Financial Services: More capital is needed, but reform is slow.
Nov. 25, 2005 issue - American Treasury Secretary John Snow was in
According to a report by McKinsey & Co.,
Prime Minister Manmohan Singh understands the stakes. He's been trying to eliminate a 10 percent cap on foreign shareholders' voting rights in private banks. He has also been seeking to raise the limit on FDI in the insurance industry from 26 percent to 49 percent—but as with other reforms, Singh's leftist political allies have stymied efforts to get new investment rules implemented.
Right now, foreign banks can open branches and wholly-owned subsidiaries, and can also acquire up to 74 percent of a domestic bank. But because their voting rights on domestic acquisitions are limited, they have little management control. Still, Citibank, Standard Chartered and HSBC are opening branches and selling credit cards. On the insurance side, global players like U.S.-based MetLife, Prudential and AIG and
In both sectors, foreign players are counting on rising demand to chip away at resistance in
© 2005 Newsweek, Inc.