Latest news with #IraDugal
Mint
03-06-2025
- Business
- Mint
India considers easing bank ownership rules as foreign interest grows
Indian central bank reviewing ownership rules for banks Foreign banks eager to tap India's rapid growth, trade deals SMBC's deal for Yes Bank shows foreign interest, RBI flexibility By Ira Dugal and Swati Bhat MUMBAI, June 3 (Reuters) - The Indian banking regulator is signalling possible rule changes ahead that would let foreigners own more of India's banks, spurred by overseas institutions' eagerness for acquisitions and the fast-growing economy's need for more long-term capital. The Reserve Bank of India last month bent its rules to let Japan's Sumitomo Mitsui Banking Corp buy a 20% stake in Yes Bank, and two foreign institutions are vying for a stake in IDBI Bank, highlighting the pressure to ease foreign ownership rules that are among the strictest of any major economy. RBI Governor Sanjay Malhotra told the Times of India last week that the central bank was examining shareholding and licensing rules for banks as part of a broader review. A source familiar with the central bank's thinking said it would be more open to letting regulated financial institutions own bigger stakes, with approvals on a case-by-case basis, and to certain rule changes that could address disincentives for foreign acquisitions. Analysts say foreign banks are keen for deals in India, the world's fastest-growing major economy, especially as it angles for regional trade agreements. Such pacts could open up new opportunities in India for global lenders elsewhere in Asia and the Middle East. "The interest is driven by India's strong economic growth and large under-penetrated market," said Madhav Nair, deputy chairman of the Indian Banks Association. Indian regulators, for their part, worry that India lags other large economies in mobilising banking capital, which will be vital to sustaining rapid economic growth. Alka Anbarasu, associate managing director at Moody's Investors Service, said India will need much more capital for its banking system over the medium term. "Whether this has prompted the regulator to consider bringing in strong international players into the banking system, it would be a good rationale for doing so," she said. While most large global banks from Citibank to HSBC to Standard Chartered have operations in India, they are focused on the more profitable corporate and transaction banking segments, along with trading, rather than bread-and-butter lending. The share of foreign banks in outstanding bank credit in India is less than 4%, central bank data shows. Banking remains one of the most guarded sectors of the Indian economy. While foreigners including portfolio investors can own up to 74%, regulations limit a strategic foreign investor's stake to 15%. Foreign banks are also deterred by a maze of other regulations, including a 26% cap on voting rights and a requirement that any large shareholding by a so-called promoter - a strategic investor with direct influence over management decisions - be sold down to 26% within 15 years. The RBI is open to giving foreign buyers more time to sell down their stake, the source familiar with the bank's thinking said. The source declined to be identified as the deliberations are confidential. The RBI did not respond to an email seeking comment. The source also highlighted the banking regulator's increased openness to case-by-case exemptions from the 15% ownership limit, as offered for the Yes Bank purchase. The $1.58 billion deal was the largest cross-border acquisition ever in India's financial sector. Two foreign investors - Canada's Fairfax Holdings and Emirates NBD - are also contending for a 60% stake in government-owned IDBI Bank. Emirates recently received regulatory approval to set up an Indian subsidiary, making it only the third major foreign bank to do so after Singapore's DBS and State Bank of Mauritius. The decision was prompted by an interest to acquire a majority stake in IDBI Bank, a source familiar with the buyers' thinking said. Emirates NBD declined to comment. Fairfax did not respond to a request for comment. An increase in the 26% cap on voting rights, or in the 15% investment limit, could encourage foreign bank investors, ratings agency Fitch said in a note last week. It believes the RBI's preference is for foreign banks with a strong performance and solid governance to acquire stakes larger than 26% through wholly owned subsidiaries regulated in India. The source familiar with RBI thinking said the limit on voting rights was hard-coded in law and would need to be reviewed by the finance ministry. On regulatory issues under the central bank's purview, the source added, the stance on foreign strategic investors may need to be adjusted, especially given domestic investors' lack of interest in running banks. "Where the long-term capital will come from will have to be thought through," the source said. (Reporting by Ira Dugal and Swati Bhat; Editing by Edmund Klamann)
Yahoo
03-06-2025
- Business
- Yahoo
Analysis-India considers easing bank ownership rules as foreign interest grows
