The Reserve Bank of India is actively examining the limits of foreign ownership in domestic banks but has clarified no immediate changes to the current framework are on the horizon, Governor Sanjay Malhotra said during the post policy conference.
The review comes as India seeks to attract more global capital to strengthen its banking sector, especially with strategic bank sales like IDBI Bank drawing foreign interest. Emirates NBD is currently in the race to acquire IDBI Bank, alongside Prem Watsa's Fairfax Capital.
Recently, Japanese lender Sumitomo Mitsui Banking Corp announced acquiring 20% stake in Yes Bank.
Currently, foreign direct investments limit is capped up to 74% in private sector banks, with 49% allowed via the automatic route.
However, any single non-resident entity is typically capped at 15%, unless the RBI grants special approval on a case-by-case basis.
There have been exceptions to these rules in the past such as Fairfax's 51% stake in Catholic Syrian Bank.
Malhotra said that the central bank is examining the entire ownership structure and eligibility criteria for foreign investment in banks. He said that this is a complex process requiring careful consideration of the broader economic impact, and warned against expecting quick, dramatic changes.
"There are deeper questions which shouldn't be seen in cricket's analogy in T20. If it needs changes, keeping the whole economy in mind we will do those necessary changes," he said.
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