Banks meeting the regulatory capital requirements and with prior approval from their boards will be able to infuse capital in their overseas branches and subsidiaries, retain profits in these centres, and repatriate or transfer profits without prior clearance from the Reserve Bank of India (RBI).
This was announced by RBI Governor Shaktikanta Das in the Monetary Policy Statement on Wednesday. “With a view to providing operational flexibility to banks, it has been decided that banks need not seek prior approval of the RBI if they meet the regulatory capital requirements,” Das said.
According to the statement on Developmental and Regulatory Policies, the banks would have to do post-facto reporting to the RBI. “The instructions in this regard are being issued separately,” it further said.
Scheduled commercial banks have largely been scaling down their overseas operations during the last few years because of the muted demand from Indian corporates in the overseas markets as well as the focus of the Indian banks towards the domestic markets, noted Anil Gupta, Vice President and Sector Head, Financial Sector Ratings, ICRA.
“Higher flexibility to infuse or repatriate capital in overseas branches will provide improved operational flexibility to domestic banks,” he said.
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