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The finance ministers of the G-20 nations started a two-day meeting in the port city of Busan, South Korea on Friday amid clear indication that the group is divided over the issue of imposing a bank tax to fund future bailouts.
The meeting, also to be attended by the central bankers of the G-20 which is more representative than the G-7 grouping of the rich nations, started amid the festering debt crisis affecting Greece as well as a couple of other Eurozone nations and the uncertainty looming large over the spread of contagion to other parts of Europe.
While India, Australia and Canada are opposed to the proposal to tax banks for future bailouts of banks and financial institutions, the European Union, the US, and Britain are all for it.
Finance minister Pranab Mukherjee made it clear that New Delhi prefers sound regulatory practices than taxing banks at his meeting with Il Sakong, the chairman of the presidential committee for the G-20 meeting.
"India is not in favour of imposing any tax on banks," he said, adding a better option would be to adopt better regulatory mechanism as is being followed by our banks.
The Reserve Bank is widely credited for following prudential norms and cautious approach towards new financial products that made banks under its purview remain largely unaffected by the direct impact of global financial crisis.
Besides India, Australia and Canada too are opposed to a bank levy, reported South Korean news agency Yonhap.
While opposing the levy, Australia and Canada argue that such a tax is not needed as they did not suffer the financial crisis the way some other countries did.
"Australia is committed to moving the G-20 agenda forward on financial regulation. The G-20 has a responsibility to make sure our global banking system can stand on its own two feet in the years ahead," Australian treasurer Wayne Swan told the agency in an interview.
"But it is also important to remember that the crisis did not play out the same way in every country. The Australian financial system did not go through the kind of upheaval seen in other advanced economies and is not expected to require the same kind of adjustment," he told the Yonhap.
Canada, the host for the upcoming G-20 summit later this month at Toronto, also expressed discomfort over the move, the agency said. Canadian finance minister Jim Flaherty told reporters, "there are many countries" that support its opposition to the idea. But South Korean finance minister Yoon Jeung-hyun said, "a bank levy remains on top of our agenda."
The meeting is expected to take up the issue of the festering debt crisis in the Eurozone region and hence fiscal soundness of each nations.
"One of the key agendas will be the issue of fiscal soundness," South Korean deputy finance minister Shin Je-yoon was quoted as saying by the news agency Yonhap. The minister further said the need to strengthen fiscal soundness of each nation is likely to be emphasised in a communique.
World Bank chief economist and senior vice-president Justin Yifu Lin said the global economy is recovering better than expected, but the sustainability of the recovery remains fragile, Yonhap reported.
Although coordinated policy responses helped the global economy rebound at a faster-than-expected pace, "the foundation of the sustainable recovery is still quite weak," Lin said. "The best way to get out of the crisis is growth," he was quoted as saying by the agency.
The news agency also quoted Asian Development Bank chief economist Lee Jong-wha as saying the Eurozone debt problems would not plunge the world economy into a double-dip recession.
The meeting will be held closed doors, and ministers will announce a joint communique at the end of the two-day deliberations in the later part of Saturday.
The G20 consists of the G-7 nations--Britain, Canada, France, Germany, Italy, Japan and the US and other 12 developing nations--India, Argentina, Australia, Brazil, China, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa, and Turkey -- and the European Union.