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FDI: Entry and ownership rule
On 6 November 2013, the Reserve Bank of India issued new guidelines for foreign banks to open Wholly Owned Subsidaries (WOS's) in the country. As a WOS, the foreign bank subsidaries will get near national treatment accorded to national banks.
Earlier, foreign banks were allowed to open branches in the country, with a yearly limit on the number of branches as per commitments to the WTO, or set up a WOS. As a locally incorporated WOS with national treatment, the bank now has much more flexibility to open up braches.
The guidelines contain rules with regards to eligibility under this scheme, minimum equity capital, corporate governance, mergers etc. Banks with complex structures, or that do not provide adequate disclosure in their home jurisdiction, or are not widely held, etc. are mandated entry into India only through the WOS setup.
On 26 November 2013, the RBI clarified that any conversion of a branch of a foreign bank into a WOS or transfer of shareholding of a bank to a holding company will be exempt from any stamp duty incident on such a transfer.
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