From Nationalisation to Foreignisation: The Silent Takeover of India’s Banking Sovereignty

X: @vivekbhavsar

In a move that could reshape India’s financial sovereignty, the All India Bank Officers’ Association (AIBOA) has sounded a warning against what it calls the “foreignisation” of the Indian banking system. The trade union, representing officers from public, private, regional rural and co-operative banks, has condemned the growing trend of allowing foreign capital—and in some cases, foreign governments themselves—to gain control over India’s domestic banks.

The Pattern That Cannot Be Ignored

This is not a stray instance. In November 2020, the old-generation Lakshmi Vilas Bank (LVB), headquartered in Karur, Tamil Nadu, was taken over by Development Bank of Singapore (DBS) after a regulatory-led merger. Before that, Fairfax India Holdings—a subsidiary of a Canadian firm—acquired a controlling 51% stake in Catholic Syrian Bank, now rechristened CSB Bank.

Then came the crisis of YES Bank in 2020. What began as a domestic bailout by the State Bank of India and other Indian institutions soon resulted in Japan’s Sumitomo Mitsui Banking Corporation (SMBC) acquiring a 24.2% strategic stake. A bank once saved by Indian taxpayers was quietly opened to foreign control.

Each of these episodes marks a deliberate shift — a slow but unmistakable transfer of control from Indian hands to foreign institutions.

The RBL–Emirates NBD Deal: A Dangerous Precedent

The latest and most alarming case is that of RBL Bank Ltd., an 82-year-old institution with over ₹2.07 lakh crore in total business, 570+ branches, and another 1,100 business correspondent outlets. RBL is a well-managed, deposit-rich, and largely retail-owned bank with no promoter, no bad loans, and no negative net worth.

Yet, RBL has reportedly entered into an understanding with Emirates NBD Bank PJSC—a Dubai government-owned entity—to acquire a 51% controlling stake.

If this deal is approved, a foreign sovereign bank will effectively control an Indian financial institution — something unprecedented in our banking history. Though voting rights for foreign investors are capped at 26%, policy discretion and regulatory flexibility could easily open the backdoor for full operational control, as history has often shown.

This is not foreign investment—it is foreign control. It risks turning India’s hard-earned financial independence into a playground for geopolitical influence. As AIBOA warns, this must not be dismissed as a routine FDI transaction, but treated as a matter of national security and economic sovereignty.

From Indira Gandhi’s Nationalisation to Modi’s Liberalisation: A Shift in Vision

When late Prime Minister Indira Gandhi nationalised 14 private banks in 1969–70, she did so with a clear objective: to democratise credit and place banking at the service of the nation. That bold decision gave millions of Indians their first savings account, their first home loan, their first chance to grow.

Today, under Prime Minister Narendra Modi, we are witnessing the opposite trend — the foreignisation of Indian banks through stealth mergers, “strategic” stake sales, and regulatory nods that lack parliamentary oversight.

Will Dubai-based or Japan-backed institutions ever extend small loans to farmers, artisans, or hawkers? Or will they prioritise corporate clients, data control, and cross-border interests?

Why should a stable, investor-owned bank like RBL, with a clean record and strong deposits, be sold to a foreign government-owned entity?

Who benefits from this?

And most importantly — why should the Reserve Bank of India be allowed to approve such transactions without the knowledge or consent of Parliament?

Also Read: Tendering Shadows – Part III: The Missing Answers

The Warning We Ignore at Our Peril

History offers a sobering lesson. The East India Company too arrived as a trader with “investment intentions”. Within decades, it ruled India.

If foreign-owned banks are permitted to gain controlling stakes in Indian financial institutions, the same slow erosion of sovereignty will follow — not through armies, but through algorithms, boardrooms, and cross-border money flows.

As the AIBOA General Secretary S. Nagarajan rightly warned: “The foreign capital acquiring stake in Indian banking is not only high risk but also against the sovereignty of our Nation.”

This is not about isolationism. It is about control — about who decides where India’s money goes, who shapes its credit priorities, and who ultimately dictates its economic future.

A Call for Accountability

Before any such deal is approved, there must be parliamentary debate, public disclosure, and regulatory transparency. The RBI cannot act as an independent island insulated from democratic accountability.

If we remain silent today, the same banking system that once empowered the poorest will tomorrow serve only those sitting in foreign capitals. What Indira Gandhi nationalised for the people, the present regime seems willing to foreignise for investors.

The question before the nation is simple yet profound:

Will India remain the master of its financial destiny — or become a client of foreign interests in the name of modernisation?