Moscow, Mar 16 (IANS/RIA Novosti): Russian President Vladimir Putin has signed a law banning foreign banks from opening branches in the country, the government website said.

The bill was adopted by the State Duma Feb 22 and approved by the Federation Council March 6.

The bill amends a number of existing Russian banking laws as part of a strategy to develop the domestic banking sector by 2015.

The law excludes branches from the definition of the banking system in Russia.

It also removes the phrase "branches of foreign banks" from articles on the state registration of credit institutions with foreign investment and on additional requirements for their establishment and activity.

Foreign capital in the Russian banking sector is held in subsidiaries of foreign banks, registered in accordance with Russian legislation.

The explanatory note to the document states that branches operate in a different way from subsidiaries of foreign banks, since branches are not subject to Russian jurisdiction.

Due to this, the note said, they are not subject to full supervision by regulators; they are not obliged to allot money to obligatory reserve funds, or to report to the Bank of Russia via both the Russian and international accounting systems, nor do they need to submit monthly reports to the Bank of Russia.

The bill's sponsors say these privileges may reduce the competitiveness of Russian banks.