The Hindu Business Line : RBI honouring word on branches to WTO

Mumbai, Nov. 26 The Reserve Bank of India is honouring the branch licensing commitment made to the World Trade Organisation in 1997. Speaking at BANCON here today, the RBI’s Deputy Governor, Mr V. Leeladhar, said that foreign banks were given licences to open 75 branches between 2003-07 excluding offsite Automatic Teller Machines.

This was despite the fact that India, under the WTO commitment, was obliged to issue only12 licences per year. India, he said, issued only a single class of banking licence to foreign banks unlike the practice followed in some of the foreign banking jurisdictions. There were no restrictions on the scope of operations of foreign banks.

Also deposit insurance cover was uniformly available to all foreign banks at a non-discriminatory premium. The prudential norms applicable to the foreign banks, he said, were by and large the same as that was applicable to Indian banks, he added. In fact he said, there was a feeling among Indian banks that there was a “positive discrimination.” He illustrated the point with the priority sector guidelines. Priority sector requirement for foreign banks was only 32 per cent as against 40 per cent for domestic banks. However, he said, “Permitting foreign bank’s presence in a country is in some senses also guided by the extent of reciprocity among the nations – which simply means that there should be some defensible proportionality in the authorisations granted for the banks of each other’s countries.”

But he said that countries such as the US during the last five years were yet to authorise any of the office of Indian banks, despite requests for the same. During the same period, the US banks were given 19 authorisations. He said that the regulatory regime in India was “essentially non-discriminatory” as between branches of foreign banks and domestic banks. He said that the market share of foreign banks in off -balance sheet business was as high as 72.66 per cent.

In the case of foreign exchange business, the share of foreign banks was as on the ascent. It was high as 52 per cent for the first half of the current financial year, as against 41 per cent during the entire last year. He said that profits of foreign banks were far more remunerative than domestic banks. The net profit of foreign banks per branch was Rs 11.99 crore as against the corresponding figure of Rs 33 lakh for domestic public sector banks.

More Stories on : Foreign Banks | RBI & Other Central Banks | WTO

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