ICICI, Axis, HDFC Bank allowed to offer services to DefMin in global buys

The Ministry of Defence has allowed HDFC Bank, Axis Bank, and ICICI Bank to provide financial services in overseas procurement done by the department, a first after the Centre opened up allocation of government business for private banks.

These private banks will provide Letter of Credit (LC) and direct bank transfer business for overseas procurement by the defence ministry. These banks may be allocated with LC business of Rs 2,000 crore, each on the capital and revenue side, for one year on concurrent basis (Rs 666 crore for each bank under both capital, as well as revenue), the defence ministry said in a statement. Until now, only authorised public sector banks were allowed to provide these services to the defence ministry. “The performance of these banks will be monitored regularly so as to take necessary further action, as required,” it said.

Even as the quantum of business may not be significant, the move showcases the government’s intent of opening up business for private banks, said Prakash Agarwal, head-financial institutions at India Ratings. 

This would further give a leg up to the government's efforts to bring in more competition and improve efficiency in the system, Agarwal said.