1273609, Pushpinder kalra, F2, Q-13-Foreign banks on Indian Lands

Foreign banks on Indian Lands

Foreign banks whose branch offices are in India but they are incorporated outside India, have their head office in a foreign country are allowed to set up their subsidiaries in India .They have to operate their business by following all the rules and regulations laid down by the RBI - Reserve Bank of India. They have to pay more attention to the priority sector by giving them a special place in bank lending. These banks are expected to follow all the banking regulations, just like any other domestic banks.

 According to Reserve Bank of India data, there are 41 foreign banks, 26 state-run lenders and 20 private-sector banks in the country. Seems like, India is a profitable market as well for foreign lenders.

Standard Chartered Bank is becoming the largest foreign bank in India for its operations in banking and financial services followed by HSBC and Citibank. They can bring in product innovation in lending to agriculture and SMEs rather than derivatives. I also think that private lenders and foreign banks would bring in a revolution in agriculture finance as they did in retail and technology, helping public sector banks learn in the process.

Advantages of Investment in India:

Huge market size and Fast developing Economy: - India is the second largest country in the world just behind China in terms of population. Currently the total population is about 1.2 billion. This huge population base automatically makes a huge market for the business operators to capture and also a major part of it is still can be considered as un-served or not yet been penetrated. He economy of India is also moving at faster pace than most of the economy of the world and inhabitants of the country also obtaining purchasing power at the same rate.

Availability of diversified resources and cheap labor force: - The huge advantage every company gets by investing in India is the availability of diversified resources. It is a country where different kinds of materials and technological resources are available. India is a huge country and has forest as well as mining and oil reserve as well. These are also coupled with availability of very cheap labor forcesat almost every parts of the country.

Increasing improvement of Infrastructure: - A lot of research study in India finds out that historically the country fails to attract a significant amount of FDI mainly because of problems in infrastructure. But the scenario is changing. The Indian government has taken huge projects in transportation and energy sectors to improve the case.

Public Private Partnership: - Investors experience Public private Partnership in different important sectors like energy, transportation, mining, oil industry etc. It is advantageous in several ways as it has eliminated the traditional tirade barriers and also joint venture with government is risk free up to the great extent.

IT Revolution and English literacy: - Today the modern India considered being one of the global leaders in IT. India has developed its IT sectors immensely in last few years and as of today many leading firms outsource their IT tasks in India. Because of IT advancement the firm that will invest in India will get cheap information access and IT capabilities, as Indian firms are global leader.

FDI: - Recently the Government of India has liberalized their policies in certain sectors, like Increase in the FDI limits in different sectors and also made the approval system far easier and accessible. Unlike the historical tradition, today for investing in India government approval do not require in the special cases of investing in various important sectors like energy, transportation, telecommunications etc.

Regulatory framework and Investment Protection: - In the process of accelerating FDI in the country the government of India has make the regulatory framework lot more flexible. Now a day’s foreign investors get different advantages of tax holiday, tax exemptions, exemption of service and central taxes. The government also opened few special economic zones and investors of those zones also get a lot of befits by investing money. Apart from that there are number of laws has been passed and executed for making the investments safe and secure for the foreign investors.

FUNCTION OF A FOREIGN BANK 

BANKING BUSINESS: -

The exchange bank conducts all types of banking business. They accept Deposit from the public, grant loans, discount trade bills and provide remittance facilities. And thus compete with Indian banks.

FINANCING INLAND TRADE: -

They also finance trade in many up country centers, as they opened a number of branches in the main ports and trading centers of the country.

 AGENCIES SERVICES:

Like other commercial banks, foreign exchange bank render several agencies services to their customers.

MERCHANT BANKING: -

Some exchange bank has opened merchant banking division to provide banking services. For e.g.: - The National and Grind lays banks first started merchant banking services in 1967, followed by the first National City banking1970. The exchange banks have been doing a profitable business in the country. Their financial ratio. I.e. Profit-to Income ratio is more than double that of the Indian commercial bank. Their high profitability may be attributed to their non-fund business, such as commission, brokerage, etc. Further they mostly finance multinational corporations, and their returns are higher. Moreover, they minute their risk in lending also.

Conclusion

If we notice, foreign banks in India are getting more aggressive in their product offerings and looking at a broader audience segments. Rural market has also become an important segment for these foreign banks to widen the reach of banking services in under-penetrated markets.