December 2016 \ Business & Investment \ Special Column on law & diplomacy
Opening Indian Branch Offices of Foreign Banks

At present, foreign banks have presence in India only through branches.

By Mr K K Anand

e)    At present, foreign banks, if eligible, are allowed by the Reserve Bank of India (RBI) to set up business in India through a single mode of presence i.e. either branch mode or a wholly owned subsidiary (WOS) mode. In the aftermath of the crisis and building on the lessons from the crisis, the RBI issued a Discussion Paper in January 2011 on the mode of presence of foreign banks in India. Taking into account the feedback received on the Discussion Paper, the Scheme for setting up of WOS by foreign banks in India has now been finalized. It has been decided, as hitherto to, allow foreign banks to operate in India either through branch presence or they can set up a wholly owned subsidiary (WOS) with near national treatment. The foreign banks have to choose one of the above two modes of presence and shall be governed by the principle of single mode of presence.

f)    Having regard to the foregoing, Reserve Bank, in terms of the powers conferred on it under Section 35A read with Section 44A of the Banking Regulation Act, 1949, in the public interest and in the interest of banking policy hereby issues a ‘Scheme for Setting up of Wholly Owned Subsidiaries (WOS) by foreign banks in India’. 

The Scheme

2.    Branch mode or wholly owned subsidiary

a)    All foreign banks which are not carrying on banking business in India and which wish to do so in the future and to whom the matters referred to in paragraph 4 herein below shall carry on banking business in India only through a wholly owned subsidiary.

b)    Foreign banks which are not carrying on banking business in India and which wish to do so in the future and to whom the matters referred to in paragraph 4 herein below do not apply have the option to carry on banking business in India either through a wholly owned subsidiary or through the branch mode. If they choose to carry on banking business through the branch mode, and in case at a later date they come within the purview of paragraph 4 herein below, they shall convert their branches into WOS.




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