RBI permits banks to infuse capital in overseas branches Without its prior approval

The Reserve Bank of India vide its circular no. RBI/2021-22/136 dated 08.12.2021 grants permission for infusion of capital in overseas branches and subsidiaries and retention/ repatriation/ transfer of profits in these centers by banks incorporated in India.

Old Practice

Banks incorporated in India seeks the prior approval of Reserve Bank of India for the following:

• infusion of capital in their overseas branches and subsidiaries
• retention of profits in, and transfer or repatriation of profits from these overseas centers.

New Practice

After the circular comes into effect, Banks shall NOT be required RBI approval for capital infusion/ transfers which meet the regulatory capital requirements (including capital buffers). Instead of RBI approval, the banks shall seek the board approval. Following points should be considered by Banks:

• Banks shall ensure that all compliances have been done according to the home and host country laws and regulations.
• Banks shall also analyze all relevant aspects like their business plans, regulatory requirements under home and host country and performance framework of the overseas centers.

Reporting

Banks shall report all such instances of infusion of capital and/ or retention/ transfer/ repatriation of profits in overseas branches and subsidiaries within 30 days of such action, to the Chief General Manager-in-Charge, Department of Regulation, Central Office, Mumbai with a copy to Chief General Manager-in-Charge, Department of Supervision, Central Office, Mumbai.

NOTE:

• Banks which do NOT meet the minimum regulatory capital requirements, shall be required to take prior approval from Reserve Bank of India (RBI).
• This is circular is applicable to all Scheduled Commercial Banks other than foreign banks, Small Finance Banks, Payment Banks and Regional Rural Banks.