RBI asks to bring down foreign investments in private banks

RBIThe Reserve Bank proposed bringing down the foreign investment levels in the private sector banks. It says that the level should be 50 per cent instead of 74 per cent.

Experts believe that such a step is taken it will help lenders to retain Indian-owned status. The recommendations were given in the discussion papers that talked about allowing the entry of private banks in a market where two private players have already lost their position to state-owned ones.

The Central Bank in its statement said, "Since the objective is to create strong domestic banking entities and a diversified banking sector ... aggregate non-resident investment, including FDI, NRI and FII in these banks could be capped at a suitable level below 50% and locked at that level for the initial 10 years."

Some experts are also of the view that the recommendations will have repercussions on the way FDI is calculated and this will directly impact the downstream investments.

Foreign indirect investment too showed be monitored, said RBI. At present, the level is below 50 per cent.

It is not clear if such steps will be for the existing banks.