Tuesday, August 12, 2008

Policy towards foreign banks in India

As per the RBI's roadmap for foreign banks, there is to be a review of policy towards foreign banks' entry into and expansion in the Indian market in 2009. My own assessment is that the RBI will continue to be cautious unless a government with a very different attitude comes to power next year. I don't see major sales of public sector banks to foreign banks, for instance.

Branch licensing policy may become more liberal but a level playing field between foreign banks and Indian banks is unlikely. Even the Raghuram Rajan committee on financial sector reform, which wants abolition of branch licensing, does not favour extending such a policy to foreign banks until a couple of years after it has been extended to Indian banks.

I wrote an article about the theoretical pros and cons of foreign bank entry into India for EPW recently.

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