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India Considers Easing Foreign Bank Ownership Rules

Written by: Team Angel OneUpdated on: Jun 4, 2025, 1:08 PM IST
India may relax foreign bank ownership rules as capital requirements rise and overseas interest grows, though changes will likely proceed case by case.
India Considers Easing Foreign Bank Ownership Rules
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Data from the Reserve Bank of India shows that foreign banks hold less than 4% of the total outstanding bank credit in India as of March 2024. Over the years, this share has remained consistently low. In March 2000, foreign banks held a slightly higher share, but since then, Indian private banks have expanded rapidly while the presence of foreign banks has stayed limited.

RBI Reviewing Existing Rules

The Reserve Bank of India is currently reviewing shareholding and licensing norms. As per the reports, the central bank may allow regulated foreign financial institutions to own higher stakes in Indian banks, subject to case-by-case approvals. The current cap on strategic foreign ownership is 15%, while overall foreign ownership is allowed up to 74%, including portfolio investors.

Recent Acquisitions 

In April, the RBI made an exception to permit Japan’s Sumitomo Mitsui Banking Corp to acquire a 20% stake in Yes Bank. This $1.58 billion transaction is now the largest cross-border banking deal in India. Separately, Canada’s Fairfax Holdings and UAE-based Emirates NBD are competing to buy a 60% stake in IDBI Bank. Emirates NBD also received approval to set up a local banking unit in India.

Regulatory Constraints Still in Place

Foreign investment is still subject to various limits, including a 26% cap on voting rights and a requirement to reduce promoter holdings to 26% within 15 years. Any change to the voting rights cap would require action by the finance ministry.

Read more: RBI Adds 58 MT of Gold to Reserves in FY25!

Conclusion

The RBI is exploring options to ease restrictions, with capital needs and foreign interest both rising. Any adjustments are expected to be gradual and based on specific cases.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Jun 4, 2025, 1:08 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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