India's local wealth managers push to grow as foreign rivals struggle

* Local wealth managers plan to hire staff, open morebranches

* Foreign private banks struggling to compete

* India home to fastest growing wealth management mkt

By Sumeet Chatterjee and Devidutta Tripathy

MUMBAI, Sept 2 (Reuters) - India's homegrown wealth managersare hiring more staff and expanding in smaller cities, seekingto attract rising numbers of newly minted millionaires as highcosts and regulatory restrictions drive some global rivals toscale down.

India last year was the world's fastest growing wealthmanagement market, according to a CapGemini and RBC WealthManagement study published in June, spurred largely by risingpersonal income as well as a boom in e-commerce start-ups thathas also attracted foreign investors such as Japan's SoftBankCorp and Singapore's Temasek Holdings.

To take advantage of this growth, local firms such as IIFLWealth Management and Kotak Wealth Management, which have longdominated the industry, said they plan to add more branches andbankers within months.

New players are also set to break in, with the State Bank ofIndia saying it plans start offering wealth managementservices this year for the first time.

"The business itself is pretty robust and growing well,"said Rajesh Iyer, head of investments at Kotak Wealth, whichestimates the combined net worth of wealthy Indians to triple toabout $6 trillion in the next five years.

IIFL Wealth, which manages assets worth about $12 billion,plans to increase the number of its client-facing staff to 200from 160 in the next couple of months, said Executive DirectorYatin Shah.

LOCAL FLEXIBILITY

IIFL and Kotak are among the top three wealth managers inIndia in terms of assets under management, outperforming thelocal units of banks such as Barclays, Julius Baer and Deutsche Bank, several bankers said.

These local firms already control some 75 percent of themarket, industry executives say, and their expansion plans willput more pressure on the global banks, which are alreadystruggling with higher wages and a narrower client base.

Some banks, like Royal Bank of Scotland, are alsoselling their onshore India private banking units as part of aglobal restructuring.

Earlier this year, bankers and consultants had told Reutersforeign private banks would hire wealth managers and increasetheir headcount by a fifth, compared with a 10-15 percent fallover the past two years, to cash in on the Internet start-upboom and signs of an economic revival.

Many of these global banks, however, have struggled tocompete with the locals firms, which typically have a lowerinvestment threshold and can tap clients from their offices insmaller cities such as Ahmedabad, Vadodara and Chandigarh -places global banks can't set up a cost-effective presence.

Local firms are also not subject to the same stringentglobal regulations of international private banks, which allowsthem to invest their clients' money into sectors such as realestate, where the rules remain obscure by global standards.

"As a foreign bank, I have to take approval not just fromthe local regulators but also from the regulators back home,"said the country head of a European private bank who declined tobe named because he is not authorised to speak to the media.

"Local wealth managers have the flexibility to offer a widerange of things." (Editing by Clara Ferreira Marques and Miral Fahmy)