One step closer: State Bank of India prepares to open branches in Pakistan

NEW DELHI: After 45 years of shutting its service in Karachi and Lahore, the State Bank of India is looking forward to visiting and working in Pakistan again after the two countries agreed in principle to allow banks from both sides to open branches across the borders.

On the Indian side, the Reserve Bank of India is getting ready to invite applications from interested commercial banks, following a meeting of their officials earlier this month. For Indian banks, the biggest problem seems to be the high capitalisation requirement for banks in Pakistan, which Indian lenders find steep.

Newspaper reports quoted bank officials as saying, “There were some differences on the financial parameters for eligibility of banks as the Pakistani side had kept capitalisation norms too high. But the requirement has been scaled down now and the norms have been finalized.”

The two sides have also reached an agreement on the licensing fees that banks will have to pay, reports said.

The modalities will now be circulated to banks, which will then put in applications depending on the feasibility of the proposal. The State Bank of India and Bank of India approached the State Bank of Pakistan in September 2008 seeking permission to start branches again, but high capitalisation requirements forced them to drop their interest in the scheme.

The recent meeting between officials of the two central banks followed the meeting between Indian and Pakistani commerce ministers in New Delhi on April 13, where they announced their intent to fast-track opening of bank branches to boost trade.