'RBI is protectionist,' says British trade minister

Stanchart's plan for 100 rural branches stuck.

Calling the Reserve Bank of India (RBI) "protectionist", visiting British Trade and Investment Minister Digby Jones said that Standard Chartered (StanChart) Bank's plan to open 100 branches in rural India has been pending since last October.

"Standard Chartered went to the RBI and said you have 200 million people in poverty. It said we will open 100 branches in rural India with micro-finance (which frankly is not going to make a lot of money). But it will enable a lot of people to have access to the financial services for the first time," Jones told Business Standard in an exclusive interview here today.

Jones added that the bank had applied last October and "are even waiting for an acknowledgement to their request".

"Here you have a fabulous British bank that will do two things. It will get access to the market but at the same time, it will act as a catalyst towards rural development and inclusive growth in India. Just out of sheer protectionism, the RBI says no," Jones added.

When asked if he has discussed the matter with the Indian authorities, Jones said, "I discuss the matter with every Indian I meet."

StanChart's India office said it had no comment to offer.

On its foreign bank branch licensing policy, RBI Deputy Governor V Leeladhar had said in November that it was more than WTO-compatible.

Under the terms of India's WTO commitment, licences for new foreign banks may be denied when the share of foreign banks' assets in India, including on- and off- balance-sheet items, in the total assets of the banking system exceeds 15 per cent.

RBI has autonomously not invoked this limitation so far to deny licences to new foreign banks, he added, even though the actual share of foreign banks in the total assets of the banking system stood at 49 per cent, as at the end of January 2007.

At present, there are 29 foreign banks operating in India with a network of 273 branches and 871 offsite ATMs.

Last November, StanChart, the largest international bank in India, had said it would increase its involvement in microfinance in the coming year, through higher investments in the sector and the number of its partnerships with microfinance institutions.

The Board of Standard Chartered Plc had met in New Delhi last October, where it looked at agricultural finance and discussed ways of helping the Indian farming community.

Standard Chartered Plc Chairman E Mervyn Davies had, however, said branch licensing restrictions were limiting growth for the bank.

StanChart currently has 83 branches in 33 cities.