It's technically not a prohibition, but because the Reserve Bank of India regulates banks and requires a license to deal with anything banking, even if you already have an existing relationship (with other jurisdictions it only penalises marketing into their country which is understandable) with the account holder RBI could just sue us for operating without a licence, and RBI tends to just sue even if you think it's stupid. The resident is never penalised here (unless you have very large stash offshore), it's the bank.

Also, since that some may just scratch their head, here is the relevant provision from MasterCard (https://www.mastercard.us/content/dam/public/mastercardcom/n...).

It is not prohibited for an individual to maintain a foreign bank account in India but capital controls (FEMA) applies and banks providing services to Indian residents might need to comply with regulatory framework.

It's the same in most countries. The regulatory burden may be different but banking presence is required in the country if you are serving domestic market at scale.

Indian residents can open HSBC expat account domiciled on the jersey island as an example.

Just google "India" and "black money". I'm not from there, but it feels like the boogeyman of Indian politics. It seems the government is able to perpetuate some idea that India has simply unimaginable wealth, but that it was all stolen by a select few and if only they could get it back everything would be OK.

Taxation(tracking) leaps to mind.

Almost all banks are required to comply with tracking and sharing tax information due to OECD agreement at country level for tax reporting standardization.

It's the default regardless of the country unless you are sanctioned.

It's a factor but only a single one among multiple others.