Q. 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?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Correct answer: (b) 2 only
Question from UPSC Prelims 2024 GS Paper
Explanation:
1. There is no minimum capital requirement for wholly owned banking subsidiaries in India.
This statement is incorrect. The Reserve Bank of India (RBI) does impose minimum capital requirements for wholly owned subsidiaries (WOS) of foreign banks in India. As per RBI guidelines, these subsidiaries are required to maintain a minimum paid-up capital of Rs. 500 crore (5 billion rupees).
2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
This statement is correct. The RBI mandates that at least 50% of the directors on the board of a foreign bank’s wholly owned subsidiary should be Indian nationals. This requirement is part of the RBI’s efforts to ensure local representation and understanding in the governance of these banks.
Therefore, the correct answer is (b) 2 only.