A Study of Foreign Banks and Indian Financial Development

Abstract

Despite the promotion of foreign banks in India, there have been concerns in RBI regarding the increasing footprint of foreign banks in the country. Most of the foreign banks in India have confined their work to the areas of Investment Banking and foreign exchange Market and have not paid much attention to the other "priority sector” in the country. This paper examines the impact of foreign banks on financial sector development. To look at the impact of foreign banks the paper analyses various parameters like the rural presence, contribution towards priority sector, technological development and financial ratios like return on asset and equity.   Two case studies have been discussed –  one, about The  Hong Kong and Shanghai Banking Corporation's (HSBC) journey in India and the other, about BCCI in India. The paper ends by discussing various challenges which are faced by foreign banks when they set-up their shop in the country.