India has become an attractive banking destination for several foreign banks and this indicates growing global confidence in the country’s prospects as a business destination. The Government has been taking several initiatives to make it easier to do business in the country and lift investor confidence. Global biggies are now attracted by India’s growing reputation for a transparent and investor-friendly business environment along with the attractive future prospects in terms of an emerging customer base in this part of the world.
The Reserve Bank of India (RBI) in tandem with the Government, has been playing a vital role in regulating and boosting the banking sector with timely reforms as well. In this context, it is but natural that several foreign banks are now eyeing their next phase of expansion in India as per several reports.
More foreign banks may come to Indian shores soon
India may witness an influx of more foreign banking entities in the near future which will put it at par with other top Asian countries such as Hong Kong, Singapore and China which are considered major global financial hubs. As per reports, close to 15 global/foreign banks have been considering forays into the Indian banking ecosystem. These banks have reportedly been in contact with the Reserve Bank of India (RBI) for setting up branches in India.
RBI has previously released information which shows how 46 foreign banks are already operational in the country at the moment. Two of these foreign banks are also functioning in the WOS (wholly owned subsidiary) format. The Reserve Bank of India has also informed the Union Finance Ministry of India about the interest shown by these 15 foreign banks in establishing Indian branches as per reports. In case of foreign banks, RBI approval is required before establishing Indian branches with the exception of banks functioning in the WOS format.
Other key details that you should know
RBI has also opined previously that foreign banks usually set up Indian branches on the basis of their own business judgment and evaluation of their commercial prospects in the country. In case of banking entities which are functioning in the WOS format, based on the RBI regulations, a minimum of 25% of the total branches set up in a particular financial year, should be based in rural or Tier-5 and 6 centers which are largely un-banked or have limited access to banking services. These should be areas which do not possess any buildings or other structures of SCBs (scheduled commercial banks) for offering banking solutions and transactional services to customers.
Foreign banks also have to compulsorily offer loans and funding to Indian farmers and also scheduled tribes and scheduled castes for employment purposes like other banks in the country. RBI also has regulations that foreign banks should be adhering to the extant priority sector regulations issued by it. The guidelines enable foreign banks which have 20 branches or more, to enable lending of around 40% of their ANBC (Adjusted Net Bank Credit) or the Credit Equivalent of the Off-Balance Exposure (whichever is more) for the priority sector. This encompasses lending for the Weaker Sections in society, covering scheduled castes and tribes.
SBM Bank (India) Limited is a subsidiary of the Mauritius based SBM Group while DBS Bank India Limited is a subsidiary of DBS Bank Limited. They received their banking licenses in 2017 (6th December) and 2018 (4th October) respectively for starting banking operations in the country via the WOS (wholly owned subsidiary) format. SBM Bank (India) Limited started operating in the country from the 1st of December, 2018 while DBS Bank India Limited commenced operations from 1st March, 2019. Standard Chartered has the highest number of branches in India, namely 100 branches at present while CitiBank already has 35 branches under its name here. HSBC operates through a network of 26 branches in India while Deutsche Bank has 17 Indian branches. Barclays Bank Plc from the United Kingdom (UK) currently has 6 branches in India.