{"id":131410,"date":"2026-03-10T14:08:37","date_gmt":"2026-03-10T14:08:37","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=131410"},"modified":"2026-03-10T14:08:37","modified_gmt":"2026-03-10T14:08:37","slug":"india-banking-finance","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/india-banking-finance\/","title":{"rendered":"India: Banking &amp; Finance"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-131410","comparative_guide","type-comparative_guide","status-publish","hentry","guides-banking-finance","jurisdictions-india"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Vritti Law Partners LLP<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/02\/Vritti-New-Logo-200-x-200-.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Vritti Law Partners LLP<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/02\/Vritti-New-Logo-200-x-200-.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Banking &amp; Finance laws and regulations applicable in India<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the national authorities for banking regulation, supervision and resolution in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Reserve Bank of India (RBI), established pursuant to the Reserve Bank of India Act, 1934 (RBI Act) is the apex monetary authority in India and the principal regulator and supervisor of the banking sector.<\/p>\n<p>In this capacity, the RBI is entrusted with the licensing, regulation and ongoing supervision of commercial banks, co-operative banks, and non-banking financial companies, as well as certain other financial institutions. These powers are exercised primarily under the RBI Act and the Banking Regulation Act, 1949 (BR Act), along with rules, directions and prudential guidelines issued thereunder.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Which type of activities trigger the requirement of a banking license?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the BR Act, a banking company is one that carries on the business of banking, i.e., accepting public deposits for the purpose of lending or investment, repayable on demand or otherwise and with-drawable by cheque, draft or other means. No entity may undertake such activities without a licence from the RBI.<\/p>\n<p>Banking companies may also undertake ancillary activities permitted under the BR Act, while certain non-banking entities may engage in lending or investment under separate RBI regulatory regimes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your regulatory regime know different licenses for different banking services?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. RBI issues different licences for different categories of banks and banking services under the BR Act and related regulatory frameworks.<\/p>\n<p>Broadly, banks in India may be classified into the following categories:<\/p>\n<p>(i) Commercial banks, which include public sector banks (majority government-owned), private sector banks (widely held and not government-controlled), foreign banks (operating through branches or wholly owned subsidiaries) and regional rural banks.<\/p>\n<p>(ii) Co-operative banks, which are member-owned institutions operating on co-operative principles and primarily providing credit to individuals and small businesses.<\/p>\n<p>(iii) Small finance banks, which are specialised banks focused on financial inclusion, catering to small businesses, low-income households and underserved segments.<\/p>\n<p>(iv) Payments banks, which can accept deposits (subject to regulatory limits) but are not permitted to undertake lending and are subject to restricted activities.<\/p>\n<p>In addition, certain banks are designated by the RBI as authorised dealer banks to undertake permissible foreign exchange transactions in accordance with applicable foreign exchange laws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. A banking licence issued by the RBI does not automatically permit all financial services; the scope of permissible activities is governed by the BR Act, RBI directions and other sectoral regulations.<\/p>\n<p>Scheduled commercial banks, co-operative banks and small finance banks may undertake a wide range of ancillary and para-banking activities\u2014such as dealing in negotiable instruments, issuing letters of credit, foreign exchange transactions, card issuance, safe-deposit services, agency and fiduciary functions, leasing, underwriting, mutual fund and insurance distribution, portfolio management and other financial services\u2014either departmentally or through subsidiaries.<\/p>\n<p>However, many of these activities (for example, broker-dealer services, payment system operations, insurance or asset management) require separate approvals, registrations or compliance with additional regulatory regimes, and may need to be conducted through distinct entities. Payment banks, in contrast, are restricted to accepting demand deposits, providing payments and remittance services, issuing debit cards and distributing simple financial products, and are not permitted to undertake lending.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a \"sandbox\" or \"license light\" for specific activities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. India has a regulatory sandbox regime, but there is no separate \u201clicense light\u201d for banking or financial services.<\/p>\n<p>The RBI introduced its \u2018regulatory sandbox\u2019 framework in 2019 to enable live testing of innovative products and services in a controlled environment with appropriate safeguards. The sandbox allows fintechs, banks and other eligible entities to test solutions under RBI supervision, typically in thematic cohorts (such as retail payments, cross-border payments, Micro, Small and Medium Enterprises (\u201cMSME\u201d) lending and fraud prevention). More recently, the RBI has also permitted theme-neutral applications, covering areas such as digital lending, e-KYC, digital financial literacy, open finance and emerging technologies (including AI, blockchain and machine learning).<\/p>\n<p>Participation in the sandbox does not constitute a licence and is intended solely to facilitate testing prior to obtaining any required regulatory approvals. India does not currently provide a standalone \u201clicense light\u201d regime for specific banking activities.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What regulatory restrictions or authorisation requirements apply to banks engaging in the issuance, custody or provision of services relating to cryptoassets or other digital assets?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>At present, cryptocurrencies and other virtual digital assets remain largely unregulated in India, with no comprehensive statutory framework expressly authorising banks to issue, hold or provide custody services in relation to such assets. The RBI had previously restricted regulated entities from supporting crypto transactions, but this restriction was set aside by the Supreme Court in Internet and Mobile Association of India v. Reserve Bank of India (MANU\/SC\/0264\/2020), following which banks may provide services to crypto businesses subject to standard regulatory compliance.<\/p>\n<p>Crypto assets are not recognised as legal tender. While the Government had proposed dedicated legislation (the Cryptocurrency and Regulation of Official Digital Currency Bill), it has not been enacted. In-stead, a tax framework was introduced through amendments to the Income Tax Act, 1961 pursuant to the Finance Act, 2022, which taxes income arising from transfers of virtual digital assets.