 "Govt panel reviews foreign banks' plans to open branches in India")
The inter-departmental committee (IDC), chaired by Department of Financial Services (DFS) Secretary M Nagaraju, on Friday considered the proposals received from the Reserve Bank of India (RBI) for foreign banks seeking to open branches, representative offices or subsidiaries in India.
According to the official press statement, the committee recommended the proposals placed before it after due deliberations during the meeting.
“IDC is a committee wherein the Department of Financial Services, as the nodal department, evaluates proposals received from foreign and domestic banks. Before reaching a consensus, the committee consults the proposal with member ministries/departments that is Ministry of Home Affairs (MHA), Ministry of External Affairs (MEA), Department of Commerce (DoC) seeking their inputs in the matter from security, political and economic angles respectively,” said the statement.
According to the RBI Trend and Progress of Banking in India 2024-25 report, which was recently released, noted that the number of foreign banks operating in India through branches or wholly owned subsidiary mode declined to 44, following the exit of one bank during the year. The number of branches operated by foreign banks also fell to 755, down from 780 a year ago, extending a gradual contraction seen over the past few years.
The data further showed that foreign banks operating through branch or wholly owned subsidiary mode stood at 45 in 2024, with 780 branches, compared with 44 banks and 782 branches in 2023. The branch count has steadily declined from 861 in 2022. However, the number of foreign banks having representative offices in India remained unchanged at 31.
Earlier this month, India has offered higher foreign direct investment (FDI) limits in banking and insurance and a more liberal bank branch licensing framework under the Financial Services Annex of the India-New Zealand Free Trade Agreement. This is a calibrated but forward-looking approach to financial sector liberalisation.
Under the agreement, foreign banks will be allowed to establish up to 15 branches over a four-year period. This is a significant rise from the 12 branches permitted under India’s commitments at the World Trade Organization’s General Agreement on Trade in Services.
“India’s sectoral offers represent a forward-looking liberalisation approach, featuring enhanced FDI limits in banking and insurance, alongside a liberalised bank branch licensing framework,” the finance ministry said in a statement.
“The expansion in branch limits reflects India’s commitment to progressive market opening in line with its broader strategic objectives,” it added.