India and the European Union have concluded a long-pending free trade agreement (FTA), with the commerce ministry outlining key commitments on banking access, investment limits and safeguards for domestic industries.

The agreement is expected to be signed and implemented later this year. One of the central elements of the deal is India’s decision to allow European Union banks to expand their physical presence in the country.

“India has provided market access for bank branches to the EU, that is, 15 branches over 4 years for EU banks,” the ministry said.

At present, European banks operating in India include Deutsche Bank of Germany, BNP Paribas of France, and Societe Generale of France. The new arrangement will allow a calibrated expansion of EU banking operations while retaining policy control.

The government has also reiterated its foreign direct investment commitments in financial services.

According to the ministry, India has provided “100 per cent FDI (foreign direct investment) commitments in the insurance sector and 74 per cent for banking services.”

While opening up selected sectors, the government said it has protected strategic interests.

“India has taken appropriate carve-outs for national security and also reserved policy space in sectors like legal services, thereby taking care of India-specific sensitivities,” the ministry said.

On trade rules, the agreement lays out strict conditions to prevent misuse of tariff benefits.

The ministry said the rules of origin include an “insufficient production or minimal operations and processes” clause to ensure that only genuine manufacturing or value addition qualifies for preferential tariffs.

The clause specifies activities that do not confer origin status even if carried out in a member country, such as packaging, labelling, minor assembly or peeling.

To address concerns over a sudden rise in imports, the FTA includes a bilateral safeguard mechanism. This allows India to temporarily raise duties if tariff cuts lead to a surge in imports from the EU that harm domestic industry.

Under this provision, India can raise duties up to the MFN level on affected goods.

“The maximum duration of bilateral safeguard measures cannot exceed four years. The measure can be initially applied for a period of two years, which can be extended by an additional period of two years upon a review investigation. In any case, the measure cannot exceed a period of four years,” the ministry said.

On intellectual property, the government clarified that the agreement does not require changes to existing laws.

“There is no obligation on India under the Intellectual Property Chapter in the India-EU trade deal that requires India to change or modify any of its intellectual property laws,” it said.

The deal also includes a built-in review process. The trade agreement provides for a general review by a joint committee within five years of its entry into force and every five years thereafter, or at other times as agreed by both sides.