DBS Bank evaluating RBI's WOS rules for foreign banks

DBS Bank, fourth largest foreign lender present in India, is evaluating RBI's new guidelines that provide significant benefits to foreign banks adopting Wholly-Owned Subsidiary (WOS) route of running branches here.

Also Read: RBI's foreign bank rules sets stage for more reforms: Fitch

The guidelines were issued earlier this month and allow foreign banks incorporating WOS branches to acquire local private sector lenders and expand branch-network across the country without any restrictions.

The new rules also allow foreign bank subsidiaries to list locally.

"The RBI guidelines that have been introduced on the Wholly Owned Subsidiary setup is a positive development. We are currently evaluating the guidelines. As India's fourth largest global bank, we have been, and continue to support WOS," said Sanjiv Bhasin, General Manager and CEO of DBS Bank Ltd, India.

DBS Bank India is a branch of DBS Bank, which in turn is a subsidiary of DBS Group Holdings Ltd, one of the largest financial services groups in Asia.

According to sources, DBS Bank is looking at more clarity in some tax-related issues with regard to new norms. Once those issues are sorted, a team from Singapore would come down to discuss other details with the Indian management team, they added.

DBS opened its first branch in Mumbai in 1995, while second branch was opened in New Delhi in 2005. Since then, DBS has rapidly expanded its all-India footprint of full-service branches and ATMs in about a dozen cities.

DBS bank India closed fiscal 2012-13 with a profit of Rs 288.5 crore on the back of total income of Rs 2559.19 crore.

According to RBI, foreign bank subsidiary will not be allowed to hold more than 74 percent, the sectoral cap for overall foreign investment in private banks they may acquire.

Also, the RBI framework stipulates that the initial minimum paid-up voting equity capital for a WOS would be Rs 500 crore for the new entrants.

Foreign banks, which commenced banking business in India before August, 2010, have the option to continue their banking business through the branch mode. However, they will be incentivised to convert into WOS because of the attractiveness of the near national treatment afforded to WOS, RBI said.

Priority sector lending requirement would be 40 percent for WOS, like domestic scheduled commercial banks, with adequate transition period for existing foreign bank branches converting into WOS.

The banking sector is set to get more competitive in India, as 26 entities have filed their applications with RBI for new bank licences, which are being issued for the first time in about a decade.