Query:
Bank in India wants to open international branch in UAE. What are the steps needed to
achieve that? Advise comprehensively?
Answer:
Opening an International Branch in UAE for an Indian Bank
1. Introduction
This advisory provides comprehensive guidance for an Indian bank seeking to establish an
international branch in the United Arab Emirates (UAE). The process involves navigating
regulatory requirements in both India and the UAE, while adhering to international banking
standards and practices.
2. Relevant Standard/Law References
Indian Regulatory Framework
a. The primary regulatory framework for Indian banks expanding internationally is governed
by the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949.
b. RBI’s Master Circular on “Branch Authorisation” outlines the specific requirements for
Indian banks to open branches abroad. Key points include:
i. Banks are required to submit their branch expansion plan on an annual basis. ii. The
bank’s track record of compliance and functioning in global markets will be considered. iii.
RBI will seek reports from home country supervisors where necessary. Branch
Authorisation. 7, para 19-20, page 19, Branch Authorisation. 9, para 19, page 17
c. The bank must obtain prior approval from RBI’s Department of Banking Operations and
Development, International Banking Division, for opening a branch in the UAE. Branch
Authorisation. 8, para 19, page 14
UAE Regulatory Framework
a. In the UAE, foreign banks are regulated under Federal Decree-Law No. (32) of 2021 on
Commercial Companies.
b. Key requirements for foreign banks operating in the UAE include:
i. Obtaining a license from the Competent Authority with approval from the Ministry. ii.
Registration in the Foreign Companies Register at the Ministry. iii. Compliance with UAE
laws and regulations. UAE Commercial Law Federal Decree-Law no. (32) of 2021 ON
COMMERCIAL COMPANIES, Article 336-337, page 66
c. Foreign banks must maintain an independent balance sheet and profit and loss account
for their UAE operations, audited by a registered auditor in the UAE. UAE Commercial Law
Federal Decree-Law no. (32) of 2021 ON COMMERCIAL COMPANIES, Article 338, page
66
3. Detailed Explanations
Step 1: Obtain RBI Approval
i. Prepare a detailed proposal for international expansion, including:
º Business plan for the UAE branch
º Financial projections
º Risk management framework
º Compliance with UAE regulatory requirements
ii. Submit the proposal to RBI’s Department of Banking Operations and Development,
International Banking Division.
iii. RBI will assess the bank’s:
º Financial strength and capital adequacy
º Track record of compliance in India and other international operations
º Ability to meet UAE’s regulatory requirements
Step 2: UAE Licensing Process
i. Apply for a banking license from the Central Bank of the UAE (CBUAE).
ii. Prepare and submit required documents, including:
º Detailed business plan
º Corporate governance structure
º Risk management policies
º AML/CFT compliance program
º Financial projections
iii. Obtain approval from the UAE Ministry of Economy.
iv. Register with the Foreign Companies Register at the UAE Ministry of Economy. UAE
Commercial Law Federal Decree-Law no. (32) of 2021 ON COMMERCIAL COMPANIES,
Article 337, page 66
Step 3: Operational Setup
i. Establish physical presence:
º Secure office space in compliance with CBUAE requirements
º Set up IT infrastructure and systems
ii. Recruit local staff, ensuring compliance with Emiratisation requirements.
iii. Implement governance and risk management frameworks.
iv. Establish relationships with local banks and financial institutions.
Step 4: Compliance and Reporting
i. Set up independent accounting and auditing processes for the UAE branch.
ii. Appoint a UAE-registered auditor.
iii. Establish reporting mechanisms to both RBI and CBUAE.
iv. Implement AML/CFT and KYC procedures compliant with UAE regulations. UAE
Commercial Law Federal Decree-Law no. (32) of 2021 ON COMMERCIAL COMPANIES,
Article 338, page 66
Step 5: Launch and Ongoing Compliance
i. Obtain final operational approval from CBUAE.
ii. Launch banking services in compliance with UAE regulations.
iii. Maintain ongoing compliance with both Indian and UAE regulatory requirements.
iv. Regularly report to RBI and CBUAE as per their respective guidelines.
Alternative strategy
1. Strategic Partnership with a UAE Bank
a. Instead of opening a full-fledged branch, consider forming a strategic partnership with an
existing UAE bank. This approach can provide:
º Faster market entry
º Reduced regulatory complexity
º Access to local market knowledge and customer base
b. Implementation steps:
º Identify potential UAE bank partners
º Negotiate partnership terms (e.g., revenue sharing, operational control)
º Obtain necessary approvals from RBI and CBUAE for the partnership
º Implement joint banking services
c. Pros:
º Lower initial investment
º Reduced regulatory burden
º Leverage local partner’s expertise
d. Cons:
º Limited control over operations
º Potential conflicts with partner
º Revenue sharing may reduce profitability
2. Digital Banking Presence
a. Establish a digital-only banking presence in the UAE, focusing on online and mobile
banking services.
