DBS Bank will convert its Indian operations into a wholly owned subsidiary as and when the Reserve Bank of India prescribes guidelines for the presence of foreign banks in India.

Now, the Singapore-headquartered bank has a presence in the country through 12 branches and 40 ATMs.

“Like it happened in the case of corporatisation of BSE, we think stamp duty and capital gains tax exemptions should also be available to foreign banks converting their Indian operations into a wholly owned subsidiary,” said Mr Sanjiv Bhasin, CEO.

According to the RBI, presence of foreign banks in India via the wholly owned subsidiary route will ensure that there is a clear delineation between the assets and liabilities of the domestic bank and those of its foreign parent.

A locally incorporated bank has its own board of directors and these directors are required to act in the best interests of the bank. The board will prevent the bank from carrying on business in a manner likely to create a substantial risk of serious loss to the bank’s creditors.

Further, local incorporation provides more effective control in a banking crisis and enables the host country authorities to act more independently as against branch operations.

The RBI has said that foreign banks converting into wholly owned subsidiary would be placed in a much better position than the foreign bank branches operating in India but less than that of domestic banks. This would provide very significant incentives for the subsidiary mode of presence for foreign banks in India.

When it comes to meeting priority sector lending – agriculture, MSME, and exports – target, Mr Bhasin said the RBI will give foreign banks five years to meet the target. Currently, the priority sector lending target for domestic banks is pegged at 40 per cent of their adjusted net bank credit as at the end-of previous year.

Capital infusion

Meanwhile, DBS infused Rs 508.5 crore capital late last week to grow its business in India. With this addition, the total capital fund of the bank in India was over Rs 3,300 crore as of March-end 2012.

Mr Bhasin said the capital infusion will take care of the bank’s growth requirements over the next 18 months.

Mr Yazad Cooper, CFO, DBS Bank, said the bank has moved the RBI to set up four more branches. The bank has branches in Bangalore, Chennai, Cuddalore, Kolkata, Kolhapur, Moradabad, Mumbai, Nashik, New Delhi, Pune, Salem and Surat.

Indian operations contribute 7.5 per cent to DBS Bank Ltd’s global revenue. As on March-end 2011, DBS Bank India had deposits and advances aggregating Rs 7,019 crore (Rs 6,338 crore as on March-end 2010) and Rs 7,552 crore (Rs 4,015 crore).

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