The State Bank of India will be the first Indian bank to get the qualifying full bank status in Singapore.
The Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) have come to a settlement for the opening up of the financial sector of their respective countries with a formal finance ministry clearance which is set to come any day.
At present the DBS bank Ltd, the largest bank in Singapore in terms of assets is having two branches in India. With the getting of approval the Singapore bank will be able to open its eight new branches across India. It is being believed that the Reserve Bank will also be issuing a license to United Overseas bank Ltd (UOB) of Singapore to set up shop in India, making it the second bank from Singapore to have a presence here.
Sequentially, MAS will be giving the State Bank of India full bank (QFB) status. On getting approval India’s largest lender will be able to raise retail deposits and open 15 centers in Singapore, including automated teller machines (ATMs) and point of sales operations. Currently SBI is having only one branch in Singapore, but has no access to retail deposits.
According to banking analyst with a brokerage who do not want to be identified said, “I can’t recall single instances of a foreign bank getting eight branches at one go”. People closely related to the development said that four of the eight branch licenses had been pending since last year and the RBI approval is for all eight branches to be in tier II and tier III cities and not metros.
According to the confirmed figures available since October, 29 foreign banks from 19 countries were running 273 branches across India.
In August 2005, an Indo-Singapore Comprehensive Economic Cooperation Agreement (CECA) came into effect under which both countries agreed to open up their financial sectors to each other. So far, two Indian banks—Bank of Baroda and Axis Bank Ltd—have been allowed to set up operations in Singapore.
According to CECA agreement three Singapore banks will be allowed to open 15 branches in India, while three Indian banks will be given the QFB status. While, no other Indian bank has been given the status, the SBI will be the first one to get it.
Among Indian banks, Bank of India, Indian Overseas Bank, Indian Bank, UCO Bank, Bank of Baroda, SBI, ICICI Bank Ltd and Axis Bank have a presence in Singapore. Their status ranges from full banks to wholesale banks of offshore banks.
All other banks except for UCO Bank, which has two branches, have a single-branch presence in Singapore.
Singapore, being an important financial hub for South-East Asia, is a strategic money centre on the lines of London, Frankfurt, New York and Tokyo. It will play a very important role for Indian entities when the country opts for full convertibility of its currency.
On Monday the DBS Group, South-East Asia’s largest lender, in a statement it said that it is optimistic about obtaining approval for its expansion in India, and is waiting for the confirmation from India’s central bank.
“We are optimistic that we will receive the go-ahead to expand in India soon. However, as of now, nothing is confirmed,” said Karen Ngui, a spokeswoman for the Singapore bank.
According to the World Trade Organization (WTO) norms, the Indian banking regulator is required to offer 12 new licenses every year to all foreign banks but, RBI has been liberal when it comes to branch licensing.
For instance, between July 2006 and June 2007, the Indian central bank allowed seven foreign banks that have already been operating in India to open 20 new branches and an additional seven to enter India by setting up representative offices.
Between July 2006 and October 2007, six foreign banks: ABN Amro Bank NV., Barclays Bank Plc., Shinhan Bank, Deutsche Bank AG and Standard Chartered Bank, had set up 13 branches and four foreign banks, Banco Bilbao Vizcaya Argentaria, Banca di Roma, Depfa Bank Plc. and National Australia Bank opened four representative offices.
DBS, which has the largest retail network in Singapore with 83 branches and some 880 ATMs handling at least 50% of all ATM transactions in Singapore, made it first appearance in India in 1994 by setting up a representative office in Mumbai. In 1995 it was converted into a branch.
Ten years later it opened its second branch in New Delhi when it also acquired a controlling stake in Cholamandalam Investment and Finance Co. Ltd, a financial services firm with interests in consumer finance, asset management and securities.
By the end of the fiscal year March, it had a deposit base of Rs3,836 crore and advance portfolio of Rs1,229 crore. On a Rs225 crore income, it posted a net profit of Rs74 crore last year.
UOB, Singapore’s second-largest lender, is providing a range of financial services through its global network of 524 branches, offices and subsidiaries in 18 countries and territories in Asia-Pacific, Western Europe and North America. Currently it is having banking subsidiaries in Singapore, Malaysia, Indonesia, Thailand and the Philippines.