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Private US banks may be banned from lending to India and Pakistan

The United States government will later this week contemplate a ban on private banks from lending loans and credit to the Indian and Pakistani governments. This is part of the US economic sanctions in the wake of the nuclear tests in the subcontinent.

Reports say the Clinton administration is planning to effect two executive orders that are likely to exempt lending to the private sector.

But US banks were puzzled over the scope of the orders. Most of the banking industry in the subcontinent is government-owned and any form of direct ban might affect the American banking industry, trade, and money flows, some banks feared.

In fact, US banks have asked the White House against sweeping sanctions as state-owned agencies, enterprises and banks abound in the subcontinent.

Financial experts say a clarification would be in order, and sought to differentiate commercial banks from investment banks. They hope the US banks would not be forced to divest from underwriting activities and allowed to maintain private commercial involvement.