India's stand against any tax on banks for funding bailouts was vindicated, with the G-20 leaders agreeing that any such levy should be left to individual nations.
Discussing the issue threadbare, the leaders of the developed and fast developing economies declared that though the financial sector should make a fair and substantial contribution towards paying for any bailouts, policy should take into account each nation's 'circumstances and options.'
It may be recalled that just before G-20 summit here, Finance Minister Pranab Mukherjee had said, "We are not in favour of having taxation on banks."
He voiced India's opinion within days of participating in the G-20 ministerial meeting at Busan, in South Korea.
In their Toronto declaration, the G-20 leaders, including Prime Minister Manmohan Singh, US President Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy, decided that while the financial sector should make a contribution to prevent a breakdown, the policy approach should differ from country to country.
"We agreed the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government's intervention, where they occur, to repair the financial system or fund resolution. . .
"To that end, we recognise that there is a range of policy approaches. Some countries are pursuing financial levies. Other countries are pursuing different approaches. We agreed the range of approaches follow these principles: "To protect tax payers: reduce risk from financial system. . . take into account individual countries' circumstances and options and help promote a level playing field," the declaration said.
While countries like Britain, which has already levied a tax, France and Germany campaigned for such a tax, India has reservations.
It pointed out that its banking institutions were conservative by nature and followed healthy norms that prevented any crisis in the country in 2008.
India has been in favour of strong financial regulations, rather than imposing a levy on the banks.
Mukherjee had said that if there were well-placed regulations, the health of banks can be protected.
The governments in the US and several other Western countries had pumped in hundreds of billions of dollars into many big financial players to avert their collapse in the wake of the economic turmoil in 2008-09.
