November 24, 2024

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Hyundai Motor Group's plant in Chennai, India. Korean firms are increasingly heading to India as an alternative production base to China. (Hyundai Motor Group)

Local lenders are expanding their presence in India, the world’s fifth-largest economy, as Korea-India economic ties deepen amid the global supply chain reshuffle.

KB Kookmin Bank, one of the top five lenders in Korea, will launch two new branches in India this year in Chennai and Pune. The lender has deployed six employees in the country for the setup.

“An approval from local authorities came in October. We plan to open the branches in the early third quarter,” an official from KB Kookmin Bank said.

While the bank has been running a branch in Gurugram since February 2019, it is the first time in more than five years for the lender to add new establishments in the country.

The two locations, Chennai and Pune, are where many big-name Korean companies have ventured out. Korean tech giant Samsung Electronics and top automaker Hyundai Motor operate factories in the southeastern coastal city of Chennai, known as "Detroit of India." Korean tech behemoth LG Electronics operates a plant in Pune as well.

Another major lender Woori Bank also plans to launch new branches in Pune and Ahmedabad, a hub of petrochemical complexes, within the first half of this year, having announced the plans in October.

The two new branches will raise the number of Woori’s branches in India to five, adding to the Chennai branch which was set up in 2012, and two others in Gurugram and Mumbai, both established in 2017.

Including KB Kookmin and Woori, all top five commercial lenders have expanded to India. Shinhan Bank runs six branches in the country, while Hana has two. NH NongHyup Bank opened a branch in July last year, its first-ever branch in the country.

The lenders’ latest push for India reflects the projection that India will play a bigger role in the global supply chain as a counterweight to China as its presence as a manufacturing hub falters. The Indian government has been pushing forward its "Make in India" initiative to encourage foreign firms to base their manufacturing arms in the country.

As a result, foreign direct investment to India grew from $74.4 billion in the 2019-2020 fiscal year to $82 billion in 2020-2021 and $83.6 billion in 2021-2022, according to the Korea Trade and Investment Promotion Agency.

In addition, amid an escalating US-China rivalry, Korea has been strengthening ties with India to lower its dependence on China, which has been its biggest trading partner for decades.

According to the Korea International Trade Association, Korea’s exports to India stood at $18.9 billion in 2022, a sharp increase from $15.6 billion in 2021. Preliminary figures from the Trade Ministry show Korea’s outbound shipments to India stood at $17.9 billion last year.

Major Korean firms such as Hyundai Motor are eyeing India as an alternative market for growth to derisk from geopolitical tensions in key markets such as China and Russia.

“India is a country with high potential for growth as a post-China production plant under the current Modi administration, along with its vast domestic market. Many Korean businesses are located in Chennai and Pune, making a business-friendly environment for Korean banks," an official from a local bank said.

By Im Eun-byel (silverstar@heraldcorp.com)