The changing turf for foreign banks

The move is towards opening up the sector, but selectively, with regulatory scrutiny and special approval

- TAMAL BANDYOPADHYAY

In September 2006, the Union government had put the Satara (Maharashtra)-based United Western Bank under a moratorium on the Reserve Bank of India’s (RBI's) advice.

There were many suitors for the old private bank, including two large foreign banks operating in India, but it was IDBI Bank Ltd that came out a winner.

‘The scene is very different now. The turf on which foreign banks play in India is changing fast, as is the approach of foreign investors towards Indian banks. And, of course, the lens through which the banking regulator looks at them, too, is changing.

Before we delve deeper into the new phenomenon, here’s a snapshot of the foreign banking industry in India.

In March 2025, there were 44 foreign banks and 34 representative (rep) offices. Branches of foreign banks have been on a decline. For instance, in March 2021, there were 874 branches and 36 rep offices; by the next year, the branches had slipped to 861 and rep offices to 34. The trend continued. In March 23, there were 782 branches and 33 rep offices, and by March 2024, the branch network further dropped to 780 and rep offices to 31.

In March 2025, foreign banks had 993 ATMs across India. How does this compare with the ATM network of public sector and private banks? Well, public sector banks had 133,000 ATMs and private banks 77,117.

Foreign banks’ share in deposits is around 4.92 per cent and advances about 3.85 per cent.

Let’s return to what is happening now. Last Friday, Federal Bank Ltd announced that Blackstone, the world’s largest alternative asset manager, would invest ₹6,197 crore in the Kochi-headquartered bank through its affiliate Asia II Topco XIII Pte Ltd. Once the deal is sealed, Blackstone will hold a 9.99 percent stake in Federal Bank and have the right to nominate one director on its board.