India is pegged to take the third place as a banking hub after China and the US by the year 2040 as banking sector growth in the major emerging economies of the world would outstrip that in the developed nations before 2050, a report said. The banking sector will grow significantly faster than GDP in the E7 group of emerging economies, consisting China, India, Brazil, Russia, Indonesia, Mexico and Turkey, according to a projection by accounting firm PriceWaterhouseCoopers.

Domestic credit in China alone may overtake Britain and Germany by 2010, Japan by 2025 and the United States by 2050, while India may be the third biggest domestic banking market by 2040, it said. Bank profits from seven of the biggest emerging markets could outstrip the sector’s profits from the current seven leading industrial nations or G7 — the US, Japan, Germany, the UK, France, Italy and Canada — by 2050, the firm said in its report Banking in 2050: How big will the emerging markets get?.

India may rise from the relatively low levels today to emerge as the third largest domestic banking market in the world by 2040 and in the long run it may grow faster than China, the report said. “China will continue to grow somewhat faster than India over the next 5-10 years but after that, Chinese growth will be held back by its rapidly ageing population and diminishing returns to its investment-led strategy,” PwC executive director Jairaj Purandare said.

The new report also forecasts that domestic credit in India would grow to $23 trillion in 2050 from $0.4 trillion in 2004, driven by the growing middle class in cities and private banks gaining market share in the state-run dominant industry. “M&As will encompass consolidation activity “in-market’ as local banks acquire one another, foreign banks enter E7 markets and banks from the E7 expand internationally through acquisitions,” said Nick Page, partner at PwC.

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