With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:
- There is no minimum capital requirement for wholly owned banking subsidiaries in India.
- For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 4 — Neither 1 nor 2
Both statements are incorrect based on the RBI's 2013 Scheme for Setting up of Wholly Owned Subsidiaries (WOS) by foreign banks in India. The scheme explicitly prescribes specific capital requirements and board composition norms that contradict both statements.
❌ Statement 1 – Incorrect: The RBI mandates a minimum paid-up voting equity capital of ₹500 crore for wholly owned banking subsidiaries of foreign banks in India, not 'no minimum capital requirement'.
❌ Statement 2 – Incorrect: The RBI rule states that not less than 50% of directors should be Indian nationals/NRIs/PIOs (not exclusively Indian nationals). Additionally, at least one-third of directors must be Indian nationals specifically resident in India.
📝 Short Notes: RBI Norms for Foreign Bank Subsidiaries (WOS)
| Parameter | Requirement |
|---|---|
| Minimum Capital | ₹500 crore paid-up voting equity capital |
| Board Composition | ≥50% directors to be Indian nationals/NRIs/PIOs |
| Resident Directors | ≥33.33% (one-third) must be Indian nationals resident in India |
| Independent Directors | At least 50% of the board should be independent directors |
| Branch Conversion | Foreign banks with significant presence may convert branches to WOS |
| Regulatory Framework | RBI Guidelines on WOS (2013), Banking Regulation Act, 1949 |
Question 2 of 9 Reserve Bank of India
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