Capital a/c convertibility may be 3-4 years away: StanChart

Mumbai, March 22 | Updated: Mar 23 2006, 05:30am hrs
Standard Chartered Bank, the largest foreign bank in the country has said that some work needs to be done prior to full capital account convertibility. Recently the central bank has set up a committee to prepare a road map to full capital account convertibility.

Capital Plans
Banking industry is still fragmented, and further efficiencies need to be realized
Foreign investment in certain sectors such as retail, insurance etc, is desirable
Further relax controls both on inward and outbound capital
Full convertibility could still be 3-4 years away according to the bank. To meet its objective of fiscal consolidation, the central government aims to adhere to the FRBM deadline of reducing the fiscal deficit to 2% of GDP (currently 4.1%) and primary deficit to nil by 2009.

While banking sector balance sheets have improved significantly over the years, the banking industry is still fragmented, and further efficiencies need to be realized. A related issue remains the phased reduction in cash reserve and statutory liquidity ratio requirements, which would complement a lower fiscal deficit and strengthened, risk controls in the banking system.

Though the further relaxation of foreign investment in certain sectors such as retail, insurance etc, is desirable, progress on these reforms has been slow given nature of coalition governments at the center since 1990s.