Emirates NBD Bank gets conditional nod from RBI to open local arm

India allows foreign banks to operate either as a branch or wholly-owned subsidiary of the parent. All except two — DBS Bank India and SBM Bank India — work as branches. A local unit gives more flexibility to the bank than when operating as a branch. 

Also read: Before you borrow via a lending app, ask whether it’s worth losing your privacy over?

The RBI, in a statement, said that Emirates NBD Bank PJSC currently operates under the branch mode through its branches located in Chennai, Gurugram and Mumbai. In India, it reported a loan book of ₹4,641.6 crore as on 31 March 2024, per its latest available annual report, up from ₹3,417.2 crore in FY23. 

The group has operations in the United Arab Emirates, Egypt, Saudi Arabia, India, the UK, Turkey, Bahrain, Russia, Austria, Germany, Singapore and representative offices in China and Indonesia, as per its website. 

“The in-principle approval has been granted to the bank for setting up a WOS (wholly owned subsidiary) through conversion of its existing branches in India," it said. 

According to RBI, it would consider granting a licence for commencement of banking business through the wholly-owned subsidiary mode to Emirates NBD Bank PJSC, on being satisfied that the bank has complied with the “requisite conditions laid down by RBI as part of in-principle approval". 

Also read: JP Morgan’s Mookim seeks bright spots amid earnings lull in Indian markets

Interestingly, Emirates NBD was one of the suitors for private sector lender IDBI where the government and the Life Insurance Corp of India (LIC) want to sell 61% of their stake, per media reports. The Economic Times reported on 21 January that those interested in IDBI Bank include Fairfax Financial, Emirates NBD, Oaktree Capital and Kotak Mahindra Bank.

The government and LIC collectively owned a 94.71% stake in IDBI Bank as on 31 March. 

In the past, the regulator has allowed the local arm of a foreign bank to take over a domestic lender. In November 2020, RBI had seized control of the struggling Lakshmi Vilas Bank (LVB) and forced a merger with the local unit of Singapore’s largest lender DBS Bank. That was the first time the central bank had tapped a bank with a foreign parent to backstop an Indian rival.

Also read: GN Bajpai: Tokenize real estate to open up an attractive asset class

Foreign banks have found it an uphill task to penetrate meaningfully into India, barring a few areas. The difficultly has been more pronounced in retail operations, given the deep on-ground presence of Indian public sector and private banks. In fact, a clutch of foreign banks have exited certain businesses in India, the latest being Citibank which sold its consumer banking business for ₹11,603 crore to Axis Bank in 2023.