<\/p>\n<p>Crypto asset service providers, including exchanges operating in India, are required to register with the Financial Intelligence Unit \u2013 India and comply with applicable anti-money laundering and counter-terrorist financing laws, including reporting, record-keeping and customer due diligence obligations.<\/p>\n<p>Indian law does not currently provide an express authorisation for banks to undertake crypto asset issuance or custody. Accordingly, any engagement with crypto-related entities is governed by general banking, prudential, risk management and anti-money laundering requirements, while the broader regulatory framework for digital assets continues to evolve.<\/p>\n<p>In contrast, the RBI-issued e-Rupee i.e. India\u2019s central bank digital currency is fully authorised legal tender, and banks play a key role as intermediaries by distributing digital wallets, onboarding users, handling KYC, and facilitating transactions. In practice, banks avoid direct involvement with private crypto due to RBI\u2019s cautious scrutiny.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can cryptoassets or digital assets constitute \"deposits\" or equivalent protected funds under applicable law, and are they capable of benefiting from depositor protection, client asset safeguarding or segregation regimes?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. Under Indian law, crypto assets or other virtual digital assets are not recognised as \u201cdeposits\u201d and therefore do not fall within depositor protection or deposit insurance frameworks.<\/p>\n<p>The concept of a \u201cdeposit\u201d for banking purposes is governed by the BR Act, which contemplates money placed with a bank and repayable on demand or otherwise. Crypto assets do not meet this definition, nor are they recognised as legal tender.<\/p>\n<p>Accordingly, such assets are not eligible for deposit insurance provided by the Deposit Insurance and Credit Guarantee Corporation (\u201cDICGC\u201d), and there is no specific statutory client asset protection or safeguarding regime applicable to crypto assets in India.<\/p>\n<p>While crypto asset intermediaries may implement contractual or operational safeguards, these do not constitute statutory depositor or client asset protection regimes under Indian banking or financial sector laws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If cryptoassets are held by the licensed entity, what are the related capital requirements (risk weights, etc.)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Indian law, there are no specific capital requirements or prescribed risk weights for crypto assets held by banks, because the RBI has not recognised private crypto assets as a regulated asset class under the prudential framework applicable to banks. The RBI\u2019s Master Direction \u2013 Basel III Capital Regulations (Basel III Regulations) lays down risk weights for recognised exposures such as loans, government securities, equity investments and other financial assets, but it does not contain any separate category or treatment for crypto assets. Further, the RBI has repeatedly cautioned that virtual currencies are not authorised and cause financial stability risks.<\/p>\n<p>The Basel Committee on Banking Supervision issued prudential guidelines on crypto asset in December 2022, and amendments in July 2024, with international implementation targeted from January 01, 2026. However, as of February 2026, the RBI has not formally amended its Basel III Regulations to incorporate a specific crypto asset capital treatment framework aligned with the Basel committee standard.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the general application process for bank licenses and what is the average timing?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, an application for a banking licence must be submitted to the RBI in the prescribed form under the BR Act and the Banking Regulation (Companies) Rules, 1949. The RBI has adopted an \u201con-tap\u201d licensing regime for universal banks (introduced in 2016) and for small finance banks (introduced in 2019), enabling eligible applicants to apply on a continuous basis rather than during limited licensing windows.<\/p>\n<p>The application process and information requirements vary depending on the category of licence sought, but generally include detailed disclosures on promoters and ownership structure, compliance with \u201cfit and proper\u201d criteria, minimum capitalisation, governance arrangements, proposed business plan, financial projections, target markets and operational readiness. The RBI undertakes a comprehensive evaluation and may grant an in-principle approval subject to fulfilment of pre-operational conditions before issuing the final licence.<\/p>\n<p>There is no fixed statutory timeline for approval, however, the licensing process typically takes around 12 to 18 months or longer, depending on the complexity of the proposal, regulatory review and the time taken to address queries and conditions imposed by the RBI.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent may foreign or overseas banks conduct cross-border banking activities into the jurisdiction without establishing a local presence or obtaining local authorisation, and what limitations or conditions apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>India is an exchange-controlled economy, and cross-border banking activities are primarily governed by the Foreign Exchange Management Act, 1999 (\u201cFEMA\u201d) and regulations issued by the RBI. Foreign exchange transactions are broadly classified into capital account transactions (which alter assets or liabilities of residents or non-residents and are regulated or permitted only as specified) and current account transactions (generally permitted unless specifically restricted).<\/p>\n<p>Foreign banks are not permitted to carry on core banking business in India on a cross-border basis with-out RBI authorisation and typically must establish a branch or wholly owned subsidiary. Cross-border foreign exchange transactions and remittance activities are channelled through banks authorised by the RBI as authorised dealer (AD) banks. Even licensed banks must obtain the appropriate authorised dealer approval (typically Category I) to undertake foreign exchange dealing, derivatives and remittance activities.<\/p>\n<p>Entities that are not banks may undertake limited foreign exchange activities only if licensed by the RBI as AD Category II (e.g., money changers), which allows restricted sale and purchase of foreign exchange for specified purposes such as travel-related transactions, subject to incorporation and regulatory requirements in India.<\/p>\n<p>Overall, the framework is restrictive, and sustained cross-border provision of banking services to Indian residents generally requires local presence and RBI approval, with foreign exchange transactions permit-ted only within the FEMA and authorised dealer regime.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What legal forms are permitted to operate banks in the jurisdiction (e.g. public company, private company, subsidiary or branch), and what are the key regulatory considerations associated with each structure?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the BR Act, banking business in India may be carried on either by a company or a co-operative society, with licensing and supervision by the RBI. The legal form varies depending on the category of bank.<\/p>\n<p>Permitted legal forms and key considerations:<\/p>\n<p><strong>(i) Banking companies (companies limited by shares):<\/strong> Private sector banks, small finance banks and payment banks are typically incorporated under the Companies Act as public companies limited by shares. They must comply with RBI licensing conditions, capital requirements, shareholding norms, governance standards and prudential regulation.