It also stipulated guidelines on ownership and governance in private sector banks. As per the first phase between March 2005 and 2009, the foreign banks will be permitted to establish presence by way of setting up a WOS or convert the existing branches into one, the RBI said in a release following Finance Minister P
Chidambaram's announcement in the budget on banking reforms. The foreign banks will have to follow certain eligibility criteria such as ownership pattern, financial soundness, supervisory rating and international ranking.
The WOS should have a minimum capital requirement of Rs 300 crore (Rs 3 billion) and ensure sound corporate governance.
These entities would be treated on par with the existing foreign bank branches for expansion with flexibility to go beyond the existing WTO commitments of 12 branches in a year and preference for branch expansion in under-banked areas.
During the first phase, foreign banks will be eligible to acquire stake in Indian private sectors banks identified by the RBI for restructuring.
The central bank said it would permit such acquisition if the investment by the concerned foreign bank is in the interest of stakeholders of the investee bank in the long term.