ET Exclusive: If India wants foreign capital in banking, forced glide backs are unattractive, says Emirates NBD CEO Nelson
In his first media interaction after announcing the $3 billion acquisition of a 60% stake in RBL Bank, CEO Shayne Nelson said the transaction was a strategic decision to “accelerate” growth. Nelson, who is responsible for the transformation of Dubai Headquarters bank, whose assets have almost quadrupled to $310 billion in the last 12 years and whose market value has increased 11-fold to $48 billion, said the capital commitment also reflects the UAE government’s confidence in India.
“This is also in line with our customers’ increasing investment in India. It positions us well for future profitability while benefiting India and our existing customers around the Gulf Cooperation Council (GCC) countries.” He added that he would “love” to further expand his economic interests. “If you are a long-term investor willing to commit a large capital, mandatory return makes the investment unattractive. This is very important because if India wants foreign capital, there should be room for such regulations. We are not an individual promoter; we are a financial institution and would love to go to 74% if given a chance.”
Nelson also argued strongly that voting rights should be equal to economic interests in a bank. “To attract foreign investment, removing the 26 percent voting limit and allowing equal voting rights on shares would make a big difference. It requires parliamentary change but will increase confidence and capital inflow,” he said.
At a time when Japanese banks are aggressively exploring growth opportunities in India, Nelson, who is Australian-born and Chief Risk Officer of Standard Chartered Bank, said the biggest advantage RBL and Emirates can leverage is the “NRI corridor between India-Gulf Cooperation Council (GCC)-Africa”.
He said GCC remittances account for 50% of NRI flows to India and Emirates has a presence in these corridors. “Large companies that are already banking with the bank can now be included on the RBL platform. SME banking is something we are good at and we operate in all our markets as we think they are the future of any country. Trade and capital flows also need to increase.” Emirates NBD, the 2nd largest bank in the UAE, positions itself as a regional financial industry power, operating in just 5 key markets: Saudi Arabia, Turkey, Egypt and India, as well as its own domestic markets. With deposits shifting to wealth products, Nelson said he sees huge opportunities in asset management and investment banking in India and does not rule out “sudden acquisitions” to consolidate market shares. Admitting that RBL is a mid-tier private bank in India with a capital of $1.8 billion, Nelson argued that a loan book of over $25 billion could be achieved with additional capital increase. “Our first priority is to use this capital.”
It worked as RBL as an acquisition target was offered control unlike the names they were associated with at various points in time, such as Yes Bank and even IDBI.
