The Reserve Bank of India (RBI) is likely to announce the guidelines for the entry of foreign and private banks in India by month-end after the monetary policy. Foreign entities that finally get the go-ahead from the RBI would be given full banking licences as per their applications, a source said.
A committee is currently assessing the credentials and track records of foreign entities that have applied for banking licences. “Once the committee decides on an entity, it would get equal status as that of any Indian bank,” an official source, who did not wish to be identified told HT. Goldman Sachs, Morgan Stanley, JP Morgan, Rabo and Doha Bank are among those that have applied for banking licences with the RBI.
The “reciprocity” model would also be critical while allowing a foreign entity to operate as a bank in India. Banks of only those countries, which have allowed Indian banks to set up branches, will be allowed to set up shop in India.
“The principle of reciprocity will be a determining factor in allowing foreign banks to set up branches in India. This could be specified in the new policy,” said a government official.
The policy on foreign banks was originally scheduled to be rolled out in 2009 but was deferred in wake of the global financial crisis that shattered world economy after the collapse of large investment banks including Lehman Brothers in 2008.
India and China has already begun the process of “reciprocity” agreement that would allow Chinese banks to set up branches in India.
While at present there are no banks from China operating in India, State Bank of India (SBI), Bank of Baroda, Bank of India and Canara Bank already have branches in China.
The guidelines for granting fresh licences to private entities is also expected to be stringent and those that are granted licences would be expected to serve the rural markets as well.