INDIA WINS 20-20 WORLDCUP

INDIA WINS 20-20 WORLDCUP

India, Singapore set to open up banking

The Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) are finally ready to open up the financial sector of their respective countries.
According to people intimately familiar with the development, both regulators are very close to reaching an “understanding”.

“It’s a sort of quid pro quo,” says one person, who didn’t want to be named. “MAS will offer the qualifying full bank (QFB) status to State Bank of India (SBI) and possibly to ICICI Bank as well. This will enable these two banks to raise retail deposits and open 25 centres in Singapore, including brick and mortar branches and ATMs. RBI, in turn, will allow DBS and other Singapore banks to open more branches.”
Greater presence: Singapore’s DBS Bank will be allowed to open more branches in India
Greater presence: Singapore’s DBS Bank will be allowed to open more branches in India
India’s central bank is also the banking regulator and MAS regulates the entire financial sector in Singapore, including capital markets .

MAS is asking for 15 branch licences for Singapore banks but RBI cannot offer so many at one go as, under World Trade Organization (WTO) norms, the Indian banking regulator is required to offer 12 new licences every year to all foreign banks. “RBI may offer six branch licences to DBS this year,” this same person said. According to him, a formal announcement will be made soon, certainly before the end of 2007.
“RBI and MAS are working closely to review the applications by banks to be set up or to expand in the respective jurisdiction. This will help enhance economic connectivity between India and Singapore. Once these details are settled, the appropriate announcements would be made,” an MAS spokesperson told Mint.

Since August 2005, when the Indo-Singapore Comprehensive Economic Cooperation Agreement (CECA) came into effect, trade between the two countries has increased significantly. Since the CECA came into being, two Indian banks—Bank of Baroda and Axis Bank—have been allowed to set up operations in Singapore. DBS, Singapore’s largest bank, too, has been granted one more branch licence in India, taking its network to two.

Under the CECA, both the governments have promised to open up the financial sector. Three Singapore banks are to be allowed to open 15 branches in India, while three Indian banks will be given the QFB status.

However, not a single Indian bank has yet got the QFB status as MAS has been insisting on “ratings” of Indian banks as a precondition to offer the status even though the treaty does not stipulate that.

MAS had taken an official stance that QFB licences could be given to those Indian banks that meet its “prudential requirements” and the CECA does not guarantee automatic entry. The insistence on prudential requirements is in conformity with the general principle under WTO and other free trade agreements (FTAs). Singapore has 10 FTAs in force.