Since banking sector reforms have not been implemented, 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 in 2009 by according national status to foreign banks.
As per the liberalisation road map prepared by the RBI, foreign banks would have been allowed to acquire any private sector bank in the country and 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 RBI allows," a senior banker said.
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Under the first phase of banking sector liberalisation, foreign banks can set up a wholly-owned subsidiary (WOS) or convert existing branches into a WOS. The first phase was initiated in 2005, was aimed at allowing the domestic banks to strengthen their presence and financial position through consolidation and reforms.
The proposed reforms, such as aligning voting rights of the foreign partners with their stakeholding pattern, have not been implemented due to stiff opposition from the Left allies of the UPA government.
There has been no major consolidation in the sector, either, despite repeated pleas by the finance ministry.
Foreign players such as Citibank, Standard Chartered Bank and HSBC already have a presence in the country, while others are waiting in the wings. Royal Bank of Canada and the northern European bank Glitnir have opened their representative offices in the country this year.