The Reserve Bank of India (RBI) has conveyed to Pakistani authorities that it cannot allow Pakistani banks to open their branches in India until the political leadership or the Union government gives green signal, sources in the Ministry of Foreign Affairs told Business Recorder.
The Cabinet recently approved Most Favoured Nation (MFN) status for India, but institutions of national security and prime spy agency ISI are reportedly unhappy with the government for what they consider are 'fast track' measures to enhance trade ties with India. Indian Prime Minister Manmohan Singh has thanked Pakistan for this move.
Sources said the Governor of Reserve Bank of India (RBI), Dr D Subbarao, was supposed to call on Commerce Minister Amin Fahim during the latter's recent visit to India, but due to his scheduled meeting with IMF in Washington, Dr Subbarao was unable to do so.
In absence of RBI Governor, Deputy Governor (Monetary Policy), Dr Subir Gokarn, called on the Minister at his hotel suite. Commerce Secretary Zafar Mahmood, High Commissioner to India, Shahid Malik, Chief Executive of Trade Development Authority of Pakistan (TDAP) Tariq Iqbal Puri and a few select delegates were present during the meeting. SBP Executive Director (Banking Policy), Inayat Hussain, who was in Mumbai for a conference, was also invited to participate in the meeting.
During the meeting, the two sides discussed the possibility of opening bank branches in each other's country in the light of Commerce Secretaries' meeting in April in Islamabad. According to sources, RBI Deputy Governor stated that there was no impediment in terms of operational and administrative framework for opening of branches, or allowing investment.
He, however, admitted that RBI would move forward only after getting a green signal from political leadership, or the central government of the country. During the discussion he said that the RBI does not go for direct opening of branches, but initially allows subsidiary sort of operations by foreign banks, before they can be allowed to open branches in India.
Both sides agreed that representatives of the central banks of both countries will hold a meeting soon to discuss and devise appropriate recommendations for consideration by their respective governments. It was agreed that both sides would cooperate and collaborate further in this direction. Sources said that Pakistan's delegation appreciated the achievements of Indian financial sector and its role in economic growth.
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