India has called on China to expand banking links between the two countries and to enhance licensing procedures, in an effort to create a more conducive environment for companies — on both sides of the border — still grappling with financial barriers despite rapid growth in trade and mutual investments.

Minister of State for Finance Namo Narain Meena, who was in this northeastern port city on Tuesday to open the State Bank of India’s second branch in China — the only Indian bank which has been able to do so — made a pitch to Chinese regulators to help enable the ten Indian banks that currently have a presence in the country to open branch operations.

“Foreign bank licensing policy is gradual in China, and all these banks are at various stages of establishing their operations,” he said. “It is hoped that other Indian banks that have fulfilled conditions set for foreign banks in mainland China also graduate to opening branch operations at an early date.”

SBI, which opened its first branch in Shanghai in 2006 — almost a decade after it set up a representative office — received the greenlight from Chinese regulators to open a second branch in this thriving port city, through which much of India’s trade with northern China is routed. The Shanghai branch was allowed to start operations in the local Renminbi (RMB) currency in 2010. “The success achieved at the Shanghai branch has encouraged us to strengthen our presence in China by upgrading our representative office in Tianjin to a branch,” said SBI Managing Director Hemant Contractor. The bank works with around 90 Indian companies which trade with China and around 200 Chinese companies.

Operating capital

The Tianjin branch, which will open with an operating capital of 300 million RMB and does not yet have the approval to work in RMB, would focus on assisting ‘small and medium companies’ located in northern China and ‘try to facilitate bilateral trade finance’, Mr. Contractor said.

SBI is the only Indian bank to operate two branches in China in addition to two branches in Hong Kong. The Industrial and Commercial Bank of China (ICBC) is the only Chinese bank with a branch in India, although the ICBC has expressed interest in opening a second branch — in New Delhi — and the Bank of China is considering opening a branch in Mumbai.

Banks in both countries have expressed some frustration at the challenging licensing procedures on both sides of the border. With increasing bilateral trade, which has risen from a couple of billion dollars at the start of the last decade to $74 billion in 2011, when China became India’s biggest trading partner, the need for expanded banking relations has risen, officials say.

Ambassador to China S. Jaishankar said India had now become the largest market for project exports from China, with over $ 55 billion worth of projects — from infrastructure to power — under execution.

“In this background, expanded banking relation between India and China is very important,” he said. “The Reserve Bank of India and the China Banking Regulatory Commission have already reached agreement to expedite processing of licences... It is only when our banks are more connected that we can be said to have achieved the full spectrum relationship that is natural to neighbours.”