Three Singapore banks get nod to start operations

The government will allow three Singapore banks "" DBS Holdings Ltd, Overseas Chinese Banking Corporation and United Overseas Bank "" to start operations in India, Commerce and Industry Minister Kamal Nath said Monday. He said these banks would be treated at par with Indian public sector banks.

"These banks will start operations in India after Aug. 1 when the Comprehensive Economic Co-operation Agreement between India and Singapore comes into effect," Nath told reporters after the Union Cabinet approved the signing of the agreement.

Nath said the three banks have decided to set up wholly-owned subsidiaries in India, which meant they can open any number of branches in the country.

"These banks would be treated at par with Indian banks as far as branches, places of operation and prudential norms are concerned," he said.

Nath said, in return, Indian banks currently operating in Singapore would qualify as "full banks" and be allowed electronic clearance.

Two Singapore investment companies""Temasek and Singapore Government Investment Corp.""will be treated as separate entities and allowed to hold 10% each in listed Indian companies, he said. Currently, both the companies together cannot hold more than 10 per cent in Indian firms.

The Comprehensive Economic Co-operation Agreement will cover almost all facets of the economic spectrum, including investments, services and goods, Nath said.

He said Singapore had emerged as the trading hub of Asia and it was very important for India to have a strong trade structure with the country.

India has also decided to extend its double taxation avoidance treaty with Singapore. India has already entered into this treaty with Mauritius. Singapore companies use the Mauritius route to invest in India.

"I expect $2 billion foreign direct investment and $5 billion institutional investment from Singapore in the first year from the date the agreement comes into effect," Nath said.

Prime Minister Manmohan Singh and his Singapore counterpart Lee Hsien Loong will sign the pact on June 29. The agreement will come into effect August 1.

In 2004-05 (April-March), India's trade with Singapore was $6.5 billion.

Nath said India will scrap customs duty on 506 items imported from Singapore, once the agreement came into effect while there will be a phased reduction on elimination of tariff on over 4,600 items.

"Singapore had also offered entry of all products made in India at zero duty. It is expected that CECA will be helpful in developing supply chains from India since Singapore is a trading hub," he said.

Nath said both India and Singapore would put in place stringent rules of origin to prevent third country goods from penetrating the bilateral pact.