Major reforms in banking sector on anvil, says RBI Guv

The Reserve Bank of India is likely to announce in the coming weeks guidelines for allowing entry of foreign banks in the country

GN Bureau | October 14, 2013

In a major fillip to the banking structure in the country, the Reserve Bank of India is contemplating allowing entry of foreign banks to set up branches or acquire domestic banks, governor Raghuram Rajan has said.

According to a report in The Times of India, Rajan made the announcement while addressing a gathering in Washington on Sunday. "That is going to be a big opening because one could even contemplate taking over Indian banks, small Indian banks and so on," Rajan said. However, he did not divulge any further details and said that the apex bank would announce the relevant guidelines in the coming weeks.

Rajan has assured that foreign banks setting up a wholly-owned subsidiaries structure would be treated at par with the domestic banks. However, this treatment would be subject to two specific conditions, he clarified.

"One (is) reciprocity— your country should allow the same to our own banks— and second you come through one route either you have a branch or you have a subsidiary; don't do both. That is primarily to simplify our regulatory function, but also to make it clean. But once you have a fully owned subsidiary, we would allow you a lot of freedom," he said.

Since taking over charge as the apex bank governor in September, Rajan has introduced a slew of measures so as to strengthen the banking structure which in turn would fuel the country’s economic growth.



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