| Subsidiary route likely to be optional for foreign banks |
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Mumbai/ Kolkata, 9 July In a major relief to foreign banks operating in India, the Reserve Bank of India (RBI) might not make it mandatory for those entities to convert into subsidiary companies. The banking regulator is finalising the norms on subsidiarisation of foreign banks. It appears likely to make the subsidiary route optional for the foreign lenders. However, depending on the subsidiarisation model's success, RBI could ask all foreign banks to adopt this structure at alater stage. "In our discussions with RBI, we were given the impression that subsidiarisation will not be made mandatory. The guidelines are expected in the next 90 days," a senior executive of a large foreign bank in the country told Business Standard, requesting anonymity. The central bank is in discussion with the government on tax- related issues, seen as a major hurdle for setting up as asubsidiary. Foreign banks can choose to operate either through branches or set up subsidiaries. At present, all 43 foreign lenders operate via the branch route, without establishing local subsidiaries. RBI had released a discussion paper on the presence of foreign banks in India in January 2011. Bankers feel foreign banks that have large presence in India and are considered " systemically important" will probably set up subsidiaries to expand their branch network. It is generally believed that foreign banks opting for subsidiarisation will be treated at par with Indian banks in terms of branch licensing. RBI is required to permit opening of at least 12 foreign bank branches every year. In the past, the central bank had allowed foreign lenders to open up to 17- 18 branches in a year. These banks have often complained that the restrictive branch licensing policy has prevented them from expanding their businesses significantly in India. "The idea ( of subsidiarisation) is to have better control. The foreign banks that are systemically important may not have the option to continue operations through branches. But not all foreign banks will be asked to set up subsidiaries," said another banker in charge of the consumer banking business of a foreign bank in India. Sector analysts feel the central bank might have decided to keep subsidiarisation optional after getting feedback from foreign banks that have only one or two branches in the country and have no immediate plans to start a retail banking business. Foreign banks had earlier resisted the proposal of subsidiarisation due to issues pertaining to taxation and stamp duty. Some banks were also not comfortable with the proposal to list the subsidiaries in local exchanges, following the completion of a minimum prescribed period of operation. Reserve Bank of India to issue guidelines by end- September, in discussion with government on tax implications of the alternatives [1]Foreign banks opting to create subsidiaries likely to be treated at par with Indian banks in branch licensing [1]Large foreign banks, which are ' systemically important', likely to opt for subsidiarisation [1]Depending on the performance of banks converting into subsidiary, RBI maymake subsidiarisation mandatory later Standard Chartered Bank 99 HSBC 50 Citibank 42 Deutsche Bank 17 DBS Bank 12 Source: Banks Branch network of top foreign banks in India EASING NORMS |
| Sebi cracks whip on potato investment schemes |
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Mumbai, 9 July The Securities and Exchange Board of India ( Sebi) on Tuesday directed Kolkata- based Sumangal Industries ( SIL) and its several promoters and directors to wind up its existing collective investment schemes ( CIS) and refund the money collected to investors within three months. Sumangal Industries had collected money from investors under its potato purchase schemes'. Sebi's investigations found various schemes of the company are akin to CIS, which comes under the jurisdiction of Sebi. Sebi has also barred the company from collecting any money henceforth from investors or carry out CIS activities. Sebi said if the company failed to refund money to investors, it would initiate criminal proceedings against Sumangal Industries or its promoters. Sebi's investigation found Sumnagal's schemes fulfilled several conditions to come under the ambit of CIS. First, the payments made by investors were pooled and utilised for the purposes of the scheme or arrangement. Second, contributions made to such scheme by the investors are with a view to receive profits. The third conditions was that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors. The last condition was that the investors didnt have day to day control over the management and operation of the scheme or arrangement. "Considering the above discussion, it can be said that the transactions between SIL and its customers are not trading business transactions simpliciter. They satisfy all the ingredients of a CIS as defined under Section 11AA of the Sebi Act. It is clear that the business run by the SIL is nothing but that of a CIS, as all the conditions of Section 11AA of the Sebi Act are satisfied by the scheme/ operations of SIL," said Prashant Saran, wholetime member, Sebi in an order. Directs Kolkata- based Sumangal Industries to close schemes and refund money |
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Company Secretary, Chennai
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