BANCA POPOLARE DI VICENZANEW DELHI REPRESENTATIVE OFFICE

BENVENUTI TUTTI

INDIAN BANKING SECTORINDIAN BANKING SECTORANDAND

SCENARIO POST 2009SCENARIO POST 2009

BACKGROUNDBACKGROUND

THE INDIAN BANKING SECTOR COMPRISES THE INDIAN BANKING SECTOR COMPRISES OF LARGE NUMBER OF BANKS WHICH OF LARGE NUMBER OF BANKS WHICH INCLUDE:INCLUDE:

GOVERNMENT OWNED(PUBLIC SECTOR) BANKSGOVERNMENT OWNED(PUBLIC SECTOR) BANKS PRIVATE SECTOR BANKSPRIVATE SECTOR BANKS FOREIGN BANKSFOREIGN BANKS REGIONAL RURAL BANKSREGIONAL RURAL BANKS CO-OPERATIVE BANKSCO-OPERATIVE BANKS LOCAL BANKSLOCAL BANKS

THE BANKING SECTOR IS REGULATED BY THE BANKING SECTOR IS REGULATED BY RESERVE BANK OF INDIA(RBI).RESERVE BANK OF INDIA(RBI).

FOREIGN BANKS ARE FOREIGN BANKS ARE PERMITTED TO OPERATE AS:PERMITTED TO OPERATE AS:

REPRESENTATIVE OFFICEREPRESENTATIVE OFFICE

BRANCHBRANCH

WHOLLY OWNED SUBSIDIARY(WOS)WHOLLY OWNED SUBSIDIARY(WOS)

NO FOREIGN BANK HAS SET UP NO FOREIGN BANK HAS SET UP WOS IN INDIA SO FARWOS IN INDIA SO FAR

TOP MULTINATIONAL BANKS HAVE TOP MULTINATIONAL BANKS HAVE BRANCH PRESENCE IN INDIA AND BRANCH PRESENCE IN INDIA AND ARE ENGAGED IN:ARE ENGAGED IN:

CORPORATE LENDINGCORPORATE LENDING RETAIL MARKETRETAIL MARKET ASSET MANAGEMENTASSET MANAGEMENT INVESTMENT BANKINGINVESTMENT BANKING

MULTINATIONAL BANKS IN MULTINATIONAL BANKS IN INDIA WITH BRANCHES:INDIA WITH BRANCHES:

ABN AMRO BANK (Now Royal Bank of Scotland)ABN AMRO BANK (Now Royal Bank of Scotland) BANK OF AMERICA BANK OF AMERICA BARCLAYS BANKBARCLAYS BANK BNP PARIBASBNP PARIBAS CAYLON BANKCAYLON BANK CITIBANKCITIBANK DEUTSCHE BANKDEUTSCHE BANK HSBCHSBC STANDARD CHARTEREDSTANDARD CHARTERED SOCIETE GENERALESOCIETE GENERALE

PRESENCE OF ITALIAN PRESENCE OF ITALIAN BANKS IN INDIABANKS IN INDIA

NO ITALIAN BANK HAS NO ITALIAN BANK HAS BRANCH PRESENCE IN INDIABRANCH PRESENCE IN INDIA

THE FOLLOWING ITALIAN BANKS HAVE THE FOLLOWING ITALIAN BANKS HAVE REPRESENTATIVE OFFICE IN INDIA:REPRESENTATIVE OFFICE IN INDIA:

BANCA POPOLARE DI BANCA POPOLARE DI VICENZAVICENZA

BANCA MONTE DEI PASCHI DI SIENABANCA MONTE DEI PASCHI DI SIENA BANCHE POPOLARE UNITEBANCHE POPOLARE UNITE BANCO POPOLAREBANCO POPOLARE INTESA SANPAOLOINTESA SANPAOLO UNICREDIT BANCAUNICREDIT BANCA

INDIAN BANK IN ITALYINDIAN BANK IN ITALY

Only State Bank of India (SBI), has a Only State Bank of India (SBI), has a Representative Office in Milan, Italy.Representative Office in Milan, Italy.

It is understood that they are actively It is understood that they are actively considering upgrading their Representative considering upgrading their Representative Office to a branch in the near future.Office to a branch in the near future.

Major Indian Banks in Import/Export Major Indian Banks in Import/Export Trade FinancingTrade Financing

State Bank of IndiaState Bank of India ICICI BankICICI Bank Punjab National Punjab National

BankBank Canara BankCanara Bank Bank of BarodaBank of Baroda Bank of IndiaBank of India Union Bank of IndiaUnion Bank of India

Indian Overseas Indian Overseas Bank Bank

Syndicate BankSyndicate Bank Central Bank of Central Bank of

IndiaIndia Corporation BankCorporation Bank HDFC BankHDFC Bank Axis BankAxis Bank EXIM BankEXIM Bank

ROLE OF ITALIAN BANKS IN DEVELOPMENT OF ITALIAN BUSINESS IN INDIA

CORRESPONDENT BANKING AND TRADE FINANCE ACTIVITIES.

