Should India Ease Entry Rules for Foreign Banks?

By Kavaljit Singh | Briefing Paper # 13 | November 2013

On October 12, Raghuram Rajan announced that the Reserve Bank of India will soon issue new rules allowing a more liberal entry of foreign banks in India. While examining the past performance of foreign banks in India, the author contends that the key issue is not xenophobic hostility towards foreign banks but their niche business model devoid of social and developmental banking. Several big international banks including JPMorgan, HSBC and UBS have recently paid billions of dollars in regulatory fines for their alleged role in Libor rate fixing, money laundering and reckless trading. Should India give such banks a free run, asks the author.