India granted a banking license to National Bank of Abu Dhabi PJSC, according to three people familiar with the matter, the first in Asia’s third-biggest economy since 1980 for a United Arab Emirates-based lender.
NBAD, the Persian Gulf nation’s biggest lender, will begin operations in the world’s most populous democracy this year, one of the people said, asking not to be identified because the information is private. An Indian bank is expected to be allowed to set up in the U.A.E. in return, with State Bank of India the most likely candidate, according to two of the people.
NBAD Chief Executive Officer Alex Thursby outlined plans last year to expand and build expertise in eight foreign banking centers, including one in Mumbai. India is the U.A.E.’s biggest economic partner with $68.5 billion of trade between the two in 2013, data compiled by Bloomberg show, and its nationals make up the largest share of the oil-rich country’s 8.3 million population, according to its embassy in Abu Dhabi.
NBAD wants “to be in a position to take advantage of the investment and trade flows that occur between the megacities situated within the west-east corridor,” Shabbir Malik, a Dubai-based analyst at EFG-Hermes Holding SAE, said by e-mail today. “India has two megacities – Mumbai and Delhi.”
Spokesmen for NBAD and State Bank of India, the country’s biggest lender, weren’t immediately able to comment. A spokeswoman for the Reserve Bank of India and the U.A.E. central bank’s supervision department did not respond to e-mailed requests for comment.
Abu Dhabi Commercial Bank PJSC (ADCB), the U.A.E.’s fourth-biggest bank, and Dubai-based Mashreqbank PSC (MASQ), owned by the billionaire Al Ghurair family, are the only U.A.E. lenders to have Indian banking licenses, having started there in 1980.
Banks in the U.A.E., the second-biggest Arab economy after Saudi Arabia, are expanding into foreign markets as the country’s small population limits opportunities at home. About 51 banks also operate in the country, including units of HSBC Holdings Plc (HSBA) and Citigroup Inc. (C)
NBAD’s plan to build hubs in eight global cities is part of a plan to tap an expanding middle class and growing trade and investments flows within a so-called “west-east corridor” that it says extends from west Africa to the east coast of China.
The U.A.E. has also restricted new bank licenses. State-controlled Bank of Baroda is the only Indian lender that has a U.A.E. permit. State Bank of India (SBIN) and ICICI Bank Ltd. (ICICIBC), India’s second-biggest lender, have offices in the Dubai International Financial Center, a tax free business park mainly for institutions offering corporate and investment banking as well as wealth management. It can’t offer retail banking.
The U.A.E. has the biggest banking market in the six-nation Gulf Cooperation Council, which includes Saudi Arabia. India, a country of more than a billion people, has 26 government-owned, 21 private and 43 foreign banks, according to the country’s Banks Association.
To contact the reporter on this story: Arif Sharif in Dubai at email@example.com