Morgan Stanley is unleashing a major drive to tap India's domestic wealth next year, hiring 100 private bankers in a bid to manage $1 billion in assets by the end of 2010.

The Wall Street bank, which has offshore private banking operations in Singapore and Hong Kong, is making a push into the Indian domestic wealth market where Citigroup and Merrill Lynch already have huge plans.

That will be our first buildout on an onshore private wealth business in Asia, said Leslie Menkes, a Singapore-based managing director for the Wall Street bank's private wealth management arm, while speaking at the Reuters Wealth Management Summit.

Morgan would be competing against Citigroup and Merrill Lynch as the three U.S. banks aggressively try to tap India's fast-growing private banking market. India had 100,000 millionaires in 2006, up 21 percent from a year earlier, according to a Merrill Lynch/Capgemini report.

Merrill said in March it plans to expand to cover at least 10 Indian cities in the next three years, from five cities now.

A senior Citigroup executive told Reuters in February that the bank plans to double the number of bankers dealing with wealthy non-resident and resident Indians from about 100, by the end of 2008.

Citi's Smith Barney broking unit, which handles clients with assets of at least $1 million, plans to expand from one office now to a presence in 12 Indian cities.

Menkes said Morgan Stanley's focus in India would be mainly on rupee-based business targeting wealthy clients who have $5 million in assets. That group makes up 40 percent of India's 100,000 millionaires.

Internationally it targets clients who have $25 million in assets.

We will open for business in the middle of next year. We will certainly open in Mumbai, Delhi and Calcutta and probably in Bangalore, he said, adding by the end of 2010 it wants to be in eight locations in India.

Menkes said the bank already has hired four senior executives from Merrill Lynch to setup the private banking business.

Earlier this year Morgan Stanley split from its Indian partner to develop a wholly-owned, full-service Indian business.

TAPPING DOMESTIC WEALTH

Menkes said that it was difficult to tap India's domestic wealth outside of the country, unlike in China where international banks could attract clients doing business in Hong Kong where a lot of Chinese firms list.

In India you don't have the H-share market where wealthy individuals are monetising their assets, he said.

He said regulations also restrict the range of products that investment banks can offer to clients based in India.

But Menkes said that the attractiveness of the Indian market was the huge wealth in the hands of retail investors and the low cost of doing business in the country.

He said once the Indian onshore operation is active, the bank would launch a similar business in China.

Menkes, who is head of the private banking unit that covers Southeast Asia, Australia/New Zealand and India, said that its Asian private wealth business has seen over 50 percent growth this year, led by China, Hong Kong and Taiwan.

He said that the bank's Asian private banking assets were expected to grow by about 50 percent this year from around $25 billion at the end of 2006.

New client assets would make up the majority of the growth.

China Investment Citigroup Morgan Stanley