India’s Regulatory Strings Could Reduce Foreign Banking Reform Impact

Under the Reserve Bank of India (RBI) rules announced late on Wednesday, foreign banks which convert their local operations from a branch structure to being subsidiaries will be treated on nearly equal terms with local lenders.

This could open the way to them opening more outlets across India and could also allow them to buy local private sector banks – potentially a major lure as banks seek to tap into the fast-growing Indian economy.

The rules are aimed at giving India greater regulatory power over foreign banks in the wake of the global financial crisis.

Yet foreign banks would also face a bigger regulatory burden in the subsidiary setup, including having to earmark 40 percent of their lending to the “priority sector,” which includes undeserved parts of the economy and agriculture.

via India may find few takers for new foreign bank rules

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