MUMBAI: 2009 was the year in which the banking sector was supposed to be opened up for foreign banks in India, according to a World Trade Organisation (WTO) commitment by the government. Foreign investors were likely to be allowed to increase their stake in private banks to up to 74% and foreign banks were expecting more branch licenses in India.
However, all indications are that 2009 may not be such a great turning point after all, as foreign banks, post the financial crisis, are in no position whatsoever to expand in India. Also, Indian bankers say that any leeway to foreign banks in India should be reciprocated by similar measures from other countries.
Chanda Kochhar, joint managing director and CFO, ICICI Bank, said, "The WTO works on reciprocity among countries and (the commitments) are not specific to one nation. Many countries are still not as open as India." Kochhar will take over as managing director and chief executive officer of the bank in May 2009.
About a year back, former RBI deputy governor V Leeladhar had created a stir when said that two of the largest private banks in India (ICICI and HDFC) are being owned by foreign institutional investors which had bought the maximum permitted 74% of their shares.
That share may have come down now as many FIIs have sold out from the stock market in the last one year. Nevertheless, Leeladhar pointed out that India is much more liberal than it is made out to be.
Banks will also need to raise capital in 2009 as they move towards the stricter Basel-II framework. Stronger risk management systems, employee training and advance technology will also play a crucial role come 2009,particularly after what happened with the banking sector in the Western countries.
