Subsidiarisation of foreign banks would be tax neutral: Finance Minister Pranab Mukherjee
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"The Reserve Bank of India is formulating a scheme for subsidiarisation of Indian branches of foreign banks to ring fence Indian capital and Indian operations from economic shocks external to the Indian economic scenario," Finance Minister said in the Lok Sabha.
"To support this effort, I propose to provide tax neutrality for such subsidiarisation," he said while initiating discussion on Finance Bill, 2012 in Lok Sabha.
Last year, RBI in its discussion paper supported subsidiary-led model for foreign banks operating in India, instead of the existing branch mode of expansion.
RBI had said incentives were necessary to promote the subsidiary route.
Among the incentives RBI had proposed are liberal branch expansions and allowing the wholly-owned subsidiaries (WOS) of foreign banks to raise rupee resources by issuing non-equity capital instruments in form of hybrid instruments and subordinate debt.
The current regulations allow foreign banks to raise resources only from their parent body or head office through Innovative Perpetual Debt Instruments. (Economic Times)
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