Axis Bank Limited — Combination C-2022/06/941

Notice under Section 6(2) of the Competition Act, 2002 given by Axis Bank Limited

CORAM:

Mr. Ashok Kumar Gupta Chairperson

Ms. Sangeeta Verma Member

Mr. Bhagwant Singh Bishnoi Member

Order under Section 31(1) of the Competition Act, 2002

1. On 17th June 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’), given by Axis Bank Limited (‘Axis’/‘Acquirer’). The Notice was filed pursuant to the execution of a Business Transfer Agreement dated 30th March 2022 (‘Citi BTA’) entered between the Acquirer and Citibank, N.A. (‘Citi’) and a Business Transfer Agreement dated 30th March 2022 (‘Citicorp BTA’) entered between the Acquirer and Citicorp Finance (India) Limited (‘Citicorp’).

2. The Proposed Combination envisages: (i) the proposed slump sale by Citi (acting through its India branch) of an undertaking comprising its consumer banking activities (‘Bank Consumer Business’) to the Acquirer on a going concern basis; and (ii) the proposed slump sale by Citicorp of an undertaking comprising its consumer banking activities (‘NBFC Consumer Business’) to the Acquirer on a going concern basis. [Hereinafter, Bank Consumer Business and NBFC Consumer Business are collectively referred to as ‘Target Businesses’. The Acquirer and the Target Businesses are collectively referred to as the ‘Parties’].

As a consequence of the Proposed Combination, the Acquirer will acquire complete and sole control over the Target Businesses, which will be subsumed with and into the Acquirer.

3. The Acquirer provided certain additional clarifications by way of voluntary submissions dated 15th July 2022 and 22nd July 2022.

4. The Acquirer is a private sector bank listed on BSE Limited and National Stock Exchange of India Limited. The Acquirer is a licensed scheduled commercial bank under the Reserve Bank of India Act, 1934 (‘RBI Act’) and engaged in the provision of retail banking services, commercial and wholesale banking services and treasury services to customer segments including individuals, Micro, Small & Medium Enterprises (‘MSMEs’), agricultural businesses and corporate businesses. In India, the Acquirer has a footprint of approx. 4,594 domestic branches and nine direct subsidiaries.

5. Citi is a national banking association organised in the USA. Citi’s business offerings are divided into two broad categories: (i) global consumer banking; and (ii) institutional clients group. Through its global consumer banking division, Citi offers banking and wealth management services to retail customers. Its institutional banking division offers a broad spectrum of wholesale banking products and services. In India, Citi is a Reserve Bank of India (‘RBI’) licensed scheduled commercial bank under the RBI Act and offers a full range of consumer and institutional banking products and services. Citi carries out operations in India through 35 domestic branches.

6. Citicorp is a public company whose debt securities are listed on a recognised stock exchange, and it is licensed as a systematically important non-deposit taking non-banking financial company (‘NBFC’). It offers NBFC business services in India, such as the provision of commercial vehicle and construction equipment loans, trade advances, etc. As part of its corporate business, Citicorp provides margin and securities backed finance, corporate loans, mid-and small-segment loans and trade finance. As part of its consumer business, Citicorp provides personal loans and asset backed finance.

7. The Bank Consumer Business comprises, inter alia, the consumer banking activities of Citi’s branches in India, including credit cards, wealth management, loans and small banking business.

8. The NBFC Consumer Business comprises inter alia, the asset-backed financing business, which includes commercial vehicle and construction equipment loans, as well as the personal loans portfolio.

9. The Commission assessed the presence of the Acquirer and the Target Businesses in various business segments and sub-segments thereof. With respect to horizontal overlaps, the Commission noted that the activities of the Parties overlap in the following broader business segments, namely, a) provision of retail loans and lending services, b) provision of deposits and deposits-related services; c) provision of digital payment services; d) distribution of insurance services; e) distribution of mutual funds (‘MFs’); f) referral of Portfolio Management Services (‘PMS’); g) referral of Alternate Investment Funds (‘AIF’); h) distribution of bonds; i) provision of foreign exchange services; and j) provision of depository participant services.

