Sector or Sub-Sector

Limitations on Market Access

Limitations on National Treatment

Financial Services

The commitments in financial services¹ are made in accordance with the General Agreement on Trade in Services and the Annex on Financial Services. All the commitments are subject to entry requirements, domestic laws, rules and regulations and the terms and conditions of the Reserve Bank of India, Securities and Exchange Board of India and any other competent authority in India.

A. Insurance and Insurance related services

Non-life, limited to

(1)

Unbound except in the case of insurance

(1)

Unbound.

insurance of freight

of freight, where there is no requirement

Ex.5(a)(i)(B)

that goods in transit to and from India

should be insured with Indian insurance

companies only. Insurance is taken by the

buyer or seller in accordance with the

terms of the contract. This position will

be maintained. Once under a contract the

Indian importer or exporter agrees to

assume the responsibility for insurance

such as in the case of f.o.b. contracts for

imports into India or c.i.f. contracts for

exports from India, insurance has to be

taken only with an Indian insurance

company.

(2)

Unbound.

(2)

Unbound.

(3)

Unbound.

(3)

Unbound.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated in the

horizontal section.

horizontal section.

(1),

(2)

Reinsurance can be taken with foreign

(1)

Unbound.

Reinsurance and

reinsurers to the extent of the residual

retrocession

uncovered risk after obligatory or

(2)

Unbound.

5(a) (ii)

statutory placements domestically

with Indian insurance companies.

(3)

Unbound.

(3)

Unbound.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated in the

horizontal section.

horizontal section.

Insurance intermediation

(1),

(2)

Reinsurance of domestic risks can be

(1)

Unbound.

limited to reinsurance

placed with foreign reinsurers

Ex.5(a)(iii).

through overseas brokers, to the

(2)

Unbound.

extent mentioned under reinsurance

and retrocession.

(3)

(i)

Overseas brokers are allowed to have

(3)

Unbound.

resident representatives and

representative offices who can

procure reinsurance business from

Indian insurance companies to the

extent mentioned above. They can

also place reinsurance business from

abroad with Indian insurance

companies.

(ii)

Except for the business indicated

above, the resident representatives

and representative offices cannot un-

dertake any other activity in India.

(iii)

All expenses of the resident repre-

sentatives and representatives offices

have to be met by remittances from

abroad and no income can be re-

ceived in India from Indian residents.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated in the

horizontal section.

horizontal section.

B. Banking and other financial services (excluding insurance)

1.

(i)

Acceptance of

(1)

Unbound.

(1)

Unbound.

deposits and other

repayable funds

(2)

Unbound.

(2)

Unbound.

from the public

5(a)(v).

(3)

(i)

Only through branch operations of a

(3)

(i)

Foreign Banks are required to

foreign bank licensed and supervised

constitute Local Advisory

(ii)

Lending of all

as a bank in its home country.

Boards consisting, inter alia,

types including

of professionals and persons

consumer credit,

(ii)

Grant of licence as permissible under

having expertise in areas such

mortgage credit

existing laws.

as small-scale industry and

and financing

exports. The Chairman and

of commercial

(iii)

A limit of twelve licences per year

members of the Local

transactions but

both for new entrants and existing

Advisory Board must be

excluding

banks.

resident Indian nationals

factoring.

except for the Chief Executive

Ex.5(a) (vi)

(iv)

Banks are allowed to install ATMs

Officer who may be a foreign

at branches and at other places

national The appointment of

(iii)

All payment and

identified by them. Installation of

Chairman and members of the

money

ATM at a place other than in licensed

Board requires Reserve Bank

transmission

branches is treated as a new place of

of India's approval

services including

business and requires a licence.

credit, charge and

Licences issued for ATMs installed

(ii)

Foreign banks are required to

debit cards,

by foreign banks will not be included

publish consolidated financial

travellers cheques

in the ceiling of twelve licences

statements of the Indian

and bankers’ draft.

referred to in item (iii) above.

branches as at March 31 every

5(a) (viii)

year.

(v)

Investments in other financial services

(iv)

Guarantees and

companies by branches of foreign

(iii)

Public sector enterprises can

commitments.

banks licensed to do banking business

invest surplus funds in term

5(a)(ix)

in India individually not to exceed 10

deposits only with scheduled

per cent of owned funds or 30 per

commercial banks

(v)

Trading for own

cent of the invested company’s

incorporated in India.

account of:

capital, whichever is lower.

(a)

money market

(vi)

Licences for new foreign banks may

instruments.

be denied when the maximum share

of assets in India both on and off

(b)

foreign exchange.

balance sheet of foreign banks to total

assets both on and off balance sheet

(c)

transferable

of the banking system exceeds 15 per

securities

cent.

