India has questioned Singapore's decision to not to grant qualifying full banking status to the State Bank of India. The two countries have asked their monetary authorities to set up a committee to look into the matter.
"The Monetary Authority of Singapore and the Reserve Bank of India will set up a committee to finalise the road map to grant QFB status to the SBI. The decision was taken at the last review meeting held earlier this month," a government official said.
Singapore had expressed its inability to grant QFB status to the SBI on the ground that the bank did not have an investment rating by agencies like Fitch or Standard & Poor's.
"There was also an apprehension that since the Indian government had a majority holding in the bank it could not take autonomous decisions," an official said.
Officials pointed out that Singapore was reluctant to relax the prudential norms for the SBI since it had refused to dilute its conditions to provide QFB status to banks from Malaysia and Indonesia.
The RBI has made clear that the issue of pending licences being issued for setting up of branches to two Singapore banks -- United Overseas bank and DBS -- was not linked to the granting of QFB status to the SBI.
"The two banks in question had applied for licences to set up branches in metropolitan areas. The norms stipulate that these banks are required to open up branches even in the non-metropolitan areas," an official said.
Officials said the department of revenue was also willing to consider the norms of the Double Taxation Avoidance Agreement to ensure that genuine investment from Singapore was not blocked.
India has added two eligibility conditions for capital gains tax exemption in the DTAA with Singapore.
These include listing on a recognised stock exchange and a total annual expenditure on operations in the residence state equal to or more than $2,00,000 or Rs 50,00,000 in the 24-month period from the date of the gains.
The two conditions were added to prevent round tripping. Singapore wants these norms to be relaxed to bring the DTAA at par with India's tax treaty with Mauritius.
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