Chiefs of foreign and Indian banks crossed swords at the Mint Annual Banking Conclave here on Monday, over the opening up of the financial sector in India.
Representatives of foreign banks argued that foreign banks with long-term commitment and interest should be allowed liberal expansion of their operations in India. However, Indian bank chiefs favoured the postponemnet of free-entry for foreign banks by a couple of years.
In April 2009, World Trade Organization (WTO) norms that ensure liberal play for foreign banks in the banking system of the country will come into effect. However, the Reserve Bank of India (RBI) will have a formal say on this issue.
“India requires $500-700 billion to invest on infrastructure projects over the next five years. Foreign banks should be allowed, even if some conditions are to be imposed,” said OP Bhatt, chairman, State Bank of India.
The Mint conclave focused on the topic ‘2009: Should the Country Open up the Financial Sector?”. Mint is a sister publication of the Hindustan Times.
“The Indian banking sector has been underperforming as far as parameters like infrastructure, consolidation and financial inclusion are concerned. Allowing foreign banks will help improve the situation,” said Sanjay Nayar, CEO, Citigroup, India
Arguing that the Indian regulators cannot be termed too harsh on foreign banks, KV Kamath, MD and CEO, ICICI Bank said: “Out of 18 countries that we operate in, 16 are completely closed when compared to the Indian market.” He also said that every country had its national interests in mind while allowing a foreign bank’s entry.
“Level-playing field is not allowing foreign banks to occupy 90 per cent of the banking space. They should be domesticised,” said KC Chakrabarty, CMD, Punjab National Bank.
Neeraj Swaroop, CEO-India, Standard Chartered Bank, cited how opening up telecom, aviation and automobile sectors over the last 10 years has changed their landscape, to buttress his argument for liberalizing foreign banks’ entry from April 2009.
Gunit Chadha, managing director and CEO, Duetsche Bank, suggested that education and healthcare should find a place in the priority sector for banks.