About India

India is one of the fastest growing emerging economies in the world. It is the 18th largest export economy globally (2017) and is a world leader in IT.

India is a relatively low-cost region in which to operate and has a skilled workforce, enabling companies to use it as a strategic and operational support centre for wider operations. It is a major exporter of IT services, particularly in business process outsourcing and software services, which is the fastest growing part of the economy.

The Indian government is instituting an ongoing series of economic reforms to increase efficiencies in doing business with the global economy and to overcome the market's historical limitations, particularly in relation to FDI. These changes have culminated in the privatisation of state-owned enterprises, the reduction of financial controls, industrial deregulation and the increase of FDI caps. India's largest export partner is the United States, followed by China and the United Arab Emirates.

India's banking sector is heavily influenced by state-owned banks, with the government holding majority stakes in many of the largest banks. There are 20 public sector banks, 42 private sector banks and 44 foreign banks.


India Market Profile Infographic_small

Corporate Treasury in India

India is the fastest-growing emerging economy in the world, and a global leader in information technology. Here, we highlight some of the key factors relevant to treasury and cash management in India.


Financial Market Development

  • The World Economic Forum ranks India 35th in the world for its financial system in The Global Competitiveness Report 2018.
  • It ranks India 83rd for the soundness of its banks, and 115th for banks’ regulatory capital ratios.
  • The Indian rupee (INR) is a closed currency. The Reserve Bank of India (RBI) has imposed capital controls in the past, such as in August 2013 when it cut overseas remittances by individuals to USD75,000 from USD200,000, and reduced overseas investments by Indian companies by three-quarters.
  • In November 2016, large-denomination bank notes were removed from circulation and strict bank withdrawal limits were imposed. These limits have since been lifted and new bank notes have been introduced.


Sophistication of Banking Systems

  • India's banking sector is heavily influenced by state-owned banks, with the government holding majority stakes in many of the country's largest banks. There are 20 public sector banks, 42 private sector banks, 33 state co-operative banks and 44 foreign banks, as well as more than 50 regional rural banks.
  • Daily foreign exchange turnover averaged USD34 billion in April 2016, accounting for 0.5% of global turnover (Bank for International Settlements triennial global survey 2016).
  • India's bond market is not well-developed and remains small compared with other developed economies. While it is composed of both corporate and government bonds, government bonds dominate and are the most liquid component of the bond market. Total corporate bond issuances outstanding stood at IRD30.672 trillion at the end of March 2019.
  • India is a member of the Asian Clearing Union.


Regulatory Bodies

  • The banking system in India is regulated by the Reserve Bank of India (RBI). Regulation is in line with international standards. RBI approval is required in certain cases for the repatriation of funds.



  • The corporate income tax is 30% for Indian companies. However, for companies that have a turnover of INR2.5 billion for the 2018/2019 financial year, the corporate income tax will be reduced to 25%. A surcharge of 7% on income up to INR10 million and 12% on income above INR100 million is also imposed.
  • Foreign companies pay corporate income tax of 40%, with a surcharge of 2% on income up to INR10 million and 5% on income above INR100 million.
  • Resident companies are taxed on worldwide income. Foreign companies are taxed on income that is received or generated in India.
  • Foreign companies are considered to be resident in India if they have a Place of Effective Management in India.
  • There is no branch profits remittance tax on remittance of profits by the branches of foreign companies to their head offices.
  • Interest income received by a foreign company is subject to a withholding tax of 20% plus surcharge and cess. Under certain circumstance, the withholding tax rate on the interest will be reduced to 5% plus surcharge and cess.
  • Interest expenses that are used for business purposes are generally tax deductible. There are no thin capitalisation rules in India.
  • Indian companies distributing or declaring dividends are charged a dividend distribution tax of 15% (plus 12% of surcharge and 4% education cess).
  • A securities transaction tax of between 0.001% and 0.125% is charged depending on the nature of the securities.
  • Capital gains tax is charged at 10%, 15% or 20% depending on the type of asset and whether the gains are long term or short term.
  • Tax incentives are available to certain industries operating in Special Economic Zones (SEZs). For example, offshore banks and international financial services centres that meet certain conditions are eligible for a 100% tax exemption on specified income for five years and a 50% concession for a further five years.
  • Goods and services tax (GST) is charged at 5% to 28% depending on the nature of the goods or services involved and the individual state. There are also special rates and GST compensation cess on certain goods. The export of goods and services is zero-rated.
  • Resident companies are charged withholding tax of 10% on interest. Foreign companies pay withholding tax of 20% on interest and 20% on dividends if no treaty is in place. Where a tax treaty is in place, withholding tax on interest ranges from 5% to 15%, and withholding tax on dividends ranges from 5% to 25%.
  • India has tax treaties with more than 90 countries and territories.
  • India is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.


