The ongoing political turmoil in Pakistan is making public sector banks like State Bank of India, Punjab National Bank and Bank of India have second thoughts about their plans for foraying into the neighbouring country.
That apart, even the Reserve Bank of India has not given its nod to any of the banks for opening branches in Pakistan. All the applications are pending with the central bank, a source said.
?As of now, our plans for setting up branches in Pakistan have been put on hold and no concrete step is likely to be taken on this front in the next one and half years,? a senior PNB official said. The banks were slated to open branches in Pakistan by this yearend.
Trade between India and Pakistan has almost come to a standstill. In fact, it is likely to register a decline of about 20% in 2007-08 owing to the current political turmoil and stagnate at $2.1 billion as against the projected figure of $2.7 billion. Earlier, the Centre had encouraged Indian banks to look at opening branches in Pakistan to give a fillip to bilateral trade. Banks from Pakistan were also expected to open branches here.
According to Assocham data, within the Saarc block, India has been the biggest trading partner of Pakistan in the recent years with its share in the latter?s total trade since 2001 increasing almost 50%. Expanding banking network in Pakistan naturally would have strengthened bilateral ties. ?However, considering the present political situation in that country, we are not very keen on setting up bank branches immediately. We will wait and watch before taking the plunge,? an insider said.
Both India and Pakistan governments had earlier agreed to increase direct air linkage to facilitate easier travel while focusing on issues such as energy in addition to banking.