The Indian lender Yes Bank plans to convert money from Indians in the UAE into investments in one of the world’s fastest-growing economies.
About 2.6 million Indians live in the UAE, making them the biggest expatriate population in the country and Indian banks such as Yes, the fifth-largest private bank in India, are keen to persuade those with money sitting idle in bank accounts here to invest back home or elsewhere at a time when interest rates on the dirham are at record lows and rates in India are among the world’s highest.
“In my opinion, the savings of people here in the UAE, and the GCC in a larger context, the savings should not be sitting only in bank deposits,” Rana Kapoor, the bank’s managing director and chief executive said in an interview with The National at the bank’s new representative office in Abu Dhabi after an inauguration event yesterday. “Can they invest more in Indian businesses or more in local businesses here? I think that our bank brings the opportunity to invest in tax-free bonds in India, to invest in infrastructure in India, to be able to invest in areas such as infrastructure and health care. India is a fantastic turnaround story.”
Yes Bank, which was established in 2003, has seen its assets grow fast thanks in part to the high interest rates offered on its savings accounts. Today, the bank offers 7 per cent on its savings account, the highest in India.
The UAE is its first foray outside of its home market. It has only been able to enter the Emirates now because of a regulation which requires any bank opening in the country to have been operating for at least 10 years.
Mr Kapoor also said that Yes Bank is in the process of getting a licence to operate in the Dubai International Financial Centre and hopes that he will set up an office there by the end of the year.
In recent years a number of Indian banks have opened shop in the DIFC, the region’s de facto financial hub, to help finance increasing trade flows between the Middle East and Asia. As well as asset management services, Mr Kapoor is eyeing mortgage financing, the remittance market, and funding small and medium-sized business. Bankers at Yes may have their work cut out for them, as many Indian banks such as Bank of Baroda already operate in the UAE and local banks here such as FGB and National Bank of Abu Dhabi have or are building presences in India.
Lower interest rates in the UAE may also dampen appetite for debt in Indian rupees to fund things like home purchases, Mr Kapoor acknowledged.
Still, the economy of the UAE is also growing and that presents an opportunity to act as a financial intermediary for Indians, especially those who are financially comfortable, who want to invest back home amid economic reforms undertaken by the prime minister Narendra Modi.
Since assuming power last year, Mr Modi lost little time in his plans to overhaul the country’s economy, Asia’s third-biggest. As well as moving towards market-based energy pricing by removing energy subsidies, Mr Modi is also getting ready to pass a goods-and-services tax, to open up more to foreign investment as well as to better target subsidies for fertilizers, cooking gas and food towards those that need them most.
That has left many businessmen like Mr Kapoor impressed while investors have expressed their satisfaction by helping push the country’s benchmark Sensex stock index to a record high this year.
“Firstly, the level of corruption is probably at the lowest level in many years now,” Mr Kapoor said. “Second, the confidence and conviction is slowly coming back. Third, there are steady reforms. We are not seeing blockbuster reforms, but we are seeing steady reforms and I think India finds it easier to absorb reforms that are steadily communicated rather than tectonic shifts in the economy.”