India’s booming economy and young population should make it a banker’s paradise. Millions of people are opening accounts, taking loans, and spending. Yet, foreign banks like Citibank, Standard Chartered, and Deutsche Bank are exiting retail banking, while domestic giants like SBI and HDFC thrive.

The reason? Scale and reach. Indian banks dominate with thousands of branches and millions of retail depositors. SBI has over 22,000 branches, HDFC Bank more than 9,000. This allows them to collect low-cost deposits, fund loans cheaply, and generate massive profits. Foreign banks, by contrast, operate just a few dozen branches. Without scale, they rely on expensive wholesale funding, which eats into profits.

Net Interest Margin (NIM) explains the challenge. While foreign banks report decent margins on paper, their high operating costs—staff, branches, compliance—devour profits. RBI rules also make expansion through a subsidiary model costly and complex.

Exits are sometimes strategic. Citibank left 14 global markets to focus on wealth management, while Standard Chartered prioritized institutional banking.

For Indian banks, these exits are opportunities. Acquiring these customers and assets strengthens domestic players, proving that when it comes to retail banking, homegrown scale beats global experience.