In a big sign of relief to the foreign banks desirous of converting their branches into wholly owned subsidiaries in India, the Reserve Bank of India (RBI) has notified that conversion of existing foreign bank branches into wholly owned subsidiaries in India will neither attract any capital gains tax nor stamp duty.
The foreign banks were confused over the incidence of tax if they convert braches to wholly owned subsidiaries and sought queries from the central bank regarding the issue. Earlier, this month, the RBI has said that foreign banks, which do not provide adequate disclosures and having complex structures would have to operate in India only through wholly-owned subsidiaries (WoS) in order to regulate and avoid 2008-like crisis. The initial minimum paid-up equity capital or net worth for wholly owned subsidiaries should be Rs 500 crore it added. However, it allowed the foreign banks operating in India before August 2010 to continue their operations in branch model.
The recent RBI guidelines were issued on the back of 2008 global financial crisis, which has emerged due to the growing complexity and inter-connectedness of financial institutions. The central bank has also allowed foreign banks to list their subsidiaries in the local stock exchanges. At present, foreign banks have presence in India only through branches. There are around 43 foreign banks operating in India with a network of 333 branches as of March 2013.
The foreign banks were confused over the incidence of tax if they convert braches to wholly owned subsidiaries and sought queries from the central bank regarding the issue. Earlier, this month, the RBI has said that foreign banks, which do not provide adequate disclosures and having complex structures would have to operate in India only through wholly-owned subsidiaries (WoS) in order to regulate and avoid 2008-like crisis. The initial minimum paid-up equity capital or net worth for wholly owned subsidiaries should be Rs 500 crore it added. However, it allowed the foreign banks operating in India before August 2010 to continue their operations in branch model.
The recent RBI guidelines were issued on the back of 2008 global financial crisis, which has emerged due to the growing complexity and inter-connectedness of financial institutions. The central bank has also allowed foreign banks to list their subsidiaries in the local stock exchanges. At present, foreign banks have presence in India only through branches. There are around 43 foreign banks operating in India with a network of 333 branches as of March 2013.
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