Foreign banks in india

INTRODUCTION, MAJOR FOREIGN BANKS, ROLE, ADVANTAGES, DISADVANTAGES, MARKET SHARE, ETC.

1. CONTENT INTRODUCTION BRANCH FORM MAJOR FOREIGN BANKS ROLE OF FOREIGN BANKS RBI POLICY MODE OF ENTRY ADVANTAGES DISADVANTAGES MARKET SHARES CONCLUSION

2. INTRODUCTION Foreign banks are the types of international bank. Foreign banks are defined as banks from a foreign country working in India through branches. Foreign bank is a bank with a head office outside the country in which it is located. It is obligated to follow the regulations of both the home and host country. Because the foreign branch bank ‘s loan limits based on the parent ‘s bank capital, they can provide more loans than subsidiary banks. E.g. If ICICI bank opens its branch in America. The branch would be legally obligated to follow both Indian and American banking regulations.

3. BRANCH FORM There are two ways of presence of foreign banks in India. 1)  Branch form of presence- Branch form of presence means that the foreign bank has its physical branch in India. As of November 2018, India has 45 foreign banks with total 286 branches operating in India. 2)  Representative Office-  Representative offices are not actually a branch. Currently, 40 foreign banks are operating as representative office in India. Apart from that, few foreign banks have entered into India via the NBFC route also.

4. ROLE OF FOREIGN BANKS Enhance competition in banking sector Technology and skill transfer Both foreign and local banks have been investing on financial innovation. Modern banking services are expanded Enhance customer satisfaction Increase in provision of foreign currency Foreign banks participation in Foreign Exchange and money market contribute for deepening of financial system.

5. RBI POLICY RBI policy  towards presence of foreign banks in India is based upon two cardinal principles: 1) Reciprocity – By reciprocity, it means that overseas banks are given near national treatment in India only if their home country allowed Indian banks to open branches there without much restrictions. 2) Single mode of presence- By single mode of presence, it means that RBI allows either of the branch mode or a wholly owned subsidiary (WOS) mode in India.

6. RBI POLICY Some other policy guidelines of RBI towards foreign banks are as follows: Foreign Banks have to adhere to mandated Capital Adequacy requirements as per Basel Standard. Foreign Banks should have to meet minimum capital requirement of Rs. 5 billion. Foreign Banks should need to maintain minimum CRAR at 10% Priority sector targets for foreign banks in India is 40%. Further, Foreign banks have to follow other norms as set by Reserve Bank of India.

7. MODE OF ENTRY Foreign banks who wish to open up the branches in India have to apply to the RBI and satisfying the RBI licencing requirements: The bank should also get permission from their home country to set up branches in India. The foreign banks seeking to set up business in India should have a minimum start-up capital of $25million. The other factors to be considered in approving foreign bank operation includes: Financial soundness of the foreign banks

8. Economic and political relations between the home country of the foreign banks and I ndia . International ranking of the bank Home country ranking of the bank International presence of the bank Rating given to the bank by international rating agencies

9. ADVANTAGES Foreign banks are more efficient because of their global presence and experience. They can bring new innovative product. At times foreign banks supports the government in maintaining balance of payment and bringing stability in the domestic market. Foreign banks bring more competition which is always good for growing economy. Better placed to serve multinational companies due to their geographic presence. Low cost of funds

10. DISADVANTAGES Domestic player may not be able to compete and in the process might become obsolete. Currency may become volatile if not managed properly. Foreign banks mostly open their branches or subsidiaries in the financial hubs of the host country, hence they do not serve majorly in the financial inclusion process of local country.

11. MARKET SHARE Foreign Banks account for less than  1% of the total branch network  in the country. However, they account for approximately  7% of the total banking sector  assets and around 11% of the profits. Most of the foreign banks in India are niche players and their business is usually focused on trade finance, external commercial borrowings, wholesale lending, investment banking and treasury services. Some other banks are confined to private banking and wealth management.

12. CONCLUSION Foreign banks in India always brought an explanation about the prompt services to customers. After the set up of Foreign banks in India, the banking sector in India also become competitive and accurative . Foreign banks contributed to the banking sector and entire economy. RBI provide a launch pad to foreign banks for greater business expansion after 2009. India is expected to find a place in the strategy of these banks given the country‘s growth.