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US banks to continue operating in India

A correspondent in Bombay

Sanctions will not stop US banks from doing business in India, David Lipton, undersecretary to the US treasury department, informed the state department on Thursday.

The US could not avoid sanctions against India due to the unequivocal nature of the Glenn Amendment but it decided to discuss the activity of US banks in India in a different order since the strictures in this regard were more ambiguous.

Sources at the American banks felt the US government would not jeopardise their business of many years due to obligatory and immediate political considerations.

The sanctions in place do not allow the banks to invest in government tender. But since that would violate Indian laws, a middle ground would have to be found to protect the banks' interests, the sources said. The banks would also be at a huge disadvantage since they could then not deal with many important government-owned banks and companies involved in many commercial activities.

The banks were also important since their presence was vital to the interests of US firms already in India and which are feeling the pinch of the sanctions. Already some of these companies are beginning to consider raising funds from Europe.

The US banks in India did not stop dealing with Indian banks and PSUs after sanctions were announced, hoping the executive order on the issue would avoid causing their business any injury.