India to Audit Foreign Banks Operations Prior to Permitting New Branches
Nov. 6 – The Reserve Bank of India has confirmed that it will require foreign banks to undergo a full audit of their Indian operations prior to be allowed to establish new branches.
India had committed to allowing twelve new branches of foreign banks a year to be opened, however in practice has been far more open. Some 32 foreign banks currently operate in India with some 300 branches between them.
Under India’s WTO agreements, the country has the right to exclude licenses from banks once their share in the banking system exceeds 15 percent. This threshold was passed some time ago. The requirement to audit foreign banks before further expansion is to preserve risk management capabilities over concerns that any failures could create risks for Indian financial markets.
India is also pushing for its domestic banks to have greater access in international markets and says that the issuance of further main banking licenses to foreign banks in India will depend on reciprocity. The move to audit foreign banks expansion in India is seen as a sensible precaution in light of the current global crisis.
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