Retail-banking customers in India, like their counterparts throughout Asia, are very loyal to their domestic banks and quite hesitant to incur debt. Our recent survey on the attitudes of Indian customers toward personal financial services reinforces these assessments. But the study also found, beneath this veneer, significant differences among customer segments. These differences could present foreign entrants with opportunities in this growing market.
As part of a broader Asian effort, we surveyed more than 300 urban banking customers in India with annual household incomes greater than $1,150. Respondents were evenly divided between affluent and less affluent households.1 A significant majority—69 percent—said that they would stay with their current bank, even if competitors offered lower fees and higher interest rates. This professed loyalty may be linked, at least in part, to a lack of alternatives. State-owned banks, with 75 percent of total assets and vast branch networks, dominate the sector. State Bank of India, for example, has the country's largest network, with more than 9,000 branches, while ICICI Bank, one of a new breed of private domestic banks, has fewer than 600.2 Restrictions limit the number of branches that foreign banks can open and bar them from acquiring healthy...