India eases rules for foreign banks

India's central bank has been looking to take measures to open up the banking sector

India's central bank has unveiled new rules that will allow foreign banks to expand their presence in the country.

Foreign banks will now be allowed to set up "wholly owned subsidiaries" in India, which will enable them to open branches anywhere in the country.

The subsidiaries will need a minimum capital of 5bn rupees ($80m; £50m).

The changes are a part of the push by the central bank's new governor, Raghuram Rajan, to liberalise the sector as he looks to boost growth.

Foreign banks have long wanted to boost their presence in the country - home to nearly 1.2 billion people.

However so far they have had to face tight regulations, especially over the number of branches they can open.

The Reserve Bank of India said the new rules would allow them to open branches "at par with Indian banks".

However, they will need permission to open branches in "certain locations that are sensitive from the perspective of national security".

The RBI said it would also consider introducing takeover rules that would allow foreign companies to own as much as 74% of a domestic bank.

But it said any such decision will be taken after a review relating to "the extent of penetration of foreign investment in Indian banks and functioning of foreign banks".