Indian Companies Intensify Global Expansion, Fueling Growth in Cross-Border Banking

As optimism in India's economic landscape grows, Indian companies are expanding globally, boosting revenue for banks. With 83% of large companies and 75% of mid-sized firms engaged in cross-border trade, there's increased competition between domestic and foreign banks. Advancements in digital banking and pricing advantage are key drivers.

The economic optimism in India is leading more Indian companies to explore international markets for growth, a trend highlighted in a recent CRISIL report. This global expansion is expected to enhance revenues for both global and domestic banks that facilitate cross-border activities.

Indian corporations have significantly increased their international operations in recent years. Currently, 83% of large corporations in India use at least one bank for cross-border trade and payments, up from 71% two years ago. This surge reflects the broader trend of leveraging domestic economic strength to seize global opportunities.

Ruchirangad Agarwal, Relationship Director and Head of Corporate Banking - Asia and Middle East at Coalition Greenwich, noted, "In the past 12 months, there has been notable growth in activity by large Indian corporates in outbound, cross-border corridors, especially within the Asia-Pacific, Europe, and North America." About 75% of mid-sized Indian companies also engage in international trade banking services.

These companies predominantly use banking services for traditional trade, cross-border payments, and managing receivables from global suppliers and clients. Historically, Indian corporations relied on foreign banks for their extensive global networks and competitive funding options. However, large domestic banks are now competing aggressively for a larger share of the cross-border banking market, driven by advancements in digital banking and competitive pricing.

Agarwal stated, "Although foreign banks offer robust networks and product capabilities, two key trends are enabling Indian banks to compete effectively. First, Indian banks' digital capabilities now match those of foreign banks. Second, a combination of higher international interest rates and reduced lending appetite from some foreign banks has allowed Indian banks to be competitive on pricing and balance sheet." The growing demand for international banking services is expected to boost revenue across the Indian corporate banking sector, which saw a 4% revenue growth in 2023, following a 15% increase in 2022.

While cash management has shown strong performance due to higher interest rates, it is expected to stabilize as rates level off. Conversely, investment banking experienced double-digit growth due to robust capital markets activity. Moving forward, cross-border business is anticipated to become a crucial revenue driver.

Agarwal concluded by saying, "Companies require banking services to support their international growth, primarily in traditional trade but increasingly in receivables finance as supply chains realign within Asia." (ANI)

(With inputs from agencies.)