YV Reddy red flags the strong presence of foreign investors in Indian banks

Former RBI Governor YV Reddy has sounded caution on the ‘strong presence’ of foreign investors in both public sector and private banks in the country.

Referring to banks such as ICICI Bank and HDFC Bank among others, in his KLN Prasad Memorial Lecture on the state of Indian banking at the Administrative Staff College of India (ASCI) here, Reddy said after the government’s share, the largest stakeholders in Indian banks are foreign investors.

On the extent of foreign shareholding in Indian banks, he said it was well over 70 per cent. In public sector banks, the government and LIC account for bulk of the shareholding and a major part of the rest lies with foreigners.

This was not the case in many other countries similar to India, he said, adding that though banks were incorporated in India, “all of them go for proxy advisors”. “Before it is too late, we have to save the Indian banking system for Indians,” Reddy said.

Government shareholding in public sector banks will come down, and under the current policy that space will get occupied irrevocably by foreigners-owned banks. Thus, there is a need for ‘fit and proper guidance’ and the current system of ownership needs to be relooked at, Reddy said.