The US government, which has sparked a global tariff war, has listed a slew of entry barriers and unfavourable treatment faced by foreign firms in India’s financial services sector like banking, insurance, digital payments, accounting.
Life Insurance Corporation of India and National Payments Corporation of India have been named as entities receiving favourable treatment from New Delhi.
It also said that the requirement to store data related to electronic payments data locally has hampered the ability of foreign firms operating in this field. “Foreign firms assert that the data storage requirement hampers the ability of service suppliers to detect fraud and ensure the security of their global networks,” according to The 2025 National Trade Estimate (NTE) Report released by the US States Trade Representative, a government agency.
"Many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage," the report stated.
"Foreign accounting firms face obstacles to entering the Indian accounting services sector," it said, adding that only accounting firms structured as partnerships under Indian law may supply financial auditing services.
The report, released earlier this week, came ahead of the US President Donald Trump’s Liberation Day measures. On Thursday, the US announced reciprocal tariffs on around 60 countries with 26% tariff on all goods Indian exports to the US.
“India – very, very tough. The prime minister just left and he’s a great friend of mine. But I said, ‘You’re a friend of mine but you’ve not been treating us right. They charge us 52%,” Trump said.
In the report, USTR said that foreign banks, which account for less than 0.6% of the total bank branches in India, are required to submit their internal branch expansion plans on an annual basis. Their ability to expand is hindered by non-transparent limitations established by the Indian government on branch office expansion.
Similarly, on insurance, the US agency said that state-owned companies are not subject to the same law and prudential supervision as private firms. They also enjoy various guarantees from the government. It said that the Indian government’s explicit sovereign guarantee on every LIC policy, results in customers choosing LIC’s policies over those offered by private insurers.
The report said that while India’s 2025 Union Budget announcement to raise FDI cap on the insurance sector from 74% to 100% represents “progress”, it still is not clear if the country will remove safeguards instituted in 2021. “These safeguards require a majority of board members to be Indian residents and, if an insurer is incorporated or domiciled outside of India, to maintain a higher solvency requirement for foreign-invested insurers.”
Foreign reinsurers also face unequal treatment. Foreign firms can offer terms to cedents, but every cedent (party who transfers a risk or claim to another party) must then first offer the best terms obtained to Indian reinsurers, it said.
In the area of digital payments, the USTR report said that electronic payments services appear to favor Indian domestic suppliers. “Foreign digital payment companies were given until January 2023 to ensure their market shares met the 30%, but the Ministry of Finance has not enforced this market share ceiling.”
Life Insurance Corporation of India and National Payments Corporation of India have been named as entities receiving favourable treatment from New Delhi.
It also said that the requirement to store data related to electronic payments data locally has hampered the ability of foreign firms operating in this field. “Foreign firms assert that the data storage requirement hampers the ability of service suppliers to detect fraud and ensure the security of their global networks,” according to The 2025 National Trade Estimate (NTE) Report released by the US States Trade Representative, a government agency.
"Many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage," the report stated.
"Foreign accounting firms face obstacles to entering the Indian accounting services sector," it said, adding that only accounting firms structured as partnerships under Indian law may supply financial auditing services.
The report, released earlier this week, came ahead of the US President Donald Trump’s Liberation Day measures. On Thursday, the US announced reciprocal tariffs on around 60 countries with 26% tariff on all goods Indian exports to the US.
“India – very, very tough. The prime minister just left and he’s a great friend of mine. But I said, ‘You’re a friend of mine but you’ve not been treating us right. They charge us 52%,” Trump said.
In the report, USTR said that foreign banks, which account for less than 0.6% of the total bank branches in India, are required to submit their internal branch expansion plans on an annual basis. Their ability to expand is hindered by non-transparent limitations established by the Indian government on branch office expansion.
Similarly, on insurance, the US agency said that state-owned companies are not subject to the same law and prudential supervision as private firms. They also enjoy various guarantees from the government. It said that the Indian government’s explicit sovereign guarantee on every LIC policy, results in customers choosing LIC’s policies over those offered by private insurers.
The report said that while India’s 2025 Union Budget announcement to raise FDI cap on the insurance sector from 74% to 100% represents “progress”, it still is not clear if the country will remove safeguards instituted in 2021. “These safeguards require a majority of board members to be Indian residents and, if an insurer is incorporated or domiciled outside of India, to maintain a higher solvency requirement for foreign-invested insurers.”
Foreign reinsurers also face unequal treatment. Foreign firms can offer terms to cedents, but every cedent (party who transfers a risk or claim to another party) must then first offer the best terms obtained to Indian reinsurers, it said.
In the area of digital payments, the USTR report said that electronic payments services appear to favor Indian domestic suppliers. “Foreign digital payment companies were given until January 2023 to ensure their market shares met the 30%, but the Ministry of Finance has not enforced this market share ceiling.”
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