RBI moots arms model for MNC banks

The Reserve Bank of India expects existing branches of foreign banks, of a certain size to voluntarily convert themselves into wholly owned subsidiaries (WOS). In a discussion paper on presence of foreign banks in India, the central bank said on Friday, it would be mandatory for banks which opt for branch mode of presence, in the country, to convert themselves into WOS if they become systemically important. To incentivise them to set up or convert into an WOS, the central bank says it could consider extending to foreign banks a branch expansion policy as applicable to private sector banks. In other words, they would not be given ‘national treatment’ like public sector banks.  Moreover, foreign banks WOS, with a capital adequacy ratio of at least 9% for preceding two completed years, and the accounting year and net non performing loans of less than 7% could declare a dividend.