India, Singapore see eye-to-eye on bank access

India, Singapore see eye-to-eye on bank access
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First Published: Mon, Jul 23 2007. 12 10 AM IST
Updated: Mon, Jul 23 2007. 12 10 AM IST
New Delhi: India and Singapore are in the final stages of closing a deal that has delayed the overseas ambitions of the State Bank of India Ltd (SBI) and ICICI Bank Ltd for almost two years and also slowed the expansion plans of Singapore’s top bank, DBS Bank, in India.
Authorities in India have now agreed to allow DBS Bank to open eight new branches in India, provided ICICI Bank and SBI are given the qualifying full bank (QFB) status by Singapore.
This will allow the Indian banks to open up to 25 branches or ATM locations in Singapore. The new branches will increase the strength of DBS Bank’s branch network in India to 10.
The deal is likely to be finalized in August, according to a senior official at India’s commerce ministry who did not wish to be identified. The official added that the deal is a compromise solution reached after hectic negotiations.
The finalization of the deal could also indicate the willingness of the two countries to implement an economic cooperation agreement they had signed two years ago.
The decision to allow DBS more branches in return for concessions to SBI and ICICI Bank comes in the wake of India taking a hard-nosed and practical approach to international trade negotiations, said the official.
India is ready to give, but not unless it gets something in return, but the difference now is that it doesn’t turn away from negotiating, he added.
The two countries signed a comprehensive economic cooperation agreement in 2005, which said that they would allow each other some concessions in financial sector investments.
Both have since sought concessions for commercial entities from their respective sides in talks that followed the signing of the agreement.
Among the issues discussed following the agreement was that relating to the stakes held by Temasek Holdings Pte Ltd and the Government of Singapore Investment Corp. Pte Ltd (GIC) in ICICI Bank.
Reserve Bank of India (RBI) guidelines cap the holding of a foreign entity in an Indian bank at 10% and doesn’t allow this limit to be breached even if the stake is held through multiple companies belonging to the foreign entity. GIC and Temasek are both owned by the Singapore government.
RBI eventually decided to treat the holdings of the two companies in ICICI Bank separately.
Currently, SBI has 45 overseas operations and ICICI Bank has 14. The Monetary Authority of Singapore (MAS), the city-state’s banking regulator, has thus far given QFB status to six overseas banks, including Standard Chartered Bank and Citibank NA.
RBI has a roadmap for the expansion of foreign banks in India. According to this, beginning 2009, wholly owned subsidiaries of foreign banks and Indian banks may be subject to the same rules.
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First Published: Mon, Jul 23 2007. 12 10 AM IST