Two Pakistan banks to open branches in India

On the heels of India's announcement on Wednesday that it would allow foreign direct investments from Pakistan (See: India allows FDI from Pakistan), Pakistan's central bank has allowed two banks to set up shop in India, officials in Islamabad told the media today.

State Bank of Pakistan governor Yasin Anwar said the National Bank of Pakistan and United Bank Ltd had been given the "green signal" to open branches in India.

Anwar's remarks came in the wake of India's decision to allow Pakistani investments in all sectors except defence, space and atomic energy.

He said the Reserve Bank of India has been informed of SBP's decision to allow the Pakistani banks to explore opportunities in India.

India's decision to allow investments from its long-inimical neighbour is seen as a strong step to normalise bilateral relations starting with trade, and will further pave the way for Pakistan to implement the much-delayed Most Favoured Nation status for New Delhi.

India has granted MFN status to Pakistan years back, but that country has not yet reciprocated the gesture.

Earlier this year, Pakistan did switch to a 'negative list' regime for trade with India, paving the way for giving the MFN status.

Trade between India and Pakistan is worth a little more than $2 billion, and the two sides have agreed to increase it to $6 billion by 2014.