By: Udaibir Das
India's free trade agreements (FTAs) are rarely read for what they imply about the financial sector. Finance is generally treated in India’s trade agreements not as a tradable service, but as a regulated utility and a strategic capability. When finance is discussed in the context of India’s trade agreements, the debate polarizes: either India is genuinely opening, or it remains stuck in defensive regulation. But neither captures what is happening: India is selectively binding regulatory discretion, exporting specific platforms, and keeping control over balance-sheet risks. From India’s earliest agreements with Singapore in 2005 to the latest concluded with the European Union and the United States in 2026, there is an arc that reflects a deliberate, if asymmetric, strategy.
Singapore’s trade agreement with India cautiously mirrored India’s multilateral obligations but did not create new access. A 2007 review acknowledged the limited ambition, but little changed. Regulatory familiarity mattered more in the long run, which enabled financial technology and payment linkages, though outside the treaty framework. Even as late as 2022, the logic had changed little.
With the United Arab Emirates (UAE), India negotiated an agreement in 88 days that prioritized trade in goods, logistics, and mobility. Financial services appeared in the services chapter but lacked institutional depth. Diaspora finance and remittances shaped the political context, yet they were not converted into binding market commitments. The U.S.–India interim framework matters for finance less through direct liberalization than through second-order channels. It is not, in the released text, a financial services agreement. But tariff changes and supply-chain rerouting can still shift credit risk, working-capital stress, and hedging demand across sectors, thereby creating a pathway by which “trade” becomes “financial stability,” even without a banking chapter in the agreement.
The India–UK agreement of 2025 marked something of a transition. It did not liberalize finance outright, but it did seek to lock in greater policy certainty around the then-applied regime. The headline number often cited, the 74% FDI cap for regulated financial activities, is better read as a binding commitment and signaling device, not as an automatic ratchet. In practice, that reduces future policy risk for foreign investors while preserving India’s discretion over supervision, licensing, and the pace of any further opening. Cooperation on fintech and financial stability signaled intent but remained consultative. Importantly, India’s domestic stance on insurance FDI has since moved further, reminding us that, in finance, the regulatory trajectory can outpace treaty text.
The India–EU FTA goes further than India’s recent agreements on financial services, less by opening markets wholesale, and more by changing the nature of commitments (negotiations concluded; entry into force will follow legal/ratification steps). For the first time, India has embedded cooperation on electronic payment interoperability into the treaty architecture, with the stated aim of enabling faster cross-border remittances and merchant payments. The text is explicit about creating opportunities for Indian payment service providers, signaling a shift from “market access” to “infrastructure and rule-setting” as the core channel of integration.
The agreement adopts an architecture like the World Trade Organization (WTO) Understanding on Commitments in Financial Services, which India had declined to multilateralize. It incorporates disciplines from the WTO's Domestic Regulation initiative, of which India is not a member. These are procedural and governance commitments: transparency in licensing, more transparent authorization timelines, and limits on how qualification requirements are applied. The agreement also addresses senior management, boards of directors, and local presence requirements, which narrow the scope for discretionary delay. For India's trade policy, this represents a shift from defending outcomes to shaping process.
The reality is that financial services in FTAs are no longer framed solely around banks and insurers. The center of gravity has shifted towards infrastructure, platforms, and regulatory interfaces. Market access is now defined less through balance-sheet expansion and more through participation in payment systems, digital rails, and supervisory ecosystems. India is not exporting bank capital at scale. This shift aligns with India’s comparative strengths: it is exporting financial architecture.
In other words, the India-EU FTA elevates India's domestic payment infrastructure from bilateral diplomacy to treaty-backed market access. Earlier UPI linkages with Singapore and the UAE rested on regulatory arrangements and memoranda. The EU agreement moves payments into the trade architecture proper. It also institutionalizes cooperation in supervisory technology, regulatory technology, and the exploration of central bank digital currency. For GIFT City, this distinction matters. India's International Financial Services Centre has positioned itself around replicating the regulatory flexibility of Singapore or Dubai within Indian territory — onshoring the offshore. The EU agreement offers something different: treaty-level validation for India's payment and fintech platforms as exportable infrastructure.
Nonetheless, the institutional asymmetry between India and the EU remains stark. Five EU banks operate 33 branches in India, with 17 representative offices. On the Indian side, State Bank of India, Bank of Baroda, and Bank of India together maintain five branches across the entire EU. The revised licensing framework allows EU banks to open up to 15 branches over four years, up from a cap of 12. Formal reciprocity exists. Effective reciprocity does not. Capital constraints, risk appetite, and supervisory capacity limit outward expansion by Indian banks.
This appears intentional. India is opening its domestic market to foreign balance sheets while positioning outward engagement around payments, fintech, and platform services. Indian public sector banks will struggle to exploit this access before private and foreign competitors capture it. At the same time, cross-border data flows and data localization remain a binding constraint for cloud-based finance, algorithmic trading, and modern risk management. The legal–financial ecosystem gap persists: financial services depend on legal services, dispute resolution, and enforceable contracts, yet India’s restrictions on foreign legal practice remain.
India has largely reset its investment-treaty approach since the mid-2010s — terminating many BITs and shifting toward a more controlled, model-treaty framework — so trade chapters increasingly substitute for what BITs used to do, mainly through transparency and process disciplines rather than enforceable investor protections. The result is that long-term financial investments remain more exposed to policy and dispute-resolution uncertainty — risks that market-access provisions, on their own, do not price away. This leaves long-horizon capital with fewer treaty backstops and greater policy risk to price, which market-access language cannot address.
In conclusion, India's FTA strategy on financial services has evolved from defensive minimalism to selective confidence. The EU agreement reflects India's most ambitious set of financial commitments, surpassing those with the UK and Australia. But its ambition lies in process, platforms, and predictability — not wholesale liberalization. The agreement is calibrated statecraft: managing openness while creating treaty-backed pathways for India's platform capabilities. The architecture is now in place. India's financial regulators have historically been cautious about using the space created by trade agreements. In time, that caution, not the treaty text, will determine whether this agreement matters.
Udaibir Das is a Distinguished Fellow at ORF America and a Vice Chair of the Official Monetary and Financial Institutions Forum, London. He also holds affiliations with the National Council of Applied Economic Research, Kautilya School of Public Policy (India), the Bank of England, and the International Forum for Sovereign Wealth Funds (London).