Money & Banking

Modi to raise banking cooperation issue with Singapore Prime Minister

Nayanima Basu Amiti Sen New Delhi | Updated on January 22, 2018

Lee Hsien Loong

Narendra Modi

Stringent qualifying norms have deterred Indian banks seeking access to the city-state’s market

During Prime Minister Narendra Modi’s forthcoming visit to Singapore, the contentious issue of cooperation in banking will feature prominently in the talks.

“The Prime Minister is going to raise this issue strongly seeking establishment of banking channels between both countries under the Comprehensive Economic Cooperation Agreement (CECA). But, so far they have refused. Now it is up to the leaders to take a call on this,” a top official told BusinessLine.

During his bilateral meeting with Singapore Prime Minister Lee Hsien Loong, Modi is expected to “directly raise” the issue of granting greater market access to Indian banks in Singapore, a proposal that has been pending for over five years, the official added.

The proposal on banking cooperation has been hanging fire ever since the second round of review of India-Singapore CECA was initiated in May 2010. The CECA has been in force since 2005.

Top Indian banks, such as the ICICI Bank and State Bank of India, have been eyeing a substantial presence in Singapore for over a decade. But they have failed to meet the qualifying standards as Singapore is one of the world’s biggest financial hubs and has stringent standards to adhere to.

Past negotiations

Several rounds of negotiations have taken place on this issue between the Monetary Authority of Singapore and the Reserve Bank of India. Earlier this year, Singapore “made it clear” to the Finance Ministry that it will not allow entry of Indian banks unless they meet the qualifying standards in terms of asset management ratio (AMR), sources associated with the development said.

The AMR for banks operating in Singapore, such as BNP Paribas and Standard Chartered, is much higher than that of Indian banks. Singapore is also concerned over Indian banks’ soaring non-performing asset levels.

Singapore has been wanting to close the review for some time, and is likely to bring up the issue during Modi’s visit, a Commerce Ministry official told this newspaper, adding that India has refused to do so.

India and Singapore are all set to take their bilateral ties to the next level with the signing of the Strategic Partnership Agreement, in which trade and investments will be one of the main pillars.

Meanwhile, Singapore has agreed to one of India’s other demands on signing the Mutual Recognition Agreement (MRA) for smoother movement of its professionals. But India has said it will not sign the pact without a solution to the banking issue, sources said.

Singapore, on the other hand, is also pushing other members of the ASEAN, such as Indonesia, Cambodia and the Philippines, to expedite the ratification process of the India-ASEAN services trade pact. It was supposed to come into effect from July.

Published on November 19, 2015

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