📅May 19, 2025 | By Prashant Marathe | EduInvesting.in
🧠 At a Glance:
Let’s say you deposit your birthday money into a big fancy foreign bank’s branch in India. Everything’s great — until one day,the bank’s HQ in some other country collapses like a Jenga tower.Now you’re thinking:
“Wait… ismymoney in India gone too?”
Don’t worry.RBI has a plan. But it depends onhow that foreign bank operates in India— as abranchor as aWholly Owned Subsidiary (WOS). And yes, this article breaks it down like you’re 12, but curious enough to start your own fintech.
🏦 Two Ways Foreign Banks Operate in India:
Imagine foreign banks as guests at a party (India being the party).
1.Branch Model– The “Tourist Guest”
- Comes with its own rules from back home.
- Lives in your house butdoesn’t fully follow your house rules.
- If something bad happens in their country,you suffer too.
2.Wholly Owned Subsidiary (WOS)– The “Resident NRI”
- Registerslocally in Indialike a normal Indian bank.
- Followsall
- Indian rules— from RBI’s capital rules to tax laws.
- If their foreign HQ collapses,Indian arm survives(mostly).
🚨 So What Happens When a Foreign Bank Fails?
🤕 If It’s a Branch:
Bad News First.
- The Indian operations arenot legally separatedfrom the parent bank.
- If theforeign HQ collapses, creditors can go after theIndian branch too.
- Depositors in India may lose moneyif RBI can’t step in fast.
- RBIcanimpose amoratorium(basically freezing everything), but recovery is messy and slow.
💪 If It’s a Wholly Owned Subsidiary (WOS):
Much Safer!
- The Indian arm is aseparate company.
- It hasits own capital, reserves, and books.
- Even if the parent company in Dubai, London, or Mars collapses, the Indian WOSkeeps running.
- It may get sold, restructured, or merged — butyour money is far safer.
🧃 Let’s
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