Improved Banking Services for NRIs in India
In terms of purchasing power parity (PPP) it is expected to become world’s third largest economy by 2050, according to a recent report titled, 'World in 2050 The BRICs and Beyond: Prospects, Challenges and Opportunities' by PricewaterhouseCoopers (PwC). It is one of the most attractive destinations for business investments for non-resident Indians (NRIs) and overseas Indians. It is a land of large manpower base, diversified natural resources and strong macroeconomic fundamentals.
The robust financial system boasts the economy of India. It is essential for economic growth and development. The financial services sector in India includes banking sector, capital markets, insurance sector, private equity, stock markets, etc.
Banking services in India
Banking in India is moderately consolidated, with the top 10 players accounting for approximately 60 per cent of the total industry. The Indian banking sector is majorly dominated by public sector banks.
The Indian economy has registered a rapid growth in the banking population in previous decade due to increase in demand for consumer loans, housing loans and credit cards. There will be a requirement of at least 40,000–50,000 additional bank branches and 160,000–190,000 additional ATMs in this decade.
Major services of banks in India include:
- Privatisation & Disinvestments
- Corporate & Debt Restructuring (Mergers & Acquisitions/ Takeovers)
- Insurance & Financial Institutions regulations
- Licensing and regulatory approvals
- Project / Assets Finance
- Consortium, Mortgage, Pledge & Lien Agreements
- Loan, Credit & Security Documentation
- Futures/derivatives litigation
Indian banks also provide business investments opportunity to the NRIs and person of Indian origin (PIOs). These are:
- Non-Resident (External) Rupee (NRE) Accounts: NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney
- Non-Resident Ordinary (NRO) Rupee Account: NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Account should be denominated in Indian Rupees
- Foreign Currency Non Resident (Bank) Account – FCNR (B) Account: FCNR (B) accounts are only in the form of term deposits of 1 to 5 years. All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. Account can be in any freely convertible currency
Government initiatives to boost Indian banking sector
The Government of India has provided an added advantage to the banking industry by proposing to set up an Asset Reconstruction Firm. The banks burdened with non-performing assets will ease considerably, with the setting up of such companies.
The Government of India has also permitted offshore banking units to be set up in special economic zones (SEZs).
Foreign direct investments (FDI) in private banking sector of India is allowed up to 74 per cent, where FDI up to 49 per cent is allowed through automatic route and FDI beyond 49 per cent but up to 74 per cent is allowed through government approval route.
Future of Indian banks
Indian banking industry is anticipated to grow exponentially and become the world’s third largest in asset size (projected at US$ 28,500 billion from the current US$ 1,350 billion) by 2025, according to a report by the Boston Consulting Group (BCG) India.
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