Mumbai, Jan 14: India’s central bank on Wednesday announced that it has given in-principle approval to Japan’s Sumitomo Mitsui Banking Corp (SMBC) to set up a wholly owned subsidiary in the country, marking an important step in the bank’s expansion plans in the Indian market.
Shift from branch to subsidiary model
In a statement, the Reserve Bank of India said the approval allows SMBC to move from its current branch-based operations to a locally incorporated subsidiary. Until now, the Japanese lender has been operating in India through a branch.
Official confirmation by RBI
“RBI has decided to grant ‘in-principle’ approval to SMBC, Japan for setting up a Wholly Owned Subsidiary (WOS) in India,” the central bank said in the statement.
Greater operational flexibility
Setting up a wholly owned subsidiary will give SMBC greater operational flexibility in India. As a locally incorporated entity, the bank will be treated on par with domestic banks, including the ability to open branches more freely without the restrictions that apply to foreign bank branches.
Existing presence in India
“SMBC is currently carrying on banking business in India in branch mode through its four branches located in New Delhi, Mumbai, Chennai and Bengaluru,” it added.
Ring-fencing of capital
The structure also ensures that the subsidiary’s capital remains ring-fenced from its parent, helping protect the Indian financial system from external shocks.
Conversion of existing branches
“The ‘in-principle’ approval has been granted to the bank for setting up a WOS through conversion of its existing branches in India,” RBI stated.
Stake in Yes Bank
SMBC already has a growing presence in India. In 2024, the bank acquired a 24 per cent stake in Yes Bank, strengthening its footprint in the country’s banking sector.
Long-term India strategy
The move to set up a wholly owned subsidiary is expected to further support SMBC’s long-term strategy in India, one of the world’s fastest-growing major economies.
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Licence subject to conditions
“The RBI would consider granting a licence for commencement of banking business in WOS mode under Section 22(1) of the Banking Regulation Act, 1949 to SMBC on being satisfied that the bank has complied with the requisite conditions laid down by RBI as part of ‘in-principle’ approval,” the central bank mentioned.
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