HSBC says new Indian banking regulation not “sensible”

Indian and foreign-owned banks won’t be able to meet the new norms.

Stuart Milne, CEO at HSBC India, said a new government regulation requiring that foreign banks adhere to 40% priority lending norms within five years is not achievable or sensible.

“The regulations are saying we have to go from 10% to 40% in five years while our balance sheets are doubling . . . We don't think it is either sensible or achievable,'' Milne said.

The new Reserve Bank of India regulations require foreign banks with more than 20 branches in India to channel 40% of their lending to priority sectors such as agriculture and small and medium businesses in five years.

"I don't think none of the Indian banks have been able to meet these targets fully after doing this for six decades,” Milne said.

“The large foreign banks are now mandated to do so starting April 1 in the next five years. That's going to be massively challenging,''.

He also said HSBC is not keen on expanding its network of branches and enter small towns.

"We don't want to open branches in smaller cities. The economy is only growing 5%. So for us in terms of expanding out footprint in India is what we can do with our existing network," Milne said.

HSBC has a network of 50 branches and has not opened a new branch in the last three years.