A Closer Look at Axis Bank's Acquisition of Citibank’s Business

• The entire acquisition process was swift, with approval from the Competition Commission of India obtained and the deal completed within just 7 months.
• The acquisition encompassed various aspects of Citibank India's operations, including loans, credit cards, wealth management, and retail banking.
• Following the acquisition, Axis Bank's capital adequacy ratio stands at 17.62%, with the Common Equity Tier 1 (CET1) ratio at 13.78%. These figures surpass the regulatory requirements.
• Despite the acquisition, Citibank India will continue to primarily serve its institutional clients both domestically and internationally.

Additional Insights:

• Axis Bank holds the position of the third-largest private sector lender in the country.
• Understanding CET1 capital:
  • As per BASEL 3 norms, banks are required to maintain a minimum capital adequacy ratio of 8% of their risk-weighted assets. However, in India, this figure is 9%.
  • The Capital Adequacy ratio is a measurement of a bank’s total capital against its Risk-Weighted Assets (RWAs).
  • A bank's capital is divided into Tier 1 and Tier 2 capitals. Tier 1 capital comprises the bank’s Common Equity Tier 1 capital and Additional Tier 1 capital. The RBI stipulates that Tier 1 capital must constitute at least 7% of RWAs on an ongoing basis.

The Competition Commission of India Act

• The Competition Commission Act was introduced to replace the previous Monopolies and Restrictive Trade Practices (MRTPS) Act, 1969.
• The Competition Commission of India was established to implement the provisions of this act, adhering to the principles of modern competition laws.
• The act prohibits anti-competitive agreements and abuse of dominant position by enterprises. It also regulates combinations (mergers, amalgamations and acquisitions) to prevent any negative impact on competition within India. Note that transfer pricing is not under the purview of the Competition Commission of India.