Norms for foreign bank arms soon

The government is likely to clarify its policy on permitting foreign banks to acquire 100 per cent stake in Indian private banks.

Government officials said the finance ministry would come out with the guidelines on how foreign banks could have wholly-owned subsidiaries in India.

In a note circulated after yesterday's Cabinet briefing, the government had said it would permit foreign banks, regulated by a financial sector regulator in the host country, to set up wholly-owned subsidiaries in India.

It also said foreign banks already operating in India through branches could acquire a 74 per cent stake in private banks.

The move could restrict stake acquisition by foreign banks, which already have branches in India but may not restrict those without any presence in the country from acquiring the entire paid-up capital of an existing private bank.

An executive in a foreign bank with branches in India said the fine print was not yet clear but it appeared the government had made a distinction between banks, which were already present in the country and which were yet to enter the market.

"But it offers us the flexibility to operate either as a branch or a subsidiary depending on how much stake we want to acquire in an existing Indian bank," he said.

Banking on India

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• The government has allowed foreign banks to set up wholly-owned subsidiaries in India
• It also said foreign banks already operating in India through branches can acquire 74 per cent stake in private banks
• The finance ministry will come out with detailed guidelines on how foreign banks can have wholly-owned subsidiaries in India