<\/p>\n<p><strong>(ii) Public sector banks (statutory corporations):<\/strong> Certain large public sector banks (for example those established under specific legislation) are constituted under their own statutes and are majority owned by the Government of India, in addition to being subject to RBI prudential supervision.<\/p>\n<p><strong>(iii) Foreign banks (branch or wholly owned subsidiary):<\/strong> Foreign banks may operate in India either through a branch (not a separate legal entity) or a locally incorporated wholly owned subsidiary, subject to RBI approval and considerations such as reciprocity and regulatory equivalence.<\/p>\n<p><strong>(iv) Co-operative banks:<\/strong> Urban co-operative banks and many regional rural banks are typically organised as co-operative societies under relevant state co-operative laws or the Multi-State Co-operative Societies framework, with dual regulation by the RBI and co-operative authorities.<\/p>\n<p>Overall, the chosen structure affects ownership rules, capital treatment, governance requirements, regulatory intensity and operational flexibility, although all forms remain subject to RBI licensing and prudential oversight.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the jurisdiction impose any structural separation or ring-fencing requirements on banks or banking groups, and what practical challenges do these create for group structures and operations?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. The RBI has introduced enhanced ring-fencing under the (Commercial Banks \u2013 Undertaking of Financial Services) (Amendment) Directions, 2025 dated December 5, 2025, aimed at limiting regulatory arbitrage and ensuring functional separation between banks and group entities.<\/p>\n<p><em><strong>Key requirements:<\/strong><\/em><\/p>\n<p><strong>(i) Exclusivity principle:<\/strong> Activities undertaken departmentally by a bank should not be duplicated in group entities unless justified and board-approved.<\/p>\n<p><strong>(ii) Mandatory structural separation:<\/strong> Certain businesses (e.g., mutual funds, insurance, pensions, investment advisory) must be conducted through separate subsidiaries\/associates.<\/p>\n<p><strong>(iii) Reputational fence:<\/strong> Restrictions on use of the bank\u2019s name, premises, or core IT systems for distribution of third-party products to avoid customer confusion.<\/p>\n<p><strong>(iv) Group NBFC \/ HFC constraints:<\/strong> Bank-group NBFCs and HFCs are treated as \u201cUpper Layer\u201d entities, with tighter capital, provisioning, and exposure norms. Restrictions include prohibitions on lending against parent bank shares and financing land acquisition for private builders.<\/p>\n<p><strong>(v) Group-wide capital and risk oversight:<\/strong> Banks must maintain policies assessing economic capital and risk on a consolidated group basis.<\/p>\n<p><em><strong>Practical challenges:<\/strong><\/em><\/p>\n<p>(i) Increased governance and compliance burden<\/p>\n<p>(ii) Reduced intra-group synergies and flexibility<\/p>\n<p>(iii) Higher capital and operational costs due to duplication of functions<\/p>\n<p>(iv) Complexity in implementing group-wide risk and capital frameworks<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What governance, risk management and internal control requirements apply to banks, including expectations regarding board composition, management oversight, committee structures and organisational culture?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Governance, risk management and internal control requirements for commercial banks in India are primarily governed by the Reserve Bank of India (Commercial Banks \u2013 Governance) Directions, 2025 (\u201cGovernance Directions\u201d), which place ultimate responsibility for sound and prudent management on the Board of Directors. Banks must adopt a board-approved governance framework clearly delineating the roles of the board and senior management, embedding enterprise-wide risk governance and ensuring robust internal control and compliance systems.<\/p>\n<p><strong>Board composition and oversight<\/strong><\/p>\n<p>(i) The board must comprise an appropriate mix of executive and non-executive directors with a prescribed minimum number of independent directors.<\/p>\n<p>(ii) Directors must meet fit-and-proper criteria, covering integrity, expertise, experience, absence of conflicts and age limits (generally 35\u201375 years).<\/p>\n<p>(iii) Banks must conduct due diligence at appointment and annual fit-and-proper assessments thereafter.<\/p>\n<p>(iv) Non-executive directors focus on strategy, policy formulation and oversight, while operational management rests with the MD\/CEO and senior executives.<\/p>\n<p><strong>Board committees<\/strong><\/p>\n<p>Banks are required to constitute key board-level committees, including:<\/p>\n<p>(i) Audit Committee \u2014 oversight of financial reporting, internal audit and internal financial controls.<\/p>\n<p>(ii) Risk Management Committee \u2014 supervision of the enterprise-wide risk framework and risk appetite.<\/p>\n<p>(iii) Nomination and Remuneration Committee \u2014 oversight of appointments, succession planning and compensation aligned with prudent risk-taking.<\/p>\n<p><strong>Risk management and internal controls<\/strong><\/p>\n<p>Banks must maintain comprehensive risk management, compliance and internal control frameworks, with strong supervisory oversight by the RBI.<\/p>\n<p>Overall, the framework is prescriptive and board-centric, emphasising independent oversight, formal governance structures, ongoing fitness assessments and integration of risk management into strategic decision-making.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What operational resilience requirements apply to banks, including expectations relating to critical or important business services, impact tolerances, and the management of operational disruptions?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The operational resilience framework for banks in India is primarily set out in the RBI Guidance Note on Operational Risk Management and Operational Resilience dated November 28, 2025 (\u201cGuidance Note\u201d), which applies across regulated entities including commercial banks, small finance banks, payments banks and other financial institutions.<\/p>\n<p>Banks are required to maintain a board-approved Operational Risk Management Framework (ORMF) integrated into their overall risk management architecture. The Guidance Note adopts a principle-based approach structured around three pillars \u2014 Prepare and Protect, Build Resilience, and Learn and Adapt. Operational resilience is defined as the ability of a regulated entity to anticipate, withstand, respond to, recover from and learn from disruptions that could materially affect its operations. The board retains ultimate responsibility for oversight, while senior management is responsible for implementation.<\/p>\n<p>Regulated entities must identify and classify \u201ccritical operations\u201d, being activities whose disruption would materially affect the institution\u2019s viability or its role in the financial system. The board must approve documented criteria for such identification, taking into account customer impact, financial stability and institutional safety. Critical operations must be mapped end-to-end and periodically reviewed, including following disruption events.