Private banks take on Indian wealth rivals

By Nishant Kumar

SINGAPORE (Reuters) - Foreign private banks in India, which have seen business stall amid the global financial crisis, are looking to poach new business from the country's dominant informal wealth managers, industry players said on Wednesday.

India's informal wealth market, which includes small brokers and investment advisors, is estimated by consultant Celent to control 1.5 times the assets managed by bigger institutions like the private banks which cater to the very rich.

But global names like RBS Coutts and Merrill Lynch MER.N hope their strong brand and more diverse product basket will help them lure the country's fast growing pool of wealthy investors away from these smaller local competitors.

"As Indian markets mature ... you are sure to see that happening as you move incrementally toward estate planning, accession planning and custodial services," Nipun Mehta, the India head of SG Private Banking, a unit of Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) told Reuters by telephone.

Wealth managers active in the world's second fastest growing major economy said the investment needs of the wealthy were increasingly complex and they were demanding a complete solution under one roof, something that global players could cash in on.

"I see a much more structured atmosphere for looking at this industry," Raj Sriram, global head of the South Asian private banking arm of the Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), told the Reuters Wealth Management Summit in Singapore.

Global private banks said they also have resources and technology which small advisors mainly operating independently would find it tough to match.

"The organized segment is going to continue to grow in India as people are made more aware of the investment choices that they have," Rahul Malhotra, Merrill's head of Asia Pacific Advisory, said at the event, held at the Reuters office in Singapore.

Late last year before the global credit crunch worsened, Celent had forecast the organized industry including private banks, then growing at 32 percent annually, would quadruple its size to manage about $1 trillion in five years.

FLEXING DISTRIBUTION MUSCLES

Singapore-based Malhotra said that the increasing distribution muscle of the private banks in India would help them reach the wealthy in far flung areas now served by local players, boosting market share.

Recent market action could also spur India's growing number of wealthy to seek more professional advice and look beyond their home market, executives said.

A steep 47 percent fall in the Indian stock market this year wiped out investors' entire gains of last year. Executives said this could prompt them to consider diversifying by investing abroad, a trend which would give players in the organized sector, particularly the private banks, an edge.

Although India restricts domestic investors' allocation to foreign markets to $200,000 a year and the fund industry's as a whole to $7 billion, globally-invested products have attracted brisk inflows.

India had more than 20 funds investing overseas, managing over $2 billion at the end of June, more than four times the amount they held two years ago, when there were only two such funds, data from fund tracker ICRA Online showed.  Continued...