Indian Banks and Their Challenges

Published: 2021-09-11 16:00:09
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Category: English

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oreign banks have been part of India's financial landscape since late nineteenth century. For the first few decades after independence, they quietly existed as icons of global financial authority, attracting high end clients and employees.
Opening of the economy in the 1990s brought fresh attention to foreign banks for their role in facilitating trade flows, introducing new products and helping capital formation. Many foreign banks expanded and tried to 'localise' products, services and branding, even as new private sector banks offered competition. The latter were able to grow rapidly, aided by an active policy of branch licensing and consolidation.
Over time, the relative disadvantage in terms of branch licensing and inorganic growth opportunities became significant hurdle for foreign banks, particularly those whose business plans went beyond serving their multinational clients in one or two locations.
RBI roadmap
In this backdrop, the roadmap for foreign banks released by Reserve Bank of India in 2005 was an important pointer to the policy direction for foreign banks; moderating hopes of rapid expansion on one hand and creating long-term optimism on the other.
The roadmap termed its goals as consolidation of domestic banks and 'synchronised' presence of foreign banks, vaguely promising a wider play during the second phase. But before the first phase of the roadmap expired in 2009, the world as we knew it came to an end, ending with it all certainty of economic relationships.
In the wake of the financial crisis, another noteworthy demise was that of the assumption that the developed world knew all along what it was doing. Also, Indian banks fared well through the crisis. All of this damaged the foundation on which the promise of change was built; thereby delaying the second phase and denying the big opportunity that many were watching out for.

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