Regulatory challenges biggest concern for foreign banks in India

Written by fe Bureau | Mumbai | Updated: Dec 12 2013, 09:20am hrs
Regulatory concerns and a changing political environment are the biggest concerns for foreign banks doing business in India, finds a survey conducted by consultancy firm PwC.

The survey further notes that 74% of banks polled expect the market share of foreign banks in India to remain steady or decrease over time.

Nearly 41% of foreign banks surveyed cited regulatory changes were biggest issue they face, followed by 33% saying that political stability was their prime concern.

It is no surprise that the survey results indicate regulatory challenges as the foremost concern for foreign banks today, given the plethora of regulatory changes in home and host countries, the report published on Wednesday said.

This is followed closely by political and social stability. Uncertainty resulting from a potential lack of clear majority of any one political party in the upcoming elections underpins apprehension regarding the direction of policies and governance in the nation, the report added

Thirty-two foreign banks of the 43 operating in the country were part of the PwC survey, which was conducted prior to RBI releasing its guidelines for foreign banks to operate under the wholly owned subsidiary model.

The RBI, in its guidelines, provided flexibility for foreign banks present in India prior to August 2010 to continue to operate as branches or to subsidiaries and promised them near national treatment if they choose to follow the subsidiary route.

Banks operating under the subsidiary model will get automatic approval to open branches and will also be allowed to take over Indian banks.