No expansion happening for Foreign Banks in India - Rajan

In addressing mostly student and academic audience at Cambridge University on Tuesday, Dr. Raghuram Rajan shared an observation that Foreign banks are not expanding in India by opening new branches, the reason for this decision being India's 'higher risk' credit rating. Rajan also emphasised that Foreign banks do not feel it is worth to open up new branches in India. 

Dr. Rajan explained that post the financial crisis, the banking system has gone through a transition and are now required to be well capitalised. India has a BAA rating , which is suggestive of higher risk. Thus it is not worth it for foreign banks to open up branches in India, because they have to park aside a lot more capital. 

India has not enjoyed higher credit ratings for quite some time now, even as China enjoys a far superior credit rating which affects the risk perception of the nation.

Dr. Raghuram Rajan is currently serving as 23rd Governor of Reserve Bank of India , was a chief economist at IMF from 2003 to 2007 , also being the youngest to occupy the position. Dr. Rajan was heavily criticised by former U.S. Treasury Secretary Lawrence Summers, famously known as Larry Summers, for warning about the growing risks in the global financial system due to policies adopted such as reducing interest rates to propel economic growth.