The Reserve Bank of India (RBI), in its guidelines for foreign banks in India, had suggested that it would relax the banking sector after March 2009.
Foreign banks operating in India have requested the Reserve Bank of India (RBI) to prepare a vision document on policy changes expected after March 2009.
The foreign banks will be listing their demands in a report that would be submitted to the RBI soon, under the guidance of the Indian Banks’ Association (IBA).
Citibank’s India head Sanjay Nayar is the head of the standing committee of foreign banks at IBA, which has drafted a report. The report will be finalized at the committee’s meeting later in this month.
The members of the committee consist of India heads of HSBC, Standard Chartered, Deutsche Bank, BNP Paribas, ABN Amro Bank, Bank of America, American Express, DBS Bank, JP Morgan, Barclays and Calyon. The foreign banks stated that the guidelines by the RBI will help them prepare and plan for the future.
The guidelines also stated that the RBI will be considering for treating the wholly-owned subsidiaries of foreign banks in India in a similar way as Indian banks, with a provision to list on Indian exchanges.
“We are just giving our views. It is up to the RBI to accept or reject them. The draft paper would detail issues concerning capital-raising options for foreign banks in India and their branch expansion, among others. The white paper looks at the roadmap for foreign banks post-2009. It expresses an opinion on how the banking sector should be, post 2009,” said a banking source.
Recently RBI deputy governor V Leeladhar commented on how the Indian regulatory regime for foreign banks was very liberal by global standards. After this the foreign banks committee took a decision to submit its report to the RBI.
Leeladhar had said the Indian regulatory regime is much fairer and provided a far more smooth ground to foreign banks than many other jurisdictions, both developed and up-coming economies. He also complained about the lack of commercial policies from regulators of other countries.
A senior executive with a foreign bank said, “The year 2009 is an election year and foreign banks are of the view that any change in government can affect the policy stance in the country. Since the RBI is an independent body, it would be nice if it could spell out a guidance note on the policy changes in advance. This will enable us to draw up India plans.’’
Branch expansion continues to be a major point of debate between the foreign banks and the regulator.
“The RBI has been issuing fresh branch licenses largely in the rural (under-banked) centres. There has to be some parity. There has to be a mix of rural and urban or semi-urban centres. You cannot expect a bank to open branches only in the rural centers. Capital raising and auditing of branches are some other issues which would be raised through the white paper,’’ said another foreign banker.