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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, in its latest report, Role of Foreign Banks in Shaping a Vibrant Bharat, detailed the contribution of foreign banks in strengthening the Indian economy and how an enabling environment can help foreign banks in contributing more meaningfully towards shaping a vibrant Bharat and a better India.
The report suggests that interventions 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 are some of the steps regulators and the government could take to enable ease of doing business in India.
“At Grant Thornton Bharat, it is our purpose to shape a vibrant India and foreign banks have been, for decades, contributing to the economic progress of the country. With an intent to bring in a fresh perspective of how foreign banks are contributing towards shaping a vibrant and better India, this report deep dives into the history, importance and the meaningful contribution of these banks in the growth of the country. The report also highlights the key operational challenges that foreign banks face and the possible interventions the RBI and government could do to ease some of these challenges,” said Vishesh C. Chandiok, CEO, Grant Thornton Bharat.
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.
“Foreign banks are essential for bringing in advanced global practices in India, and have been promoting foreign investments in a great way, but the recent exits by a few such banks have highlighted the need to reshape the financial services ecosystem. Apart from providing fungibility across PSL targets for foreign banks to focus on their niche expertise, emerging sectors such as ESG, sustainability, renewable energy, financing electric vehicles, health infrastructure could also be included within the ambit. Additionally, local borders around storage of data defeat the purpose of cross border collaboration. To ease data localisation challenges, discussions are necessary at global forums such as G-20 summits to ensure member nations adopt an enabling framework, globally”, said Vivek Iyer, Partner, Financial Services, Grant Thornton Bharat.
Adding Chandiok said, “A collaborative platform, where regulators, governments and foreign banks could come together, would provide an impetus to the Indian economy and we are confident that this report will lay the groundwork for the same. We hope to facilitate such a collaborative platform and will look forward to your participation to continue to help Shape a more Vibrant Bharat.”