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Foreign banks see M&As after amendment in Act

August 20, 2003 17:22 IST

Foreign players like Citibank, Standard Chartered Bank, HSBC and ABN Amro Bank see opportunities to spread their wings in India after the ceiling on voting rights is lifted by the government.

With the standing committee on finance approving amendments in the Banking Regulations Act, it is now a matter of time before the new legislation allowing foreign banks to set up subsidiaries in India is enacted.

"It's a step in the right direction," ABN Amro Bank's head of consumer banking Nitin Chopra said.

He did not rule out the possibilities of ABN Amro acquiring a bank in India but said a subsidiary would have greater flexibility in terms of expansion.

ABN Amro Bank, along with other major foreign banks, is waiting for the norms to be relaxed so that they can carry out their expansion.

The ceiling of 10 per cent on voting rights irrespective of the shareholding in a bank was keeping away foreign banks from acquiring Indian banks even after the government raised the sectoral cap to 74 per cent in private banks.

The Parliamentary committee, in its report tabled on Tuesday, suggested lifting the ceiling on voting rights in banks, smoothen mergers and acquisitions of private banks and permit foreign banks to set up subsidiaries in India.

The major changes would be through removal of Section 12(2) of Banking Regulation Act, allowing voting rights in proportion to the shareholding.

After the amendments, it is expected that many of the foreign banks would bring in a minimum $60 million in their Indian arm as against $10 million required for a branch.

The bill to amend the Banking Regulation Act was introduced in April this year in Lok Sabha and referred to the standing committee headed by N Janardhana Reddy in May.

The move to amend the Banking Regulation Act is intended to attract more FDI in the banking sector and aligning the rules to international standards.

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