The European Union on Monday pressed for more access to its banking and insurance companies to operate in India, the second fastest growing economy in Asia.
The Union is working with India on two aspects. First, at the multilateral level, where there is need for greater engagement in managing the global financial system in the context of G-20,” said Danièle Smadja, head of a visiting EU delegation, at a panel discussion organised by the Confederation of Indian Industry.
“Second, at the bilateral level, a dialogue with Reserve Bank of India on regulatory framework and more market access,” said Smadja.
RBI is reviewing the rules for foreign banks in the country, she noted, adding that the EU was encouraged by India’s policy stance to allow higher foreign direct investment in the insurance sector.
“The market access for the services sector (like banking and insurance) is very essential to conclude the free trade agreement between EU and India,” said Smadja.
M V Nair, chairman and managing director of Union Bank, said 34 foreign banks have presence in India, of which nine were from Europe. The latter had 60 per cent of the total assets of foreign banks in India, as of March.
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While European banks have immense scope to enter and deepen presence in India, some of them may face challenge due to their present weak financial condition, an analyst said.
Banks in Europe have had to take a large capital injection from regional and national governments and supra-national bodies like the EU. This was done to strengthen balance sheets and meet capital adequacy requirements.
Most banks in Europe lack any capital to grow organically. This situation will not change for several years to come, Nair said.