New Delhi: The Reserve Bank of India is unlikely to allow foreign banks in the country to expand freely by increasing branch networks or acquisition of a private sector bank, when this issue comes up for a review in 2009.
Since banking sector reforms have not been implemented, sources told PTI that the central bank may not be in a position to give a go-ahead to further liberalisation of foreign banks.
The apex bank was set to open up the banking sector by according national status to foreign banks in 2009 after a review of the sector.
As per the liberalisation roadmap prepared by the RBI, foreign banks would have been allowed to acquire any private sector bank in the country, while also being able to open up branches, post 2009.
“But given the current scenario and banking reforms, which are yet to see the light of day, the central bank is set to postpone the opening up of the sector to free competition from foreign players,” an official source said.
“Foreign banks can acquire banks which are not financially stable and that too only if the central bank allows,” a senior banker said.
Under the first phase of liberalisation in the banking sector, allowed by the RBI, foreign banks can establish presence by way of setting up a wholly-owned subsidiary (WOS) or conversion of existing branches into a WOS.
The first phase of liberalisation, initiated in 2005, was aimed at giving a chance to the domestic banks to strengthen their presence and financial positions through consolidation and reform process.