b. Implementation steps:
º Develop a robust digital banking platform
º Apply for a digital banking license from CBUAE
º Establish a minimal physical presence for regulatory compliance
º Launch digital banking services targeting specific customer segments (e.g., Indian
expats in UAE)
c. Pros:
º Lower operational costs
º Wider reach without extensive branch network
º Appeal to tech-savvy customers
d. Cons:
º Limited face-to-face customer interaction
º Potential challenges in building trust without physical presence
º Higher initial technology investment
3. Representative Office Approach
a. Start with a representative office in the UAE before transitioning to a full branch.
b. Implementation steps:
º Apply for a representative office license from CBUAE
º Set up a small office for market research and liaison purposes
º Gradually build relationships and understand the market
º Transition to a full branch after establishing a strong foundation
c. Pros:
º Lower initial regulatory requirements
º Opportunity to understand the market before full commitment
º Gradual investment and expansion
d. Cons:
º Limited banking activities allowed
º Longer timeline to full operational status
º Potential loss of first-mover advantage in certain banking segments
4. Used Cases/Interpretations & Disclosures by the listed entities
Emirates NBD – 2019: Emirates NBD, a leading UAE bank, has demonstrated successful
international expansion. In 2019, the bank received approvals from The Saudi Arabian
Monetary Authority (SAMA) to open 20 additional branches in the Kingdom of Saudi
Arabia. This expansion showcases the potential for cross-border growth within the Gulf
region and highlights the importance of obtaining regulatory approvals from host country
authorities. EMIRATES NBD, page 12
Emirates Islamic – 2021: Emirates Islamic, a UAE-based Islamic bank, operates an
extensive branch network of 42 branches across strategic locations in the UAE. In 2021,
the bank strengthened its presence by adding a new branch in Al Rahmaniya, an area
highly populated by UAE Nationals. This example illustrates the importance of strategic
branch placement and catering to local demographics when expanding operations.
emirates islamic, page 27
Commercial Bank International – 2023: Commercial Bank International (CBI) in the UAE
has focused on Emiratisation as part of its expansion strategy. In 2023, CBI increased the
percentage of UAE Nationals in its workforce to 26%, up from 23.9% in 2022. The bank is
committed to achieving the UAE Central Bank’s target of 45% Emiratisation in the banking
sector by 2026. This case highlights the importance of aligning with local employment
regulations and initiatives when expanding into new markets. Commercial Bank Internationl
2023, page 17
Abu Dhabi Commercial Bank – 2023: Abu Dhabi Commercial Bank (ADCB) demonstrates a
successful model of international expansion while maintaining a strong domestic presence.
As of 2023, ADCB operates 48 branches in the UAE, 3 branches in Kazakhstan, and 50
branches in Egypt through ADCB Egypt. This diversified geographical footprint showcases
how a bank can expand internationally while still deriving 96% of its operating income from
its home market in the UAE. Abudhabi Commercial Bank 2023, page 8
5. Summary
For an Indian bank seeking to open an international branch in the UAE, the process
requires careful planning, regulatory compliance, and strategic execution. Key steps
include:
1. Obtaining approval from the Reserve Bank of India, which involves submitting a
comprehensive expansion plan and demonstrating financial strength and compliance
capabilities.
2. Securing a banking license from the Central Bank of the UAE, which requires detailed
documentation, including business plans, governance structures, and compliance
programs.
3. Registering with the UAE Ministry of Economy and complying with local commercial
laws.
4. Establishing operational infrastructure, including physical presence, IT systems, and
staffing, while adhering to Emiratisation requirements.
5. Implementing robust compliance and reporting mechanisms to meet both Indian and
UAE regulatory standards.
6. Launching banking services and maintaining ongoing compliance with both
jurisdictions.
Alternative strategies such as forming strategic partnerships with UAE banks, establishing
a digital-only presence, or starting with a representative office should be considered based
on the bank’s resources, risk appetite, and long-term objectives in the UAE market.
The success stories of UAE banks like Emirates NBD, Emirates Islamic, Commercial Bank
International, and Abu Dhabi Commercial Bank provide valuable insights into effective
expansion strategies, the importance of local market understanding, and compliance with
regulatory requirements such as Emiratisation.
In conclusion, while expanding into the UAE presents significant opportunities, it requires
meticulous planning, substantial resources, and a commitment to ongoing regulatory
compliance in both India and the UAE. The bank should carefully weigh the potential
benefits against the complexities and costs involved in international expansion.
6. Attribution
The information provided in this response is based on Federal Decree-Law No. (32) of
2021 on Commercial Companies as issued by the UAE Ministry of Economy. The specific
rules referenced are Articles 336-338. For complete and authoritative guidance, please
refer to the full Federal Decree-Law No. (32) of 2021 on Commercial Companies available
through the UAE Ministry of Economy official website.
Overseas Branch Expansion by Indian Bank
