Mumbai, Nov. 27: HSBC Holdings is closing its private banking unit in India, becoming the latest foreign bank to leave the cut-throat wealth management business in the country.
"After a strategic review of the global private banking operations in India, we have decided to close the business," an India spokesman said on Friday.
"This marks further progress in the HSBC group strategy to simplify business and deliver sustainable growth."
The division headed by Shantanu Ambedkar employed 70 people, who will be absorbed into the retail banking operations.
The bank employs about 32,000 people in India, where it also offers corporate, retail and investment banking services.
The HSBC spokesman in Mumbai said it would offer private banking clients the choice to move to HSBC Premier, the bank's global retail banking and wealth management platform. The process is likely to be completed in the first quarter of 2016.
It was not immediately clear how much assets HSBC's private banking unit managed in India, but wealth management industry sources said the bank was not one of the top three players in this segment.
The British bank is also investing in HSBC Premier in India to enhance its product and services suite, which can be made available to select customers, he added.
The bank made the announcement in an internal e-mail to employees earlier in the day.
Many foreign wealth managers had scrambled to set up shop in India a few years ago and aggressively ramped up operations to take advantage of robust economic growth in Asia's third-largest economy, only to find themselves struggling.
Even though India's economy has been minting millionaires at a strong pace, it has failed to translate into profits for the foreign wealth managers that have set up teams of well-paid bankers to help manage those riches.
Tough competition coupled with poor margins have been cited as the principal reasons behind their exit.
Banks including Royal Bank of Scotland (RBS) and Morgan Stanley have sold their India private banking units in the recent past, as part of their global restructuring
In September, Royal Bank of Scotland sold its wealth management business to Sanctum Wealth Management.
Australia's Macquarie had parted with its 50 per cent stake in the joint venture Religare Macquarie Wealth Management to its India partner back in September 2013.
Earlier, Morgan Stanley had sold its business to Standard Chartered, while UBS AG and EFG are some of the other entities who have done the same.
According to Asia-Pacific Wealth Report released by Capgemini and RBS Wealth Management in September, the number of high net worth individuals in India rose 26.3 per cent to 198,000 in 2014.
There are optimists who feel that existing players need to be patient and the business was set for better growth in the future.
Private sector banks continue to operate in the sector. For instance, HDFC Bank offers services through its Imperia Banking. Here the requirement is that customers must maintain a minimum average monthly balance of Rs 30 lakh across all their savings and fixed deposits, or maintain an average quarterly balance of Rs 10 lakh in the savings account or maintain an average quarterly balance of Rs 15 lakh in the current account.
