World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

US 101:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Page 145, Paragraph 77:

The Secretariat notes that "In January 2011, the RBI released the Discussion Paper on Presence of Foreign Banks in India Reserve Bank of India (2011a), seeking feedback from all stakeholders and the general public with respect to the most convenient form of foreign bank presence in India." This discussion paper states that: "From financial stability perspective there would be a need to mandate at entry level itself subsidiary form of presence (i.e. wholly owned subsidiary WOS) under certain conditions and thresholds. It would likewise be mandatory for those fresh entrants who establish as branches to convert to WOS once they meet the conditions and thresholds referred to above or which become systemically important over a period by virtue of their balance sheet size." Although the paper continues that "India's commitments to WTO will have to be kept in mind" the paper certainly raises the prospect that existing bank branches may be required to convert to subsidiaries. Since India has a GATS obligation to provide bank entry via branching, does India intend to enter into negotiations under GATS Article XXI to modify its schedule? Also, we understand that one of the reasons that, to date, foreign banks have not established wholly owned subsidiaries in India is that there has been considerable uncertainty with regard to the potential for forced divestiture (e.g., to comply with a previous 74% equity ownership limitation.) In order to provide better certainty and to reduce this risk, does India intend to schedule a commitment to allow 100% foreign ownership of banks? If so, when? If not, why not?

Reply: The Press Release of 21 January 2011 is merely a Discussion Paper inviting comments/suggestions from all stakeholders; a policy view in the matter is yet to be taken. Therefore, it will be premature to comment on the outcome of the same at this stage.

US 102:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Pages 149 150, paragraph 95:

The Secretariat's Report notes that competition in the insurance sector is constrained by high entry barriers, including a 26% cap on foreign investment. The Secretariat's Report from India's previous Trade Policy Review, in 2007, noted that an amendment was under consideration by the government at that time to increase the foreign equity cap in the insurance sector to 49%. What is the status of this amendment? Does India plan to include provisions for health insurance in any current legislation under consideration? If so, how would this be implemented and would foreign health insurance companies be constrained by any remaining equity caps?

Reply: The Government had introduced the Insurance Laws (Amendment) Bill, 2008 in the Parliament (Rajya Sabha) on 22.12.2008. At present, the Bill is before the Parliamentary Standing Committee on Finance for its consideration.

The Insurance Amendment Bill also proposes to define health insurance as a separate class of insurance business. However these health insurers are also proposed to be subject to the FDI equity cap of 49%.

US 103:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 157, paragraph 119:

In April 2011 The Telecommunications Regulatory Agency of India (TRAI) issued recommendations to promote domestic telecom equipment manufacturing. These recommendations called for, inter alia, a requirement to be imposed on telecom service providers to ensure that a certain percentage of equipment purchased was manufactured in India. What is the status of these recommendations, and what steps would need to be taken for the policies recommended to have the force of law and be required to be followed by service providers? How will India ensure that they do not conflict with trade obligations?

Reply: TRAI has given certain recommendations for taking measures to enhance telecom equipment manufacturing in India. These recommendations are under the consideration of the Central Government. It is thus premature to comment on any possible conflict with trade obligations of India.

US 104:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 157, paragraph 119:

The United States notes that India issued significantly revised telecom licensing amendments in May 2011 that require, inter alia, that the certification of certain telecom equipment take place only in India. Please explain how this requirement furthers India's security objectives that underlay these amendments more than testing that takes place outside India. Who will be responsible for establishing and operating the certification labs in India?

Reply: Security testing of telecom equipment is different than conformance and performance testing. Each country has its own security standards and India would also like to have its own standard. Government will establish the test standards, procedures as tools for security testing and accreditation of test labs.

US 105:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 158, paragraph 122:

TRAI has identified problems telecommunications companies have had obtaining competitive access to cable landing stations located in India, which limits their ability to provide telecommunications services. What is the status of TRAI's efforts to institute rules for such access?