MUFG to open a new bank branch in India

The bank branch is expected to open during the summer in the Gujarat International Finance Tec-City (GIFT City) in the Ahmedabad area. The office will be MUFG Bank's sixth branch in India after those in New Delhi and Mumbai. GIFT City will let banks extend loans in dollars, an incentive Japanese lender MUFG Bank will use to serve businesses seeking growth capital.

The Mitsubishi UFJ Financial Group unit aims to invest USD 300 million in Indian startups through an initiative targeting growth opportunities outside of Japan.

India generally allows loans denominated only in rupees, the national currency. For a bank to extend a loan in dollars or other currencies, the lender needs to execute the transaction from a branch in a neighbouring country. This triggers a tax of 5% or 10%, an expense frequently passed on to borrowing companies.

Dollar-denominated loans in GIFT City will not face such a tax, giving companies access to financing on more favourable terms. Banks will benefit from a more straightforward lending process. India looks to raise industrial competitiveness through GIFT City. Demand for business loans is brisk in India for uses such as long-term capital expenditures.