The British Government has urged India to further open up its financial sector to foreign banks.
“We are eager to see UK banks play a bigger role in the financial development of India,” Lord James Sassoon, the Commercial Secretary to Britain's Treasury department, told delegates at a conference on the Indian banking sector in London.
With foreign banks forming less than 10 per cent of the domestic banking industry in India, there is enormous scope for growth, as well as potential for contributing to financial inclusion schemes in the country, he said.
“They can play a significant part in bringing modern banking services to millions more,” he said.
Among the reforms sought are more licences for branches for those foreign banks that pose a lower risk to financial stability, and greater regulatory clarity, said Lord Sassoon.
He added that the Government was also eager to see opening up in other financial sectors of the economy, particularly the insurance sector. He urged quick adoption of the pending legislation to increase foreign investment in insurance joint ventures to 49 per cent from 26 per cent. “We look to see further progress in making this a reality.”
“India's infrastructure requirements means huge requirement for sectors such as insurance,” he said.
Keen interest abroad
The potential growth of India's domestic banking sector is attracting widespread interest abroad. India will become the world's third largest domestic banking sector by 2050, after China and the US, PricewaterhouseCoopers concluded in a report published in June.
India's banking sector will overtake Britain's by 2030, and in the longer term could overtake even China's, PwC added.
Lord Sassoon's comments come ahead of a meeting next week in London between Mr George Osborne, Britain's Chancellor of the Exchequer, and the Finance Minister, Mr Pranab Mukherjee, for the UK-India Economic and Financial Dialogue.
Lord Sassoon said he hoped that further developments in the financial services sector would be among the issues discussed.