RBI for consultation on foreign banks norms

Reserve Bank of India governor Y V Reddy said the central bank wants to formulate the guidelines of foreign banks' operations in India "through an ongoing process of consultation, as in the past".

He made this comment early this week while delivering a lecture on Indian and global economy at Lal Bahadur Shastri National Academy of Administration, Mussoorie.

Referring the RBI's draft guidelines on ownership and governance in private sector banks "" which has proposed to cap the private and foreign banks' stake in any Indian private bank at 5 per cent "" Reddy said, "Based on the feedback received, a second draft of the guidelines would be prepared and put in public domain for further discussions."

The presence of foreign banks in India, according to the governor, has benefited the financial system by enhancing competition, resulting in higher efficiency.

There has also been transfer of technology and specialised skills which has had some demonstration effect as Indian banks too have upgraded their skills, improved their scale of operations and diversified into other activities, he said.

Reddy also emphasised the fact that at a time when access to foreign currency funds was a constraint for Indian companies, the presence of foreign banks in India enabled large Indian companies to access foreign currency resources from the overseas branches of these banks.