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DBS Bank has received in-principle approval from the RBI to operate a wholly-owned-subsidiary (WOS) in India.
DBS Bank currently operates 12 branches in India and these will be converted to the new model, Piyush Gupta, CEO, DBS Group, said on Monday.
The RBI had announced this scheme to encourage foreign banks to move to this model following the global financial crisis of 2008. In its guidelines, the RBI had pointed out that the WOS model for foreign banks in India would involve local incorporation, a local board of directors, and a ring-fenced capital and assets profile that would not be affected by the impact of global events on its parent.
So far two foreign banks have received in-principle approval from the RBI for conversion.
Piyush Gupta said that the WOS model was important for the bank to grow its domestic franchise and maintain a deep presence here. He said this would go towards supporting its small and medium enterprise (SME) strategy, which was constrained by the lack of presence so far.
Supply-chain financeThe new model would also help in scaling up supply-chain finance, transaction banking and cash management operations, he said. He expected that the bank would expand its presence to at least 70 SME clusters over the next few years, although the exact form of presence — whether through a branch or ATM or other forms would be decided as the expansion progresses.
Asked about the tax implications on conversion from branch to the new model, Piyush said that he was confident there would be no capital gains tax for the same and a notification to that effect may be expected later this year.
Piyush said about $1 billion was the capital used in India. Anything beyond that would be a function of growth, he said, and added that the bank was not shy of adding capital.
The new model would also help the bank shift its lending book, which is today predominantly corporate (95 per cent is to large corporates), with greater focus on retail and SME banking in line with its global profile.
The bank also announced the inauguration of its new headquarters spread across one lakh square feet at Express Towers in South Mumbai.
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