banks and indeed foreign capital in banks, which leads them to impose a variety of forms of restrictions depending on the circumstances of each country. there are several ways in which restrictions are imposed on foreign ownership in the banking sector, whether through limiting the foreign investment in the domestic banks or the presence of foreign banks. presence of a foreign bank is usually in one of the three recognized forms ( viz., a branch, subsidiary or a wholly owned subsidiary ) and only a particular form of organisation may be permitted usually with no choice to the foreign bank. there are some restraints on the type of business permitted to a foreign bank ( such as being restricted to foreign currency operations or non - acceptance of retail deposits or other specified operations ) as also stipulations in regard to the minimum capital requirement for a branch or a subsidiary of a foreign bank. there can also be practices amongst countries in regard to the aggregate foreign investment permitted in a local bank as also on the maximum holdings by an individual or a corporate entity or an entity controlled by foreign financial institutions in a local bank. similarly, the regulations in some countries, consistent with the overall plan of financial integration, place an absolute limitation on the size of the total assets or capital of a foreign bank ( which would indirectly restrict its total assets ). it needs being borne in mind that certain policies in regard to the entry of foreign investors or a foreign bank in a country may be triggered due to extraordinary circumstances such as a financial crisis or as a part of a structured crisis management package. there are instances where as a part of response to banking crises, a higher level of initial foreign ownership have been permitted but with stipulations for dilution subsequently. furthermore, certain countries which, ab initio, did not have any private sector banking might welcome the presence of foreign banks. similarly, expectations of joining a regional bloc, say european union, might result in welcoming of a larger presence of foreign banks. hirano eiji, 2004,'policy issues concerning financial sector fdi in asia : a global financial system perspective ', cgfs workshop, ( mimeo ), seoul. the extent of foreign investment, the nature of such investment, the appropriate form of presence and the profile of actual players in the banking sector are usually prescribed by the supervisors taking into account the multiple challenges faced in a given country context including the extent of financial integration sought to be achieved. in brief, each country picks up an appropriate package that is necessitated by the circumstances, which ensures

sector, in general, and the banking sector, in particular, concurrent with the well - calibrated de - regulation process already set in motion. the liberalisation measures would need to take into account several imperatives, such as, consolidation of domestic banking sector ; restructuring of development finance institutions ; and appropriate timing for the significant entry of foreign banks so as to be co - terminus with the transition to greater capital account convertibility while being consistent with our continuing obligation under the wto commitments. it is also necessary to examine several issues relating to implementation of the press note no. 2 not in isolation but as part of overall reform paradigm of the banking sector. in respect of foreign banks, issues include : choice of the mode of presence, acceptable transition path, according national treatment, addressing supervisory concerns, linkages between foreign banks and their presence in other ( non - banking ) financial services and the timing of various measures as per a road map to be drawn up. reserve bank intends to formulate the guidelines, through an ongoing process of consultation, as in the past. the proposed guidelines in this regard are expected to carry forward the process of financial integration of india in a carefully calibrated and transparent manner. thank you, ladies and gentlemen. let me wish you all the best in your careers ; and, that would ensure that my grand children will also be the beneficiaries of a happier india.