The Reserve Bank of India (RBI), on November 28, 2025, issued consolidated Guidelines on the setting up of wholly owned subsidiaries (WOS) by foreign banks in India, motivated by lessons from the 2008 global financial crisis and the need to strengthen resolvability, depositor protection and local supervisory control. The Guidelines set out the rationale for local incorporation (separate legal entity, ring-fenced capital, clearer legal applicability and stronger local governance) and reiterate India’s long-standing single-mode approach (branch or WOS), while updating eligibility and supervisory expectations for foreign entrants.
The Scheme clarifies modes of presence (branch vs WOS), lists factors that will compel or favour WOS presence (e.g., complex structures, inadequate home-jurisdiction supervision, systemic importance), and prescribes eligibility criteria including home-supervisor approval, consolidated supervision, and financial soundness. Key operational and prudential requirements include an initial minimum paid-up voting equity capital/net worth of ₹500 crore (with the entire initial capital to be brought in upfront), Basel III and additional local capital buffers (minimum CRAR of 10% for three years), governance and board composition norms (majority as per Section 10A, 2/3 non-executive, 1/3 independent, Indian representation, full-time India-resident CEO), branch-authorisation rules, priority sector obligations, limits on use of parental ratings/support, and restrictions on group/related-party dealings.
The Guidelines also set out conversion and amalgamation procedures for existing foreign bank branches (application via PRAVAAH in Form III, in-principle RBI approval, shareholder approvals and RBI sanction of amalgamation under Section 44A of the B.R. Act), provisions for dilution of WOS equity to 74% under FDI rules and listing, limits on further entry when foreign banks’ share of system capital exceeds thresholds, and other statutory/compliance obligations (Companies Act, FEMA, RBI statutes and Directions). The RBI retains the right to modify conditions as needed.
[Notification No. RBI/DOR/2025-26/144]
