repatriate capital from the Indian operations if required. The tax treatment suggested by the paper has also not found favour with the foreign banks.
“We have been waiting since 2011, when the first discussion paper came out. Since then, there has been a lot of talk, though no new development has happened. We would rather wait and watch,” said the Indian spokesperson for a foreign bank. When contacted, HSBC India and Citibank said they would be unable to comment on the developments, till final guidelines were announced.
“Foreign banks want to know what is the distinct advantage of taking the subsidiary model. If it means that the branch licensing policy is liberalised, they would be interested," said Abizer Diwanji, head of financial services at Ernst & Young.
The paper had also argued that priority sector requirements for subsidiaries of foreign banks would be similar to those of Indian banks. Currently, foreign banks need to maintain 32% of their advances under the priority sector lending category, however, in the subsidiary model, this would go up to 40% as is the case with domestic banks.
Most foreign banks are in favour of a policy which allows them to choose between the subsidiary model or branch model to expand their presence in India, rather than being rushed into one model by the regulator, experts said.