits of ₹1.78 lakh crore, a 26% jump from FY24.

These are the same PSBs many investors once dismissed as lumbering dinosaurs.

RBI’s Ownership Chessboard

And then there’s RBI’s cautious game of chess.

Non-resident ownership in Indian banks is capped at 15%, unless the regulator makes exceptions (distressed bank takeovers, for instance).

Recently, RBI has been reviewing those limits—but don’t expect the floodgates to open.

Foreign banks know the drill: retail is out, niches are in.

Corporate lending, investment banking, wealth management, and forex—these are still lucrative.

Just not your neighbourhood savings account.

Signals For Traders: Who Gets the Spoils?

Here’s where the investor angle sharpens.

Every exit equals an entry point for someone else.

Axis Bank snagged Citibank’s retail business, instantly scaling its credit card game.

PSBs are turning into profit machines.

Private banks are flexing harder than ever.

Fintechs and payments players—UPI-backed, digital-first, cost-light—are circling to scoop up the gaps foreign banks leave behind.

For equity watchers, this isn’t the end of foreign banks in India. It’s a strategic reset.

They’ll still be here—just less in your high street, more in your corporate boardroom.

But the protagonists now? The locals.

The Cheeky Takeaway

Foreign banks once funded railways, ports, and opium.

Then they swaggered in with shiny retail offerings during liberalisation.

Today, they’re quietly retreating while Indian banks throw profit parties.

For investors and traders, don’t read exits as weakness in the sector.

Read them as strength—domestic strength.

Because if history tells us anything, it’s this: foreign banks wrote the prologue to India’s financial story.

But the climax? That’s being authored by homegrown banks and digital natives.

And if you’re watching the markets, every foreign retreat is not a loss. It’s a signal.

Sources and References:

1. IJCRT
   
2. ALLSUBJECTJOURNAL
   
3. RBI
   
4. ECONOMICTIMES
   
5. IBEF
   
6. AXISBANK
   
7. BUSINESSSTANDARD