Foreign banks that were making a beeline to acquire controlling stakes in private banks in India post-April 2009 now have to wait indefinitely to bolster/initiate their operations in the country. The current global financial mess and uncertainty pertaining to the financial strength of banks around the world have prompted the central bank of India to put on hold its policy on the presence of foreign banks in the country. Thus, the second phase of the "Roadmap for Presence of Foreign Banks in India" has been put on the back burner. It was presumed that the second phase would deal with issues such as the extension of national treatment to wholly-owned subsidiaries, dilution of stake and permitting mergers and acquisitions of any private sector bank in India with foreign banks.

But the collapse of some big banks and recapitalization of others in the US and Europe and the fear that the failure of foreign banks can pose a threat to the Indian banking sector have induced the RBI to take the decision that it would continue with the status quo regarding the presence of foreign banks in the country. In the past, many banks from China, Japan and the Middle East have shown their eagerness in buying controlling stakes in Indian banks—but now these banks have to wait for some time as the RBI plans to defer the proposal. A review will be done once there is more transparency regarding stability, recovery of the global financial system, and a shared understanding of the regulatory and supervisory architecture around the world. Economists hail this decision of RBI as welcome pragmatism, derived from the lessons learnt from the banking crises across the globe.

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