The US Federal Reserve is expected to approve the proposals submitted by the ICICI Bank and the State Bank of India to open branches in the US. The process is reportedly in its final stages, and the approval is expected in a month’s time.
The impending approval is being viewed as a reciprocal move to the Reserve Bank’s permission to Citibank for new branches in India. The licenses for Indian banks to expand in the US have been in cold storage for some time, with US authorities arguing that Indian banks are not covered by enforceable laws to prevent money laundering and malpractices in the branches in the US.
Indian authorities have refuted this charge, stating that Indian laws cover such offences adequately, and are in step with worldwide practices. The US appears to have finally acknowledged this view.
The approvals would augment the efforts of ICICI and SBI to mop up NRI remittances which are steadily growing by 20% per annum. The last financial year, 2006-07 registered USD 25 billion, with 40% of it from the US alone.
Growing business ties between India and the US are also opening up opportunities for Indian banks. ICICI operates in 18 countries presently, and is focused on the Indian customer. A branch in the US would give both ICICI and SBI a hold in the US NRI market from where they could expand to full subsidiaries.
