Are Foreign Banks Leaving India? The Bigger Story Behind the Recent Banking Deals

Several major changes in India’s banking sector have raised an important question: Are foreign banks really leaving India?

The recent sale of Citibank’s consumer banking business to Axis Bank and Deutsche Bank’s agreement to transfer its retail, private banking and wealth-management businesses to Kotak Mahindra Bank may create that impression.

But the broader picture is more complicated.

Some international banks are reducing their exposure to traditional retail banking, while others are continuing to expand in areas such as corporate banking, investment banking and wealth management. At the same time, foreign institutions are also making major investments in Indian banks.

A striking example is Emirates NBD’s investment in RBL Bank. In June 2026, Emirates NBD completed a transaction that gave it a 60% stake in RBL Bank, following an investment of around $2.75 billion. The bank described the transaction as part of its long-term commitment to the Indian market.

So the real question is not simply whether foreign banks are leaving India.

The more useful question is:

What kind of banking business do international banks want to operate in India today?

Foreign Banks Have a Long History in India

Foreign banks are not new participants in the Indian financial system.

Institutions such as HSBC and Standard Chartered have roots in India that go back to the nineteenth century. Kolkata and Bombay, now Mumbai, were important centres of international trade, creating demand for services such as trade finance, foreign exchange and international payments.

The banking landscape has changed dramatically since then.

Today, foreign banks operate in an environment shaped by digital payments, UPI, large domestic banking networks, stricter regulation and intense competition for customers.

That makes the business environment very different from the one these institutions entered more than a century ago.

What Happened to Citibank in India?

Citibank provides one of the clearest examples of the changing strategy of international banks.

In 2023, Axis Bank completed the acquisition of Citibank's consumer businesses in India. The transaction covered businesses including credit cards, loans, deposits and wealth management.

According to Axis Bank's transaction disclosure, the purchase consideration was approximately ₹11,603 crore.

It is important, however, not to describe this simply as Citibank completely leaving India.

Citigroup has continued to maintain other operations in the country, particularly in areas connected with institutional and corporate clients.

The bigger change was therefore in the type of business Citigroup wanted to operate directly.

A global bank does not necessarily need to run mass-market retail banking in every country where it operates. It may instead concentrate its resources on businesses where it believes its international network and expertise provide a stronger advantage.

Deutsche Bank Is Following a Similar Path

A more recent example involves Deutsche Bank.

In June 2026, Deutsche Bank announced an agreement under which Kotak Mahindra Bank would acquire its India-based retail banking, affluent private banking and wealth-management businesses.

According to Deutsche Bank's official announcement, the transaction involved approximately ₹29,000 crore of loans, ₹16,000 crore of deposits and around ₹10,500 crore of assets under management.

The businesses involved approximately 150,000 customers and around 1,000 employees.

But there is an important detail that can easily get lost in the headlines.

Deutsche Bank has said that India remains an important market and that its corporate and investment banking franchise, global business services and asset-management activities will continue.

Therefore, selling a particular business segment should not automatically be interpreted as a complete withdrawal from the country.

Why Is Retail Banking So Difficult for Foreign Banks?

India has one of the world's most competitive retail banking markets.

Domestic banks already have enormous customer bases, extensive branch networks and increasingly sophisticated digital platforms.

Customers can open accounts, transfer money, apply for loans, use credit cards and make instant payments through highly developed digital ecosystems.

UPI has also transformed the way Indians make everyday payments.

For a foreign bank entering the retail market, therefore, the obvious question is:

What can it offer that customers cannot already get from an established Indian bank?

Being an international brand is not necessarily enough.

A retail banking operation requires scale.

Banks have to spend money on customer acquisition, technology, branches, employees, risk management, compliance and lending infrastructure.

A smaller foreign bank with a limited physical presence can find it difficult to compete with Indian banks that already have millions of customers and extensive distribution networks.

How Can Foreign Banks Operate in India?

The regulatory structure also matters.

Foreign banks can operate in India through different structures, including branches of the overseas parent and wholly owned subsidiaries.

Under the branch model, an overseas bank operates through branches in India rather than creating a completely separate Indian banking company.

The alternative is the Wholly Owned Subsidiary (WOS) structure, where the foreign bank establishes a separate Indian banking subsidiary.

The Reserve Bank of India's framework for foreign banks explains the regulatory framework governing these structures.

Each model has different implications for capital, regulation, expansion and operations.

Priority Sector Lending Adds Another Layer

One of the most important issues is Priority Sector Lending, commonly known as PSL.

The RBI introduced priority-sector lending requirements to ensure that bank credit reaches economically important areas that may otherwise receive insufficient financing.

These sectors include areas such as agriculture, micro and small enterprises, education and renewable energy, among others.

Under the RBI's Priority Sector Lending Directions, 2025, the applicable targets depend on the type and structure of the bank.

For example, foreign banks with 20 or more branches have a 40% overall priority-sector lending target, subject to the applicable calculation base and other requirements. Agriculture also has a specific sub-target, while small and marginal farmers are covered by additional requirements.

This can become particularly relevant for banks whose traditional business model is concentrated in major metropolitan areas.

The Rural Banking Challenge

Consider a foreign bank whose strongest businesses are in Mumbai, Delhi, Bengaluru or other major financial centres.

