India has agreed to allow European Union banks to open up to 15 new branches over four years under the India-EU Free Trade Agreement, the commerce ministry said on Thursday, as part of wider market-access commitments accompanying the landmark trade pact concluded this week.
The agreement, announced on Tuesday and expected to be signed and implemented later this year, also includes commitments for 100 per cent foreign direct investment in the insurance sector and 74 per cent FDI in banking services.
“India has provided market access for bank branches to the EU, that is, 15 branches over four years for EU banks,” the ministry said, adding that adequate safeguards have been built in to protect national interests.
European banks currently operating in India include Germany’s Deutsche Bank and French lenders BNP Paribas and Société Générale.
The ministry said India has taken appropriate carve-outs for national security and retained policy space in sensitive areas such as legal services, ensuring that India-specific concerns are addressed under the agreement.
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On rules of origin, it said the pact contains an "insufficient production or minimal operations and processes” clause to ensure that only goods involving meaningful manufacturing or value addition qualify for preferential tariffs. Activities such as packaging, labelling, minor assembly or peeling will not confer origin status, even if carried out in a member country.
To address potential import surges, the agreement provides for a bilateral safeguard mechanism. Under this provision, India can temporarily raise duties to the most-favoured-nation level if tariff liberalisation leads to a surge in imports from the EU that adversely affects domestic industry.
“The maximum duration of bilateral safeguard measures cannot exceed four years,” the ministry said, clarifying that such measures can initially be imposed for two years and extended by another two years after a review.
The ministry also stressed that the Intellectual Property chapter of the agreement does not require India to amend its existing IP laws
.
The pact provides for a general review by a joint committee within five years of its entry into force, and every five years thereafter.
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