The custody business provides a range of security services, including safekeeping and settlement, reporting, corporate actions, dividends collection and distribution, proxy voting, tax reclaim services, fund administration and providing market news and information.
Foreign banks like HSBC, Citi, Deutsche and StanChart are the major players in the business. They bring their overseas relationships into the country. Compared to Indian players, foreign players have the reach. Most of the business comes from foreign institutional investors (FIIs) who have business relations with the international offices of these banks. Most of these players have strong domestic as well as international businesses.
Though these players make only 2-3 basis points on custody fees, they earn largely from float, forex and a host of other transactions. With the boom in the capital market over the past few years, more FIIs are entering the market. The total number of FIIs registered so far in India is at 1,253 and the number of FII sub-accounts which are registered is at 3,720.