Sustainbility Of Foreign Banks In India-A Statistical Analysis

Prasad, Chowdari and Rao, K S Srinivasa (2006) Sustainbility Of Foreign Banks In India-A Statistical Analysis. TAPMI, Manipal.

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Abstract

It is interesting that foreign banks have been operating in India for over a century and a half (since 1842). But, greater awareness about them has come only after economic reforms in India (1991). They were allowed to operate only through branches till 2000-01 subject to reciprocity and other considerations. Foreign banks had only 5% of total deposits and 7% of total loans as market share in India. Larger foreign banks like Citibank, HSBC, Standard Chartered Bank, ABN AMRO Bank, etc., are increasingly expected to garner greater market share. With a view to reducing disparity between domestic and foreign banks as regards priority sector lending obligations, their minimum lending was fixed at 32% (as against 40% for domestic banks) of their total advances. Customers dealing with foreign banks derive higher satisfaction for sophisticated services rendered and products offered. Being global players, foreign banks may not have any obligation to extend finance to priority sector like Agriculture and SSI segment because they are not present in rural and semi-urban centres. After over a decade since formation of World Trade Organisation ( in January, 1995) and Financial Services Agreement of 1997, Indian banks are able to overcome competition from foreign banks by improving their products and services, professionalism, ambience of offices, technology usage, change in employee attitude, etc., after downsizing their staff strength and unviable branches. In the Union Budget 2003-04, Government of India permitted foreign banks to either operate as branches of their overseas parent bank or corporatise as domestic companies. In February 2005, Reserve Bank of India announced a “Road Map for Presence of Foreign Banks” to be implemented in two Phases – I between 2005 and 2009 and II from April 2009. But it was observed that number of foreign banks in India increased from 21 in 1988 to a peak of 44 in 1998 and is on the decline to 31 by March 2005. This made the authors to work on foreign banks to study their functioning in India by using ‘Closed Model’ for those foreign banks which existed and data is available throughout the study period and an ‘Open Model’ of studying all such foreign banks that operated but data is missing in some cases during the period of study. The period of study is for five years (1997-1999 and 2000-2003), and the authors made an effort to analyze each of the foreign banks and its development on various parameters under CRAMEL (Capital Adequacy, Resources Deployed, Asset Quality, Management, Earnings Quality and Liquidity) model of ranking the banks.

Item Type:	TAPMI Working Papers
Uncontrolled Keywords:	Banking; Foreign Banks; Indian Banks
Subjects:	Finance Finance > Banking Services
Divisions:	Finance and Strategy
Depositing User:	Ms. Vanitha K
Date Deposited:	15 Nov 2018 11:14
Last Modified:	25 Nov 2018 14:45
URI:	http://tapmi.informaticsglobal.com/id/eprint/313

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