The top 20 foreign banks operating in India employ 26,530 people. This will increase by 50 per cent to 39,770 by 2008. Fifteen of the top 20 overseas players predict at least a 20 per cent increase of staff strength; five banks project an increase of 100 per cent and one of them anticipates a 650 per cent increase.

This is part of the findings of PricewaterhouseCoopers' study Foreign Banks in India 2006 that was released recently.

Presumably, the staff strength is inclusive of those employees who are attached to business process outsourcing operations of the overseas entities and not commercial banking alone.

What is quite amazing is that only 46 expatriates (or 0.17 per cent) are employed by these 20 foreign banks. This number will increase to 72 by 2008. Five of the top 20 banks have no expatriates on their payroll and the maximum number of expatriates present at any individual foreign bank is 10.

This essentially means that the foreign banks operating in India are predominately run by Indians who understand the market realties, customers psyche and local needs for financial products.

And yet foreign banks' market share on the Indian turf has been declining. Between 2004 and 2005, foreign banks' market share of aggregate deposits declined from 5.1 per cent to 4.7 per cent and that of advances came down from 7 per cent to 6.8 per cent.

Overall, foreign banks' market share of assets dropped from 6.9 per cent in 2004 to 6.8 per cent in 2005.

The familiar excuse given by foreign banks for their small market share is the Reserve Bank of India's [Get Quote] reluctance in permitting them to open new branches. Standard Chartered Bank has the maximum number of branches (83), followed by HSBC's 39, Citibank's 44 and ABN Amro Bank's 24. When it comes to ATMs, Citi tops the list with 376 ATMs, followed by Standard Chartered's 165, HSBC's 158 and ABN Amro's 78.

One can grow even with a relatively small branch presence, provided one has the right business strategy in place.

Despite being run by local bankers, few foreign banks have shown innovation in strategy and product developments to grab a bigger chunk of the market.

More than a decade ago, Citibank tried to take banking to the less affluent and salaried people by introducing Suvidha account where customers were discouraged to do banking through branches and given options of other channels of banking like ATMs, Internet and telephones and the requirement of minimum balance was drastically reduced.

It was a resounding success in Bangalore but Citi could not replicate the success story in other metros like Delhi and Mumbai, since by that time, new generation private sector banks like ICICI Bank [Get Quote] and HDFC Bank [Get Quote] had entered the scene and were wooing customers aggressively.

Instead of holding on to their turf and fighting back, some foreign banks actually gave up. A few of them have moved out of auto financing and even mortgages as they found the net interest margin in these businesses shrinking.

No wonder, some of the foreign banks covered by the PriceWaterhouseCoopers survey have admitted that they made losses in retail businesses. Driven out of certain segments of retail businesses by intense competition, most of them have shifted their focus to small and medium enterprises.

However, there is no guarantee that they would reap the benefit here as local private banks and even the public sector banks have been gearing up to carve up the SME pie.

The most important driver of change in the Indian banking sector, according to the CEOs of the 20 foreign banks covered by the survey, is technology.

The other important drivers include globalisation and regulatory changes. However, in the technology space, too, foreign banks do not hold any special position vis-�-vis local players. Most of the new private banks are technology-savvy and even the public sector banks are drawing up plans to catch up with them.

The CEOs have identified the entrenched position of the domestic banks as the most difficult aspect of the Indian banking market. The second most difficult aspect is competition from their own peers.

And even though most of the CEOs feel that the market is not over-banked and there is a consensus that more and more foreign banks will enter the market, 15 of the 20 foreign banks believe that some of the overseas players - including the smaller players - will quit the Indian market.

So, while around 25 applications are pending with the RBI for getting a foot-hold in the country either through a branch, or a representative office, the existing players are still groping for the right strategy to capture the market.

Three-fourth of the foreign banks covered by this survey predict that their business model will change over the next three years. This is on account of increased competition and the growing sophistication of the customer needs.