Wednesday, October 03, 2007

Some reciprocity, please

US banks are itching to get into India. Senior US officials make it a point to lecture India on the virtues of opening up the Indian banking sector even more to foreign banks. The RBI has plans to liberalise entry further post 2009.

There is a vexatious issue involved here that can't be wished away. Most industrial economies are reluctant to allow Indian banks into their turf for one reason or another. They do not believe in reciprocity in this area. The soundness and management of Indian banks was an issue for long. Now that Indian banks have proved their mettle, the issue is money laundering and terrorist funding. As Indian Express reports, the Indian security establishment's warnings that Indian financial institutions are vulnerable to terrorist groups has now provided a convenient handle to the US treasury.

There are some who advocate unilateral opening up of the Indian banking sector- they contend that we benefit from unilateral liberalisation. They have a point but how far do we go?

Finance minister P Chidambaram had to do some tough talking in the US on this subject recently.

Chidambaram told the US team that India would have to review its policy if ndian banks aren’t allowed to open branches in the US. While there are 52 branches of US banks in India, including 19 opened in the past four years — four branches of US banks have been approved in Tier II cities this year — Indian banks have just around a dozen branches in the US.

........Chidambaram emphasized that Indian Banks were Basel II (international standard to safeguard solvency and market risks) compliant and the Money Laundering Act was in place to guard against any questionable transfers.


SUNEET said...

I agree with you fully. Indian banks have over the past years proved their quality both in terms of managerial skills as well as the lower level of bad loans when compared to banks in other countries. So they too deserve to be given a chance to become global players.

P Chidambaram has done the right thing by warning the US officials and he should back it with some tough action in terms of policy review.

I think it is this nature of US of trying to look at their own benefit and finding one reason or another for not opening their own doors that has made many people look at the Nuclear Deal with suspicion. Most people are not really ready to believe that US can go out of their way in signing a deal which can benefit anyone but themselves.

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