India and New Zealand have pledged deeper cooperation in banking and insurance under their free trade agreement (FTA). They have committed to market access and national treatment, liberal foreign direct investment (FDI) norms, and a branch licensing framework allowing up to 15 branches to be established in each other’s country over four years.
The two nations concluded negotiations on the financial services annex as part of the FTA, marking a significant milestone in strengthening bilateral economic and strategic cooperation, according to a finance ministry statement released on Tuesday.
This FTA will provide the necessary institutional and regulatory framework to accelerate bilateral collaboration, facilitate market access and catalyze deeper integration of the two economies' financial systems, the statement said.
India and New Zealand concluded their free trade agreement negotiations in a record nine months, announcing the completion on Monday.
A liberal approach allowing market access to financial institutions in key banking and insurance sectors and sub-sectors would mean entities of both countries would get national treatment with regard to regulations.
At present, FDI in Indian banking sector is capped at 20% for public sector banks and 74% for private lenders.
The sectoral offers represent a forward-looking liberalization approach, featuring enhanced FDI limits in banking and insurance. A liberalized bank branch licensing framework allowing up to 15 bank branches to be established is a significant expansion from the previously offered GATS limit of 12 branches, it added. GATS, which stands for the General Agreement on Trade in Services, is a treaty under the World Trade Organization (WTO) framework that regulates international trade in services.
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, it added.
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. New Zealand currently has no banking or insurance presence in India, and no Indian insurance companies have established operations in New Zealand.
Under the financial services annex, India and New Zealand have also committed to collaborate on developing domestic payments interoperability and supporting real-time cross-border remittances and merchant payments through integrated Fast Payment Systems (FPS).
The provision for FPS under the financial services annex 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 India–New Zealand Financial Services Annex is a strategically important step beyond tariff liberalization, helping build institutional depth in services trade. Over time, payments interoperability and fintech cooperation can create powerful network effects, strengthening India’s digital payments ecosystem and enabling efficient platforms like UPI to gain wider international acceptance, reinforcing India’s role in global fintech and services value chains,” said Rishi Shah, partner and economic advisory services leader, Grant Thornton Bharat.
“The conclusion of the India-New Zealand Free Trade Agreement is a timely and welcome development that reinforces India’s growing integration with advanced economies. The agreement opens new and durable opportunities for Indian exporters, with services emerging as a clear winner. With wide-ranging commitments across IT and IT-enabled services, professional and business services, education, tourism, construction and financial services, the FTA provides Indian firms unprecedented market access and regulatory certainty in New Zealand,” said Agneshwar Sen, trade policy leader, EY India.
Overall, the FTA is a forward-looking partnership that can catalyse services-led export growth, job creation and deeper people-to-people ties between the two countries, he added.
The financial services agreement between the two countries also 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 the country's regulatory sandbox initiatives, the finance ministry said.
Regulatory and digital sandboxes are controlled environments where firms are able to test new financial or digital products under relaxed rules, helping regulators and firms learn and innovate safely.
India and New Zealand have agreed to recognise each other's right to maintain legislative and regulatory requirements concerning the transfer, processing and storage of financial information. It 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, the finance ministry statement said. 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.
The two countries have also committed to support the provision of back-office and financial services support functions. This is aimed at leveraging India's world-leading information technology and business process services capabilities. This will also enable cost-efficient delivery of financial services through centralized back-office operations in India, support growth in India's financial services, and IT and business process outsourcing sectors. This demonstrates mutual recognition of India's critical infrastructure capacity for the bilateral financial services partnership, the statement said.
“Overall, the conclusion of negotiations on the India-New Zealand Financial Services Annex underscores both governments' commitment to deepening the economic ties and harnessing mutual opportunities in the rapidly evolving financial services landscape. The agreement is forward-looking, balanced and designed to provide enhanced market access, regulatory clarity and cooperative frameworks that will benefit financial institutions and service providers from both countries,” the finance ministry said.