UK urges India to lift cap on foreign investment in banks

MUMBAI: India needs to lift the ceiling on foreign investments in banks and expedite disinvestment of state-owned financial sector entities to attract higher overseas investment, Britain''s Chief Secretary to Treasury Paul Boateng said on Thursday.
Seeking a speedy liberalisation of Indian financial sector, Boateng said "the challenge for the Indian government, the Reserve Bank of India and industry here is to embrace the reality of increasingly integrated global markets and release the potential inherent in Indian banks, insurance companies and securities houses."
The General Agreement on Trade in Services (GATS) negotiations under WTO''s Doha agenda would provide a framework for liberalisation, he said while addressing a "Banking and Finance Summit," organised by Tata Consultancy Services here.
Political, trade and investment links between the two countries are flourishing and "now is the time to take the next step (liberalise financial sector) to sustain high growth across the rest of the economy," he added.
"UK-based banks, fund managers and insurance sector players are eager to bring their international expertise to help take Indian market to the next stage," Boetang said.
As India strives to sustain eight per cent growth and reduce poverty ratio by 15 per cent by 2012, the way forward was through domestic reform to create the right climate for an international industry, Boetang said.
A more efficient industry drives growth across all other areas of the economy, lowering the cost of capital for business, he added.
On the electronic straight through processing (STP) for financial sector, Boateng said it would facilitate integration between national markets.
"Countries with emergent financial services industries like India need to embrace this as a challenge and not reject it as a threat," he said.
Securities and Exchange Board of India chairman G N Bajpai said STP was necessary to speed up trade information flow and make T+1 settlement cycle feasible for international investors.
Indian capital markets would adopt the STP, involving depositories and stock exchanges, early next month and the market regulator was working with Reserve Bank of India on plans to adopt STP for fund transfer in next two years, Bajpai said.
With the adoption of global standards, SEB''s vision is to have at least one overseas company listed on Indian Stock Exchange by end of 2003, Bajpai added.