By Ira Dugal and Swati Bhat MUMBAI (Reuters) -The Indian banking regulator is signalling possible rule changes ahead that would let foreigners own more of India's banks, spurred by overseas institutions' eagerness for acquisitions and the fast-growing economy's need for more long-term capital. The Reserve Bank of India last month bent its rules to let Japan's Sumitomo Mitsui Banking Corp buy a 20% stake in Yes Bank, and two foreign institutions are vying for a stake in IDBI Bank, highlighting the pressure to ease foreign ownership rules that are among the strictest of any major economy. RBI Governor Sanjay Malhotra told the Times of India last week that the central bank was examining shareholding and licensing rules for banks as part of a broader review. A source familiar with the central bank's thinking said it would be more open to letting regulated financial institutions own bigger stakes, with approvals on a case-by-case basis, and to certain rule changes that could address disincentives for foreign acquisitions. Analysts say foreign banks are keen for deals in India, the world's fastest-growing major economy, especially as it angles for regional trade agreements. Such pacts could open up new opportunities in India for global lenders elsewhere in Asia and the Middle East. "The interest is driven by India's strong economic growth and large under-penetrated market," said Madhav Nair, deputy chairman of the Indian Banks Association. Indian regulators, for their part, worry that India lags other large economies in mobilising banking capital, which will be vital to sustaining rapid economic growth. Alka Anbarasu, associate managing director at Moody's Investors Service, said India will need much more capital for its banking system over the medium term. "Whether this has prompted the regulator to consider bringing in strong international players into the banking system, it would be a good rationale for doing so," she said. While most large global banks from Citibank to HSBC to Standard Chartered have operations in India, they are focused on the more profitable corporate and transaction banking segments, along with trading, rather than bread-and-butter lending. The share of foreign banks in outstanding bank credit in India is less than 4%, central bank data shows. Banking remains one of the most guarded sectors of the Indian economy. While foreigners including portfolio investors can own up to 74%, regulations limit a strategic foreign investor's stake to 15%. Foreign banks are also deterred by a maze of other regulations, including a 26% cap on voting rights and a requirement that any large shareholding by a so-called promoter - a strategic investor with direct influence over management decisions - be sold down to 26% within 15 years. The RBI is open to giving foreign buyers more time to sell down their stake, the source familiar with the bank's thinking said. The source declined to be identified as the deliberations are confidential. The RBI did not respond to an email seeking comment. The source also highlighted the banking regulator's increased openness to case-by-case exemptions from the 15% ownership limit, as offered for the Yes Bank purchase. The $1.58 billion deal was the largest cross-border acquisition ever in India's financial sector. Two foreign investors - Canada's Fairfax Holdings and Emirates NBD - are also contending for a 60% stake in government-owned IDBI Bank. Emirates recently received regulatory approval to set up an Indian subsidiary, making it only the third major foreign bank to do so after Singapore's DBS and State Bank of Mauritius. The decision was prompted by an interest to acquire a majority stake in IDBI Bank, a source familiar with the buyers' thinking said. Emirates NBD declined to comment. Fairfax did not respond to a request for comment. An increase in the 26% cap on voting rights, or in the 15% investment limit, could encourage foreign bank investors, ratings agency Fitch said in a note last week. It believes the RBI's preference is for foreign banks with a strong performance and solid governance to acquire stakes larger than 26% through wholly owned subsidiaries regulated in India. The source familiar with RBI thinking said the limit on voting rights was hard-coded in law and would need to be reviewed by the finance ministry. On regulatory issues under the central bank's purview, the source added, the stance on foreign strategic investors may need to be adjusted, especially given domestic investors' lack of interest in running banks. "Where the long-term capital will come from will have to be thought through," the source said. Sign in to access your portfolio
Yahoo
23-05-2025
- Business
- Yahoo
India cenbank to transfer record surplus of 2.69 trln rupees to government for FY25
By Swati Bhat and Ira Dugal MUMBAI (Reuters) -The Reserve Bank of India's board approved the transfer of 2.69 trillion rupees ($31.53 billion) as surplus to the federal government for the fiscal year ended March as it opted to raise its contingency risk buffer under a revised economic capital framework, it said on Friday. The government had budgeted a dividend of 2.56 trillion rupees from the Reserve Bank of India, state-run banks and other financial institutions, according to budget estimates for the fiscal year 2025/26 in February. Analysts' estimates however, had ranged between 2.7 trillion rupees and 4 trillion rupees. In fiscal year 2024, the RBI had transferred a surplus of 2.11 trillion rupees. The lower-than-expected transfer follows a change in the range of contingency risk buffer that the central bank can maintain to 6% +/-1.5%. The buffer was to be maintained between 5.5% to 6.5% previously. "We believe that the revision in ECF with hike in buffers to 6% +/-1.5% is very prudent during times of global and domestic economic uncertainty," said Kanika Pasricha, chief economic adviser, Union Bank of India. "With the number higher versus budgeted ... the RBI has managed to provide fiscal leeway to the central government." For fiscal 2025, the RBI's board has decided to raise the contingency risk buffer to 7.5% from 6.5% in the preceding year, it said. The range of risk buffers was widened with the objective of providing adequate flexibility to the central bank, keeping in mind the prevailing macroeconomic and other factors, while also smoothening the transfer of surplus to the government, the RBI said in a release post an internal review of the framework. "The review highlighted that the transfer of surplus to the government has not been as stable as was desirable," it said. "Besides, certain risk sources that were not included in the current framework as they were not significant, have now gained in importance and merit inclusion," it added. ($1 = 85.3130 Indian rupees) Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Exclusive-India offers to slash tariff gap by two-thirds in dash to seal trade pact with Trump
