RBI's Dy. Governor, Usha Thorat, unplugged at ET NOW

Usha Thorat, RBI Deputy Governor in an exclusive interview with ET NOW restated RBI's stance that foreign banks should operate as subsidiaries in India and not just as branch networks, also, the central bank would like to encourage foreign banks in India to convert into subsidiaries.

Under the current scenario, foreign banks operate as branches of their parents which lead to dual regulation, by the RBI and the regulator of the parent bank's country. In addition, when a foreign bank operates as a subsidiary it gets insulated from global financial turbulence to some extent. It would prove to be a good way to move ahead.

According to Usha Thorat, in a branch sort of model it is quiet likely that the control is really outside the jurisdiction. So the RBI is looking at whether it is useful to look at subsidiarisation of foreign banks i.e. the wholly owned subsidiaries other than branch form of presence, especially for those banks which are large and complex.