Official sources said that listing of weak banks by RBI would pave the way for a host of foreign banking entities including GE Money to pick up substantial stakes in such banks. Earlier, a clutch of banks including Bank of Punjab, Catholic Syrian Bank, Lord Krishna Bank, Federal Bank and Karur Vysya Bank were reported to be seen as takeover targets. Until the list is out, no entity would make any move. There are a host of banks, which are waiting in the wings to make a foray in the Indian financial sector, a senior government official said.
One view is that restricting FDI to weak banks may prove to be a dampener for many a foreign investor. Sources, however, pointed out that at least some investors would find even weak banks attractive. It may be noted that ING, which had picked up a major stake in Vysya Bank in 2002, was able to turn it around.
RBI has said that bar on FDI in stronger banks is likely to be lifted in 2009, when rules would be up for a review. The two-phase roadmap is spread over March 2005 and March 2009.