As India’s economic prospects continue to shine, Indian companies are increasingly targeting international growth markets, according to a recent CRISIL report. This strategic shift is expected to drive a surge in revenues for both global and domestic banks that facilitate cross-border transactions.
In recent years, there has been a notable escalation in the international activities of Indian corporations. Currently, around 83% of large Indian companies engage at least one bank for cross-border trade and payments, a significant increase from 71% two years ago. This trend underscores a broader movement of Indian firms leveraging domestic economic strength to seize global opportunities.
Ruchirangad Agarwal, Relationship Director and Head of Corporate Banking – Asia and the Middle East at Coalition Greenwich noted this trend, stating, “Over the past 12 months, we have observed heightened activity by large Indian corporates across various outbound cross-border corridors, including the Asia-Pacific region, Europe, and North America. Moreover, around 75% of mid-sized Indian companies are also seeking banking services for their international trade needs.
Traditionally, Indian corporations have depended on foreign banks for their extensive global networks and competitive funding options. However, large domestic banks are now increasingly competing for a share of the cross-border banking market. This competitive shift is driven by advancements in digital banking capabilities and a more favorable pricing environment. Agarwal elaborated, While foreign banks have long been known for their robust networks and product offerings, two key trends are enabling Indian banks to compete more effectively. First, Indian banks’ digital capabilities are now on par with those of their international counterparts. Second, due to higher interest rates globally and a slightly reduced lending appetite among some foreign banks, Indian banks can offer competitive pricing and balance sheet solutions.
The growing demand for international banking services is poised to enhance revenue within the Indian corporate banking sector. In 2023, industry revenue pools grew by 4%, following a 15% increase in 2022. While cash management has performed strongly due to higher interest rates, this segment is expected to stabilize as rates level off. In contrast, investment banking has seen double-digit growth fueled by robust capital markets activity. Looking ahead, cross-border business is anticipated to become an increasingly significant revenue driver. As companies expand internationally, they require banking services to support their growth, particularly in traditional trade and increasingly in receivables finance as supply chains realign within Asia, Agarwal concluded.
