Banking issues to dominate India-Singapore CECA talks

Financial Express (India)

Banking issues to dominate India-Singapore CECA talks

Singapore’s delay in granting QFB licence to SBI will be discussed


Thursday, March 15, 2007

NEW DELHI, MAR 14 : The Monetary Authority of Singapore’s delay in granting the qualifying full banking (QFB) licence—the highest banking status that Singapore offers to a foreign bank—to the State Bank of India will be taken up by India, when the two sides meet in Singapore later this month to review the Comprehensive Economic Cooperation Agreement (CECA). The QFB status would permit Indian banks to open more branches and get more depositors in Singapore.

“They (Singapore) have not yet completed evaluating the State Bank of India’s application for obtaining the QFB status and therefore this would be one of the main points which would be raised during the meeting,” an official told FE.

At present, the State Bank of India has a merchant banking status. Officials said India was expecting the bank to get the licence by December last year and were concerned by the delay owing to Singapore’s stringent norms.

Singapore authorities had studied the State Bank of India as a whole entity and collected information about prudential norms, including the capital adequacy ratio and deposit to credit ratio, as part of its procedural norms.

Meanwhile, ICICI Bank has also applied for the same licence. Recently, in a major boost for the efforts of the State Bank of India and ICICI, global credit rating agency Standard and Poor had reportedly upped their ratings for India to investment grade.

Seeking Status

• The QFB status will permit Indian banks to open more branches and get more depositors in Singapore
• At present, the SBI has a merchant banking status there

According to the Monetary Authority of Singapore, Indian banks do not qualify for the QFB status according to their prudential norms.

The Authority has asked the Centre to stand as a guarantor for the State Bank of India. However, according to the finance ministry, this violates the basic fabric of the CECA, and banks should be given QFB status without the government’s guarantee.

On the part of Singapore, Development Bank of Singapore, Overseas Chinese Banking Corporation and United Overseas Bank have put in their applications for getting national treatment status in India and establishing wholly owned subsidiaries here.

The finance ministry has also indicated that until Indian banks were granted QFB licences, these banks would not be allowed to operate as local bank branches.

source : Financial Express

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