10. Further, with respect to certain business segments, viz., provision of retail loans and lending services, digital payment services, insurance services and mutual funds, competition assessment was carried at narrower level as well. Within the broad segment of provisions of retail loans and lending services, the Parties exhibit overlaps in the narrower segments of provision of (a) personal loans; (b) credit (through credit cards); (c) loan against deposits; (d) home loans; (e) loans against property; (f) MSME loans; and (g) loans for commercial vehicle and construction equipment.

11. Within the broad segment of digital payment services, the Parties exhibit overlaps in the provision of National Electronic Funds Transfer (‘NEFT’), Real-Time Gross Settlement (‘RTGS’), Immediate Payment Service (‘IMPS’), Unified Payments Interface (‘UPI’), credit cards and debit cards. Within the broad segment of distribution of insurance products/services, distribution of non-life insurance and health insurance is considered at a narrower level. Lastly, within the broad segment of distribution of MFs, the Parties exhibit overlaps in distribution of equity-oriented MFs, debt-oriented MFs and hybrid and other MFs.

12. The Commission decided to leave the delineation of the relevant market open, as it was observed that the Proposed Combination is not likely to cause an appreciable adverse effect on competition in any of the possible alternative relevant markets that could be delineated.

13. The Commission noted that, in the business sub-segments of provision of credit cards and provision of credit through credit cards, the combined market share of the Parties is in the range of [10-15]% (in terms of value) and the incremental market share is in the range of [0-5]% and [5-10]%, respectively. It was further noted, based on the submission of the Parties, that the combined market shares of the Parties in these sub-segments has declined in the last three years despite increase in market size, indicating significant competitive constraints from other large players such as HDFC, SBI, ICICI, etc. In all other overlapping segments and sub-segments, either the combined market share of the Parties or the incremental market shares is in the range of [0-5]%. Accordingly, the Commission noted that the proposed combination is not likely to cause appreciable adverse effect on competition in any of the possible alternative business segments or their sub-segments in India.

14. With respect to vertical overlap between the Parties, the Commission noted that their activities overlap in the following segments: a) Provision of life insurance services by the Acquirer (upstream) and distribution of insurance services by the Target Businesses (downstream); b) Provision of health insurance services by the Acquirer (upstream) and distribution of insurance services by the Target Businesses (downstream); In case of distribution of insurance products/services, broader segment of all insurance products/services as well as distribution of health insurance, at a narrower level, were taken into account. c) Provision of MFs by the Acquirer (upstream) and distribution of MFs by the Target Businesses (downstream); In case of both provision and distribution of MFs (broader segments), at a narrower level, equity-oriented, debt-oriented and hybrid and other MFs were taken into account. d) Provision of PMS by the Acquirer (upstream) and referral of PMS by the Target Businesses (downstream); In case of provision of PMS (broader segment), at a narrower level, discretionary and non-discretionary PMS were taken into account. e) Provision of AIF by the Acquirer (upstream) and referral of AIF by the Target Businesses (downstream); In case of provision of AIF (broader segment), at a narrower level, category II and category III AIFs were taken into account. f) Provision of Bonds by the Acquirer (upstream) and distribution of Bonds by the Target Businesses (downstream).

15. The Commission observed that the Parties have a market share of [0-5]% in each of the upstream market and downstream market except in the broad market of provision of mutual funds in India and narrow segments of provision of equity-oriented and debt-oriented mutual funds in India, where the market share of Acquirer is in the range of [5- 10]% in India. Based on the foregoing, it appears that the presence of the Parties is not such as to lead to an ability or incentive on the part of Parties to foreclose competition in any market in India.

16. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

17. The order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect.

18. The information provided by the Acquirer shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.

19. The Secretary is directed to communicate to the Acquirer accordingly.