Indian banks can go global in three ways. They can set shops in most of the important financial centres like New York, Tokyo, London, Hong Kong among others.

Alternately, they can pick up troubled banks in other countries. And the third say could be to follow the ethnic business in other countries.

However, before venturing abroad, banks will need to build a strong position in the home market as they need the resilience not only to withstand global challenges, but also to invest overseas, said Leo Puri, principal at McKinsey & Company.

Banks will have to strategise as to how they will move towards globalisation following the opening up of the market as India conforms to the World Trade Organisation.

State Bank of India today is the only Indian bank with footprint across 28 countries and even with this spread, the bank's chairman and managing director A K Purwar said: "It's not sufficient to cater to the Indian market. We need to have at least six to seven more banks looking at establishing their presence outside."

While Puri advocated the need for globalisation, he cautioned bankers that it was a long and risky process.

"It has taken the best of institutions one decade to succeed and more than 80 per cent of organisations have failed. At the same time, it is a necessary risk Indian banks need to take," he added.

Speaking on the role of financial sector in globalisation, Abhijit Banerjee, professor of economics at MIT Boston, US, questioned the effectiveness of the Indian banking industry in channelling resources towards those who are best placed to use them.

He cited that one per cent increase in credit generates about one per cent increase in sales and a three per cent growth in profits.

However, when credit is withdrawn, non-performing assets increase. "This indicates that the marginal return on capital is 100 per cent," said Banerjee.

Further, banks will have to spend more on brand building, said Puri. "Overseas, Citibank is the second most recognised brand after Coke in the US," he cited.

Puri expressed concern over the existing "benign regulatory environment" and the weakly capitalised institutions which are among the leaders in the industry.

"The benign regulatory environment has not adequately pushed forward consolidation," he said, adding that it would cost just $ 1.5 billion to buy over State Bank of India at current market prices, whereas it would cost at least $ 12-15 billion to buy out a similar institute in Korea or Australia.

"The banking industry in the overseas market have far well stated reforms and have identified key institutions. India has yet to define these aspects as it moves towards globalisation," said Puri.

Speaking on what would be the deciding factors for globalisation, Purwar pointed out that it was not only the size of the balance sheet that mattered, but also the quality.

Geographical coverage proved essential as corporates moved overseas to set up their presence and required support of their banking partners.

Moreover, while banks are increasing their IT spend in terms of core banking solutions, Purwar said that banks must pare transaction costs so that they are comparable to the rest of the world.

He further pointed to the need to fine-tune human resources in terms of re-skilling and re-training.