In a major development for the Indian banking sector, the RBI (Reserve Bank of India) has given its permission to the Bank of China for offering banking solutions on a regular basis in the country. All the commercial banks in the country including the likes of HDFC Bank, SBI (State Bank of India), ICICI Bank and Punjab National Bank come within the Second Schedule and banks who are under this particular framework have to follow the specific regulations issued by the Reserve Bank of India (RBI) which is the apex bank for the country.
Major developments pertaining to the Second Schedule
The RBI has also confirmed that Jana Small Finance Bank Limited has also earned an entry into the Second Schedule which is great news for this fast-growing financial entity. The RBI has already stated that the Bank of China has obtained inclusion in the Second Schedule as per the Reserve Bank of India Act of 1934.
The Royal Bank of Scotland has had its name changed to NatWest Markets Plc in the country’s Second Schedule. National Australia Bank is no longer a banking entity within the purview of the Banking Regulation Act as per the statement issued by the Reserve Bank of India. The bank has been omitted from the Second Schedule accordingly.
Other major banking news in this respect
The Chinese connect continues to be quite strong in the Indian banking sector taking several other initiatives into account. SBI (State Bank of India), the country’s largest bank, is now reportedly the first Indian Bank to fully implement and operationalize the CNAPS or the National Advance Payment System of China courtesy its branch at Shanghai. This branch has now been officially linked to the CNAPS which is a major global milestone for SBI.
The CNAPS arrived in the year 2008 courtesy PBOC (People’s Bank of China) and ensures real-time settlement solutions for all payments which have obtained clearance in mainland China and across clearing banks at off-shore centers for the Yuan which includes Hong Kong. This system is backed up by the CIPS or China International Payments System which is the global peer, also known as the Cross-Border Inter-Bank Payment System. This launched in the year 2015 with a view towards ensuring higher usage of the Yuan as a global currency.
Crucial facts about these payment systems
CIPS already witnesses participation from several global countries. SBI is the only Indian bank which has got the license to do business with Yuan which is the local Chinese currency and has been integrated into the CNAPS by the PBOC as well. SBI Shanghai will now be providing real-time local fund transfers within China itself through routing of the same via PBOC. This does away with the requirement for maintenance of accounts and tie-ups with several banks for transfer of funds as per reports.
CNAPS will also be deployed for RMB payments on a cross-border basis which were previously being executed via local banks as correspondents. SBI will now be empowered with regard to executing BAD (Bankers acceptance drafts). The representative office for the bank in China started functioning in the year 1997 and commercial operations commenced from the year 2006 onwards. SBI has customer credit to the tune of $500 million here along with a 40 member team of staff inclusive of 32 Chinese employees. The bank has played a vital role in enabling Indo-Chinese trade and business along with spurring more investments.
It has also been catering to Indians who are working in China and other global clients while providing bank guarantees to Chinese corporate entities taking up investments and projects in technology, construction, and other fields. The bank has also been giving working capital credit and term credit to Indian corporate companies which are being promoted in China for enabling more investments in the country.