Congress Warns Against Foreign Takeovers in Indian Banking Sector

Congress party has raised alarms over the growing trend of foreign firms acquiring stakes in Indian banks, labeling it “imprudent” and warning of substantial risks to the nation’s financial sovereignty. The controversy erupted following reports that Emirates NBD Bank, the second-largest bank in the UAE, is set to acquire a controlling 60% stake in RBL Bank for a staggering Rs 26,853 crore—marking the largest foreign direct investment in India’s financial sector to date.

Congress general secretary Jairam Ramesh, in a post on X, highlighted a series of foreign acquisitions that have raised eyebrows. He pointed to the 2020 acquisition of Laxmi Vilas Bank by Singapore’s DBS Group, the takeover of Catholic Syrian Bank by Canada’s Fairfax, and the recent purchase of a 24.9% stake in Yes Bank by Japan’s Sumitomo Mitsui Banking Corporation (SMBC) for Rs 16,333 crore. “Foreign firms are gradually being allowed to acquire Indian banks. These imprudent moves pose substantial risks,” Ramesh warned, underscoring the potential threat to India’s economic independence.

The Emirates NBD deal, which involves an infusion of approximately USD 3 billion, has been hailed by RBL Bank as a “landmark transaction” and a vote of confidence in its business model, governance, and growth potential. The bank’s board recently approved the proposal, pending regulatory approvals, as part of its strategy to bolster capital and fuel expansion. However, critics argue that such deals could erode domestic control over India’s financial institutions, exposing them to external influence and volatility.

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Ramesh also drew attention to the impending privatization of IDBI Bank, which is expected to be the first full privatization of a public sector bank in India, slated for completion within this financial year. This move has further fueled concerns about the dilution of India’s banking sector, a cornerstone of its economy.

In a historical parallel, Ramesh referenced the Jan Sangh’s criticism of former Prime Minister Indira Gandhi in 1969 for not nationalizing foreign banks during her sweeping bank nationalization drive. Citing a news report from December 28, 1969, following a Jan Sangh meeting in Patna, he noted that the party had called for the takeover of all major foreign firms, reflecting long-standing concerns about foreign dominance in critical sectors.

The Congress party’s stance has sparked a broader debate about the balance between attracting foreign investment and safeguarding national interests. Proponents of the acquisitions argue that foreign capital can strengthen Indian banks, improve efficiency, and drive innovation. However, detractors warn that ceding control to foreign entities could compromise financial stability, especially in times of global economic uncertainty.

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