Banks from all around the world have been shifting billions of dollars into India, viewing it as a high-growth market, as new fears tremble the Western financial system.
Foreign Institutional Investors (FII) have struck deals worth about $15 billion in India’s financial sector. Banks of the Middle East, Europe, and Japan are leading in this push, considering India to be a stable market, even when problems appear in the US.
Why is India winning?
Strong growth: Last week, the International Monetary Fund (IMF) raised India’s growth forecast to 6.6 per cent, which makes India the fastest-growing economy in the world. The IMF also praised India for its recently rolled out policies, like changes in GST slabs.
Helpful rules: India’s central bank, the Reserve Bank of India, has been cutting interest rates and boosting credit flow, making it easier for the banks to lend money.
International investors are pumping into the Indian market:
According to Bloomberg, Emirates NBD bank (P.J.S.C), which stands for Public Joint Stock Company, plans to invest $3 billion in India’s RBL bank (Ratnakar Bank Limited). This is one of the largest foreign investments in an Indian bank.
“Earlier this month, Abu Dhabi’s International Holding Co. PJSC inked a deal to buy into Sammaan Capital Ltd. for about $1 billion, while Sumitomo Mitsui Financial Group Inc.’s banking unit in May agreed to pay $1.6 billion for 20% of Yes Bank Ltd,” as reported in Bloomberg.
Rising tension in the US market
Last week, the global markets saw a sharp fall. The reason for the fall was triggered by two US regional banks, Zions Bancorporation and Western Alliance Bancorporation, which reported millions in bad loans and alleged fraud.
This incident was followed by two recent bankruptcies by two other US companies, namely First Brands Group and Tricolour. These incidents have raised fears that there might be some problems in the US credit system.
The global banks' vision towards the Indian market is becoming clearer. While the US market looks unstable, India is offering a rare mix of high growth and a stable, regulated ecosystem.
