HSBC Treasury Management Profiles 2018 -

Current section, Introduction


India is one of the fastest growing economies in the world, according to the World Bank; gross domestic product (GDP) growth has increased by an average of 7.3 per cent since 2010. However, the government’s demonetisation policy, launched in 2016, and the introduction of a goods and services tax (GST) bill in July 2017, has seen economic growth slow; GDP grew 7.1 per cent in FY 2016-2017, slower than 8 per cent in the previous year. In addition, disappointing GDP expansion in the current fiscal year has seen GDP growth forecasts for the current fiscal year lowered; the IMF and the Reserve Bank of India (RBI) have both lowered their forecasts to 6.7 per cent, from 7.3 per cent and 7.2 per cent respectively. The World Bank has described the slowdown as an ‘aberration’ and in the long-term, it is expected that both demonetisation and the GST regime will foster, not dampen, economic growth and encourage investment. India’s economic success has brought significant increases in income for many, but the benefits have yet to filter down to all sections of the population (400 million of the population live in poverty). The country requires significant investment in infrastructure (USD646 billion over the next five years according to the Ministry of Finance), job creation and housing. India’s government hopes to fund future infrastructure investment through a combination of privatisations, although this is limited by the Common Minimum Program, which prevents the government from divesting of more than 50 per cent of profitable state-owned companies, domestic private investment, and foreign direct investment. To this end, it is in the process of removing or relaxing barriers to foreign investment; foreign direct investment inflows in to India totalled USD14.9 billion compared to USD10.4 billion in the April to June quarter.

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Legal and regulatory

  • Foreign exchange and domestic currency (INR) accounts can be held by residents both domestically and abroad. Non-interest-bearing exchange earners’ foreign currency (EEFC) accounts can be held by residents and may be credited with up to 100 per cent of their foreign exchange earnings. EEFC accounts enable foreign exchange earners to save on conversion/transaction costs while undertaking foreign exchange transactions and are typically used by companies receiving foreign currency and/or making exports traded in foreign currency
  • Non-resident bank accounts are permitted in domestic currency with prior approval from the RBI
  • India is a member of the Asian Clearing Union (ACU). Transactions between Indian residents and residents of other ACU member countries, except Bhutan and Nepal, are carried out in Asian Monetary Unit (AMU) dollars (equivalent to USD) or AMU euros (equivalent to EUR)

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  • Resident companies are taxed on their worldwide income
  • Non-resident companies are taxed on the Indian-sourced income
  • The standard rate of corporation tax for resident companies is 30 per cent. For non-resident companies and branches of non-resident companies, the tax rate is 40 per cent

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Payment instruments and systems

  • Cash is an important payment medium in India, particularly for retail transactions. Electronic credit transfers are used for both high-value corporate and low-value retail payment transactions, although the cheque remains a common payment instrument. Payment card use, particularly of debit cards, is rising. The volume and value of pre-paid card transactions increased 143.5 per cent and 143.6 per cent respectively in 2015-16, on the previous financial year
  • The launch of the unified payments interface (UPI) in 2016 is encouraging the use of mobile wallet payments
  • India operates a number of national payment systems: the RTGS; CTS, for cheque payments; ECS, for credit and debit transfers; NACH, for one-off, low-value credit and debit transfers; NEFT, for one-off, low-value credit transfers, the BBPS, for electronic giro payments, and the immediate payment system (IMPS) for payments made via mobile phone, internet or ATM

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Cash management

  • Notional pooling is not permitted. Domestic and cross-border cash concentration are permitted but regulatory controls and withholding tax implications make such arrangements difficult to operate
  • Courier or coordinator networks are used by banks to collect cheque payments

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Electronic banking

  • Mobile and internet banking services are provided by all of the country’s leading banks for both corporate and retail purposes. Mobile banking (and mobile wallet services), in particular, is growing at an exponential rate. There were 389 million mobile banking transactions in India during the 2015-16 fiscal year, up 126.6 per cent compared to the previous 12-month period. Five mobile operators have received approval from the central bank to launch operations as payment banks
  • The UPI, an open-source, online payment platform allowing users to make, receive and schedule online payments via smartphone was launched in August 2016. Payments are transferred directly between any two banks. As of March 2017, there were 44 members of UPI
  • The IMPS, a real-time electronic funds transfer system for mobile payments, has 101 participant banks with over 22 million mobile phone subscribers

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  • World Bank
  • Organisation for Economic Co-operation and Development
  • Department of Industrial Policy and Promotion
  • Reserve Bank of India

The materials contained on this page were assembled in April 2017 (unless otherwise dated).



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