Government Panel Evaluates Expansion Plans from Foreign Banks

An inter-departmental committee chaired by the Department of Financial Services (DFS) Secretary M Nagaraju has examined proposals submitted by the Reserve Bank of India for foreign banks looking to establish or expand their presence in India through branches, subsidiaries or representative offices. 

Key Development 

According to an official statement, the committee considered the proposals placed before it and recommended them after detailed deliberations. The panel functions under the DFS as the nodal department and evaluates applications from both foreign and domestic banks.  

As part of the process, inputs are sought from the Ministry of Home Affairs, Ministry of External Affairs and the Department of Commerce to assess security, political and economic considerations before a final view is taken. 

Current Landscape of Foreign Banks 

Recent data from the RBI’s Trend and Progress of Banking in India 2024–25 shows a continued contraction in the foreign banking footprint. The number of foreign banks operating through branch or wholly owned subsidiary mode declined to 44 following the exit of one lender during the year.  

Branch numbers also fell to 755, down from 780 a year earlier, extending a multi-year downward trend from 861 branches in 2022. In contrast, the number of foreign banks operating through representative offices remained unchanged at 31. 

Policy Context and Outlook 

The review comes against the backdrop of India’s calibrated push towards financial sector liberalisation. Earlier this month, India offered higher foreign direct investment limits in banking and insurance and a more liberal bank branch licensing regime under the Financial Services Annex of the India-New Zealand Free Trade Agreement.  

Under this framework, foreign banks would be permitted to open up to 15 branches over four years, compared with the 12-branch limit under India’s commitments at the World Trade Organization. 

Read More: Bank Loans Against Gold Rise 125% in a Year: RBI Data! 

Conclusion 

While foreign banks’ physical presence in India has gradually declined in recent years, the latest policy initiatives and the IDC’s review of fresh proposals signal a measured opening of the sector. The approach reflects India’s attempt to balance financial openness with regulatory oversight, even as it reassesses the role of foreign banks in its evolving banking landscape. 

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