While the new framework would, in our view, provide useful incentives for institutions to accelerate the improvement of risk management, we believe that in most areas of risk management institutions would retain their ability to choose among which specific methods they employ. In other words, we expect the standards in Basel II to be met in a number of ways, not just one.
The draft paper put out in this regard has suggested making the subsidiary route more attractive by providing near national treatment to the wholly owned subsidiaries of foreign banks. Presence of foreign banks in subsidiary form will generate greater competition for the Indian banks as this route will open up nearly equal opportunity to foreign banks in business expansion within India.