ASSISTANCE TO ITALIAN CLIENTS TO ESTABLISH IN INDIA.

CORRESPONDENT BANKING & TRADE FINANCE

Generating business of import and export trade with Italy.Liaison with local Indian correspondent banks to direct letters of credit and trade finance business to Italy.Maintenance of €uro Accounts of Indian banks in Italy.Solutions for routing/delayed payments problems.Facilitating treasury & forex trade operations. Participation in loan syndications of Indian banks.

ASSISTANCE TO ITALIAN CLIENTS

Arranging for financing facilities for Italian JV/subsidiary in India in collaboration with Indian Correspondent Bank (with or without guarantee from the Head Office in Italy)

Information on potential clients/ suppliers/ acquisition targets or JV partners in India

Identification of potential investors in India for Italian companies looking for buyers/investors

Information on rules and regulations in India

Direct contact with Indian client/JV/supplier partner at the request of Italian client.

Accompanying Italian clients in meetings with Indian counterparts (especially in the case of SME clients)

Information to clients on certain sectors/ products in India

Identification of reliable service providers in India (law firms, consultants, chartered accountants)

The Representative Office works actively with the Italian Institutions like Embassy/Consulate, Chamber of Commerce, ICE in these matters.

CURRENCY COMPOSITION OF CURRENCY COMPOSITION OF INDIAN FOREIGN TRADE & INDIAN FOREIGN TRADE &

FOREIGN CURRENCY FOREIGN CURRENCY ACCOUNTS OF INDIAN BANKSACCOUNTS OF INDIAN BANKS

Almost 70% of Indian foreign currency trade is in Almost 70% of Indian foreign currency trade is in US$ and rest mostly in Euro and Jap Yen. US$ and rest mostly in Euro and Jap Yen. Financial transactions are increasingly being Financial transactions are increasingly being done in Japanese Yen.done in Japanese Yen.

The import and Export transactions are governed The import and Export transactions are governed by Exchange control guidelines (manual) drawn by Exchange control guidelines (manual) drawn by RBI in compliance with guidelines in the by RBI in compliance with guidelines in the Foreign exchange management Act (FEMA).Foreign exchange management Act (FEMA).

Commercial transaction documents for Commercial transaction documents for import/export are required to be routed through import/export are required to be routed through commercial banks.commercial banks.

About 50 banks are authorized by RBI as About 50 banks are authorized by RBI as Authorized Dealers (AD’s) for Forex Authorized Dealers (AD’s) for Forex transactions.transactions.

Indian Banks maintain Foreign Currency Indian Banks maintain Foreign Currency Accounts (Nostro a/c’s) mostly in US $, €uro Accounts (Nostro a/c’s) mostly in US $, €uro and Japanese Yen(and Japanese Yen(¥).¥).

Other foreign currency account of Indian Other foreign currency account of Indian banks strictly for business needs are in Sterling banks strictly for business needs are in Sterling £, Swiss Francs, Canadian $, Australian $, £, Swiss Francs, Canadian $, Australian $, Singapore $ etc.Singapore $ etc.

ITALIAN BANKS SETTING UP ITALIAN BANKS SETTING UP AN OPERATIVE PRESENCE IN AN OPERATIVE PRESENCE IN

INDIAINDIA

Regulatory EnvironmentRegulatory Environment

Foreign banks require license from RBI for Foreign banks require license from RBI for setting up WOS/branch/Rep. Off.setting up WOS/branch/Rep. Off.

Reciprocity of foreign country’s banking Reciprocity of foreign country’s banking regulator is most important criteria for regulator is most important criteria for obtaining RBI’s license.obtaining RBI’s license.

Setting up a branch requires high capital Setting up a branch requires high capital requirement of Rs. 1000 million (US$25 mln) requirement of Rs. 1000 million (US$25 mln) for setting first branch and Rs. 400 mln for setting first branch and Rs. 400 mln (US$10 mln) for each additional branch.(US$10 mln) for each additional branch.

High capital adequacy is required for opening High capital adequacy is required for opening more branches.more branches.

Indo-Italian JV/subsidiaries in India are widely Indo-Italian JV/subsidiaries in India are widely spread out in different regions in India and spread out in different regions in India and therefore presence by way of one branch only therefore presence by way of one branch only will not be feasible for Italian banks willing to will not be feasible for Italian banks willing to open a branch in India.open a branch in India.

Foreign banks are not allowed to acquire more Foreign banks are not allowed to acquire more than 5% in Indian private sector banks.than 5% in Indian private sector banks.

