Foreign Banks

Foreign Banks: Under the sub-Section (2) of Section 11 of the BR Act, a foreign bank (banking company incorporated outside India) operating in India, has to deposit and keep deposited with the Reserve Bank, an amount of Rs.15 lacs and if it has a place of business in Mumbai or Kolkata or both, Rs. 20 lacs. The amount has to be kept in cash, unencumbered approved securities or partly in both. Apart from this, an amount of twenty per cent of the profit for each year in respect of business transacted through the branches in India as disclosed in the profit and loss account has to be deposited with the Reserve Bank. The securities deposited can be replaced by other unencumbered approved securities or cash deposited can be similarly replaced by securities. The Central Government can exempt any foreign bank from this requirement on the recommendation of the Reserve Bank for a specified period if the amounts deposited already by it are considered adequate. On the cessation of business by any foreign bank for any reason, these deposits shall form the assets of the company on which the creditors in India shall have the first charge.

Accounting & Finance for Banking

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