PNB applies to RBI; BoI approaches External Affairs Ministry

A clutch of top public sector banks are looking to open branches in Pakistan. These include Punjab National Bank (PNB), Bank of India (BoI) and State Bank of India.

For banks such as PNB and BoI, it would be a sort of homecoming as their roots were in Pakistan, prior to partition.

Leading in the race to once again establish presence in Pakistan is PNB, which started its journey in Lahore in 1894.

PNB has volunteered to open a branche in Pakistan and submitted its application to the Indian banking regulator Reserve Bank of India, official sources told Business Line. Authorities in Pakistan have in-principle agreed to such a move.

Talks are on between the Indian and Pakistani banking regulators to permit more banks from either side to open branches in each other’s territory, they said.

“We are more than keen to have a commercial presence in Pakistan,” said K. R. Kamath, Chairman and Managing Director, PNB.

BoI has already applied to the Ministry of External Affairs here. The bank is looking to get back some of its earlier assets now held in Pakistan. These assets were frozen at the time of partition.

Reciprocal basis

The permission to open bank branches is granted by the two countries on a reciprocal basis. Pakistan’s banking regulator, the State Bank of Pakistan (SBP), had recently given its nod to two Pakistan-based banks — United Bank Ltd and National Bank of Pakistan — to apply for banking licence in India.

SBP has intimated the RBI of its decision to permit the two Pakistani banks to send their applications to the latter.

“Indian companies would like to deal with Indian banks even in Pakistan due to the comfort level. Also, if a dispute arises, it will be easier for Indian companies to settle them with Indian banks than with Pakistani banks,” said Ajay Sahai, Director-General and CEO, Federation of Indian Export Organisations.

“Besides, if an Indian bank has branches in Pakistan too, Indian exporters can save on banking charges and the same will be the case with Pakistani exporters having accounts with their banks,” he added.

(This article was published on August 7, 2012)
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