RBI Issues Revised Guidelines for Wholly Owned Subsidiaries (WOS) of Foreign Banks- 2025 

The Reserve Bank of India (RBI), through Circular No. RBI/DOR/2025-26/144 dated November 28, 2025, has issued a significantly updated framework governing the establishment and operation of Wholly Owned Subsidiaries (WOS) by foreign banks in India. The revised guidelines mark an important regulatory shift aimed at strengthening financial stability, improving supervisory control, and ensuring enhanced protection for Indian depositors in an increasingly interconnected global banking environment. 

The updated norms draw heavily from global experience following the 2008 financial crisis, which exposed the challenges regulators face when dealing with large multinational banks operating across jurisdictions. Complex cross-border structures, inadequate disclosure standards in certain countries, and the absence of effective resolution mechanisms had contributed to systemic vulnerabilities worldwide. In this context, RBI highlights that local incorporation of foreign banks offers several advantages, such as the creation of a self-contained legal entity with its own capital base, ring-fenced assets, and an independent board bound by Indian law. This structure provides regulators with clearer oversight and enables more efficient resolution in case of financial distress. 

Under the revised framework, foreign banks are permitted to operate in India either through the branch mode or through a WOS; however, they must adopt only a single mode of presence. In certain situations, establishing a WOS becomes mandatory for instance, where the home jurisdiction offers preferential treatment to domestic depositors, where disclosure and supervisory standards are deemed inadequate, where the bank’s structure is excessively complex, or where the bank becomes systemically important in India. Banks operating in India post-August 2010 may also be required to convert their branches into a WOS if they fall under these criteria. New entrants must satisfy RBI regarding home-country supervision, financial soundness, international ranking, and must secure approval from their home regulator before applying for a WOS licence. 

A WOS must maintain a minimum paid-up capital of ₹500 crore, comply with Basel III capital and liquidity norms, and adhere to enhanced governance standards akin to those applicable to domestic private sector banks. These include having a majority of non-executive directors, at least one-third independent directors, and a full-time CEO who is resident in India. WOSs must comply with the full spectrum of Indian banking laws and RBI regulations on governance, outsourcing, IT systems, capital adequacy, branch authorisation, KYC, and priority sector lending. They may also raise non-equity capital in India, declare dividends subject to prudential guidelines, and optionally dilute foreign shareholding to 74% for listing on Indian exchanges. 

RBI has additionally outlined a detailed procedure for conversion of existing branch operations into a WOS, involving application through PRAVAAH, incorporation under the Companies Act, approval of an amalgamation scheme by shareholders, RBI sanction, and transfer of branch assets and liabilities to the newly incorporated subsidiary. 

Overall, the revised guidelines modernise India’s regulatory approach toward foreign bank presence, ensure better alignment with global standards, and reinforce RBI’s objective of safeguarding financial stability, enhancing transparency, and protecting the interests of depositors.