Foreign Banks in India

Foreign Banks in India

Subject : Economy

Section: Monetary Policy

Context: The proposed takeover of Swiss bank Credit Suisse by its bigger rival UBS

What are foreign Banks?

• Financial institutions that serve customers outside of their own country are referred to as “Foreign Banks.” A Foreign Bank branch operates as a kind of international bank, subject to the regulations of both its home country and the country in which it has a physical presence. As of the year 2022, 46 international banks have established operations in India, as reported by the country’s central bank. A total of 45 international banks operate in India, with most of their roughly 300 branches concentrated in the country’s largest cities.
• Their presence but their presence is relatively small—with a 6 per cent share in total assets,4per cent in loans, and 5 per cent in deposits. They are more active in the derivative markets (forex and interest rates),where theyhavea50per cent share. Most are there as branches of the parent bank, with only a few present as a wholly owned subsidiary. But they retain capital,liquidity, and make annual report disclosures similar to Indian banks. The five biggest foreign banks in India by assets are HSBC, Citibank(which has sold its consumer business to Axis), Standard Chartered, Deutsche Bank, and JP Morgan Chase (the largest US bank)

Why are they important?

Foreign companies operating in a country may have a positive impact in two ways: they can raise the volume of the country’s exports and imports, and they can provide more job possibilities for the country’s skilled workers.

Functioning of foreign Banks :

Foreign banks in India account for only 1% of the country’s branch network, but they contribute 11% of the country’s banking sector profits. This is because these banks are specialised in areas like trade finance, wholesale lending, external commercial borrowing, treasury service, and investment banking rather than general retail banking.