Commonwealth Bank of Australia (ASX: CBA) shares may receive a longer-term boost if its Indian partnership plans are successful.
CBA is best known as a bank that serves households and businesses in Australia and New Zealand. But, some of those customers have an economic connection in India. That may be an Australian business with an Indian presence or an Indian business with an Australian presence.
Commonwealth Bank has announced that it has signed a memorandum of understanding (MOU) with ICICI Bank — a leading private sector bank in India — to collaborate on "supporting customers across the Australia-India corridor".
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CBA's Indian partnership
CBA is looking to achieve four things with its financial institution partner in India.
Under the MOU, the first goal is to "facilitate introductions of corporate and business customers who are interested in investing or setting up businesses in the other bank's home country".
Second, CBA wants to "facilitate trade between corporate and business customers in Australia and India by supporting them with banking services and providing guidance in relation to cross-border trade opportunities".
The third goal is to "assist customers migrating to Australia and India with banking services".
Finally, CBA wants to "support cross-border payments by collaborating on customer-centric solutions".
CBA will host workshops with customers in Sydney and Brisbane this week to increase understanding and accelerate growth across the Australia-India corridor.
What did management say?
CBA group executive of business banking, Mike Vacy-Lyle, explained why this is a useful partnership for the ASX bank share:
The business environment presents significant opportunities for both Australian and Indian businesses and we are excited to partner with ICICI Bank to better facilitate trade and advance prosperity in both countries.
We understand that doing business in another country can present challenges as well as opportunities for businesses. That is why we are delighted to be working with ICICI Bank to give our business customers dedicated access to a leading banking partner across the corridor.
The economic connection between Australia and India is becoming increasingly important. Particularly in light of the Australia-India Economic Cooperation and Trade Agreement (ECTA) coming into effect on 29 December 2022.
Under the ECTA, 85% of Australian goods exports (by value) to India are now tariff-free, and 96% of imports from India are now tariff-free. Further tariff reductions are expected to occur in both countries to help grow trade between them in the coming years.
CBA share price snapshot
Commonwealth Bank shares have climbed around 40% since the start of 2024, compared to the S&P/ASX 200 Index (ASX: XJO), which has climbed almost 10%.
