NEW DELHI (Reuters) - India said on Tuesday it would oppose a single global bank levy designed to insure against failing institutions, an IMF proposal backed by Germany and France, when Prime Minister Manmohan Singh attends the G20 summit in Canada.
Asia’s third-largest economy, where financial institutions are tightly regulated, argues its banks are sound and what is required to prevent failures globally is stricter capital rules which New Delhi will push at the summit this week.
“On the issue of bank tax, as far as India is concerned, the health of our banking system speaks for itself,” Foreign Secretary Nirupama Rao said, when asked about India’s stand on the contentious levy.
She said India hoped the summit would see the leaders arrive at “common principles for reforming financial markets”, while Finance Secretary Ashok Chawla said India would “support all efforts at raising the benchmark on financial regulation”.
The levy proposal was widely expected to be set to rest at the Toronto summit, but with Germany and France renewing their push for it, the bank tax could emerge as a sticking point among the world’s top economies.
A German official on Tuesday said it was a key test if the grouping could find a common position on important matters.
In a joint statement on Tuesday, Britain and the two nations said they would coordinate planned levies and were committed to the full implementation of the financial sector reforms agenda.
Opposing the proposal are Japan, Brazil and Canada, which have argued their banks did not need tax-funded bailouts at the height of the financial crisis.
India will also renew its push for reforms at international financial institutions like the IMF, which would give it and other emerging economies a greater voting share.
Brazil, Russia, India and China argue the current rules give an unfair advantage to developed economies like the United States, Japan and Europe and have called for the reforms to be completed by November.
“The agenda on international financial institutions reforms should continue to be pursued vigorously,” Chawla said.
India has 1.88 percent of the total IMF votes, China has 3.65 percent, Russia 2.69 percent and Brazil 1.38 percent. In comparison, the United States alone has over 16 percent.
But with growth rates in the emerging powers ahead of the developed world, and with their huge populations, the BRIC nations are demanding a shift in the voting share away from the developed world.
Editing by Krittivas Mukherjee and Ron Popeski