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Citigroup is dissolving its consumer banking business unit in India, and Axis Bank is buying it for $1.6 billion. The deal is said to be the biggest so far as the company works on boosting its credit card business.
According to Reuters, the decision to sell Citi’s Indian consumer banking biz is part of the company’s chief executive officer, Jane Fraser’s drive to revamp the business by giving up its retail banking operations in 13 countries. Citi chose the regional units for the closure of the retail unit by determining which of them do not have the necessary scale to compete in a particular market.
Citigroup first brought credit cards to India in 1987, and at that time, the financial company was one of the first foreign lenders to do so. However, as years pass by, its market share has been declining. As per the Australian financial services group Macquarie, the numbers fell to four percent from 13% ten years ago.
Despite this situation, the Mumbai headquartered Axis Bank still has a lot to gain from the acquisition. It was said that the bank will benefit from the deal since it will gain access to 2.6 million Citi card users, that are said to average higher spending compared to other credit cards of Indian rival banks.
CNBC TV18 reported that Axis Bank will be paying full cash to Citi for the acquisition of its consumer retail business. The deal includes the sale of Citi’s retail business in India, wealth management, consumer loans, and banking.
Moreover, as part of the agreement, all of Citi’s 3,600 existing employees in India will move to Axis Bank. Thus, the workers will be able to retain their jobs.
Citi and Axis’s acquisition deal resulted from a months-long bidding process, and the auction also includes Axis’ rival, Kotak Mahindra Bank, as one of the leading bidders. There is a lot of interest in Citi’s consumer business because credit card use in India has been booming. Among the banks in India, there is also a growing interest in offering credit cards and mortgages to clients as these could help the company in long-term income growth.
Finally, the sale of Citi’s consumer retail banking to Axis Bank is expected to close within the first half of 2023. Still, the deal is subject to customary closing adjustments in India.
