India’s central bank has granted in-principle approval to Japan’s Sumitomo Mitsui Banking Corp (SMBC) to establish a wholly owned subsidiary in the country. This move signifies a significant advancement in SMBC’s expansion strategy within the Indian market. SMBC, which previously operated in India through branches, will now transition to a locally incorporated subsidiary, as per the Reserve Bank of India’s statement.
The approval from the RBI enables SMBC to enhance its operational flexibility in India. By becoming a locally incorporated entity, the bank will enjoy privileges similar to domestic banks, such as the freedom to establish branches more easily compared to foreign bank branches. The current branch-based operations of SMBC in India, spanning New Delhi, Mumbai, Chennai, and Bengaluru, will undergo transformation through this approval.
The establishment of a wholly owned subsidiary will also ensure that the subsidiary’s capital remains separate from its parent company, safeguarding the Indian financial system from external disturbances. SMBC’s decision to set up a wholly owned subsidiary follows its acquisition of a 24% stake in Yes Bank in 2024, which bolstered its presence in India’s banking sector. This strategic move is anticipated to reinforce SMBC’s long-term objectives in India, a rapidly growing major economy globally.
The Reserve Bank of India may grant SMBC a license to commence banking operations in the wholly owned subsidiary mode under Section 22 (1) of the Banking Regulation Act, 1949, upon verifying the bank’s compliance with the stipulated conditions. The approval for SMBC to establish a Wholly Owned Subsidiary (WOS) by converting its existing branches in India underscores the bank’s commitment to expanding its foothold in the Indian market.
