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‘Foreign banks not expanding because of India's riskier rating’

It made sense post financial crisis to ask banks to hold more capital, says Rajan

Policy Pulse
Publish Date: May 11 2016 12:30PM | Updated Date: May 11 2016 12:30PM

‘Foreign banks not expanding because of India's riskier rating’

Foreign banks have not opened new branches in India as they need to set aside a lot more capital because of the country's "higher risk" credit rating and they feel it is "not worth" doing so, said central bank Governor Raghuram Rajan. 

 
In a lecture titled 'Why Banks?' as part of the Marshall Lecture 2015-16 series at Cambridge University, Rajan said more demand on banks to hold capital in post financial crisis scenario has come at a cost. 
 
He added: "It made sense post financial crisis to ask banks to hold more capital. But one of the concerns bankers have been expressing, even if bankers may have low credibility since they have cried wolf too often, that eventually it will... create more aversion to taking on risky lending”.