DBS gets nod to operate as wholly-owned subsidiary in India

Singaporean lender DBS today said that it has received in-principle approval to convert its India operations into a wholly-owned subsidiary (WOS).

DBS, the first foreign lender to seek RBI approval, had applied for the licence way back in 2014 to operate as a wholly-owned subsidiary. The application has been pending with finance ministry, which took time to grant approval due to lack of a precedent.

DBS is the second bank after State Bank of Mauritius to receive the nod.

"We have received an in-principle approval from RBI to start working as a wholly-owned subsidiary," Piyush Gupta, chief executive of the largest Singaporean bank, told reporters here.
 

He was in town to inaugurate a new headquarters of the bank.

Gupta said even though the approval provides for 12 months to get the final approval, the bank is confident of getting it in 6-9 months. He said the issue of capital gains tax has been sorted out and there will be no requirement for for the bank to pay the levy.

In March this year, DBS India chief executive Surojit Shome had told PTI that the approval was delayed as the finance

ministry was taking time.

"A new category of banks has to be created...100 per cent owned foreign banks do not exist. With the first bank licence, a new category of banks will get created. It is still a new thing," Shome had said.

DBS India has over 12 branches now with over 1 million customers.

Since the 2008 global credit crisis, the RBI had been insisting that large foreign banks should convert their operations into wholly-owned subsidiaries (WOS) in the country to insulate the local operations from any difficulties which the parent may face in their home market.

The present branch model exposes the banks to risks if an event like the 2008 financial meltdown happens, it was felt and the regulator has offered a 'carrot and stick' approach and has made all the new foreign lenders and existing ones having certain size to operate as a WOS.

The guidelines were issued in late 2014 and DBS was the first to apply, followed by at least two others the Dutch lender ABN Amro and State Bank of Mauritius.

In November 2013, the RBI had come out with a new policy incentivising WOS and also ensured changes in laws, including tax and stamp duty benefits and near-total national treatments, but none of the lenders fell in line so far.