Its customer base may consist largely of wealthy individuals, multinational companies, institutional investors and large corporate clients.

But agricultural lending requires access to a very different customer base.

Finding and servicing small farmers requires distribution networks, local knowledge, credit assessment capabilities and appropriate risk-management systems.

This creates a strategic challenge.

A bank cannot simply focus on wealthy urban customers and ignore the broader regulatory and economic requirements associated with operating a banking business in India.

At the same time, building a huge rural distribution network may not fit the business model of an international bank focused on high-value financial services.

Why Some Foreign Banks Are Moving Toward Specialized Businesses

This helps explain why some foreign banks are increasingly concentrating on areas where their global capabilities can make a bigger difference.

These areas can include:

Corporate banking
Investment banking
Mergers and acquisitions advisory
Foreign exchange
Treasury services
Trade finance
Wealth management
Cross-border financial services
Banking for multinational corporations

These businesses are different from mass-market retail banking.

A multinational company operating across several countries may need financing, currency management, international payments and advisory services across multiple jurisdictions.

A global bank can potentially use its international network to provide those services.

That is a competitive advantage that a purely domestic banking model may not always replicate in the same way.

HSBC Shows Why the Story Is More Complicated

HSBC is another useful example.

It would be misleading to use HSBC as proof that foreign banks cannot succeed in India.

HSBC operates globally, and India remains part of its international network.

However, claims about HSBC earning a specific amount such as ₹17,000 crore in net profit from India alone need to be treated carefully unless they can be matched with an India-specific audited financial statement.

HSBC's official 2025 results, for example, report group-level financial figures. Its reported group profit before tax was $29.9 billion, while profit before tax excluding notable items was $36.6 billion.

Those are global HSBC figures, not India-only profits.

This distinction is extremely important when analysing international banks.

A global parent's profit, an Indian subsidiary's profit and the contribution of an individual business segment are not interchangeable figures.

The official HSBC 2025 results provide the relevant group-level financial information.

India Is Not Simply Closing Its Doors to Foreign Banks

Perhaps the most interesting part of the story is what is happening on the investment side.

While some international banks are selling or restructuring their retail operations, foreign financial institutions are also making large investments in India's banking sector.

Emirates NBD's investment in RBL Bank is a major example.

In June 2026, Emirates NBD completed its investment that resulted in a 60% stake in RBL Bank.

According to Emirates NBD's announcement, the transaction represents a major commitment to India's banking sector.

This illustrates a completely different way for an international bank to build scale in India.

Instead of spending years developing a large retail branch network from scratch, a foreign bank can potentially use an established Indian banking platform, customer base and distribution network.

That is a fundamentally different strategy.

What Does the RBL Bank Deal Tell Us?

The Emirates NBD-RBL Bank transaction suggests that foreign banks do not necessarily need to build their Indian operations entirely from the ground up.

An established Indian bank already has:

Customers
Branches
Employees
Regulatory infrastructure
Digital banking systems
Lending relationships
Knowledge of the domestic market

A strategic investment can therefore provide a foreign institution with immediate access to an existing banking platform.

The RBL Bank announcement provides additional details about the transaction and the proposed strategic relationship.

Is the Foreign Banking Model in India Changing?

The evidence points toward a shift in strategy rather than a simple foreign-bank exodus.

Some international banks have reduced their exposure to mass-market retail banking.

Some have sold consumer businesses to large Indian banks.

Others continue to focus on corporate and institutional clients.

And some foreign institutions are entering the Indian banking sector through large investments in existing Indian banks.

These strategies can coexist.

There is no contradiction between one foreign bank selling a retail operation and another foreign bank investing billions of dollars in an Indian bank.

They may simply be pursuing different business models.

What Could Happen Next?

India's growing economy will continue to create opportunities for international financial institutions.

But those opportunities may not necessarily come from traditional retail banking.

Corporate finance, cross-border transactions, investment banking, wealth management, foreign exchange and international trade finance could remain important areas for global banks.

Meanwhile, India's domestic banks are likely to continue strengthening their position in retail banking through large branch networks, digital platforms and established customer relationships.

That could lead to a more specialized banking landscape.

Some foreign institutions may focus on high-value financial services.

Some may partner with Indian banks.

Some may acquire stakes in domestic institutions.

And others may continue operating through specialized corporate and institutional businesses rather than competing directly for millions of retail customers.

The Bigger Picture

So, are foreign banks leaving India?

The answer depends on what part of the banking business we are talking about.

If we look specifically at retail and consumer banking, there has clearly been significant restructuring. Citibank's consumer business was acquired by Axis Bank, while Deutsche Bank has agreed to transfer its retail, affluent private banking and wealth-management businesses to Kotak Mahindra Bank.

But that does not mean international banks are abandoning India.

Deutsche Bank continues to emphasize its corporate and investment banking operations in the country, while Emirates NBD's RBL Bank investment demonstrates that foreign banking capital is also moving deeper into India's financial system.

The more accurate story is therefore about repositioning.

Foreign banks are reassessing where they can compete, where they can earn attractive returns and where their global capabilities provide a meaningful advantage.

India remains too important a financial market to describe the entire story simply as an exit.

The real transformation is happening in how foreign banks choose to participate in India's banking system.