The Reserve Bank of India (RBI) has granted “in-principle” approval to Emirates NBD Bank, a UAE-headquartered bank, to set up a Wholly Owned Subsidiary (WOS) in India. The approval is part of the “Scheme for Setting up of WOS by foreign banks in India” and allows Emirates NBD Bank to convert its existing branches in India into a WOS. The bank currently operates in India through branches in Chennai, Gurugram, and Mumbai.
The “in-principle” approval is subject to certain conditions, which the bank must comply with before the RBI grants a license for commencement of banking business in WOS mode. Once the conditions are met, the RBI will consider granting a license under Section 22 (1) of the Banking Regulation Act, 1949.
The move towards local incorporation of foreign banks in India is aimed at creating a separate legal entity with its own capital base and local board of directors. This provides a clear delineation between the assets and liabilities of the domestic bank and those of its foreign parent, ensuring that there is a ring-fenced capital and assets within the host country. Local incorporation also provides effective control to local regulators and clarity on the applicability of the laws of the country of incorporation.
Under the scheme, all foreign banks that wish to operate in India in the future must do so through a WOS. This move is expected to enhance the stability and security of the Indian banking system, while also providing foreign banks with greater flexibility and autonomy to operate in the country. Emirates NBD Bank’s decision to set up a WOS in India is a significant step towards deepening its presence in the country and expanding its banking services to Indian customers.
The RBI’s approval is a positive development for foreign banks looking to establish a presence in India, and is expected to attract more foreign investment into the country’s banking sector. The move is also in line with the Indian government’s efforts to liberalize the banking sector and encourage foreign investment, while ensuring that the sector remains stable and secure. Overall, the approval is a significant step towards promoting greater cooperation and collaboration between Indian and foreign banks, and is expected to have a positive impact on the country’s banking sector.