No special status for Singapore: RBI

The Reserve Bank of India (RBI) may treat banks from Singapore like any other foreign bank and subject them to the rigours of the branch licensing policy that is applicable to all foreign banks. This is despite the Comprehensive Economic Co-operation Agreement (CECA) signed with the Monetary Authority of Singapore (MAS).

 

RBI Deputy Governor V Leeladhar told reporters on Thursday that there could not be a reciprocal arrangement with Singapore in allowing banks from the city state a greater freedom in establishing presence in India. "The provisions of the CECA are up to the interpretation of the regulators (from the respective countries). There cannot be a quid pro quo,'' he said.

 

Under the CECA, signed between India and Singapore in June 2005, Singapore has committed to award three qualified full bank (QFB) licences to three Indian banks while India had agreed to give three Singaporean banks free access to the Indian banking space.

 

Leeladhar said: "The requests of the State Bank of India (SBI) and ICICI Bank for qualified full banking licenses are being considered by the MAS. This is irrespective of whether we give licences (to Singapore banks)."

 

Singapore's DBS Bank currently operates in India with two branches – one each in Mumbai and Delhi. The bank has not got any new branch licences this year so far.

 

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RBI deputy governor said the RBI has received applications from Singapore banks seeking to set up operations in India and open branches in the country. "We are processing them (the applications)," added Leeladhar.

 

When asked to react to the RBI's views, a MAS spokesperson, through an e-mail response, said: "The RBI and MAS are working closely to review the applications by banks to be set up or to expand in the respective jurisdictions. This will help enhance economic connectivity between India and Singapore. Once these details are settled, the appropriate announcements would be made."

 

Earlier, the implementation of the CECA had hit a roadblock as the MAS was upset with the RBI's refusal to treat its investment arms, Temasek and the Government of Singapore Investment Corporation (GIC), as separate entities, when it comes to their investments in shares of the ICICI Bank. Similarly, the RBI was unhappy with the MAS seeking government guarantee for granting QFB status to the SBI, the country's largest bank.

 

The RBI has since changed its stance and has agreed to treat Temasek and GIC as separate entities. The two investment arms of Singapore would now be in a position to own up to 10 per cent equity each in banks.

 

The recent upgrade of India's sovereign rating to investment grade should also help expedite processing of applications of both the SBI and ICICI Bank.