India, New Zealand ink financial services pact to boost economic ties

New Delhi, Dec 23 India and New Zealand have concluded negotiations on the Financial Services Annex of the Free Trade Agreement (FTA), marking a significant milestone in strengthening bilateral economic and strategic cooperation, according to a Finance Ministry statement issued on Tuesday.

The India-New Zealand Financial Services Annex marks a notable advancement over standard GATS (General Agreement on Trade in Services) commitments, involving a total of 18 articles, the statement explained.

The forward-looking, balanced agreement strengthens bilateral cooperation in financial services with innovative provisions on digital payments, fintech, data transfer and back-office services and potential to establish India as a fintech hub, the statement said.

Currently, only two Indian banks — Bank of Baroda and Bank of India — maintain subsidiary operations in New Zealand with a combined total of four branches, while New Zealand currently has no banking or insurance presence in India. The agreement will serve as an important catalyst for broadening India's financial services presence in New Zealand and welcoming New Zealand financial institutions to India's growing and dynamic financial services markets.

Under the Financial Services Annex, India and New Zealand have committed to collaborate on developing domestic payments interoperability and supporting real-time cross-border remittances and merchant payments through integrated Fast Payment Systems (FPS).

This provision directly strengthens India's digital payments ecosystem and fintech sector, enhances remittance flows from the Indian diaspora, creates market opportunities for Indian payment service providers and leverages India's technological expertise in digital payment systems such as UPI and NPCI.

The two countries have also committed to strengthen collaborative efforts in financial services innovation. The agreement includes specific provisions for learning from each other's Regulatory Sandbox and Digital Sandbox frameworks for cross-border applications.

These provisions position India as a fintech hub within the bilateral partnership. Further, it facilitates knowledge exchange and regulatory learning with a developed economy and create collaboration opportunities for Indian fintech companies while supporting India's regulatory sandbox initiatives.

India and New Zealand recognise each party's right to maintain legislative and regulatory requirements concerning the transfer, processing and storage of financial information, and aims to facilitate financial service suppliers to establish cross-border digital operations while ensuring complete regulatory control over data sovereignty and consumer privacy protections.

The agreement provides for cushioning Indian financial institutions from arbitrary or discriminatory credit assessment practices in the New Zealand market. This provision ensures parity of treatment with New Zealand domestic institutions, facilitates market access for Indian banks, insurance companies, and other financial service suppliers, and prevents discriminatory regulatory treatment that could restrict Indian financial institutions' operational capabilities.

Both the nations have also committed to support the provision of back-office and financial services support functions. This will leverage India's world-leading information technology and business process services capabilities. This will enable cost-efficient delivery of financial services through centralized back-office operations in India, will also support growth in India's financial services, IT and business process outsourcing sectors.

The schedules of specific commitments reflect progressive collaboration among both sides, with comprehensive commitments on Market Access and National Treatment in key Banking and Insurance Sectors and Subsectors. India's sectoral offers represent a forward-looking liberalization approach, featuring enhanced Foreign Direct Investment (FDI) limits in banking and insurance, alongside a liberalised bank branch licensing framework allowing up to 15 bank branches to be established over a four-year period.

This is a significant expansion from the previously offered GATS limits of 12 branches. These offers will enable Indian financial service suppliers to expand operations into New Zealand, strengthening India's position in financial services exports and cultivating progressive sectoral growth. They also position New Zealand’s financial institutions competitively in India's dynamic and rapidly expanding financial services market, the statement added.

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