Dubai-based Emirates NBD Bank gets in-principle RBI nod to set up India subsidiary: 10 things to know

The Reserve Bank of India (RBI) said on Monday that it has decided to grant in-principle approval to the UAE's Emirates NBD Bank PJSC for setting up a wholly-owned subsidiary in India. Emirates NBD Bank PJSC is Dubai's government-owned lender. The Indian central bank's nod is under its scheme for setting up wholly-owned subsidiaries by foreign banks in the country.  

RBI gives in-principle approval to Emirates NBD Bank PJSC: What next?

• The development comes at a time when Emirates NBD Bank PJSC is carrying out banking operations in India in branch mode. Currently, the UAE-based lender has its branches located in Chennai, Gurugram and Mumbai in India. 
• The bank is based in Dubai and is the second-largest bank in the UAE.  
• The in-principle clearance will enable to Dubai-based lender to to establish the subsidiary by converting its existing branches in India.

• The RBI will now consider granting a licence to the UAE-based lender to enable it to commence banking business in wholly-owned subsidiary mode under Section 22 (1) of the Banking Regulation Act, 1949. 

• The issuance of this licence will be subject to the bank complying with the RBI's requisite conditions, according to the central bank.
• The bank has been operating in India since November 2017.
• To start a wholly-owned unit (100 per cent subsidiary) in India, the bank needs at least Rs 300 crore as starting capital.
• It also has to maintain enough capital to cover risks, which means a safety cushion of 10 per cent.
• The bank's parent company in Dubai can own the entire Indian business for a minimum period set by the rules.
• The RBI also says that only those foreign banks can open fully-owned branches in India if their home country keeps a close check on how they operate.

Eligibility for foreign banks to set up 100% subsidiary in India

• There are three main conditions that a foreign bank looking to set up a wholly-owned subsidiary in India must meet, as per the RBI website:
• The foreign bank must satisfy the RBI that it is subject to adequate prudential supervision in its home country. “In considering the standard of supervision exercised by the home country regulator, the RBI will have regard to the Basel standards,” according to the RBI.
• The foreign bank’s home country regulator must approve the establishment of the proposed subsidiary in India.
• A number of other factors are also taken into consideration while considering the application for a wholly-owned subsidiary application:
  • Economic and political relations between India and the home country of the foreign bank
  • Financial soundness of the foreign bank
  • Ownership pattern of the foreign bank
  • International and home country ranking of the foreign bank
  • Rating of the foreign bank by international rating agencies
  • International presence of the foreign bank