Deutsche Bank-Kotak Deal: Why Foreign Lenders Are Pulling Back from India's Retail Banking

Kotak Mahindra Bank's decision to acquire Deutsche Bank's retail banking, private banking and wealth management business in India is the latest in a series of deals that have reshaped the country's banking sector. The transaction, valued at ₹282 crore (about $29.8 million), comes as the German lender exits retail banking in India to sharpen its focus on other business segments.

The acquisition will bring around 1.5 lakh customers, ₹29,000 crore in advances (about €2.7 billion), ₹16,000 crore in deposits, ₹10,500 crore in assets under management (AUM) and nearly 1,000 employees under Kotak Mahindra Bank, according to a report by Reuters. Deutsche Bank said the move is part of its strategy to simplify its business and concentrate on areas where it has greater scale and returns.

The deal follows similar transactions involving Citibank and Standard Chartered, raising a broader question; Why are several foreign banks stepping away from retail banking in India while domestic lenders continue to expand?

A Growing Trend of Foreign Bank Exits

The Deutsche Bank transaction is not an isolated case. Over the past few years, several global lenders have sold parts of their retail businesses in India to domestic banks.

In March 2023, Axis Bank completed the acquisition of Citibank India's consumer business in a deal worth ₹11,603 crore. According to Axis Bank, the acquisition included 21 lakh customer relationships, 22.5 lakh credit cards, ₹27,300 crore in consumer loans and ₹50,200 crore in deposits, along with Citibank's wealth management business. The deal reporytedly expanded Axis Bank's presence in the premium retail banking segment.

In January 2025, Kotak Mahindra Bank acquired Standard Chartered Bank India's personal loan portfolio worth ₹3,330 crore. The portfolio comprised nearly one lakh customers, enabling Kotak to expand its unsecured retail lending business.

More recently, in April this year, Federal Bank agreed to acquire a select credit card portfolio from Standard Chartered Bank India. While the financial terms were not disclosed, the transaction formed part of Standard Chartered's ongoing efforts to optimise its retail business in India.

These transactions indicate a broader shift in strategy among several multinational banks operating in the country.

Why Foreign Banks Are Scaling Back Retail Ops

One of the main reasons is the intense competition in India's retail banking market, as per a previous report by ETBFSI.

Large domestic lenders such as HDFC Bank, ICICI Bank, State Bank of India, Axis Bank and Kotak Mahindra Bank have built extensive branch networks, strong digital banking platforms and diversified retail product offerings over the past two decades. Their scale allows them to serve customers across urban and semi-urban markets while expanding into newer segments.

Despite India's fast-growing economy and expanding affluent population, several foreign banks have found it difficult to grow their retail businesses because of intense competition from domestic lenders, according to Reuters.

Regulatory requirements have also shaped the operating environment. Foreign banks operating in India are subject to capital, compliance and branch expansion norms set by the Reserve Bank of India. While these regulations apply across the sector, many global lenders have found it challenging to build the scale needed to compete with large domestic banks in the mass retail segment, as per the ETBFSI report.

Another reason is the strategic shift by global lenders towards businesses with higher returns. Over the past few years, several international banks have been restructuring their global operations by exiting consumer banking businesses in select markets and focusing on corporate banking, investment banking and wealth management. Citigroup's exit from India's consumer banking business was part of its global plan to withdraw from retail operations in 13 markets, while Deutsche Bank said the sale of its India retail business is, as quoted by Reuters, "a further step in simplifying our business" and sharpening its focus on core strengths.

Why Indian Banks Are Buying These Businesses

For Indian banks, these acquisitions offer a faster route to growth than building new customer relationships over several years.

Acquiring an existing retail franchise provides immediate access to customers, deposits, loan books and wealth management businesses without having to create them from the ground up.

The acquisition of Deutsche Bank's India retail business will allow Kotak Mahindra Bank to tap into affluent banking and wealth management by adding 1.5 lakh customers, ₹16,000 crore in deposits, ₹29,000 crore in advances and ₹10,500 crore in assets under management, as per media reports.

Axis Bank's acquisition of Citibank India similarly expanded its consumer banking franchise and strengthened its position in the credit card market. Kotak's earlier acquisition of Standard Chartered's personal loan portfolio also helped it expand its retail lending business through an existing customer base.

These transactions reflect the different priorities of domestic and foreign banks. While Indian lenders are using acquisitions to increase their retail scale, several multinational banks are concentrating resources on businesses where they have a stronger competitive position globally.

What It Means for Customers

For retail customers, these transactions generally involve the transfer of accounts, loans, deposits and wealth management relationships to the acquiring bank after receiving regulatory approvals. Banks typically continue servicing existing products during the transition before migrating customers to their own systems and product offerings.

Foreign banks exiting retail banking in India are not necessarily leaving the country altogether. Most continue to operate in areas such as corporate banking, investment banking, treasury services and institutional wealth management.

The Deutsche Bank-Kotak Mahindra transaction is the latest example of this shift. It reflects the continued consolidation of India's retail banking sector, with domestic lenders expanding through acquisitions while several global banks narrow their focus to specialised financial services.