With strict entry guidelines, Singapore is insistent on Indian banks maintaining a high quality capital adequacy, an issue that has become a sore point between both countries.
As a result, the long-pending review of the India-Singapore Comprehensive Economic Cooperation Agreement has remained stuck.
The CECA was signed in 2005.
A review of the trade deal was launched in May 2010 to update and expand it.
Both sides seem to have locked horns over giving Indian banks more access to the booming Singapore market.
As of now, only ICICI Bank and State Bank of India are operating there.
The main issue has been that of a higher Asset Management Ratio as has been prescribed by the Monetary Authority of Singapore for qualifying full banks from India.
Currently, Singapore prescribes an AMR of 70 per cent for State Bank of India and ICICI, compared to 35 per cent for other foreign banks or QFBs such as Standard Chartered, BNP Paribas or Citibank.
“The very high and differential treatment in respect of applicability of AMR for Indian banks compared to other foreign banks is adversely impacting the viability and profitability of Indian QFBs present there.
"In fact, the high and differential AMR requirement is one reason why there is no application for a third QFB licence from any other (Indian) bank,” a senior ministry of external affairs official told Business Standard.
Under the CECA, Singapore had said it would allow three Indian QFBs to set up shop there. The matter is being handled by the Reserve
Markets remain rangebound; Sesa Sterlite up 3%
An external agency to monitor Bhushan Steel?
Opt for a shorter tenure when taking a loan
IDBI Bank to declare Kingfisher Airlines 'wilful defaulter'
Retail trade in derivatives: Is there really a problem?