State Bank of Mauritius gets banking license in India; Woori, PPF in queue

SBM is the second largest in Mauritius

State Bank of Mauritius has become the first foreign entity to receive a license to start a bank in India.

The bank, along with DBS of Singapore, had received preliminary approval several months ago.

It has now received the final banking license on Dec 6, banking sources confirmed.

Mauritius, despite being a tiny Island nation in the Indian ocean, has extensive financial links with India.

A large chunk of foreign capital that gets invested in Indian stock markets comes via Mauritius due to favorable agreements between India and the Island country.

Unlike branches, a wholly owned unit in India will be eligible to do almost all the activities that Indian banks do, including lending to the corporate sector.

Currently, all other foreign banks — such as Citibank, Standard Chartered and HSBC — operate via local branches and offices. The RBI severely limits the number of branches that foreign banks can open without obtaining a banking permit in India.

SBM has four branches in India at present. In its home country, the bank targets both individuals as well as companies and is the second largest by banking assets.

Over the last few weeks, State Bank of Mauritius has been busy hiring banking professionals, including former ICICI executive Siby Sebastian who has been roped in to head the operations of the Indian unit.

The Reserve Bank of India had announced guidelines for foreign banks to set up wholly owned subsidiaries in 2013, but foreign lenders have been apprehensive of the tight financial scrutiny that they will be subjected to in the country.

Foreign banks often face political heat in India for allegedly helping Indians move money to tax havens abroad.

With a branch-only presence, foreign banks do not have to subject themselves to the same level of scrutiny and do not stand to lose much by way of fines and penalties.

On the other hand, these companies have to bring in millions of dollars to start wholly owned subsidiaries.


However, several banks are now starting to show interest in the Indian market, and not just for providing an India touch-point for their global clients.

Singapore-based DBS Bank, South Korea-based Woori Bank and Czech Republic-based PPF Bank are the other three banks that have applied for starting wholly owned subsidiaries in India.

Out of these, only DBS Bank has received an ‘in-principle’ approval, and is awaiting the award of the actual banking license.

DBS has said that it is interested in dealing with small and medium enterprises, supply chain and transaction banking in the Indian market.

PPF banka, based in Czech Republic, is primarily focused on corporate and investment related services, while Korea’s Woori Bank is one of the the oldest banks in Asia and was started 119 years ago.

Woori already has extensive operations in China, Bangladesh and Indonesia.