<\/p>\n<p>The Guidance Note also requires banks to set impact tolerances (tolerance for disruption) for each critical operation, representing the maximum level of disruption acceptable under severe but plausible scenarios. These tolerances must be board-approved and periodically tested, using metrics such as maximum toler-able downtime, acceptable data loss and minimum service levels during contingency arrangements.<\/p>\n<p>In addition, banks must maintain robust incident management and business continuity frameworks, including escalation protocols, board reporting, cyber and ICT risk management, and post-incident review processes to ensure recovery of critical operations within approved tolerance thresholds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What regulatory expectations apply to banks\u2019 outsourcing arrangements, including the use of cloud service providers and reliance on critical third-party service providers?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The regulatory framework governing outsourcing of financial and IT services by scheduled commercial banks is set out in the Reserve Bank of India (Commercial Banks \u2013 Managing Risks in Outsourcing) Directions, 2025 (Outsourcing Directions). Outsourcing is defined as the use of a third party to perform, on a continuing basis, an activity that would otherwise be undertaken by the bank itself. Banks must adopt a board-approved outsourcing policy covering governance, approval thresholds, materiality criteria, due diligence standards and monitoring processes. The Board and senior management retain ultimate responsibility for outsourced activities and must ensure outsourcing does not weaken internal controls, customer protection or supervisory access.<\/p>\n<p>The Directions require banks to identify Material Outsourcing of IT Services \u2014 i.e., arrangements whose disruption could significantly affect operations, reputation or customer service. Such arrangements are subject to enhanced due diligence and continuous oversight. Outsourcing contracts must be legally binding written agreements incorporating mandatory provisions on audit and inspection rights (including RBI access), confidentiality and information security, service levels, incident reporting, restrictions on sub-contracting, indemnities, and robust termination and transition provisions to ensure continuity.<\/p>\n<p>Cloud computing (IaaS, PaaS or SaaS) is treated as IT outsourcing where it replaces internally performed functions. Where cloud supports core banking systems, customer data or other critical workloads, it will typically constitute material outsourcing, requiring detailed pre-engagement risk assessments (including data classification, storage and processing locations) and a documented cloud governance framework. Importantly, migration to cloud infrastructure does not transfer regulatory accountability, and banks re-main fully responsible for compliance, resilience and data protection.<\/p>\n<p>For critical third-party service providers whose failure could materially impair essential services, the Directions impose heightened governance: identification within the outsourcing inventory, enhanced onboarding due diligence, ongoing risk monitoring, and contractual provisions extending audit and supervisory access through the subcontracting chain where necessary.<\/p>\n<p>Overall, the Outsourcing Directions emphasise board oversight, lifecycle risk management, enforceable contractual safeguards and continuity planning to ensure that outsourcing \u2014 including cloud adoption \u2014 does not dilute regulatory accountability. Parallel outsourcing risk management directions have also been issued by the RBI for other regulated entities (e.g., NBFCs, payment banks, small finance banks and co-operative banks) on broadly similar principles.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do environmental, social and governance (ESG) and climate-related regulatory requirements affect banks, including governance, risk management, disclosures and prudential supervision?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, ESG and climate expectations for banks are driven primarily by the RBI through its climate-risk and sustainable finance guidance, together with sustainability disclosure requirements prescribed by the Securities and Exchange Board of India (SEBI) for listed banks.<\/p>\n<p><strong>(i) Governance:<\/strong> Banks are expected to adopt a board-approved climate risk strategy, with the board overseeing climate-related policies and risk appetite and senior management responsible for implementation.<\/p>\n<p><strong>(ii) Risk management:<\/strong> Banks must identify and manage physical and transition climate risks within their enterprise risk frameworks, including integration into credit appraisal, portfolio monitoring, stress testing and scenario analysis.<\/p>\n<p><strong>(iii) Disclosures:<\/strong> Listed banks must provide ESG and climate disclosures under SEBI\u2019s sustainability reporting regime (e.g., BRSR), while RBI guidance encourages climate-related financial disclosures aligned with global best practices.<\/p>\n<p><strong>(iv) Prudential supervision:<\/strong> There are presently no specific climate-related capital requirements; however, the RBI incorporates climate risk considerations into supervisory reviews and expects banks to build internal risk measurement and data capabilities.<\/p>\n<p>Overall, the Indian regime is principles-based and evolving, focusing on governance integration, risk management embedding and enhanced disclosures, with prudential treatment likely to develop as supervisory frameworks mature.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What regulatory restrictions or requirements apply to banks' remuneration policies, including bonus caps, deferral, malus and clawback, and how are these enforced in practice?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, remuneration of commercial banks is governed primarily by the Governance Directions, which impose detailed requirements on compensation design, governance and supervisory oversight.<\/p>\n<p><strong>Governance and policy framework:<\/strong><\/p>\n<p>Private sector banks must adopt a board-approved compensation policy covering all pay elements (fixed pay, perquisites, bonuses, severance, share-linked instruments, retirement benefits, etc.). The Nomination and Remuneration Committee is responsible for formulation and implementation of the policy in coordination with the Risk Management Committee to ensure alignment with risk, capital adequacy and financial performance. Compensation for Whole-Time Directors (WTDs), MD &amp; CEO\/CEO and Material Risk Takers must be risk-adjusted, symmetric with risk outcomes and structured through an appropriate mix of cash and equity-linked components.<\/p>\n<p><strong>Bonus caps and structure of variable pay:<\/strong><\/p>\n<p>Remuneration must clearly distinguish fixed and variable components. Variable pay is performance-linked and may be paid in cash, share-linked instruments (e.g., stock appreciation rights) or a combination. The Governance Directions provide that:<\/p>\n<p>(i) variable pay may be capped at up to 300% of fixed pay for the performance period;<\/p>\n<p>(ii) where variable pay is up to 200% of fixed pay, at least 50% must be in non-cash instruments;<\/p>\n<p>(iii) where it exceeds 200%, at least 67% must be in non-cash instruments;<\/p>\n<p>(iv) if equity-linked instruments cannot be granted, variable pay is generally capped at 150% of fixed pay;<\/p>\n<p>(v) deterioration in financial performance must result in a reduction or elimination of the bonus pool.