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Two Indian banks likely to enter Pakistani financial market
Erum Zaidi
Sunday, August 05, 2012
--
KARACHI: Two Indian banks are likely to enter the financial market of Pakistan, following the country's central bank approval to the National Bank of Pakistan (NBP) and the United Bank Limited (UBL) to open their branches in India, sources in the banking sector said on Saturday.
It is expected the Reserve Bank of India will soon to finalise the names of the two banks that would be granted approval to enter into the Pakistani financial market.
The opening of banking channels in each other's countries was one of the main features of the Pak-India trade agreement signed in February 2012. It was also decided that the representatives of the central banks of both countries will meet and finalise institutional frame work for the opening of banking branches in Indian and Pakistan with a view to enhance economic and trade ties between the two countries.
Sources said that apart from the trade pact, Indian financial regulations encourage presence of foreign banks in their country.
The present policy on the penetration of foreign banks in India is followed by two cardinal principles of reciprocity and single mode of presence. In case of Pakistan, it seems that any one or two banks will also start business operations in Pakistan.
When contacted, an official of the National Bank said that the management of the NBP has not been informed by the State Bank about the approval of opening branches in India. "The matter is being handled on government-to-government basis," the NBP official said.
However, sources said that Reserve Bank of India (RBI) has also been taken on-board by the authorities of Pakistan's central bank and the RBI is likely to give permission to the said banks to open branches in the main cities of India.
NBP has been seeking to enter India's banking sector since 2006. The State Bank had given permission to the NBP and UBL to open their branches in India two years ago, but due to the political and diplomatic hurdles, the deal was not materialised.
Sources said that another major bank of Pakistan, MCB Bank, has also applied to the State Bank to start banking operations in India, but the application of the bank is still under process and no development has occurred on this so far.
Banking sector experts and analysts said that SBP's permission to the NBP and UBL and India's move to lift ban on foreign investment has been done in a view to progress peace process between the two countries by boosting trade activities.
It is a positive development that along with a public sector bank, a private sector bank is also going to penetrate in the Indian financial market for the first time since independence, the experts said.
Similarly, Indian banks should come here and start their businesses to cater to the need of both sides' traders and exporters in terms of opening letter of credit, they said.
"Despite the fact that NBP and the UBL are the two largest banks of Pakistan in terms of capatilisation, profitability assets and local and international branch network, penetrating in the Indian banking industry will be a challenging task especially, in the presence of the huge competition there as currently the branches of 88 foreign countries operating there," said Ahsan Mehanti, a senior analyst at Arif Habib Corporation.
These banks will only sustain if they follow aggressive business strategy, taking the business community on board, he said.
According to the RBI, there are currently 34 foreign banks operating in India as branches and their balance sheet assets accounted for about 7.65 percent of the total assets of the scheduled commercial banks as on March 31, 2010 as against 9.03 percent as on March 31, 2009.
In case the credit equivalents of off balance sheet assets are included, the share of foreign banks was 10.52 percent of the total assets of the scheduled commercial banks as on March 31, 2010. Out of this, the share of top five foreign banks alone was 7.12 percent.
According to the financial regulations of RBI, any foreign bank interested to open a branch in India should have a minimum paid-up capital requirement of Indian rupees three billion, maintaining 10 percent capital adequacy ratio. Further, the banks should be financially sound, having good country and international ranking.
Two Indian banks likely to enter Pakistani financial market - thenews.com.pk
Erum Zaidi
Sunday, August 05, 2012
--
KARACHI: Two Indian banks are likely to enter the financial market of Pakistan, following the country's central bank approval to the National Bank of Pakistan (NBP) and the United Bank Limited (UBL) to open their branches in India, sources in the banking sector said on Saturday.
It is expected the Reserve Bank of India will soon to finalise the names of the two banks that would be granted approval to enter into the Pakistani financial market.
The opening of banking channels in each other's countries was one of the main features of the Pak-India trade agreement signed in February 2012. It was also decided that the representatives of the central banks of both countries will meet and finalise institutional frame work for the opening of banking branches in Indian and Pakistan with a view to enhance economic and trade ties between the two countries.
Sources said that apart from the trade pact, Indian financial regulations encourage presence of foreign banks in their country.
The present policy on the penetration of foreign banks in India is followed by two cardinal principles of reciprocity and single mode of presence. In case of Pakistan, it seems that any one or two banks will also start business operations in Pakistan.
When contacted, an official of the National Bank said that the management of the NBP has not been informed by the State Bank about the approval of opening branches in India. "The matter is being handled on government-to-government basis," the NBP official said.
However, sources said that Reserve Bank of India (RBI) has also been taken on-board by the authorities of Pakistan's central bank and the RBI is likely to give permission to the said banks to open branches in the main cities of India.
NBP has been seeking to enter India's banking sector since 2006. The State Bank had given permission to the NBP and UBL to open their branches in India two years ago, but due to the political and diplomatic hurdles, the deal was not materialised.
Sources said that another major bank of Pakistan, MCB Bank, has also applied to the State Bank to start banking operations in India, but the application of the bank is still under process and no development has occurred on this so far.
Banking sector experts and analysts said that SBP's permission to the NBP and UBL and India's move to lift ban on foreign investment has been done in a view to progress peace process between the two countries by boosting trade activities.
It is a positive development that along with a public sector bank, a private sector bank is also going to penetrate in the Indian financial market for the first time since independence, the experts said.
Similarly, Indian banks should come here and start their businesses to cater to the need of both sides' traders and exporters in terms of opening letter of credit, they said.
"Despite the fact that NBP and the UBL are the two largest banks of Pakistan in terms of capatilisation, profitability assets and local and international branch network, penetrating in the Indian banking industry will be a challenging task especially, in the presence of the huge competition there as currently the branches of 88 foreign countries operating there," said Ahsan Mehanti, a senior analyst at Arif Habib Corporation.
These banks will only sustain if they follow aggressive business strategy, taking the business community on board, he said.
According to the RBI, there are currently 34 foreign banks operating in India as branches and their balance sheet assets accounted for about 7.65 percent of the total assets of the scheduled commercial banks as on March 31, 2010 as against 9.03 percent as on March 31, 2009.
In case the credit equivalents of off balance sheet assets are included, the share of foreign banks was 10.52 percent of the total assets of the scheduled commercial banks as on March 31, 2010. Out of this, the share of top five foreign banks alone was 7.12 percent.
According to the financial regulations of RBI, any foreign bank interested to open a branch in India should have a minimum paid-up capital requirement of Indian rupees three billion, maintaining 10 percent capital adequacy ratio. Further, the banks should be financially sound, having good country and international ranking.
Two Indian banks likely to enter Pakistani financial market - thenews.com.pk
