The Reserve Bank of India’s stance on foreign investment in Indian banks is refreshing. The recent flurry of deals transacted by Yes Bank, RBL Bank, and Federal Bank suggest the regulator is more than willing to enable foreign entities to drive the operations at some of the country’s smaller lenders.

That’s a practical approach as India’s banking system needs more long-term capital, better governance discipline, and faster diffusion of global best practices. Allowing higher foreign ownership—under a clear, rule-bound framework—delivers all three.

The RBI is therefore right to relax its stance on foreign investment in banks, and the government should back this direction. For example, Blackstone’s proposed capital infusion of Rs 6,200 crore into Federal Bank will ultimately increase the le

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