"Ease the 5% Exposure Cap": Financial Institutions Accompanying President Lee Urge Indian Authorities

Over 600 Employees from the Five Major Banks and Reinsurers Expand into India
Stricter Regulations Than Local Banks Hamper Business Operations
Insurance Companies Request Improvement of Settlement Conditions for Workers

It has been confirmed that major banks and other financial institutions accompanying President Lee Jae-myung on his state visit to India have requested the Indian authorities to ease capital regulations locally. The banks are reported to have emphasized that they have reached limits in major business areas such as corporate lending, due to local capital investment cap regulations in India—a promising market with a population nearing 1.5 billion. Insurance companies have also called for regulatory easing, including the improvement of settlement conditions for local workers.

Banks Say "5%·10% Lending Cap Restricts Business Operations"

President Lee Jae-myung is speaking at the Korea-India Business Forum held on the 20th (local time) at the Bharat Mandapam Convention Centre in New Delhi, India. Photo by Yonhap News

According to the financial sector on April 24, during the 'Korea-India Financial Cooperation Forum' held on the 20th (local time) during President Lee's visit to India, KB Kookmin Bank, Woori Bank, and others requested the Indian Ministry of Finance and the International Financial Services Centres Authority (IFSCA) to relax the cap on capital investment exposure (risk exposure). The forum was also attended by Lee Eogwon, Chairman of the Financial Services Commission; Lee Byeongrae, Chairman of the General Insurance Association of Korea; and Jeong Wankyu, Chairman of the Credit Finance Association. On the Indian side, representatives from the Ministry of Finance, IFSCA, the National Payments Corporation of India (NPCI), as well as major financial companies and fintech officials were present.

India is an unexplored market with high growth potential for domestic banks. Currently, the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have a combined total of 669 local staff and representatives. Shinhan Financial Group is the most active, operating as a local subsidiary rather than a branch, employing 406 people across six regions, including Mumbai and New Delhi. This is followed by Woori Bank (111 people), Hana Bank (71 people), KB Kookmin Bank (61 people), and NH Nonghyup Bank (20 people). There is also active expansion by secondary financial institutions such as Hyundai Capital (40 employees) and Korean Re (currently recruiting).

However, all parties agree that regulations are holding them back. India’s International Banking Units (IBUs) apply a single borrower exposure cap of 5% of the parent bank’s Tier 1 capital (common equity capital and other core capital), and a 10% cap for borrower groups. This means that even if there is significant demand for large-scale loans from local companies, banks can only lend less than 5% of their own capital. In contrast, Indian local banks have a lending cap of 20-25%, placing domestic banks at a disadvantage in the competition for customer acquisition and contract expansion.

As a result, the five major banks are facing difficulties in attracting high-quality corporate clients and expanding Letter of Credit based discounting (LCBD) services. In addition, India’s restrictions on overseas borrowing (such as the ban on exceeding 100% of Tier 1 capital), the minimum capital requirement for branch establishment (20 million dollars, or approximately KRW 2.96 billion), and deposit regulations that only allow receipt in dollars or foreign currency, all serve as entry barriers. A financial sector official stressed, "If Indian authorities ease the regulations so that the parent bank's capital size can be reflected when setting the capital requirement, we could increase our lending performance through large credit operations for high-quality corporate clients." He added, "Although the likelihood of the Indian authorities easing regulations is low, continuous advocacy is necessary, as regulatory relaxation is a prerequisite for full-scale business expansion."

Insurance Companies: "Improvement of Settlement Conditions for Workers Needed"

The general insurance industry has also requested the authorities to improve settlement conditions for local workers as part of efforts to enter the Indian market. The General Insurance Association of Korea has received a request to enter 'GIFT City' (Gujarat International Finance Tec-City) and plans to conduct a demand survey among its member companies in the future.

However, the industry remains cautious about full-scale entry, as profitability has declined due to the worsening loss ratio in auto insurance. Both Samsung Fire & Marine Insurance and Hyundai Marine & Fire Insurance have previously withdrawn their offices, and none of the six major general insurers (Samsung Fire & Marine, Meritz Fire & Marine, DB Insurance, Hyundai Marine & Fire, KB Insurance, Hanwha General Insurance) currently have concrete plans for entry. At present, Korean Reinsurance is operating in India.

An industry source said, "The Indian market takes a long time to build trust and its social maturity is still low," adding, "Rather than short-term results, we have no choice but to continue market research from a mid- to long-term perspective."

This content was produced with the assistance of AI translation services.