Benefits for Local Treasury

  • India has a pro-business government that is relaxing FDI rules.
  • The RBI is broadening the country’s derivative and debt markets.
  • 11 Indian banks have joined SWIFT’s global payments innovation initiative, improving cross-border payment infrastructure.
  • India is a relatively low-cost region in which to operate and has an adequately skilled workforce, enabling companies to use it as a strategic and operational support centre for wider operations.
  • Resident and non-resident companies are permitted to participate in cross-border sweep structures, but for non-resident companies, foreign-exchange control rules and withholding tax on inter-company loans apply.
  • Cash concentration is available, but non-residents may have to pay withholding tax on interest.
  • Notional pooling is not permitted in India.
  • International financial services centres in Special Economic Zones that meet certain conditions are eligible for a 100% tax exemption on specified income for five years and a 50% concession for a further five years.


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Banking System

  • State-run banks are a significant part of India's banking sector, with the government owning a majority stake in two of the top five banks: State Bank of India and Punjab National Bank. Private banks HDFC, ICICI Bank and Axis Bank round out the top five.
  • There are 27 public sector banks (controlling 70% of the banking sector), 21 private sector banks, 49 foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks, with further financial support from cooperative credit institutions.
  • The government announced in 2014 that it would reduce its stake in state-run banks, although it also planned to boost struggling state-owned banks with private sector expertise and a central banking body, the Bank Board Bureau.


Bank Accounts

  • Residents are permitted to open INR accounts domestically. Foreign currency accounts both in India and overseas are subjected to certain conditions prescribed by the RBI.
  • Non-residents (as defined under Foreign Exchange Management Act, 1999) can open INR account in India, subject to conditions prescribed by the RBI.


Legal and Regulatory

  • The RBI's Board for Financial Supervision oversees India’s banking sector, with the National Bank for Agriculture and Rural Development overseeing provincial rural and most cooperative banks under the auspices of the RBI. The RBI also implements foreign currency controls.
  • A resident company must be registered under the Companies Act 2013 and rules made there under.
  • A company incorporated outside India can enter Indian markets as a Wholly Owned Subsidiary in India or as a Joint Venture Partner of an Indian Company. A company incorporated outside India can also set up a branch, project office or liaison office in India under various regulations.
  • India has anti-money laundering legislation in place and is a member of the Asia/Pacific Group on Money Laundering (APG), the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) and the Financial Action Task Force (FATF). It also operates the Financial Intelligence Unit under the Ministry of Finance, which is tasked with safeguarding the financial system from the abuses of money laundering, terrorism financing and other economic offences.




Payment Systems


(Unified Payments Interface)

  • Operated by NPCI.
  • Over 140 participant banks
  • A real-time electronic system used for both payment and collections through Push and Pull mode.
  • Available 24/7, 365 days a year.
  • Facilitates fund transfers using multiple payment identifiers like Virtual Payment Address (VPA) or combination of account number and Indian Financial System Code (IFSC) or a combination of Mobile Money Identifier (MMID) and mobile number or Aadhar number.
  • Introduced the concept of Payment Service Providers (PSP) to enable banks to offer mobile applications to non-customers to participate in UPI.
  • Final settlement done via NG–RTGS across participant banks' accounts with RBI.



India’s national real-time gross settlement (RTGS) system

  • For high-value (more than INR 200,000) and urgent INR-denominated interbank transfers.
  • Operated by the RBI.
  • Effects final settlement of net balances originating from other clearing houses.
  • Settles transactions in approximate real time (within two hours) on gross or offset basis, with participant banks' accounts with RBI.



Cheque Truncation System

  • Processes cheque payments in India.
  • Operated by National Payments Corporation of India (NPCI).
  • Cheque clearing houses dealt with on a grid-based system and split into three regions - North, Southeast and West. Allows same-day settlement with cheques drawn within same jurisdiction. Cheques drawn on banks outside of these jurisdictions can take three days to three weeks.
  • Cheques are truncated before being processed in regional clearing houses.
  • Final settlement is done via RTGS across participant banks' accounts with RBI.



National Automated Clearing Services

  • Is a deferred net settlement system operated by the RBI.
  • Used for repetitive and non-urgent bulk electronic credit and debit payments for transactions up to INR 10,000,000.
  • Divided into NACH-Credit and NACH-Debit subsystems.
  • Payment instructions done centrally.
  • Payments settled on T+0.
  • Final settlement done via RTGS across participant banks' accounts with RBI.



National Electronic Funds Transfer

  • For low-value, one-off electronic payments.
  • Is a deferred net settlement system operated by the RBI.
  • Uses Structured Financial Messaging System (SFMS) to process transactions.
  • Payments made on half hourly batches on T+0. 
  • Final settlement done via NG-RTGS across participant banks’ accounts with RBI.



Bharat Bill Payment System

  • Used for bill payments similar to GIRO payments.
  • Payments settled on T+0.
  • Final settlement done via NG-RTGS across participant banks' accounts with RBI.
  • Live with over 10 players and over 30 billers. 
  • Supports transactions through cards, wallets, UPI, IMPS and Net Banking.


(Immediate Payment Service)

Interbank Mobile Payments Service

  • Operated by NPCI.
  • A real-time electronic interbank payment and collection system. 
  • Facilitates fund transfer using multiple payment identifiers like combination of account number and Indian Financial System Code (IFSC) or a combination of Mobile Money Identifier (MMID) and mobile number or Aadhar number. 
  • Available 24/7, 365 days a year.
  • Final settlement done via NG-RTGS across participant banks' accounts wiht RBI.


