Of the New Southbound countries, India has undoubtedly received the most attention in finance over the past year. According to the Financial Supervisory Committee, lending by Taiwanese banks to New Southbound countries has grown the fastest in India, increasing by NT$106.3 billion in 2023, far above the NT$55 billion in new loans from Australia, ranked second. The FSC also reported that in the first four months of this year, new lending to all New Southbound countries by Taiwanese banks reached NT$150.3 billion, exceeding expectations by 2.37 times. India also placed far above the rest with at NT$80.2 billion, accounting for more than half of the new lending in New Southbound countries, and once again far ahead of Australia’s NT$32 billion in second place.

In addition, Taipei Fubon Bank expressed interest in setting up an Indian branch last year, and in late February it obtained FSC approval to set up a branch in Mumbai. Why has India become the most attractive country for banks and financial regulators?

Three big advantages

With the largest overseas presence, CTBC Bank was the first to enter India, first establishing a branch there in 1996. After 30 years, they now have two branches, but they have the longest and most in-depth perspective of any Taiwanese bank of the Indian market. So what doe they regard as India’s most important advantages for other banks? A senior CTBC overseas business executive describes three reasons.

First is the demographic dividend. The executive pointed out that India is the world’s sixth largest economy, with a population exceeding 1.3 billion. This rich potential for demand is what forms the “dividend market” that is attracting banking to India.

The second is economic connections. Taiwan and India already have a close trade relationship, and many Taiwanese-based companies, including Hon Hai Technology Group and Powerchip Semiconductor Manufacturing Corporation, have already invested to build production facilities, supporting the local manufacturing industry and creating job opportunities.

Third, American supply chains require distributed manufacturing bases. The executive hopes that as industries disperse their manufacturing bases, along with the optimism by many Taiwanese businesses about India’s plentiful labor market potential and enormous internal demand, naturally the focus of development will start turning toward India. Taiwanese financial institutions have followed Taiwanese companies overseas in response to government policies to provide cross-border financial services. As more Taiwanese businesses enter India, Taiwanese banks will likewise set up more branches there.

International syndicated lending

Regarding the recent operating tactics in India, as well as the remarkable results of some businesses, the senior executive states that cross-border services is CTBC’s strength, mainly due to its extensive global network. Therefore, CTBC effectively assists Indian customers in Singapore, Japan, the United States, and Hong Kong, etc. to provide financial services to their satisfaction. From the start, CTBC focused on cross-border development of Taiwanese-funded companies. It has successfully expanded its service scope over the last 30 years to resolve large Indian businesses’ most complex financial problems, including helping organize international syndicated lending.

First-class expatriate talent + local elites

Regarding the traits possessed by the staff sent to CTBC’s Indian branches, as well as local talent, the executive said that because the colleagues sent to India need to solve the problems of Taiwanese business customers, in addition to India’s already complex environment, being able to operate independently is a highly valued core competency. Especially for those sent to the Indian branches, their English competency and situational adaptability “both require first-class talent.”

The executive also emphasized that to successfully grow the business and increase CTBC’s local competitiveness, “the locals are the most important, not the expatriates!” Less than 10% of CTBC Bank’s positions in India are filled by Taiwanese personnel.

India is located far from the other New Southbound countries in Southeast Asia. Will this make the Indian branches unique? CTBC said that even though India is further away, “within the structure of CTBC, it shouldn’t be seen as an independent unit.” Because CTBC already has diversified bases in Southeast Asia, its many years of cross-border communication and coordination abilities keeps maturing due to its organizational cooperation. Therefore, instead CTBC has used India’s unique attributes to cooperate with and reinforce other overseas branches to expand the business’s scope.

Indian branches can also complement other overseas CTBC branches in Southeast Asian markets. When Indian businesses seek overseas funds, for example, the Singapore and Tokyo branches work together to assist the Indian branches in creating competitive cross-border financing structures.

Domestic demand bolsters the rapid development of syndicated loan projects

Financial experts also point out that driven by increasing domestic demand in the Indian market, IndianOil, NTPC Limited, and other large state-owned enterprises have all emerged on the international syndicated loan market. The financial industry is abuzz with expectations for India.

Fubon is the second most proactive bank in India after CTBC. Last year, it not only expressed interest in opening an Indian branch, but also took practical actions, coordinating and sponsoring a 5 year, US$10 billion syndicated loan for the State Bank of India, which is also SBI’s first social loan meeting the requirements of the Asia Pacific Loan Market Association (APLMA). In addition to driving CSR development and implementation, it is more importantly the largest case on the global syndicated lending market in which a Taiwanese bank is lending funds to another bank. This is of great significance for the international visibility of Taiwanese banking, and also demonstrates Fubon’s commitment to the Indian market.

Fubon noted that because bilateral trade and investment between Taiwan and India are heating up, as well as international supply chain migration and the expansion of local demand, a growing number of Taiwanese businesses are now investing heavily in India. Fubon is optimistic about India’s potential, and it plans to make Mumbai its first branch in South Asia.

The bank also hopes that the Mumbai branch plans will not only complete its global business network and expand overseas asset deployment, but more importantly demonstrate its significance in Asia-Pacific business networks.

Fubon reports that in 2022, India’s economy reached US$3.47 trillion, surpassing the UK as the world’s 5^th largest economy. The Central Bank of India estimates that GDP growth was 6% in 2023; if it maintains stable growth, it will surpass Japan to become the 3^rd largest economy by 2030. In addition, India’s population was 1.43 billion people in 2023, surpassing China as the world’s most populous country. With huge potential for domestic consumption and an abundant labor force, it has internal and external demand, economic growth, and an important strategic position in overseas markets. By virtue of its abundant labor force of high-skilled talent, low production costs, and the government’s continued actions to improve the economic landscape, India has already become an emerging production base of Taiwanese and international manufacturers for supply chain reorganization.

One of the few emerging markets with moderate risk and high rewards

Fubon is optimistic about the Indian market, including the continued growth of Indian companies’ overseas financing in terms of scale and profit. It reports that in 2023, Taiwanese banks lent the Indian market over NT$106.3, the most among the New Southbound countries. At the same time, the profit growth rate of Indian businesses leads Asia, so large companies need abundant and stable financing to expand, giving banks a stable source of projects, and the whole market a good rate of return. In addition, international credit rating agencies Fitch, S&P Global, and Moody’s have all given India a “stable”  outlook, and India is one of the few emerging markets with high rewards and controllable risks. Setting up bases in India can first satisfy Taiwanese supply chain deployments, and second the development of local business and scale of international financing. Seeing these are multiple financial demands, Fubon decided to set up in India, selecting Mumbai as its first big city. Fubon says that when it is complete, the branch will support Taiwanese and high-quality local companies’ business development in the region, combining its plentiful resources in the Asia-Pacific region with its financial services.

Despite the development potential and business opportunities, banks entering India need to be exceedingly careful about certain topics. India is a complex society, stemming from its diversity and contradictions. Therefore, before banks enter, they must first deeply understand the local religions, laws, languages, and cultures. Including CTBC’s large pool of local talent, 90% its staff are local Indians.

India’s primary religions are Hinduism, Islam, Christianity, and Sikhism, and it has 22 official languages with hundreds of dialects, so large cultural differences exist between regions. Furthermore, even though India’s caste system has been outlawed, the traditional system still affects social structure and people’s lives in some areas. Moreover, India’s multi-ethnic society can create political, economic, and cultural conflicts. Financial institutions must pay attention to these factors when entering India to avoid hitting any landmines.