With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:
- 1.There is no minimum capital requirement for wholly owned banking subsidiaries in India.
- 2.For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
Which of the statements given above is/are correct?
Answer & explanation
Answer: (d) Neither 1 nor 2
Both statements are wrong. RBI's scheme for wholly owned subsidiaries (WOS) of foreign banks sets an initial minimum paid-up voting equity capital of ₹5 billion (₹500 crore). On the board, the 50 per cent rule counts Indian nationals, NRIs and PIOs together, with a separate condition that one-third of the directors are Indian nationals resident in India.
- ✗ 1. A WOS must start with at least ₹5 billion (₹500 crore) of paid-up voting equity capital, and a newly set up WOS must bring in all of it upfront from its parent.
- ✗ 2. The rule is wider than 'Indian nationals': not less than 50 per cent of directors must be Indian nationals, NRIs or PIOs, and one-third of the directors must be Indian nationals resident in India. The statement misstates it.
- • Since then RBI has since issued the Reserve Bank of India (Setting Up of Wholly Owned Subsidiaries by Foreign Banks) Guidelines, 2025, amended in March 2026. The points above follow the 2013 scheme that applied in the exam year.
Remember · A foreign bank's Indian WOS needs at least ₹5 billion (₹500 crore) paid-up capital. Its board needs 50% Indian nationals/NRIs/PIOs, including one-third resident Indian nationals.
Sources
- RBI, Scheme for Setting up of Wholly Owned Subsidiaries (WOS) by Foreign Banks in India (6 November 2013), minimum capital ↗ “The initial minimum paid-up voting equity capital for a WOS shall be ₹ 5 billion. … not less than 50 per cent directors should be Indian nationals/NRIs/PIOs subject to the condition that one-third of the directors are Indian nationals resident in India”
- RBI, Setting Up of Wholly Owned Subsidiaries by Foreign Banks, Amendment Guidelines, 2026 (10 March 2026) ↗ “Please refer to the Reserve Bank of India (Setting Up of Wholly Owned Subsidiaries by Foreign Banks) Guidelines, 2025 (hereinafter referred to as ‘the Guidelines’).”
Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·