Role of foreign banks in shaping a vibrant Bharat

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For decades, foreign banks have been the pioneers in introducing new products, segments and state-of-the-art technologies, thereby promoting greater economic efficiency and banking sector reforms in the country. Grant Thornton Bharat’s report on the role of foreign banks in shaping a vibrant bharat, details the contribution of foreign banks in strengthening the Indian economy and how an enabling environment can be help foreign banks in contributing more meaningfully towards shaping a vibrant Bharat and a better India.

The genesis of foreign banks in India dates back to the 19th century with the need for establishing banks that catered to foreign exchange business, foreign trade-related financing and bill discounting. As India’s interconnectedness with the global economy increased, many foreign banks entered the space and started viewing India as an emerging global market. However, while foreign banks are essential for bringing in the necessary global practices in India, the recent exits by a few foreign banks have highlighted the need to rethink and reshape the financial services ecosystem and make it more friendly for foreign banks to operate.

The report suggests some interventions and recommendations that might better the ease of doing business in India by these foreign banks, such as:

  • Relooking at the priority sector lending targets
  • Adopting a differentiated licensing structure
  • Rationalising corporate tax rate for foreign banks
  • Incentivising subsidiary form of presence of foreign banks through lower capital requirements
  • Easing norms for data localization
  • Potential to consider amendments to the Banking Regulation Act, 1949

and more.

Read the full report to get a detailed understanding.