Approach of Italian Banks to Approach of Italian Banks to the Indian marketthe Indian market

The approach of Italian banks to the Indian The approach of Italian banks to the Indian markets has always been cautious due to many markets has always been cautious due to many reasons.reasons.

The Italian Banks have always had a client centric The Italian Banks have always had a client centric approach rather than a market centric approach as approach rather than a market centric approach as they pick only indo Italian trade.they pick only indo Italian trade.

The low levels of Italian investment in India leading The low levels of Italian investment in India leading to small volume of Indo-Italian bilateral trade, now to small volume of Indo-Italian bilateral trade, now about USD 4 billion, has not grown to its potential about USD 4 billion, has not grown to its potential compared to the growth of say Indo-German trade at compared to the growth of say Indo-German trade at about USD 10 billion.about USD 10 billion.

The critical mass of Indo-Italian trade to justify heavy The critical mass of Indo-Italian trade to justify heavy capital requirements for setting up branches, still does capital requirements for setting up branches, still does not exist, especially given the client centric approach not exist, especially given the client centric approach of Italian banks.of Italian banks.

A small 1 or 2 branch presence in India would not yield A small 1 or 2 branch presence in India would not yield results and it would require a network of branches at least results and it would require a network of branches at least in the major cities to yield results.in the major cities to yield results.

Most Italian banks are concentrating their expansion Most Italian banks are concentrating their expansion efforts in Eastern Europe due to cultural and physical efforts in Eastern Europe due to cultural and physical proximity.proximity.

There are limits on how much can a bank lend for There are limits on how much can a bank lend for commercial purposes, out of total funds available (about commercial purposes, out of total funds available (about 68 % ) and further restrictions on their deployment into 68 % ) and further restrictions on their deployment into priority sector at concessional rates of interest with priority sector at concessional rates of interest with higher risk factor as also to a single client as a proportion higher risk factor as also to a single client as a proportion of their capital. This acts as a limitation to efficiently of their capital. This acts as a limitation to efficiently deploy funds in the market to earn reasonable profit.deploy funds in the market to earn reasonable profit.

The rise of China as the manufacturing hub of the The rise of China as the manufacturing hub of the world and the consequent increase of investment and world and the consequent increase of investment and trade with that country has led to that market being trade with that country has led to that market being seen as more attractive than India.seen as more attractive than India.

The Italian banks still prefer to get involved in The Italian banks still prefer to get involved in transactions where there is no exposure to Indian transactions where there is no exposure to Indian corporate risk and the transaction is secured by corporate risk and the transaction is secured by guarantees from Indian banks.guarantees from Indian banks.

The lean structure of the Representative Office in The lean structure of the Representative Office in terms of human resources and capital investment fits terms of human resources and capital investment fits in well with the client centric approach of Italian in well with the client centric approach of Italian banks which allows the Representative Offices to banks which allows the Representative Offices to focus on the needs of the clients without being under focus on the needs of the clients without being under too much pressure to recover the investment being too much pressure to recover the investment being made by the Bank.made by the Bank.

THE FUTURE SCENARIO IN THE THE FUTURE SCENARIO IN THE BANKING SECTOR IN INDIABANKING SECTOR IN INDIA

In terms of WTO framework India is required to open In terms of WTO framework India is required to open up Financial Sector to foreign players after April 2009.up Financial Sector to foreign players after April 2009.

We expect that even if the market is open in 2009 the We expect that even if the market is open in 2009 the regulator RBI will play an important role in approving regulator RBI will play an important role in approving foreign bank’s investment in Indian banks and the track foreign bank’s investment in Indian banks and the track record of the foreign banking regulator in their record of the foreign banking regulator in their countries vis-à-vis Indian banks.countries vis-à-vis Indian banks.

We do not expect major steps from RBI until formation We do not expect major steps from RBI until formation of new Government after the Indian National Elections of new Government after the Indian National Elections in May 2009.in May 2009.

Given that the 2009 is less than one year away, it would Given that the 2009 is less than one year away, it would be advisable for Italian banks to get their India strategy be advisable for Italian banks to get their India strategy in order and to start looking at possible options in the in order and to start looking at possible options in the post 2009 scenario.post 2009 scenario.

Vi ringrazio moltissimo per la Vi ringrazio moltissimo per la vostra pazienza.vostra pazienza.

BuonagiornataBuonagiornata

EE

Buon LavoroBuon Lavoro

NEW DELHI REPRESENTATIVE OFFICE You are most welcome to contact: Mr. Pradeep Khanna, Chief Representative, Cell: +91 9810886364 Mr. Ashok R. Rao, Advisor, Cell: +91 9820208256 Banca Popolare di Vicenza New Delhi Representative Office 1510-1512 Narain Manzil 23, Barakhamba Road, New Delhi-110001 Phone: +91 11 41524344/45 Fax: +91 11 41524346 E-mail: newdelhi@popvi.com ; mumbai@popvi.com Website: www.popolarevicenza.it