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- By Parinda News Bureau, February 23, 2006, 14:33 IST
Bank Told To Provide Govt Guarantee If It Wants Licence
It has come as a rude shock to an institution that is considered a proxy for the Indian economy; an institution that borrowed hard currency to help a nation hit by sanctions. The 200-year-old State Bank of India - the country's largest bank - is aghast at a recent communication from the authorities of an island state almost the size of Mumbai.
The Monetary Authority of Singapore (MAS) the hard-boiled financial regulator and central bank — has said SBI will not get a full-fledged banking licence in Singapore unless the Indian government furnishes a guarantee.
While SBI can continue to run its offshore banking branch that deals in US dollars and international currencies, a central guarantee or cover is a prerequisite if SBI wants to deal in Singapore dollars, the local currency. This means that without the guarantee, SBI cannot accept deposit from or give loans to local and retail consumers in Singapore.
"We are not prepared to accept this in any way... The bank has taken up the matter with the government and Reserve Bank of India. We are trying to resolve the issue," a senior SBI official told ET. SBI, known for its solid fundamentals, conservative accounting practices and hidden reserves, finds it difficult to accept the condition since a guarantee or letter of comfort against possible default is given, if at all, only to a weak institution.
MAS, one of the toughest regulators in the world, has its own set of prudential parameters to decide whether an entity will get a licence to operate as a Qualifying Full Bank (QFB) — a bank which can deal in local currency.
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