Reserve Bank of India will soon be inviting comments on the discussion paper for increasing the share of foreign banks in Indian banking industry to almost 15%. The apex bank has been mulling over the issue since five years and has now come to the conclusion of allowing them a bigger slice of the cake.

The new foreign entrants will be asked to locally incorporate themselves while the existing players will also be directed to incorporate themselves locally and become subsidiaries of their foreign parents. The basic idea is to stop the Indian operations of these banks to act as branches of the parent bank.

Once this is done, these banks will also be treated equally with domestic banks and rules applicable to them will be the same as that to the domestic players.

India currently houses 32 foreign banks with 310 branches, the leader being Standard Chartered Bank with a branch count of 95, followed by HSBC (50) and Citibank NA (43).

As per the 1997 commitment to World Trade Organisation, RBI has to allow opening of 12 new branches of foreign banks in the country every year which includes both existing players and new entrants. With the implementation of the new policy, RBI will become more liberal in this regard.

"The challenge will be maintaining the 15% cap in assets. What do we do when their market share in assets come close to 15%? We won't be able to give them a free hand (for branch licences). This is the challenge. We are looking into all these," said an RBI official.