India-UK FTA unlocks financial services boom

These commitments are expected to foster advancements in electronic payments, FinTech, financial diversity, stability, and market integration
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Christopher Ames

The free trade agreement (FTA) between India and the UK is set to significantly expand opportunities for financial services in both nations. The Indian government announced on Thursday that the agreement will enable financial services suppliers to broaden their reach in the UK, while simultaneously facilitating UK investment into India’s financial market, subject to existing sectoral Foreign Direct Investment (FDI) conditions.

Key provisions in the FTA include non-discrimination rules to ensure fair treatment for Indian firms operating in the UK, alongside comprehensive transparency commitments that guarantee equitable, transparent, and objectively administered UK rules for authorising Indian financial services firms. These commitments are expected to foster advancements in electronic payments, FinTech, financial diversity, stability, and market integration.

A detailed chapter on financial services outlines substantial market access for Indian entities in the UK. For instance, there will be ‘unbound’ and ‘none’ limitations on market access for Indian firms related to the acceptance of deposits and other repayable funds from the public.

Similar liberalisations apply to “lending of all types, including consumer credit, mortgage credit, factoring, and financing of commercial transactions” by Indian entities in the UK. Furthermore, life insurance will face ‘none’ limitations. However, in non-life insurance, there will be binding limitations on market access for risks related to maritime shipping, commercial aviation, space launching, and freight, including satellites and goods in international transit.

innovative services

Regarding UK companies gaining access to India’s financial market, the government emphasised that such investment has the potential to introduce new, innovative, and competitive financial services, ultimately benefiting customers and the broader economy without compromising the stability of India’s financial services sector.

All commitments in this sector are subject to the rules and regulations prescribed by various regulators. For the life insurance sector, market access limitations will be ‘none,’ with the caveat that commercial presence must be through the incorporation of a company with foreign investment not exceeding 74 per cent and adherence to minimum capitalisation norms.

In terms of national treatment, a majority of directors and key management personnel, along with at least one among the Chairperson of the Board, Managing Director, and Chief Executive Officer, must be Resident Indian Citizens. Similar conditions will apply to non-life insurance companies.

Industry experts anticipate a significant boost from the FTA.

According to Anil Talreja, Partner, Deloitte India, the financial sector in these countries is backed by robust infrastructure, coupled with state-of-the-art technology, and this huge step will lead to collaboration in terms of financial consolidation, online payment mechanisms, AI driven security measures as well as capital markets.

“Signing of the FTA should result in a surge in financial transactions between the two countries, both in terms of inbound /outbound investments and the transactions as a consequence of spurt in the trade activities between the two nations,” he said.

Vivek Iyer, Partner with Grant Thornton Bharat, said the FTA serves as a precursor to longer term financial market integration between London and IFSC GIFT City / Mumbai, given the increased trade finance and foreign exchange needs that will get generated as a result of the increased trade in the corridors.

“There will be a significant credit uptick in the MSME sector as a result of the new opportunities from the UK FTA agreement, and we expect the MSME portfolios of banks and NBFCs to increase substantially primarily from a trade finance and treasury standpoint,” he said.

Published on July 24, 2025

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