HSBC, has welcomed M V Nair committee’s report on priority sector lending, saying that it seeks to bring in a level playing field.
“We welcome the report as it calls for a level playing field for all, because the proposed increase is not just for one particular sector but is flexible,” HSBC India country manager Ms Naina Lal Kidwai said, talking to PTI.
Ms Kidwai pointed out that though the report seeks to increase the PSL target for foreign banks to 40 per cent of the overall advances, it also calls for creating special categories within the existing sectors such as small and marginal farmers, microenterprises, etc, and seeks that minimum levels be achieved in every sub-category.
“A bank should not be forced to do something in which it has no expertise. For instance, if a bank has no history in lending to agriculture sector, it should not be forced to do, that will only mess things up,” Ms Kidwai said.
On February 21, the panel headed by Union Bank of India chairman Mr M V Nair submitted the report to RBI. The report called for a steep 8 percentage points increase in the PSL target for foreign banks to 40 percent, on par with domestic banks. It also called for retaining the overall quantum of such lending at the existing level for the domestic banks.
On the RBI’s guidelines on foreign banks, which want them to adopt the subsidiary route and not branch route, Ms Kidwai said, “No final view has been arrived at as the issue involves huge tax liabilities. The report is pending with the finance ministry as it has huge capital gains tax implications for all the players, apart from giving us tax breaks.”
HSBC is open to the RBI guidelines as it will give it a level playing filed, but the taxation part has to be considered, she said. If this issue is resolved, there is no problem with the subsidiary route, she added.
As to what will be the tax implication for HSBC, she refused to give a number, but said “It is really substantial, specially for the very old players like us.”
Under the new PSL recommendations, which are open for public comments till March 31, foreign lenders will have to lend 15 percent each to exporters and to MSEs, with 7 percent allocation to micro businesses. But for the foreign banks operating as wholly-owned subsidiaries, it calls for the PSL requirements to be hiked, to bring them on par with local banks.