Banks see profits in India's millionaires club

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Creating a database of high net worth individuals (HNI) and designing products can be a huge challenge in India, where only about 30 million of the billion-plus population pay taxes, and are coy about revealing income and wealth details.

"Many of our clients are entrepreneurs who hold cash as their largest asset class, and about 70 percent of HNIs keep less than half their assets with private banks," said Shiv Khazanchi, head of Standard Chartered's private banking unit in India.

But he saw opportunity in the challenge.

"Indian entrepreneurs are expanding their businesses, taking their companies public, making acquisitions, so they want professional advice," said Khazanchi, who has 200 clients in financial hub Mumbai and aims at 1,000 clients in six cities.

Centurion Bank of Punjab is targeting not just HNIs, but also the upper end of the middle class that it estimates to be about 50 million households in all.

"Even a fifth of this, with an annual growth rate of more than 20 percent, gives us a really big base," Bhandari said.

Still, competition for wealthy clients is expected to be fierce, with a manpower shortage adding to bankers' woes.

Merrill Lynch plans to more than double its 250-strong private banking team, while Standard Chartered is hiring 50.

And while foreign banks are keen to beef up their presence in India ahead of a planned 2009 review of the financial services industry, local banks are confident they will have the edge, particularly in tapping the wealthy in smaller towns.

"We gave them their first credit card, the first car loan, the first home loan," said Anup Bagchi, who heads a private banking team of 500 at ICICI Bank, India's No. 2 bank.

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