On 21 January, the Reserve Bank of India (RBI) released a discussion paper on the presence of foreign banks in India.
Currently a foreign bank can operate either by setting up a branch office or by incorporating a wholly owned subsidiary after receiving RBI approval and fulfilling the minimum capital requirement criteria: ₹3 billion (US$70 million) for wholly owned subsidiaries and ₹25 million for branch offices.
The discussion paper proposes that foreign banks should operate as wholly owned subsidiaries rather than as branches, arguing that wholly owned subsidiaries can be controlled more effectively in a crisis.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
