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Expansion in the US not easy for Indian banks: David Mulfordnews
02 December 2006

Mumbai: Indian banks may have to wait for some more time to set up branches in the US, says US ambassador David Mulford. In an exclusive interview with Sanjay Pugalia, editor, CNBC-Awaaz, Mulford said that for Indian banks to operate in the US, they would have to meet certain regulatory requirements on money laundering.

Till the compliance mechanisms are put in place Indian banks would have to delay the launch of their US operations.

Mulford's announcement gains significance as finance minister P Chidambaram has already raised concerns over the stringent regulations put in place by the US administration for allowing Indian banks to expand overseas branch network expansion in the US.

Replying to a question in the Rajya Sabha in the last monsoon session of Parliament on whether India would follow the same principles to allow US banks to open branches in India, Chidambaram had replied, "Reciprocity will be a consideration in dealing with this matter. The US Federal Reserve follows a rather restrictive policy in granting foreign banks permission for opening branches... We have taken up the matter with the US at different forums."

Mulford though was very upbeat about the expansion of foreign retailers in the Indian retail sector and said this would have very positive impact on the economy. "It is not just Wal-Mart, it is the retail development itself," that will create backward and forward linkages leading to overall growth, Mulford said. He also expected that Wal-Mart would get a presence in India through the Bharati-Wal-Mart deal. He, however, refused to comment on whether the deal would get regulatory approval or not.

On the crucial nuclear deal between India and the US, the US ambassador said he expected that the entire process including presidential assent, and the formal agreement between the two countries and negotiations with IAEA should be over by May. He, however, clarified that India's concern on backdoor inspection of its nuclear installations are unfounded.

India needs massive investment in the infrastructure sector, but foreign investment is hard to come by in this area. Mulford said the lack of interest was probably due to confusion among investors. "There are both federal and state responsibilities in the infrastructure sector. In fact, many of the responsibilities fall on the states. So many American companies find it difficult to deal with diversity on infrastructure," Mulford statted.

Mulford also talked at length on tackling terrorism, simplifying visa procedure, the need for increasing the number of H1B visa for Indian professionals and increasing cooperation in the field of education and agriculture. While 80,000 Indian students are currently studying in the US, a mere 1,700 American students come to India.

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Expansion in the US not easy for Indian banks: David Mulford