Mumbai: Four foreign banks have applied to the Reserve Bank of India (RBI) to set up local subsidiaries in the country, almost two years after the central bank announced guidelines for these banks to open local units in the world’s fastest growing major economy.

“Four have applied and some others are also in discussions," said R. Gandhi, RBI deputy governor in charge of banking regulations on Tuesday. He did not share names of the foreign banks that have applied.

Singapore’s DBS Bank Ltd and SBM Bank (Mauritius) Ltd have applied to start subsidiaries in India, Mint had reported in May.

RBI has promised “near-national treatment" to foreign banks opening local subsidiaries in India, which would allow them to open branches freely.

But large foreign lenders such as Citibank NA, Hongkong and Shanghai Banking Corp. Ltd (HSBC) and Standard Chartered Plc are not sure about opening a local subsidiary as they are sceptical of the so-called priority sector lending norms, which force lenders to give loans to agriculture and small businesses.

Gandhi clarified that foreign banks cannot be part of the newly licensed differentiated payments banks or even the small banks, in-principle licences for which are due “in the next few weeks".

“We will also release the names of systemically important banks in the next two or three days," Gandhi said.

This is the first time that RBI will release names of systemically important banks in India, a process that will be carried out every August. These banks will need to maintain a slightly higher capital adequacy ratio depending on their exposure to sensitive sectors and whether their operations are consolidated in a particular sector.

Meanwhile, Gandhi warned against the rise of virtual currencies and crowd funding, which he said though disruptive are risky in nature as they operate in a regulator-free environment.

“It is the wisdom of several centuries in the financial system that unregulated entities are highly risky especially when there is no enforcer. Both these have the potential to support criminal and anti social activities like money laundering, terrorist funding and tax erosion. Crypto currencies have been widely suspected to finance criminal activities," Gandhi said.

“We have to be careful and critically watch these developments that is why these may be disruptive but not desirable," he said.

Later in the day, Gandhi said RBI will work with the Securities and Exchange Board of India (Sebi) to formulate regulations for crowd funding in India.

“Sebi has already released a discussion paper and based on the that we will finalize the regulations," Gandhi said, but added that there are no plans to regulate virtual currencies right now though the central bank “is carefully watching" the use of such currencies.

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