India

India: A Growing Opportunity

India’s scale, dynamism and open economy offer attractive business prospects for all multinational companies (MNCs). But its complexities make choosing the right banking partner essential


As one of the world’s most important economies, India is an increasingly essential investment destination for multinational companies. It is already the world’s seventh-largest economy with a GDP of $2.26 trillion and has a population of 1.34 billion people — 18% of the world’s population.

Apart from its size, a key attraction for multinational firms is its economic stability. India’s economy is expected to grow 6.75%-7.5% in FY’17-181 while inflation is within the targeted range of 4% +/-2% at 4.9%. FX reserves are well above standard norms for reserve adequacy at $400 billion1 at the end of December 2017; and government taxes rose by 17% in FY ’17-18. Market analysts generally expect India’s fiscal deficit to be approximately 3.5% of GDP in FY18. In November 2017, these strengths were reflected in Moody’s upgrading of India’s sovereign credit rating to Baa2.

India’s ambitions for the future are equally impressive. The government has a flagship initiative, called Make in India, aimed at boosting manufacturing so that it contributes 25% of GDP by 2025. India also aims to create 100 smart cities by 2020, improving water and electricity supply, urban mobility, affordable housing, sanitation, health, and safety and using advanced technology to address the country’s rapid urbanization.

Doing business in India

India’s business environment is improving. The recent Goods and Service Tax (GST) statute introduced standard tax rates across the country, simplifying administration for companies and making it easier to sell goods in multiple states. There are initiatives underway to improve financial inclusion, especially in rural areas. Other recent reforms include the demonetization of large denomination banknotes in November 2016, aimed at supporting India’s digital drive and financial inclusion.

India’s foreign direct investment (FDI) policy is already one of the most liberal among emerging economies with FDI of up to 100% automatically allowed in most sectors and activities; recent reforms have eased rules for international companies in previously restricted sectors such as retail. FDI can be funded by external commercial borrowing or non-convertible debentures while equity investment can be through shares, preference shares, foreign venture capital investments or convertible debentures.

Similarly, India’s regime for repatriation of profits is favorable compared to many emerging market countries. Dividends are freely repatriable without restrictions, net of tax deducted at source or dividend distribution tax; sales proceeds can also be remitted, net of applicable taxes. And interest on fully, mandatorily and compulsorily convertible debentures is freely repatriable without any restrictions (net of applicable taxes).

Choosing the right partner

While India’s economy is increasingly open, its complexities mean that on-the-ground knowledge is critical for companies to achieve their goals. Multinational firms seeking to expand in India therefore need to ensure they work with a bank that has a strong presence in the country.

Citi has a 115 year history in India and services over 1,400 large local corporate and multinational clients. Citi moves 5.9% of the country’s payment flows, offering a single unified channel across all payment types in India. Citi is responsible for 14.6% of FX flows in India (the largest share in the onshore market). Citi was the first bank to launch end-to-end paperless cross-border and trade payments following a change in The Reserve Bank of India (RBI) regulations.

As India’s economy rapidly evolves, the requirements of both large domestic corporates and international firms entering the market are changing. Citi is committed to innovation and is at the forefront of many new technologies. For example, Citi is a market leader in complex receivables implementations in India: Citi can offer auto-reconciliation across all forms of collections (wires and physical), including eCollect, ACH-onCall and Smart Recon.

There are several initiatives underway to digitize trade in India: Citi offers a deep digital penetration in corporate trade services with 45% of letters of credit and 21% of domestic trade finance online. And India’s Immediate Payment Service is among the most effective faster payments schemes in the world: Citi Application Programming Interfaces (APIs) enable instant payments from client applications.

Citi is also an innovator in virtual cards, cross-border e-commerce and mobile banking for corporates in India: it offered the first mobile app to enable authorizers to transact with a single device anytime, anywhere and has more than 1,000 corporates live on mobile banking channels. Moreover, Citi is now leveraging artificial intelligence to deliver cost and resource reductions and enhance clients’ experience.

Supporting Global companies and their Indian subsidiaries

In contrast to many global banks, Citi’s local capabilities in India provide support in line with that offered by many domestic private or state-owned banks: Citi has over 200 seasoned bankers, service managers and product specialists on the ground.

Citi’s presence delivers tangible benefits to the many MNCs that operate IT, IT-enabled services, business payment outsourcing, knowledge process outsourcing or research and development entities in India, which work as captive centers of an overseas parent. Typically, these Indian subsidiaries receive monthly remittances from their parent company in foreign currency to manage costs and overheads.

Citi is able to effectively service these companies because of the depth and breadth of its operation in India.

Leveraging Citi’s global and local capabilities

Citi recently won a mandate for a leading US player in the generic pharmaceutical industry. While the parent company in the US has an established banking relationship with another international bank, including a significant lending relationship, it approached Citi to discuss banking services for its Indian subsidiary.

Its specific requests were:

Citi worked with the client locally to understand its key requirements while coordinating with the parent account management team, including meeting the company’s management during a roadshow visit. A series of integrated customized solutions were proposed to meet the company’s needs, including CitiDirect® via a host-to-host connection to facilitate auto-reconciliation and digital domestic and cross-border flows. The solution allows the CFO, based in the US, to monitor accounts in India, the US and EMEA through a single platform. Citi’s local branch presence, competitive pricing and superior value proposition were crucial to Citi’s winning the mandate.


Tushar Vikram

Tushar Vikram
Business Head Citi Commercial Bank

Shruti Gupta

Shruti Gupta
Commercial Subsidiaries Group Head Citi Commercial Bank

Dhwanik Bangdiwala

Dhwanik Bangdiwala
Team Lead Citi Commercial Bank