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Defence Ministry Inks MoUs With Three Private Banks, Here's Why
Defence Minister Rajnath Singh
The Defence Ministry has linked up with private sector banks to provide financial services in overseas procurement.
What's up: The Ministry signed MoUs with three private sector banks to provide letters of credit and direct bank transfer business for overseas procurement.
The agreement was signed by PCDA (Principal Controller of Defence Accounts), New Delhi, on behalf of the Defence Ministry.
The three private sector banks are HDFC Bank, ICICI Bank, and Axis Bank.
Until now, only authorised public sector banks were tapped for such services.
For the first time, private banks have been allowed to provide financial services to the Defence Ministry.
A letter of credit is a letter issued by a bank to another (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.
Government policy regarding defence indigenistion has been clear since the Aatmanirbhar Bharat package was announced in 2020.
PM Modi also underlined the government's trust in the private sector and the need for India to have private-sector-driven growth.
In this vein, while presenting the budget for FY 2022-23, Finance Minister Nirmala Sitharaman announced that 68 per cent of the capital procurement budget for defence will be earmarked for domestic industry. This is up from 58 per cent last fiscal year.
The FM also announced that defence R&D will be opened up for industry and startups while adding that an umbrella body will be set up for certification of defence equipment.
