India, Pakistan banks seek stronger ties

MUMBAI: Indian and Pakistani banks have shown interest in starting operations in each other’s countries, State Bank of Pakistan governor Shamshad Akhtar said. However, she did not name any banks as both the regulators are still to endorse the applications.

Akhtar said that, as per the understanding between the Reserve Bank of India and the State Bank of Pakistan, two Indian and two Pakistani banks will be permitted in each other’s countries.

Akhtar also said that the relations between the central banks of the two countries are “cordial and open” and added that the focus of the relationship would sharpen going forward. Pakistan has steadily reduced government holding across all sectors and 80% of Pakistani banks are now privately owned, Akhtar said.

Like Indian banks Pakistani banking is also approaching a phase of consolidation with the intention of avoiding overexpansion. “Market forces will determine the consolidation process,” Akhtar said.

The Pakistani central bank, like its Indian counterpart, is on a rate tightening spree with its key rate being raised to the current 9.5% from 7% in 2005.