<\/p>\n<p><strong>Deferral requirements:<\/strong><\/p>\n<p>For WTDs, MD &amp; CEO\/CEO and other Material Risk Takers, a minimum of 60% of variable remuneration must be deferred, irrespective of the amount. The minimum deferral period is three years, with pro-rata vesting. At least 50% of any cash bonus must also be deferred (subject to limited de-minimis exemptions).<\/p>\n<p><strong>Malus and clawback:<\/strong><\/p>\n<p>Deferred remuneration must be subject to malus and clawback provisions:<\/p>\n<p>(i) Malus enables reduction or cancellation of unvested pay before vesting;<\/p>\n<p>(ii) Clawback requires recovery of remuneration already paid under specified circumstances (e.g., misconduct, risk management failures or adverse financial performance).<br \/>\nPolicies must clearly specify trigger events and applicable timelines (covering at least the deferral and retention period).<\/p>\n<p><strong>Supervisory enforcement:<\/strong><\/p>\n<p>The RBI exercises enforcement through governance reviews, supervisory inspections and approval processes for senior management remuneration. Banks may be required to modify compensation structures or risk-adjustment methodologies where they are inconsistent with prudent risk management or regulatory expectations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Has your jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. India has implemented the Basel III capital and liquidity framework through regulations issued by the RBI, beginning with the 2013 Basel III Regulations and subsequent directions. The framework was introduced in phases and is now fully operational, including liquidity standards such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) (effective October 2021).<\/p>\n<p><em><strong>Key areas of implementation<\/strong><\/em><\/p>\n<p><strong>(i) Higher minimum capital requirements (a key deviation):<\/strong><\/p>\n<p>India applies more conservative thresholds than the Basel minimums.<\/p>\n<p>(a) Minimum CET1: 5.5% (vs Basel 4.5%)<\/p>\n<p>(b) Capital Conservation Buffer (CCB): 2.5%<\/p>\n<p>(c) Effective CET1 including CCB: 8.0%<\/p>\n<p>(d) Minimum total capital (including buffers): 11.5%<\/p>\n<p>This reflects a supervisory preference for stronger loss-absorbing capacity.<\/p>\n<p><strong>(ii) Leverage ratio:<\/strong><\/p>\n<p>The RBI prescribes a 4% minimum leverage ratio for domestic systemically important banks (and 3.5% for others), which is higher than the Basel baseline of 3%.<\/p>\n<p><strong>(iii) Liquidity standards:<\/strong><\/p>\n<p>India has implemented Basel III liquidity metrics in full (LCR and NSFR). In addition, banks must comply with the Statutory Liquidity Ratio (SLR), a domestic requirement mandating investment in specified liquid assets (currently around the high-teens percentage of net demand and time liabilities). While not a Basel requirement, it effectively creates an additional liquidity buffer.<\/p>\n<p><strong>(iv) Differences across bank categories<\/strong><\/p>\n<p>There are no separate Basel III frameworks for different categories of commercial banks. However, the impact varies:<\/p>\n<p>(a) Public sector banks may face practical capital-raising constraints due to government owner-ship thresholds.<\/p>\n<p>(b) Smaller or specialised banks (e.g., small finance banks) follow tailored prudential norms but broadly aligned capital principles.<\/p>\n<p>In short, India is regarded as a \u201cBasel III-plus\u201d jurisdiction, meaning the core framework is fully adopted but with certain stricter prudential calibrations, particularly on capital and leverage, reflecting a conservative supervisory stance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements with respect to the leverage ratio?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, banks operating in India are required to maintain a minimum leverage ratio as prescribed by the Reserve Bank of India (RBI) under its \u201cBasel III Capital Regulations\u201d issued pursuant to the Master Circular dated July 1, 2013 bearing reference no. RBI\/2013-14\/70 DBOD.No.BP.BC.2 \/21.06.201\/2013-14.<\/p>\n<p>As per RBI\u2019s notification \u201cBasel III Capital Regulations- Implementation of Leverage Ratio\u201d dated June 28, 2019 bearing reference no. RBI\/2018-19\/225DBR.BP.BC.No.49\/21.06.201\/2018-19, banks must maintain a minimum leverage ratio of 4% for domestic systemically important banks (D-SIBs) and 3.5% for other banks. In addition to the minimum leverage ratio requirement, the RBI guidelines also require banks to monitor and manage their leverage risks on an ongoing basis. The leverage ratio guidelines in India are intended to complement the existing capital adequacy framework and to provide an additional measure of the risk level of a bank&#8217;s balance sheet.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What liquidity requirements apply? Has your jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The liquidity requirements are as follows:<\/p>\n<p>(i) Cash reserve ratio (CRR): a prescribed percentage of a bank\u2019s net demand and liabilities deposits (NDTL) as reserves in cash form with the RBI. Currently, the CRR is 3%.<\/p>\n<p>(ii) Statutory liquidity ratio (SLR): a prescribed percentage of a bank\u2019s NDTL in the form of liquid assets such as cash, gold and government securities. Currently, the SLR is 18%.<\/p>\n<p>(iii) Net stable funding ratio (NSFR): a measure of the available stable funding relative to the required stable funding. It is intended to promote funding stability in a bank over long-term and limits overreliance on short-term wholesale funding. Currently, a bank must maintain NSFR at a minimum of 100%.<\/p>\n<p>(iv) Liquidity coverage ratio (LCR): banks must maintain a minimum level of high-quality liquid assets ensuring sufficient liquidity for meeting the bank\u2019s short-term obligations under stressed conditions. Currently, a bank must maintain LCR of 100%.<\/p>\n<p>Basel III introduced stringent liquidity norms including Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The LCR ensures that banks have an adequate stock of unencumbered high-quality liquid assets to cover potential net cash outflows over a 30-day stress period. And the NSFR requires banks to maintain a stable funding profile in relation to their off-balance sheet activities.<\/p>\n<p>India has implemented the Basel III liquidity requirements, including LCR and NSFR. Reserve Bank of India, vide its circular dated June 09, 2014, bearing reference no. RBI\/2013-14\/635<br \/>\nDBOD.BP.BC.No.120\/21.04.098\/2013-14 issued guidelines on Liquidity Coverage Ratio (LCR). India\u2019s Basel III Framework on Liquidity Standards includes the LCR requirement, which mandates that banks hold a sufficient stock of high-quality liquid assets (HQLAs) to cover net cash outflows over a 30-day stress period. More recently, the RBI has updated and revised the LCR rules, and the latest version of the LCR framework is set to take effect from 1 April 2026. The RBI issued final Basel III NSFR guidelines in May 2018 initially stipulating implementation from 1 April 2020. However, due to the COVID-19 pan-demic, the effective date was deferred. The NSFR requirement ultimately came into force on 1 October 2021 pursuant to circular dated February 5, 2021 bearing reference no. RBI\/2020-21\/95 DOR.No.LRG.BC.40\/21.04.098\/2020-21.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Which different sources of funding exist in your jurisdiction for banks from the national bank or central bank?