Friday, February 18, 2011

Once Indian Banks were deprived of foreign expansion

In the recent times the Indian Banks are constantly expanding their branch network in the foreign countries and are also enjoying very descent profits but the case was very different during the early days of the country, i.e after the independence.

During that time the Indian Banking system was bound by very strict rules and regulations imposed by the central bank that would not allow Indian Banks to expand in overseas market primarily because due to a sense of insecurity that if Indian Banks are allowed to open offices in foreign countries then the foreign bank might also request for the same. It is also known as the principle of ‘Reciprocity’.

During the sixth decade of the previous century leading Indian Banks like Punjab National Bank and Bank of India sought overseas access but The Reserve Bank of India declined the proposal at once because of the chances of the application of the principle of ‘reciprocity’. As at that time it was intolerable to let the foreign banks earn profits within the country.

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