Reserve Bank of India has reciprocated to the Pakistani initiative of allowing better cross-border banking. The Indian regulator has allowd State Bank of India (SBI) and Bank of India (BoI) to set up their branches in Pakistan.

Earlier Pakistani regulator, State Bank of Pakistan had allowed private sector bank United Bank Ltd. and semi-government bank National Bank of Pakistan to set up their branches in India. The two banks await grant of licence from RBI.

Regulators at both side of the border have agreed to issue full banking licence to two banks each said Yaseen Anwar, Governor State Bank of Pakistan. Mr. Anwar added that once they receive application for licence, it would take a few months to approve them.

The two Governors will be meeting soon to discuss the licencing process. RBI Governor, D. Subbarao had stated that cross border banking would normalize the trade relations between the two country. Earlier this month, SBI and BoI along with Punjab National Bank had expressed their interest to open branches in Pakistan.