Banking Sector in India

December 6, 2019 India INC

Banking Sector in India

Today, the retail banking is a hot commodity high on sale. With massive expansion plans underway and financial products and customization of services high in demand, banking sector has never had it so good. And there is a reason for being jubilant – the retail-banking sector is expected to grow at a rate of 30%. So no surprise players are focusing more and more on the retail and are waking up to the Banking’s potential. Giving fillip to this growth has been India’s new policy, which allows foreign banks to establish themselves on Indian soil either by setting up a wholly-owned subsidiary or by converting their existing branches into a wholly-owned subsidiary, with a minimum equity base of a modest Rs 3 billion. It also allows foreign banks, for the first time, to acquire up to a 74 percent stake in local private banks. India has also initiated policy for the “next stage of banking reforms”, which comes in two phases. In the first phase, from 2005 to 2009, although foreign banks will be allowed to own a 100 per cent subsidiary, at least half of its board members will have to be Indian nationals resident in the country. The second phase commencing 2009, however, is expected to be more liberal, and that will allow foreign banks to acquire any privately owned Indian bank. During this phase, wholly owned subsidiaries, too, can go for listing and foreign banks may dilute their holding to the extent that at least 26 percent of the paid-up capital is held by resident Indians at all times. The dilution may be either by way of initial public offering or an offer for sale. And to prove the popularity of banking in India are foreign banks who have doing brisk business for the last couple of years. Banks such as ABN-AMRO Bank, Abu Dhabi Commercial Bank, Bank of Ceylon, BNP Paribas Bank, Citi Bank, China Trust Commercial Bank, Deutsche Bank, HSBC, JP Morgan, Standard Chartered Bank are the prominent ones who have marked their presence in India. If there are foreign banks waiting for the magical year 2009 to begin their operation in India, one thing is for certain — banking has yet to reach its potential, which is ever expanding with Indian economy growing from strength to strength.