India opens up to Foreign banks

India's central bank has announced new rules that will help clear the way of international banks to broaden their presence in India.

International banks will now be permitted to establish "wholly owned subsidiaries" in India, that is designed to allow them to register branches anywhere in the India.The subsidiaries will require a minimum capital of 5bn rupees($80m; £50m).

The adjustments are an integral part of the motivation by the central bank's new governor, Raghuram Rajan, to liberalize the industry as he looks to boost growth in India.

Overseas banks have long desired to increase their presence in the country - to tap into India's huge population of nearly 1.2 billion people.

Nevertheless up to now they have been forced to deal with tighter regulations, particularly over the number of branches they are able to open up.The Reserve Bank of India stated the new rules allows them to open branches "at a similar level with Indian banks".

In spite of this, they are going to require authorization to open branches in "certain areas which are sensitive from the perspective of national security".

The RBI claimed it could possibly also consider bringing in takeover guidelines that will allow international businesses to own around 74% of a local Indian bank.

However it stated this sort of decision is going to be taken after a evaluation concerning "the degree of penetration of international investment in Indian banks as well as the functioning of overseas banks".