(Aadhaar Enabled Payment System)


  • Operated by NPCI.
  • Over 119 participant banks.
  • A real-time electronic interbank payment and collection system.
  • Interoperable biometric-based payments system that processes transactions at POS or micro ATMs.
  • Facilitates fund transfers using biometric data (such as fingerprints), Aadhaar number and bank issuing identifier number (IIN).
  • Final settlement done via NG–RTGS across participant banks' accounts with RBI.



Payment Instruments


Credit Transfers

  • High-value (more than INR 200,000) and urgent credit transfers settled via NG–RTGS in approximate real time.
  • Low-value, non-urgent, bulk credit transfers settled via NACH same day.
  • One-to-one electronic payments settled via NACH or NEFT same day.


Direct Debits (auto debits)

  • NACH Debit used for regular transfers for transactions up to INR 10,000,000 and supports both C2B and B2B Payments.
  • Settled via NACH on T+0.


Card Payments

  • Declining in popularity as digitised payments become more popular.
  • Extremely low credit card penetration in India, with debit cards accounting for 99.9% of ATM withdrawals and 71.5% of POS and online transactions.
  • Visa and MasterCard are the main brands of credit card used, and these are cleared next day.
  • RuPay is a domestic debit and credit card payment network used at ATMs, POS devices and e-commerce websites. It is operated by the NPCI.
  • Basic Savings Banking Deposit (BSBD) accounts expand RuPay facilities into the country’s remotest interiors to improve financial inclusion.
  • Most card credits and debits are processed by National Financial Switch (NFS) and settled via the Clearing Corporation of India (CCIL) same or next day.
  • Electronic money schemes are available through top-up prepaid cards.
  • Multi-application cards have been introduced by the RBI for use in banking, postal and financial services. The banks authorised to issue these cards are: ICICI Bank, HDFC Bank and Oriental Bank of Commerce.


Online Payments

  • In 2016 the government took extreme measures as part of a demonetisation programme aimed at becoming a cashless society. This has been the main driver in the country’s fast adoption of financial technology (fintech) to promote faster payment initiation and settlement. 
  • India was the second fastest country to adopt financial technology (fintech) in 2017, with 52% of digitally active consumers adopting the technology (EY Fintech Adoption Index).
  • The government has provided initiatives such as the establishment of UPI and Aadhaar Enabled Payment System (AEPS), and an application programming interface (API) aimed at increasing efficiencies in payments and banking systems through the provision of a unique identification number for every Indian resident. FY18 saw a staggering 95% growth rate of retail electronic payment transactions volume due to the steep growth of UPI.
  • The government has set up an eight-member steering committee to supervise the development of the fintech sector and formulate regulations that allow a more flexible environment and promote financial inclusion to ensure that every Indian has a bank account.
  • Maharashtra is the first Indian state to launch a fintech policy that aims to establish a global fintech hub in the Mumbai Metropolitan Region.
  • Digital wallets are forecast to overtake cards as the preferred online payment method, driven by government initiatives and incentives by retailers. The most popular digital wallets are Paytm, PayPal, Mobikwik and Freecharge. Amazon Pay and Google Tez also have a significant user base. With over 87% of Indians owning a smartphone and the expansion of mobile infrastructure, digital wallets are rapidly rising in popularity after the demonetisation programme.
  • WhatsApp payment services, supported by its parent company Facebook, launched in India, where the messaging app has its largest number of users globally. Payments are currently processed by HDFC Bank, ICIC Bank, Axis Bank and the State Bank of India.
  • The RBI has implemented strict regulations regarding know-your-customer (KYC) guidelines in preparation for interoperability measures between prepaid payment instruments (PPI), bank accounts and payment cards.
  • Mobile wallet adoption in India is one of the highest in the world (Consumer Payments Insight Survey).
  • Digital banking has been mainly targeted at the retail sector. The coverage will be extended to corporate and SME banking.


Digital Currencies

  • Cryptocurrency is not legal tender, and the government has taken measures to curtail or halt virtual exchange activity. The central bank has said it will no longer deal with or provide services to any individual or businesses dealing with or settling virtual currencies.


Cash, Cheques and Money Orders

  • Despite the demonetisation programme, cash has had a resurgence in popularity.
  • There’s been a significant drop in cheque usage as digitised payments become more popular.
  • Cheques truncated and processed via CTS through grid system, which is divided into three grids.
  • Money orders are a common service provided by India Post, which offers electronic (eMO), instant (iMO) and international (IFS) orders. Western Union and MoneyGram also operate in the country.


India Market Profile Infographic


1 (Variable) depending on type of good or service and individual state

2 Resident company: 30%; foreign company: 40%

3 (Progressive) max rate for incomes over INR1 million



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Sources: World Economic Forum, PwC, International Monetary Fund, CIA World Factbook, Trading Economics, Organisation for Economic Co-operation and Development, Bank for International Settlements, Reserve bank of India, Securities and Exchange Board of India, India Brand Equity Foundation, India Today, National Payments Corporation of India.


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