Foreign banks may pose threat to Indian banks margins: SBI

Mumbai, July 1 (UNI) State Bank of India (SBI)'s acting Chairman T S Bhattacharya today expressed concern that allowing foreign banks to acquire majority stakes in country's private sector banks from April 2009 could squeeze margins for Indian banks.

Addressing shareholders at the bank's 51st Annual General Meeting, Mr Bhattacharya said the proposed RBI move to allow foreign banks to acquire any private sector bank up to 74 per cent would lead to ''greater competition as foreign banks progressively increase their activities in India''.

Foreign banks will be allowed to acquire stake in private sector banks as a measure towards increasing international integration of the economy.

Moving towards fuller capital account convertibility would also lead to fierce competition not only from banks operating from India but also from banks and other institutions abroad, he added.

''And importantly, increased financial integration will also bring with it greater risks -- foreign exchange risks, market risk and operational risk,'' Mr Bhattacharya said. He also referred to the high-powered expert committee which was deliberating on making Mumbai an international financial centre.

''All these important changes imply that the Indian banks will face greater competition and a squeeze on margins,'' he said.

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