India for currency swap in South Asia, RBI to relax norms

And the Reserve Bank of India (RBI) could relax norms soon for the entry of foreign banks into the country, top officials said here Monday.

"India is spearheading efforts to finalise an agreement for SAARC central banks to establish a currency swap arrangement as a baseline measure that would provide funds to SAARC states to defend their currencies when faced by special exigencies," Foreign Secretary Ranjan Mathai said, addressing a conference on economic integration of South Asia.

On investment protection, Mathai said: "Policies are made by each country based on their laws but once we have policies in place which are in line with international practices, we should not allow non-economic considerations to affect in functioning of commercial entities in each others' country."

Speaking at the same meet, Commerce Secretary S.R. Rao said the "RBI is very soon, I believe, going to announce a very progressive policy for permitting opening of more foreign banks".

"I do hope that with far more regional integration of economies and commerce, the market forces themselves will demand that each of the central banks of sovereign nations take similar calls and I am sure the time is propitious and it is going to happen sooner than later," he said.

India and Pakistan are negotiating opening up of bank branches in each other's territory to facilitate greater trade and commerce between the two countries.

Rao said intra-regional trade is not a zero-sum game and there are complementarities and opportunities that must be tapped.

Funds should be invested to promote businesses within the region and issues such as trade barriers and better connectivity need to be suitably addressed to encourage intra-regional trade.

Sanjay Budhia, chairman, CII National Committee on EXIM, said poor intra-regional connectivity by road and rail is leading to high trade costs.

South Asia would benefit enormously from strengthening transport, transit and trade facilitation through regional transport and transit agreements, adopting single window approach to customs procedures and by moving towards international standards and harmonized conformity assessment procedures.