Thursday, October 24, 2013

How are India banks seizing the prefer opportunity to enter a new market?


India, the seventh-largest country by area, is currently the second-most populous country with over 1.2 billion people. However, according to the World Bank, there are only 35% of Indians have a bank account due to the fact that there are not enough banks to server this tremendous population in India. In order to seize this huge opportunity in the market, India’s largest and second-largest private-sector banks are heading out to rural areas in the country.


In the last 18 months, these two banks’ operations in small towns and villages are booming.  ICICI Bank, the largest private-sector bank has doubled its rural network to 656 branches, which stands for 20% of its total of 3,384 branches. Also, the second largest player in the market – HDFC Bank, has been expanding their businesses into rural and semi-urban areas during the same time period. Currently, more than 50% of HDFC’s branches are in these areas. The bank has brought more than two million never-banked families into the financial system. For these who had never had a bank account, this is definitely a fantastic chance to finally open their first bank accounts and have their own debit cards.

This is a perfect timing for more banks expanding their business into the new market – rural areas. One of the main reasons is that India government encourages locals to have their own bank accounts. People who receive handouts from government will be able to have the capital sources for food, employment, education through these bank accounts directly. In addition, people living in rural areas nowadays are making more money as well as having more capital needs than traditional market thought – according to ICICI, its bank lending in rural areas was as high as $170 billion last year. It also believes that the number will climb up to $900 billion by 2020.


Entering a new market which is full of potentials at the right timing with the incentives from government, banks in India will definitely thrive in rural areas in the next five years.


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