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The RBI acts as the banker to banks, enabling them to maintain accounts for statutory cash reserve re-quirements and transaction balances. It provides short-term funding and liquidity management through mechanisms such as the repo rate, at which it lends to banks, and the reverse repo rate, at which banks park surplus funds. Banks also use facilities like the liquidity adjustment facility and the marginal standing facility to manage day-to-day liquidity and access overnight funds in times of need.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do banks have to publish their financial statements? Is there interim reporting and, if so, in which intervals?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Banking companies are required to prepare standalone financial statements and consolidated financial statements (including financial statements of domestic and foreign subsidiaries) for each financial year, as of the last working day of that year, in the manner specified under the BR Act and the directions issued by the RBI. These statements must be submitted to, inter alia, the RBI as returns within three months from the end of the period to which they relate.<\/p>\n<p>Commercial banks, whether listed or unlisted, must also disclose their consolidated financial statements in their annual reports. Additionally, consolidated financial statements are required on a half-yearly basis as part of the consolidated prudential returns submitted to the RBI\u2019s Department of Banking Supervision.<\/p>\n<p>Banks whose shares are listed on a stock exchange are subject to further compliance obligations with respect to disclosures and submission of financial statements under applicable securities laws, including quarterly unaudited results.<\/p>\n<p>Banking companies incorporated in India, including subsidiaries of foreign banks, as well as foreign banks operating branches in India, are also required to submit financial statements and comply with certain reporting requirements to the Registrar of Companies under the Companies Act, in addition to the RBI reporting requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does consolidated supervision of a bank exist in your jurisdiction? If so, what are the consequences?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, the RBI undertakes consolidated supervision of banks, overseeing not only the standalone bank but also its entire group, including domestic and foreign subsidiaries, holding companies, joint ventures, and other entities that can influence policy decisions or derive economic benefits from the bank. Under this framework, banks must submit half-yearly consolidated prudential returns and may be directed to provide additional information or undergo inspections of associate enterprises. The RBI monitors group-level capital adequacy, liquidity, intra-group exposures, investments, and permissible business activities of subsidiaries, and can issue directions or impose restrictions on dividends, expansions, or new exposures if risks are identified.<\/p>\n<p><strong>Consequences of Consolidated Supervision<\/strong><\/p>\n<p><strong>(i) Stricter capital and liquidity requirements:<\/strong> Banks must maintain capital adequacy ratios and liquidity buffers at the group level, covering subsidiaries and controlled entities.<\/p>\n<p><strong>(ii) Regulatory reporting obligations:<\/strong> Banks submit half-yearly consolidated prudential returns to the RBI, including assets, liabilities, off-balance-sheet items, and risk exposures.<\/p>\n<p><strong>(iii) Restrictions on group transactions and investments:<\/strong> RBI monitors intra-group lending, guarantees, and exposures, and sets limits on equity investments in subsidiaries, financial companies, non-financial companies, and NBFCs under the bank\u2019s control. Subsidiaries may undertake only activities permitted for the parent bank under the BR Act unless RBI (or sometimes the central government) approves additional activities.<\/p>\n<p><strong>(iv) Supervisory actions:<\/strong> The RBI can issue directions or restrictions if group-level risks are identified, including limits on dividends, expansions, or new exposures.<\/p>\n<p><strong>(v) Enhanced transparency and investor confidence:<\/strong> Consolidated supervision ensures stakeholders have a clear view of the bank\u2019s overall health, reducing systemic risk.<\/p>\n<p>India has a robust system of consolidated supervision, under which the RBI oversees the entire banking group, including subsidiaries, holding companies, joint ventures, and controlled NBFCs. This ensures group-level soundness, risk containment, regulatory compliance, and affects capital requirements, liquidity, intra-group exposures, reporting obligations, and operational flexibility.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What reporting and\/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, acquiring shareholding or control of a bank is strictly regulated under the BR Act and RBI guidelines. Any person intending to acquire an aggregate holding of 5% or more of the paid-up capital or voting rights of a bank, referred to as a major shareholding, must obtain prior approval from the RBI. The RBI grants approval after being satisfied that the acquisition is in the public interest, in the interest of banking policy, to prevent the affairs of the bank being conducted in a manner detrimental to the bank, aligned with emerging trends and international best practices, or in the interest of the banking and financial system in India. The acquirer must also meet the RBI\u2019s fit and proper criteria, which include integrity, financial soundness, experience, and absence of criminal or regulatory violations. Approval is required for direct or indirect control, including influence over the board, management, or policy decisions.<\/p>\n<p>Promoter entities are subject to a maximum shareholding of 26% of the bank\u2019s paid-up capital or voting rights after 15 years from commencement of the bank\u2019s operations. For the period prior to completion of 15 years, the RBI may specify limits and conditions at the time of issuing the banking license or as part of a shareholding dilution plan. Non-promoter entities, including natural persons, financial institutions, non-financial institutions, government entities, and supranational organizations, may acquire and hold up to 10\u201315% of the bank\u2019s paid-up capital or voting rights, depending on RBI approval.<\/p>\n<p>Banks are required to establish continuous monitoring mechanisms to ensure compliance with these limits. After the issue and allotment of shares, banks must report the details to the RBI within 14 days. Foreign investors must also comply with the Foreign Exchange Management Act (FEMA) and foreign in-vestment caps, which currently allow up to 74% ownership in private banks under certain conditions.<\/p>\n<p>Following acquisition, the RBI may impose conditions on board representation, capital infusion, dividends, or other management decisions to safeguard the stability of the banking system. Acquisitions made without prior approval are considered invalid, and the RBI can direct divestment. Non-compliance may result in penalties, restrictions on future acquisitions, and reputational consequences.<\/p>\n<p>This regulatory framework ensures that any change in control or major shareholding of a bank does not compromise the safety, soundness, governance, or public confidence in the Indian banking system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, India\u2019s regulatory regime imposes conditions on eligible owners of banks, particularly regarding major shareholdings and control. Any acquisition of 5% or more must be notified to the RBI, and 10% or more, or control of the bank, requires prior RBI approval. Banks must adopt a board-approved fit and proper framework for major shareholders, consistent with RBI guidelines.