No WTO commitment on life insurance

The pact paved the way for re-insurance to be taken up with foreign players to the extent of the residual uncovered risk which could be done after obligatory or statutory placements with Indian companies domestically, they said.

On the other hand, India had withdrawn most-favoured nation (MFN) exemptions in the insurance, banking and non-banking financial services. "This (MFN exemption withdrawal) was done as a reciprocal measure in view of our major trading partners withdrawing their MFN exemptions," the sources said.

In banking andfinancial services, the country was committed to acceptance of deposits, participation in issue of securities, stock broking, consultancy services, factoring, leasing and venture capital.

While committed to allowing acceptance of deposits and other repayable funds from the public in the banking sector, lending of all types, including consumer credit, mortgage credit and financial of commercial transactions excluding factoring would be allowed under the third mode. It means commercial presence, which would require operations through foreign bank branches that were licensed and supervised as a bank in the country of origin. It is also subject to grant of licence as permissible under existing laws and a limit of 12 licenses per year for both new entrants and existing banks.

Banks were allowed to set up any time money (ATM) provisions at branches and other places identified by them. ATM installation in places other than in licensed branches would be treated as a new place of business and require licence. Suchlicence would not be included in the ceiling of the 12 licenses.

Also investments in other financial services companies by branches of foreign banks to do banking business individually should not exceed 10 per cent of owned funds or 30 per cent of the invested company’s capital, whichever was lower.

Similarly, all payments and money transmission services including credit, charge and debit cards, travellers cheques and bankers drafts would be allowed under the third mode. The commitment also provided for guarantees and commitments, trading for own account of money market instruments, foreign exchange, transferable securities, portfolio management, custodial and trust services, clearing services for other banks for cheques, drafts and other instruments in the third mode.

Banks would be allowed participation in issues of all kind of securities, including underwriting and placement as agent and provisions of services related to such issues. Such activity would allow licensed branches and also foreignservices companies through incorporation with foreign equity not exceeding 51 per cent.

Stock broking activity would be permitted through setting up of locally incorporated joint venture company with foreign equity not exceeding 49 per cent. Equity participation would be limited to recognised stock broking companies. Financial advisory services would be permitted by financial advisers on financial matters, investment, portfolio research and advice on acquisition and corporate restructuring and strategy.

This also entailed licensed bank branches and financial services companies with equity participation not exceeding 51 per cent. Similar norms applied for factoring, leasing and venture capital.