RBI has chosen an annual banking conclave to come clean on its policies for branch licences and its attitude towards foreign banks operating in India.
Deputy governor says approach towards foreign banks is liberal
MUMBAI: Reserve Bank of India (RBI) has chosen an annual banking conclave to come clean on its policies for branch licences and its attitude towards foreign banks operating in India.
RBI deputy governor V Leeladhar said the problem of branch licences rests with banks as they have not fully utilised the branch authorisations granted to them.
“Even though the banks were granted authorisations to the extent of 97% and 62% of the authorisations sought by them for the years 2004-05 (April-March) and 2005-06, respectively, as at end-March 2007, as much as 30% and 38% of the licences granted had still not been utilised,” he said at the BANCON conclave in Mumbai on Monday.
Denying criticism that the new Branch Authorisation Policy (introduced in September 2005) was more restrictive, Leeladhar pointed out that there has been a 61% increase % in the total number of authorisations granted last year.
“The actual number of authorisations issued by the RBI under the new policy has been much higher than before. For instance, as against the a total of 881, 1125 and 1259 authorisations given by the RBI under the old policy regime during 2003-04, 2004-05 and 2005-06, respectively, the number of authorisations issued under the new policy during 2006-07 was 2028.”
Under the new policy, the central bank takes branch applications once a year as against the earlier system where the banks approached the RBI throughout the year for branch authorisations.
Leeladhar clarified that banks are free to approach the RBI even in the middle of the year for any extra branches “especially in the rural or underbanked areas”.
The RBI deputy governor also rubbished claims from foreign banks that the RBI was less liberal in granting business to them in India. “The facts indicate something else. Foreign banks in India are given similar licences as Indian banks, not lower or higher like in some other countries,” he pointed out.
“In fact, some Indian bankers complain that foreign banks enjoy some positive discrimination like no minimum lending to agriculture, lending to export sector under priority,” he added.
On profitability, an issue which foreign banks often complain about, Leeladhar said the profitability per branch for foreign banks was Rs 11.99 crore in 2005-06 compared with just Rs 33 lakh for Indian PSU banks. He added that though according to the WTO agreement of 1997-98, India has to give 12 licences per year, between 2003 and 07 the RBI has allowed 75 foreign branches.
Also, though countries are expected to allow proportionate licences it has not been the case, Leeladhar countered. “Between 2003 and October 2007, India had granted 19 authorisations to US-based banks, most of which also stand utilised. However, in the same period, the US did not authorise any office of the Indian banks in the US territory, vis-à-vis requests from Indian banks for setting up three branches, two subsidiaries and nine representative offices. Some of the requests have been pending with the US authorities for more than five years,” Leeladhar said.
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