By Shubham Batra, Shivangi Acharya and Ira Dugal NEW DELHI (Reuters) -India has offered to slash its tariff gap with the U.S. to less than 4% from nearly 13% now, in exchange for an exemption from President Donald Trump's "current and potential" tariff hikes, two sources said, as both nations move fast to clinch a deal. This would mean that the average tariff differential between India and the U.S., calculated across all products without weighting for trade volume, would be reduced by 9 percentage points, in one of the most sweeping changes to bring down trade barriers in the world's fifth largest economy. The United States is India's largest trading partner, with bilateral trade totalling some $129 billion in 2024. The trade balance is currently in favour of India, which runs a $45.7 billion surplus with the U.S. Trump announced on Thursday his administration's first "breakthrough deal" with Britain. It lowers average British tariffs on U.S. goods but keeps in place the 10% base tariff imposed by Washington on British goods, likely setting a template for Washington's approach with other trading partners. Last month, Trump announced a 90-day pause on his long-planned reciprocal tariffs on global trading partners, including a 26% tariff on India, while his administration negotiates trade deals. A 10% base tariff continues to apply to India and many other nations during the pause. After the UK, India and Japan are the next two nations in line to finalise a deal, a third Indian government official said. "We will see which one crosses the line first." To achieve this, New Delhi has offered to reduce duties to zero on 60% of the tariff lines in the first phase of the deal which is under negotiation, said the first two sources, both Indian government officials familiar with the matter. India has offered preferential access to nearly 90% of goods imported from the United States, including the reduced tariffs, one of the two officials said. Details of India's offer to slash the tariff gap and what it has asked the U.S. in return have not been previously reported. A delegation of Indian officials is likely to visit the U.S. later this month to take the negotiations forward, a fourth official said, adding that India's trade minister, Piyush Goyal, might visit too but his plans were not finalised. All four government officials did not wish to be identified as details of the negotiations are private and sensitive. India's trade ministry, which is leading talks, did not respond to a request for comment. PREFERENTIAL ACCESS Alongside tariff exemptions, India has also asked for preferential market access for key export sectors including gems and jewellery, leather, apparel, textiles, plastics, chemicals, oilseeds, shrimp, and horticultural produce such as bananas and grapes. "Preferential market access for India would mean better terms of trade for these goods compared to America's other trading partners," the first official said. India is also looking for concessions that would give it an edge over competitors in supplying "products of interest", the official added. However, India's expectation of being exempted completely from tariffs on its exports is at odds with the deal struck between the U.S. and Britain. To make the deal more attractive for Washington, India has offered to ease export regulations on several high-value U.S. exports, the first official said. These include aircraft and parts, luxury cars and electric vehicles, telecom equipment, medical devices, hydrocarbons, wines and whiskey, berries, prunes, certain chemicals, and animal feed. Beyond tariffs, India has also asked the U.S. to treat it at par with other top U.S. allies such as Britain, Australia and Japan in critical technology sectors such as AI, telecoms, biotech, pharmaceuticals, and semiconductors. Washington's desire to share critical technologies with allies like India has often faced hurdles due to the U.S. government's own restrictive rules. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Zawya
07-05-2025
- Business
- Zawya
Indian exchanges BSE, NSE curb overseas access to their websites, sources say
MUMBAI: India's top two exchanges, the National Stock Exchange (NSE) and BSE Ltd, have temporarily restricted access to their websites for overseas users, three sources familiar with the matter said. This does not impact the ability of overseas investors to trade on the Indian markets, the sources said. The decision was taken after a joint meeting of exchanges on Tuesday in which cyber threats were discussed, one of the sources said, declining to be identified as the matter is confidential. A BSE spokesperson, when contacted by Reuters, also referred to cyber threats, but did not specify if the exchange had faced one recently. It comes against the backdrop of an escalating conflict between nuclear armed neighbours India and Pakistan, but sources did not say if the cyber threat was directly linked to recent developments. Given the sensitivity of the overall environment, some entirely "precautionary" steps have been taken by exchanges, said another of the sources. Indian markets are functioning completely normally, the person said. "BSE, being a critical market infrastructure institution (MII), proactively and continuously monitors risks at domestic and international levels for potential cyber threats," the BSE spokesperson said in response to an email from Reuters. "Based on such monitoring of cyber traffic, as a precautionary and protective measure, websites/locations are blocked to protect users and systems," the spokesperson said, adding that access is being permitted on a case-by-case basis. A spokesperson for NSE did not immediately respond to Reuters' queries. (Reporting by Ira Dugal and Jayshre P. Upadhyay; Editing by Himani Sarkar and Muralikumar Anantharaman)
