South African banks have long been trying their luck outside SA's borders and FirstRand made the leap into India in 2008.
Madhav said two or three years ago, when the Indian economy was growing at almost 8% a year, it was a good story to be part of.
"This year, it is a bit quieter, the markets are down so everybody is holding onto their brakes, but at the time when we did this four years ago it was very exciting to be here," Madhav told a group of MBA students from the University of Pretoria's Gordon Institute of Business Science in Mumbai this week.
Aside from rapid economic growth, India's well-oiled banking system and capital markets added to the appeal of the country.
"The banking system works very well in this country and is very rigorous. If you think our regulator is difficult, this is a 100 times more difficult. They virtually regulate everything," said Madhav.
If the regulator decides ATM charges are too high, one can easily open the paper on a Saturday morning and see that ATM fees were cut by 50%, without the banks knowing, he said.
The entrepreneurial culture in India makes it a good place to cultivate business.
"Every single person here wants to make a buck. If your button or zip breaks at two in morning, someone will be able to sort it out for you. No one says no [to opportunities]," said Madhav.
India's infrastructure lags that of the other Brics countries and, according to Madhav, this is one of the sectors where SA companies can play a big role in India. He said there are opportunities for SA's banks in financial services and also for companies working with mining services.
The agro-processing sector is facing big challenges in India and is another sector where SA companies can move into. At least 50% of the stock produced in India goes to waste because of a lack of efficient cold storage and refrigeration chains, said Madhav.
"With Walmart's entrance [into India] this will change, but we already have the skills, we can contribute," he said.
On the other end of the equation SA can learn from India in the fields of education and energy, said Madhav.
"In SA we have not deregulated our energy system for private producers to supply to the grid. Here, the local guys can generate electricity and supply to the grid. They do it very well and they get paid every month, on time. There is no waiting 400 or 1000 days to get their payment from the government, because the government knows if they switch off the electricity, there is a problem."
FirstRand decided to enter India because it "liked the fundamentals".
"India also grapples with banking the unbanked population and 70% of people do not have bank accounts," said Madhav.
Despite this, the Indian government restricts the foreign banks in a number of ways. It does not allow the use of multi-brands, which means FirstRand's retail operations trade as FirstRand Bank in India, and not the usual First National Bank.
The government also restricts foreign banks from opening branches, which means FirstRand Bank could open only one branch in India.
To overcome this, the group is testing its Easy Banking model whereby shopkeepers act as franchisees for the FirstRand Bank brand, said Madhav. These franchises can open accounts for customers, issue cards and take limited deposits by accessing the bank's main frame via a cellphone application.
Source: Business Times
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