The overseas operations of Indian banks and the branches of foreign banks in India are governed by regulations from the Reserve Bank of India (RBI). Indian banks have branches and subsidiaries in various countries, while foreign banks operate in India through branches and, increasingly, through wholly-owned subsidiaries. The RBI’s regulations aim to balance the growth of these entities with the need to maintain financial stability and adhere to Indian banking regulations.

Overseas Operations of Indian Banks:

Branches and Subsidiaries:

Indian banks operate overseas through branches and subsidiaries in different countries. For example, State Bank of India, ICICI Bank, and Bank of Baroda have a presence in the US through these structures.

Financial Products:

Indian banks’ overseas branches and subsidiaries are now permitted to offer financial products, including structured financial products, that may not be available in the domestic market, subject to certain conditions, according to the RBI.

International Financial Services Centres (IFSCs):

Indian banks and AIFIs can also operate in IFSCs, and the RBI’s regulations cover these operations as well.

Branches of Foreign Banks in India:

Number of Foreign Banks:

Currently, 44 foreign banks operate in India with a total of 1,253 branches, according to SATHEE.

Wholly-Owned Subsidiaries:

Foreign banks are increasingly encouraged to operate through wholly-owned subsidiaries in India. This allows them more freedom to grow while still adhering to Indian banking regulations.

Examples:

Some well-known foreign banks operating in India include Citibank, HSBC, Standard Chartered, and Deutsche Bank.

Regulation:

Foreign banks operating in India are regulated by the RBI under the Banking Regulation Act, 1949.

Key Regulations and Considerations:

RBI Directions:

The RBI issues various directions and circulars to govern the operations of both Indian banks’ overseas entities and foreign banks’ operations in India.

Compliance:

Both Indian and foreign banks are expected to comply with applicable Indian laws and regulations, unless specifically exempted.

Financial Stability:

The RBI’s regulations are designed to ensure the stability of the Indian banking system and to manage risks associated with overseas operations.

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