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Last updateTue, 17 Mar 2015 2pm

#INDIAECONOMY: Reserve Bank of India eases rules for Foreign Banks

The Reserve Bank of India has unveiled new regulations that pave the way for foreign banks to increase investment in the country.

The new rules allow for multinational banks to establish “wholly owned subsidiaries” and lifts restrictions on the number and geographical spread of branches they can own and operate. 

The subsidiaries will need a minimum capital of £50 million.

The changes are a part of the push by the Indian central bank's new governor, Raghuram Rajan, to open up the banking sector to spur growth in India’s stagnating economy. 

The Reserve Bank of India said the new rules would allow them to open branches "at par with Indian banks".

However, they will need permission to open branches in "certain locations that are sensitive from the perspective of national security".

The RBI said it would also consider introducing takeover rules that would allow foreign companies to own as much as 74% of a domestic bank.

But it said any such decision will be taken after a review relating to "the extent of penetration of foreign investment in Indian banks and functioning of foreign banks".

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