China to give foreign banks easier market access

The new regulations leave registration capital requirements for wholly foreign-owned banks unchanged

In a major bid to liberalise its banking sector, China has announced that it will lift a ban on foreign banks from opening more than one branch in a Chinese city, a move which could lead to Indian banks setting up more branches in the country.

"Foreign banks with sound risk controls and operation should be allowed to open more new branches in one city to enhance their capability to bolster the real economy," the China Banking Regulatory Commission (CBRC) was quoted as saying by the state-run Xinhua news agency.

As one of the moves to make the market access conditions for Chinese and foreign banks "more uniform," the CBRC also decided to abolish the "minimum operating capital" for setting up a branch bank.

Instead, a branch bank can be established so long as the applicant has the "disbursement capabilities for operating capital" and "operating funding is in place when the new branch is set up."

Putting them on an equal footing with Chinese banks, once operationalised the step will allow foreign banks to introduce e-banking and debit card services without requiring any approval from authorities, the report said.

The new regulations leave registration capital requirements for wholly foreign-owned banks unchanged.

They still must have a minimum registration capital of one billion yuan (about $162.8 million) to set up financial institutions in China.

The new move could lead Indian banks speed up their efforts to open more branches in China. Currently SBI has opened two branches in China -- one in Shanghai and another in port city of Tianjin.

About seven Indian banks have representative offices in different cities in China while four including SBI have opened their branches mainly to take advantage of the burgeoning India-China bilateral trade which touched an all time high of $73.9 billion in 2011 but declined to $66.47 billion in 2013.

Though the balance of trade is tilted heavily in favour of China, averaging about $35 billion a year, Indian banks which mostly cash-in on Line of Credit and financing of export-import businesses show interest in opening branches as they seek to leverage business from both Indian and Chinese firms.