Ex.5(a)(x)(A)

(B)(E).

(vii)

Foreign banks are subject to non-

discriminatory resource allocation

(vii)

Portfolio

requirements.

management,

custodial and trust

(4)

unbound except as indicated in the

(4)

Unbound except as indicated

services.

horizontal section.

in the horizontal section.

Ex. 5(a)(xiii)

(vii)

Clearing services

for other banks for

cheques, drafts and

other instruments.

Ex. 5(a)(xiv)

2.

Participation in

(1)

Unbound.

(1)

Unbound.

issues of all kinds

of securities,

(2)

Unbound.

(2)

Unbound.

including

underwriting and

(i)

Allowed for foreign bank branches

(3)

Unbound except for entities

placement as agent

licensed to do banking business in

established in accordance with

(whether publicly

India.

the limitations specified in the

or privately) and

market access column.

provision of

(ii)

Allowed for foreign financial services

services related to

companies (including banks ) through

such issues.

incorporation with foreign equity not

5(a)(xi)

exceeding 51 per cent.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

horizontal section.

in the horizontal section.

3.

Stock broking

(1)

Unbound.

(1)

Unbound.

Ex.5(a)(x)(E)

(2)

Unbound.

(2)

Unbound.

(3)

Through establishment of locally

(3)

Unbound except for entities

incorporated joint venture company

established in accordance with

with foreign equity not exceeding 49

the limitations specified in the

per cent. The foreign equity

market access column.

participation will be limited to

recognized foreign stock broking

companies.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

horizontal section.

in the horizontal section.

4.

Financial

(1)

Unbound.

(1)

Unbound.

consultancy

services, i.e.

(2)

Unbound.

(2)

Unbound.

financial advisory

services provided

(i)

Allowed for foreign banks branches

(3)

Unbound except for entities

by financial

licensed to do banking business in

established in accordance with

advisers, etc. to

India.

the limitations specified in the

customers on

market access column.

financial matters,

(ii)

Allowed for foreign financial services

investment and

companies (including banks ) through

portfolio research

incorporation with foreign equity not

and advice, advice

exceeding 51 per cent.

on acquisitions and

on corporate

restructuring and

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

strategy.

horizontal section.

in the horizontal section.

Ex. 5(a)(xvi)

5.

Factoring

(1)

Unbound.

(1)

Unbound.

Ex.5(a) (iv)

(2)

Unbound.

(2)

Unbound.

(3)

Allowed for foreign financial services

(3)

Unbound except for entities

companies (including banks ) through

established in accordance with

incorporation with foreign equity not

the limitations specified in the

exceeding 51 per cent.

market access column.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

horizontal section.

in the horizontal section.

6.

Financial leasing.

(1)

Unbound.

(1)

Unbound.

5(a)(vii)

(2)

Unbound.

(2)

Unbound.

(3)

Allowed for foreign financial services

(3)

Unbound except for entities

companies (including banks) through

established in accordance with

incorporation with foreign equity not

the limitations specified in the

exceeding 51 per cent.

market access column.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

horizontal section.

in the horizontal section.

7.

Venture capital

(1)

Unbound.

(1)

Unbound.

(2)

Unbound.

(2)

Unbound.

(3)

(i)

Allowed for foreign financial services

(3)

Unbound except for entities

companies (including banks) through

established in accordance with

incorporation with foreign equity not

the limitations specified in the

exceeding 51 per cent.

market access column.

(ii)

funding has to be entirely out of

equity.

(4)

Unbound except as indicated in the

(4)

Unbound except as indicated

horizontal section.

in the horizontal section.

Note:

The modes of supply are: (1) Cross-border supply; (2) Consumption abroad; (3) Commercial presence; and (4) Presence of natural persons.

References

Mattoo, A. (1998), 'Financial Services and the WTO: Liberalization in the Developing and Transition Economies', Geneva, Switzerland: World Trade Organisation.

1.

Financial services under GATS consist of insurance services and banking and other financial services. Insurance services encompass direct insurance (life and non-life), reinsurance and retrocession, insurance intermediation, and auxiliary insurance services (including consultancy, actuarial, risk assessment and claim settlement services). Banking and other financial services are defined under GATS to include acceptance of deposits, lending, financial leasing, payment and money transmission services, guarantees and commitments, trading (in money market instruments, foreign exchange, derivative products, exchange rate and interest rate instruments, transferable securities, and other negotiable instruments and financial assets),participation in issues of securities, money broking, asset management, settlement and clearing services, provision and transfer of financial information (including data processing), and advisory and intermediation services.