BofA-Merrill fears India reform delays

By Nishant Kumar and Pratish Narayanan

MUMBAI (Reuters) - India, whose protected financial sector helped insulate it from the worst of the global economic meltdown, should not be complacent in its push for financial sector reforms, a top Bank of America-Merrill Lynch executive said on Monday.

"One thing that does worry me is that the conservative nature of Indian regulation. That may persist longer than it would otherwise have done because of the financial crisis," said Kevan Watts, who heads the combined Indian operations of Bank of America and Merrill Lynch.

The rousing re-election of the Congress party-led government in May, which freed it from dependence on communist allies, lifted hopes of an acceleration in long-delayed financial reforms.

But the global financial meltdown has dampened Indian appetite for financial liberalisation, especially as limits on foreign banks and active regulation of the financial sector were seen as sheltering it from the worst of the downturn.

"The danger is, that if you like, India will rest on its laurels of having circumvented the crisis well," Watts told the Reuters India Investment Summit in Mumbai.

India has for years talked about allowing a greater role for foreign banks and giving equal voting rights to foreigners in private-sector banks, currently limited to 10 percent irrespective of their actual holding.

No foreign firm is allowed to operate in the pension sector and private Indian players have only a limited presence.

The life insurance market was opened nine years ago, but companies are not allowed to raise debt or go public in their first decade of operation, putting the onus on shareholders to fund costlier growth.