No plans to raise foreign ownership cap in banks beyond 15%: RBI Governor

RBI Governor Sanjay Malhotra has said there are no plans to raise foreign ownership in banks beyond 15% for now. A review of ownership norms is underway as India needs more banks with credible owners

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday clarified that there are no current plans to raise the foreign ownership limit in Indian banks beyond 15 per cent.

 

“We allow 15 per cent for non-residents, and it can go up above 15 per cent on a case-to-case basis. There is no change in this anytime soon or immediately,” Malhotra told reporters at the RBI headquarters in Mumbai.

 

Malhotra said that the central bank will soon begin a detailed review of bank ownership structures and eligibility norms. While he did not rule out changes in the future, he said such decisions would take time.

 

“We have also said that we want to re-look at the ownership structure and eligibility conditions under which non-residents, who are at 15 per cent, we are examining at present. It will not happen immediately, it will take time,” he said. “Whatever is best for the economy will be taken on board.”

'India needs more banks and credible owners'

Highlighting the need for a robust financial sector to support economic growth, Malhotra said that India needs more banks. But he stressed the importance of having reliable people in charge.

 

“Certainly, our economy is growing, we require more banks. Keeping that in mind, if there is a need for change in the ownership criteria, we will do it,” he added. “We need owners and managers, who are trustworthy.”

 

Though the general cap is 15 per cent for a single foreign investor, there have been exceptions. For instance, Fairfax from Canada holds a 51 per cent stake in CSB Bank, and Japan’s SMBC was recently permitted to acquire 20 per cent in Yes Bank.

 

Responding to a question on whether the RBI might reconsider its November 2023 directive to raise risk weights for unsecured loans — given the relatively stable asset quality in credit cards and personal loan portfolios — Malhotra was firm.

 

He said there were “no such plans” to roll back the regulation.

Higher repatriation behind dip in FDI: RBI chief

Meanwhile, the RBI Governor also pointed out that the decline in net foreign direct investment (FDI) in 2024-25 was mainly due to higher repatriation, which reflects a healthy and mature market.

 

Speaking during the monetary policy announcement on Friday, Malhotra noted that although net FDI dropped to $0.4 billion in FY25 from $10.1 billion the previous year, gross inflows rose by nearly 14 per cent — from $71.3 billion to $81.0 billion.

 

“It is germane to point out that this moderation [of net FDI] is on account of a rise in repatriation and net outward FDI while gross FDI actually increased by 14 per cent,” Malhotra explained. “Rise in repatriation is a sign of a mature market where foreign investors can enter and exit smoothly, while high gross FDI indicates that India continues to remain an attractive investment destination.”

 

Significantly, net inflows through non-resident deposits increased to $16.2 billion in 2024–25, compared to $14.7 billion in the previous year.