<\/p>\n<p>In deciding applications, the RBI considers factors such as the applicant\u2019s integrity, past criminal or disciplinary proceedings, convictions under financial protection laws, and source of funds, among others. Applicants from FATF non-compliant jurisdictions are prohibited from acquiring major shareholding. Owners must also meet financial soundness and experience criteria, and banks must monitor compliance and report changes to the RBI.<\/p>\n<p>RBI may impose conditions on board representation, capital, dividends, and group transactions, and non-compliance can result in divestment, penalties, or restrictions, ensuring stability, governance, and integrity of the banking system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific restrictions on foreign shareholdings in banks?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, foreign investment in banks is strictly regulated under the FDI Policy and RBI guidelines. Aggregate foreign investment in a private bank is capped at 74% of paid-up capital, with up to 49% via the automatic route and 49\u201374% requiring government approval, while at least 26% must be held by residents. Any acquisition of 5% or more requires RBI notification, and 10% or more or control requires prior RBI approval.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a special regime for domestic and\/or globally systemically important banks?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, the RBI has a special framework for Domestic Systemically Important Banks (\u201cD-SIBs\u201d). Banks are classified as D-SIBs based on factors such as size, interconnectedness, lack of readily available substi-tutes, and complexity. Currently, State Bank of India, HDFC Bank, and ICICI Bank have been recognized as D-SIBs.<\/p>\n<p>D-SIBs are required to maintain additional Common Equity Tier 1 (CET1) capital as a percentage of risk-weighted assets, above the requirements for other banks. This ensures that they have greater loss-absorbing capacity to reduce systemic risk.<\/p>\n<p>For foreign banks designated as Global Systemically Important Banks (\u201cG-SIBs\u201d) operating in India un-der the branch model, the RBI requires them to maintain the additional CET1 capital surcharge applicable to G-SIBs under the regulations of their home country.<\/p>\n<p>This framework enhances financial stability, strengthens the resilience of systemically important banks, and limits potential systemic impact in the event of distress.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, the RBI can impose a wide range of sanctions on banks or their officers for non-compliance with regulations to safeguard financial stability and consumer interests. These include monetary penalties or fines for breaches of prudential norms or reporting obligations. The RBI can also restrict operations, including lending, dividend distribution, capital raising, or business expansion, and may place banks under the Prompt Corrective Action (\u201cPCA\u201d) framework, limiting activities until compliance is restored.<\/p>\n<p>The RBI can take management actions, such as removal, suspension, or appointment of directors or key officers, and under the Banking Regulation Act, it can direct banks to cease unsafe practices, restrict business activities, or take corrective action on capital, liquidity, or provisioning. For serious violations, it can cancel or restrict banking licenses, order mergers, restructuring, or resolution plans, and initiate criminal proceedings against bank officials.<\/p>\n<p>These measures are risk-based and proportional, ensuring accountability, transparency, and adherence to regulatory norms, while protecting depositors and reinforcing trust and stability in India\u2019s banking system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How active are banking regulators in enforcement against banks and senior individuals, and what recent trends can be observed in supervisory or enforcement action?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, the RBI has become increasingly active in enforcement against banks and senior individuals to ensure compliance and financial stability. In FY 2024\u201325, it imposed over 350 penalties totalling to \u20b954.78\u202fcrore on banks, NBFCs, and other entities for violations including KYC lapses, cybersecurity weaknesses, asset classification errors, and reporting deficiencies. Major banks like Axis Bank, Kotak Mahindra, IDFC First, and Punjab National Bank have been penalized.<\/p>\n<p>Beyond fines, the RBI uses operational restrictions, such as limiting onboarding of new customers, restricting products, and implementing PCA for weak banks. Enforcement also targets governance lapses in co-operative banks and NBFCs. The RBI has expanded its supervision division, hiring over 800 officers, including technology specialists, reflecting a shift toward risk-based, intensive supervision.<\/p>\n<p>Recent trends show a move from symbolic penalties to actions affecting operations and board accountability, emphasizing risk management, governance, and depositor protection. High-profile cases, including restrictions on Paytm Payments Bank, highlight the regulator\u2019s willingness to take drastic measures when systemic risks are identified.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are client\u2019s assets and cash deposits protected?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, clients\u2019 assets and cash deposits are protected through a combination of regulatory safeguards, insurance mechanisms, and prudential norms enforced by the RBI. The DICGC, a subsidiary of the RBI, insures deposits up to \u20b95 lakh per depositor per bank, covering savings, current, fixed, and recurring de-posits. All commercial and cooperative banks are registered with DICGC, which ensures timely reimbursement in case of bank failure.<\/p>\n<p>Banks are subject to conservative capital adequacy requirements, strict loan classification and provisioning norms, and risk-based supervision to prevent excessive risk-taking. The RBI also enforces cybersecurity and digital banking safeguards, including robust encryption, multi-factor authentication, real-time fraud monitoring, and a limited liability policy protecting customers from unauthorized transactions if reported promptly.<\/p>\n<p>To further prevent fraud, two-factor authentication is required for domestic online card transactions, and banks are prohibited from allowing \u2018tap\u2019 mode payments above prescribed limits on physical terminals. Segregated accounts, trust arrangements, and legal frameworks under the BR Act, Companies Act, and SEBI rules provide additional protection of client assets.<\/p>\n<p>Overall, these measures ensure that client deposits and assets are secure, recoverable, and safeguarded against operational, financial, and cyber risks, maintaining trust in the Indian banking system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What recovery and\/or resolution planning obligations apply to banks, and how are recovery and\/or resolution plans reviewed and assessed by supervisory authorities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, banks, particularly large and systemically important banks, are required to maintain internal recovery plans as part of their risk management and governance framework. These plans outline measures such as capital raising, asset sales, liability restructuring, and operational adjustments, and must be board-approved and regularly updated.