LOCAL CLIENTS TO GET PRIORITY IF INDIA ARM OF BANK GOES BUST

NEWDELHI: Indian customers will have the first right over the assets of foreign banks operating in India in case of bankruptcy or any resolution action, the department of economic affairs under the finance ministry has indicated to a parliamentary panel.

This system will be a part of the contentious Financial Resolution and Deposit Insurance Bill 2017, which is under scrutiny by a joint House panel. The panel is expected to submit its report by the end of the budget session.

At a meeting of the panel, the department clarified that in case of any resolution action on the parent company in a foreign country, Indian customers will have the first right over the assets of the local arm. “The creditors of the specified service providers in India shall have first charge on the assets of the specified service provider for the purpose of resolution or liquidation under the bill,” said a ministry note.

The department of economic affairs has further clarified that the resolution of the Indian branches will be done in accordance to the bill and not be subjected to provisions of the foreign resolution plan. “It empowers the appropriate regulator to initiate resolution against a branch office of a corporate body incorporated outside India,” the note further said. Experts say this is an effort to ringfence Indian depositors. “This provision in the bill will ringfence Indian depositors against risks ,” said Kuntal Sur, partner and head of financial services risk at PWC India.