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So, the new mantra for Indian banks is to go global in search of new markets, customers and profits. Let us not forget that the competition is not only on foreign turf but also in the domestic field as well from foreign banks operating in India.

Now against these lofty objectives of Indian banks going global, let us see where we stand. Although, Indian banks have also made their presence overseas, yet it is limited. Only twenty Indian banks including private sector banks appear in the list of "Top 1000 World Banks" as listed by the London based magazine "The Banker". What is even more revealing is that State Bank of India, India's largest bank, ranks 82nd amongst the top global banks. Size is increasingly becoming important for the global banks, as it is crucial to improved efficiency. However, India's largest bank, SBI is not even a 10th in size of the 9th largest bank, Sumitomo Mitsui, which has assets of $950 billion as against SBI's assets of $91 billion. Therefore, the notion that SBI or ICICI Bank can compete in the international arena seems far-fetched at the moment.

Is size the only constraint for Indian banks?

The problem is not just one of lacking the necessary size; few Indian banks have the necessary products or human resource capabilities. If anything, the implementation of Basel II norms has raised the bar for Indian banks seeking an international presence. The top international banks can lower their capital requirements through the use of sophisticated risk management techniques and thus compete more aggressively than before.

What is being done to prepare Indian banks to meet global challenge?

Indian banking sector has already implemented internationally followed prudential accounting norms for classification of assets, income recognition and loan loss provisioning.

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* Speech delivered by V. Leeladhar, Deputy Governor, Reserve Bank of India to Kanara Chamber of Commerce and Industry, Mangalore on March 11, 2005.