Kotak Mahindra Bank

Corporate Treasury, Banking & FX in India

Report date: 
1 Apr 2025

Commentary

Is India the next China? 

In our recent Expert Perspectives series on India, [view it here], DBS Bank stated they believe it is. 

  • Except for COVID, GDP growth is consistently above 5% [source: World Bank] 
  • The government is making efforts to streamline the bureaucracy which has always been a challenge, and move it online.
  • Manufacturing is being encouraged – India has long been a big provider of services. This requires an investment in infrastructure.
  • Following COVID, there has been a big move towards a cashless society, with an advanced electronic banking system.
  • There is comparatively little movement in FX: exchange controls remain in place. However, most transactions can be executed, including cross border loans and hedging – though cross border cash pooling is still very much forbidden. However, there is still a significant administrative burden.
  • As part of the opening up, India has established a form of free trade zone, Gift City.

So – does this match our peers’ experiences?

  • We will get into the detail below: the full report [14 pages - available to premium subscribers] contains a lot of useful experiences. But, in big picture terms:
  • All peers view India as a major source of growth: some are investing in manufacturing. While no-one is considering scaling back in China, India has generally been earmarked for the next big investment, where it has not already happened.
  • Some peers have entities which are still losing ...

 

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Topics covered in this report: 
FX, Hedging FX, Funding, GiftCity, Bank Relationships, Collections - domestic
Service providers discussed in this report: 
DBS, Citi, JP Morgan, BNP Paribas, HSBC, Deutsche Bank, ICICI, HDFC, State Bank of India, Kotak Mahindra Bank, SWIFT, 360T, Bloomberg

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Treasury & FX in India

Report date: 
20 Feb 2023

Commentary

This Treasury Peer Call took place a few days after the announcement that India had officially overtaken China as the most populous country in the world. Given the increasing speculation that India might also replace China as the world’s fastest growing major economy, it seemed opportune to get a view on how things are developing.

All participants are bullish about their businesses in the country. Several already have significant operations, and most see major opportunities. The good news is that several participants are generating meaningful profits and cash – the bad news is that this creates issues in terms of cash investment and repatriation. And, of course, India is India – there are always plenty of regulations to navigate.

Main points and concerns:

  • For those companies who are generating cash, it is a challenge to invest it. Most retain a conservative approach, which means safe investments – these typically return a rate which is below inflation.
  • Cash repatriation is not without issues. The main vehicle is dividends: these attract withholding tax (the rate varies according to the jurisdictions), and are subject to complex tax rules. Cross border pooling is not allowed, and intercompany loans are subject to central bank approval.
  • Within India, cash pooling is
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Topics covered in this report: 
Investments, Hedging FX, Cash Pooling - domestic, Supply Chain Finance, Intercompany loans, HR, Payments-digital, Funding, Cash Repatriation
Service providers discussed in this report: 
Barclays, JP Morgan, Bank of America, Citi, Standard Chartered, HSBC, Deutsche Bank, BNP Paribas, MUFG, ICICI, HDFC, Kotak Mahindra Bank

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