With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements : 1. There is no minimum capital requirement for wholly owned banking subsidiaries in India. 2. 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 ?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2 ✓ UPSC's answer
Why the answer is (d)
• Under the RBI's 2013 framework, foreign banks may operate in India either as branches or as wholly owned subsidiaries (WOS), with the WOS route encouraged for systemically important banks.
• Statement 1 is wrong: a WOS must have a minimum paid-up voting equity capital of ₹500 crore and maintain capital adequacy as prescribed; there is no exemption from capital requirements.
• Statement 2 is wrong as framed: the guidelines require at least two-thirds of the board to be non-executive and not less than 50% of directors to be Indian nationals, NRIs or PIOs, with at least one-third being resident Indian nationals — so '50% Indian nationals' is not the rule.
• A WOS is treated on near-national par with Indian banks for branch expansion, subject to priority-sector norms.
• Hence neither 1 nor 2, option (d).
Why the other options are wrong
- (a) 1 only
- Statement 1 is wrong: a 500 crore minimum capital applies.
- (b) 2 only
- Statement 2 misstates the board composition rule.
- (c) Both 1 and 2
- Both statements are wrong.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2024, held on 16 June 2024. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.