FE Editorial Banking on all

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: In an interview to The Indian Express, ICCI MD KV Kamath has argued that further liberalisation of the working regime for foreign banks is not in India’s interest. Now, a standard test for those who argue against liberalisation of any sort is whether their own, narrowly defined economic interest is against it. So, it would be interesting to know whether some Indian private banks feel that foreign banks are a business threat in the near future. Of course, someone like Kamath will have the facts ready. His argument that other countries don’t reciprocate on foreign bank working conditions is not incorrect. China, for example, puts an aggregate cap of 25% on foreign equity ownership. Anything more than 10% requires special approval in South Korea. India has a maximum limit of 12 new branches for foreign banks each year. That looks restrictive. But look at Singapore, a global trade/finance hub, which allows each foreign bank only one office and disallows off-site ATMs or sub-branches. The cradle of financial capitalism is not much better—US regulations vary from state to state; it also requires all directors of a national bank to be US citizens and, if a national bank is an affiliate or subsidiary of a foreign bank, a majority of the board needs to be US citizens. So, granted, Kamath has a point. But India must judge its policy not by mean spirits of other countries but by its own interest. And it is in India’s interest to open up banking, to all comers, Indian and foreign.