Why foreign banks in India need not worry despite RBI norms

Foreign banks, which have been unhappy with the RBI's rules increasing their exposure to the priority sector may not really have much to be sorry for. CNBC-TV18's Gopika Gopakumar finds out that despite this hike in exposure, foreign banks in India are in a much better operational environment that Indian banks abroad.

Larger foreign banks operating in India have their work cut out for them. RBI's new rules, applicable to foreign banks with over 20 branches in India calls for 40% of total loans to be to the priority sector, sets specific targets for agricultural loans, and weaker sections of society and disqualifies loans to exporters as priority sector lending.
However, while these banks worry about these stricter norms, data points out that their situation is much better than the one Indian banks abroad have to deal with. For one, the return of assets (ROA) for a foreign bank in India are much higher than that from their global operations.
ROA from HSBC's Indian operations, for instance, are three times the ROA from its global buisiness while Stanchart and Citibank make double in India, what they make globally.
Even compared to returns on assets enjoyed by an Indian bank, foreign banks fare better. In terms of branches, foreign banks have it easier in India.
Banks like Citi, HSBC and StanChart have more branches in India those Indian banks abroad. With RBI doing more than the WTO-mandated 12-branch-per-year minimum, India has also let all foreign banks log on to the ATMs of Indian banks. This is a luxury Indian banks do not always enjoy abroad without a reciprocal ATM presence. These factors mitigate the argument that India is the only country to impose a 40% priroity sector lending obligation.