The ministry of finance today convened a meeting to deliberate on proposals received from the Reserve Bank of India (RBI) regarding establishment of branches, representative offices and subsidiaries of foreign banks in India.

The ministry's Inter-Departmental Committee (IDC) -- headed by banking secretary M. Nagaraju -- also reviewed proposals from Indian banks seeking to expand their presence abroad through similar arrangements, the ministry said.

Representatives of the ministry of home affairs, ministry of external affairs (MEA), department of commerce (DoC) and the Reserve Bank of India (RBI) were also present in the meeting.

The committee examined requests from foreign banks for relocation of their existing branches within India, according to a release from the ministry. "After due consideration, the committee recommended the proposals placed before it," the ministry said in the release.

It may be noted that foreign banks can open and operate in India as per the Banking Regulation Act, 1949, the RBI Act, 1934, and other guidelines issued by the banking regulator. As per the current law, the foreign banks need prior approval and license from the RBI.

Two models exist for foreign banks to operate in India – branch offices and wholly owned subsidies. Under the branch office model, while the head office is stationed overseas, the bank operates via branches in the country. the particular route does not need separate approval under the Foreign Exchange Management Act (FEMA).

The second structure is of Wholly Owned Subsidiaries, which was introduced by the RBI since 2013. The subsidiary is incorporated domestically in the Companies Act.

The IDC functions under the Department of Financial Services (DFS), which serves as the nodal authority for evaluating such proposals from both foreign and domestic banks. Before arriving at its recommendations, the committee consults with member ministries, including the Ministry of Home Affairs (MHA), the Ministry of External Affairs (MEA), and the Department of Commerce (DoC), to ensure a comprehensive and consensus‑based approach.