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?

QUESTION

Hard

Economy

Prelims 2024

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?

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Explanation

Statement 1 is incorrect. The Reserve Bank of India requires foreign banks operating as wholly owned subsidiaries to maintain a minimum capital requirement. As of current regulations, the RBI mandates that these subsidiaries must have a minimum paid-up voting equity capital of ₹5 billion (₹500 crore).
Statement 2 is incorrect. RBI guidelines do not mandate that at least 50% of the board members must be Indian nationals. Instead, the rules emphasize: The majority of board members, including the CEO, must have prior banking experience. There is no explicit requirement that 50% must be Indian nationals. However, RBI may consider nationality, residency, and experience while assessing corporate governance norms on a case-by-case basis.

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