<\/p>\n<p>The RBI reviews recovery preparedness through the Supervisory Review and Evaluation Process (\u201cSREP\u201d), ongoing inspections under Section 35 of the BR Act, and directions issued under Section 35A of the BR Act. For banks facing potential failure, the RBI may require resolution plans, detailing strategies to restructure, merge, or wind down operations while minimizing systemic disruption.<\/p>\n<p>Under Section 45, the RBI has statutory powers to prepare or sanction reconstruction or amalgamation schemes in the public interest or for depositors\u2019 protection. These may include mergers, capital reconstitution, or liability restructuring, and the RBI can impose a moratorium pending such action.<\/p>\n<p>These obligations ensure banks maintain predefined, actionable strategies to manage crises, protect depositors, and limit systemic risk, reinforcing financial stability in India.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered? Does it apply in situations of a mere liquidity crisis (breach of LCR etc.)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>India currently does not have an active statutory bail-in mechanism, but the concept is recognized under the Financial Resolution and Deposit Insurance (\u201cFRDI\u201d) Bill framework and is partially integrated into the RBI\u2019s resolution powers under the Banking Regulation Act, 1949, although the FRDI Bill was not enacted.<\/p>\n<p>Instead, the RBI uses the PCA framework for all banks, including foreign banks operating in India, to monitor financial health and intervene proactively. Banks are assessed on Capital Adequacy Ratio, Net Non-Performing Assets, and Leverage Ratio, and breaching thresholds triggers staged corrective measures.<\/p>\n<p>PCA measures include restrictions on dividend distribution, branch expansion, and high-risk lending, along with heightened regulatory oversight. In severe cases, the RBI can require management changes, capital infusion, forced mergers, or license revocation.<\/p>\n<p>While bail-in provides for writing down or converting eligible liabilities into equity in international practice, in India, resolution primarily relies on PCA interventions, mergers, reconstruction, or liquidation, with insured deposits protected under DICGC. The PCA framework serves as an early warning system, ensuring timely remedial action to restore financial stability.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a requirement for banks to hold gone concern capital (\"TLAC\")? Does the regime differentiate between different types of banks?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>India does not mandate TLAC for banks, but D-SIBs are required to maintain higher capital buffers to ensure loss-absorbing capacity. Banks use Additional Tier-1 (\u201cAT1\u201d) bonds and Tier-2 instruments as gone-concern capital. AT1 bonds are perpetual, high-risk securities that can be written down or converted into equity when capital falls below regulatory thresholds, while Tier-2 provides a secondary buffer.<\/p>\n<p>The regime differentiates banks by systemic importance, with larger D-SIBs facing stricter requirements. Foreign G-SIBs in India are expected to hold TLAC-equivalent buffers per home-country rules. These measures ensure banks maintain sufficient capital to absorb losses and protect financial stability.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a special liability or responsibility regime for managers of a bank (e.g. a \"senior managers regime\")?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, India has a special liability and responsibility regime for senior managers and key executives of banks. Under the BR Act, the RBI can issue directions to a bank\u2019s management, including directors and senior officers, to ensure proper governance, risk management, and regulatory compliance.<\/p>\n<p>Senior managers must meet the RBI\u2019s \u201cfit and proper\u201d criteria, covering integrity, competence, financial soundness, and compliance history, and are required to act in the best interests of depositors and shareholders. Banks are also expected to implement board-approved criteria to assess major shareholders and key managerial personnel.<\/p>\n<p>Failure to comply with RBI directions or involvement in misconduct, fraud, or unsafe practices can result in removal, suspension, debarment, or restrictions on managerial positions. The RBI can also hold senior managers accountable for violations of prudential norms, reporting obligations, or corporate governance standards, including initiating monetary penalties, restrictions on appointments, or criminal proceedings.<\/p>\n<p>This framework is reinforced by other authorities, such as the Ministry of Corporate Affairs, SEBI, CBI, ED, and SFIO, which can pursue civil, criminal, or regulatory action for offences like fraud, money laundering, or governance violations.<\/p>\n<p>Overall, the regime ensures that senior management bears clear responsibility for the bank\u2019s operation, risk management, and compliance, thereby strengthening governance and depositor protection in India\u2019s banking system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What regulatory, supervisory or market developments are likely to have the most significant impact on the banking sector in the jurisdiction over the next 12 to 18 months?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>India\u2019s banking sector is poised for significant regulatory, supervisory, and market developments over the next 12\u201318 months.<\/p>\n<p>The full Basel III implementation and Expected Credit Loss (ECL) provisioning framework will reshape capital planning, provisioning buffers, and risk measurement. Basel III\u2013aligned credit risk norms are expected to introduce granular risk weights across retail, corporate, MSME, and real estate exposures.<\/p>\n<p>The RBI is consolidating regulations into Master Directions for improved compliance and governance, while supervision of digital banking, fintech, cybersecurity, AI risk, and customer protection is intensifying. Digital Lending Directions and co-lending models enhance transparency and financial inclusion.<\/p>\n<p>D-SIBs face additional capital buffer requirements, and foreign G-SIBs are expected to maintain TLAC-equivalent buffers. Stricter oversight of NBFCs and group entities is anticipated, reducing contagion and intra-group risk.<\/p>\n<p>Consumer protection will be strengthened via the Integrated Ombudsman Scheme, faster grievance redressal, and stricter disclosure requirements. PSL norms and reporting standards will continue evolving, while RBI\u2019s Supervisory Data Quality Index will enhance regulatory monitoring.<\/p>\n<p>Technological transformation is a major driver: the unified payments interface (UPI), regulatory sandbox initiatives, digital co-lending, and RBI\u2019s pilot central bank digital currency are expanding financial access. Additionally, generative AI (GenAI) adoption is at a nascent stage but may significantly impact risk management, customer service, and operational efficiency.<\/p>\n<p>Macroeconomic conditions, rising digital adoption, and global trends like AI integration, cybersecurity, and climate-related finance will further influence banks\u2019 strategic, operational, and compliance priorities.<\/p>\n<p>In short, Indian banks will face a period of heightened regulatory sophistication, technological transformation, and supervisory intensity, affecting capital planning, digital operations, risk management, consumer protection, and overall financial stability.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">8112<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/131410","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=131410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}