.......RBI’s main purpose for incentivising the conversion of foreign bank branches into subsidiaries seems to be ring fencing the Indian operations of the parent in case of crises, and protecting the interest of the local depositers by ensuring adequate capitalisation and liquidity.
As foreign banks expand their presence in India, there would be increased competition for local banks. However, RBI has made sure that the foreign banks do not dominate the Indian banking sector by restricting entry of new foreign bank subsidiaries beyond 20% of the total capital and reserves of the banking system. For those foreign banks opting for the branch mode, RBI would deny new licenses when .........
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