RBI guidelines on foreign banks a valuable step: USIBC

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The new RBI guidelines regarding foreign bank operations in India are a "valuable step" and will provide strong regulatory transparency to the industry, the US India Business Council has said.

It has, however, sought certain clarifications from the Reserve Bank of India.

"By clarifying that a one-size-fits-all model will not be employed, the RBI has once again proven its long-standing reputation of being a measured, highly respected institution which takes into consideration all stakeholders including consumers," USIBC President Ron Somers told PTI.

USIBC is the apex business advocacy organisation for the US in India which comprised top American and Indian companies.

The council last week said the new set of guidelines released recently by the Reserve Bank is a welcome move and will provide strong regulatory transparency to the industry.

"The guidelines provide welcome clarity and flexibility necessary for industry, improving the investment climate for financial services in India," USIBC said in its letter to the RBI submitted on behalf of major US banks and some European ones having presence in India.

USIBC asked the RBI to define exactly what "near-national treatment" of foreign banks in India will mean.

It has also sought clarifications from the RBI on certain provisions which present lingering questions for the industry, including the credit rating of the Indian subsidiary or global parent.

It also raised questions related to new branch licensing implications if India enters into a Comprehensive Economic Co-operation Agreement (CECA) with a foreign bank's host country.

Welcoming the RBI guidelines, Somers said these rules are certainly a valuable step in the right direction.

"Global banks in India are the key to leveraging the global capital and expertise required to finance India's trillion-dollar infrastructure challenge as well as social development," Somers said.

"USIBC has been engaged in a dynamic dialogue with both public and private sector on the future of foreign banking in India since the original RBI discussion paper on this topic was released," USIBC Director of Financial Policy Melissa Frakman said.

"Our membership very much welcomes the flexibility provided by the final guidelines. With this certainty, banks are now able to plan their next century supporting India's economic growth," Frakman added.

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