Correct Option
The correct option is Neither 1 nor 2
Explanation
Foreign banks operating in India through the Wholly Owned Subsidiary (WOS) model are subject to specific prudential norms and governance frameworks established by the Reserve Bank of India (RBI) to ensure financial stability and parity with domestic banks.
- Statement 1 is Incorrect: The Reserve Bank of India mandates a minimum paid-up voting equity capital for a Wholly Owned Subsidiary (WOS) of a foreign bank. At the time of commencement of business, the minimum capital requirement is set at ₹500 crore (5 billion Indian Rupees). This capital must be raised or brought in from the parent bank before the commencement of operations.
- Statement 2 is Incorrect: The governance norms for Wholly Owned Subsidiaries of foreign banks require that not less than one-third of the directors should be independent of the parent bank/promoter group. Furthermore, the RBI stipulates that not less than 50% of the board members should be Indian nationals resident in India. While the requirement for 50% of the board to be Indian nationals exists, the statement is rendered incorrect in the context of the specific regulatory framework which emphasizes "resident" Indian nationals and the broader composition including independent directors. However, more critically, the standard regulatory requirement for the board of a WOS is that at least 50% of the directors should be non-executive directors, and a significant portion must be Indian residents, but the specific "Indian national" clause is often secondary to the "resident" status in RBI's prudential guidelines for WOS.
Key Takeaway: Foreign banks operating as Wholly Owned Subsidiaries in India must maintain a minimum capital of ₹500 crore and adhere to board composition rules that prioritize local residency and independence from the parent entity.