Scenario of Foreign Banks in India

SCENARIO OF FOREIGN BANK IN INDIA
INDEX
CHAPTE R NO. 1. 2. 3. 4. 5. 6 7 8. 9. 10. 11. 12. 13. 14. 15. 16. NAME OF TOPIC PAGE NO. 1 2 3 5 8 11 15 17 18 20 22 24 25 27 28 29
Introduction to bank Introduction to banking sector History of banks in India Types of bank Various bank account provided by bank Services provided by bank Introduction to foreign banks History of foreign bank Guidelines for presence of foreign bank in India Road map for presence of foreign bank in India Proposed frame for presence of foreign bank in India Licensing of foreign bank Opening of branch by foreign bank in India Branch expansion by foreign banks in India Corporate Governance of foreign bank in India Function of Foreign Banks

17. 18. 19. 20. 21. 22. 23. 24. 25 26. 27. 28. Role of foreign bank Details of some major foreign bank in India Advantages of Foreign Bank Effect of Foreign Bank on Indian Economy Competion From Foreign Banks Comparison of Indian bank with foreign bank Shortfall In Working of Foreign Bank Why are Foreign Bank Entering India? Does India Favors Foreign Banks? Future of foreign bank in India Upcoming foreign bank in India Conclusion 30 33 45 47 48 49 51 53 55 57 59 60

CHAPTER 1 INTRODUCTION TO BANK
Banking means the accepting, for the purpose of lending or investment, of the deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise. A Bank is a financial institution that serves as an intermediary. It is a profit seeking Business firm dealing in money and credit. It is a financial institution dealing in the money in the sense, that it accepts deposits of money from the public to keep them in its custody for safety. So, also, it also deals in credit, i.e. it creates credit by making advances out of funds received as deposits to needy people. It thus, functions as mobilize of savings in the economy. Commercial Banks are the main important sources of institutional credit in the money market. A Bank is therefore, like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses. A Bank is an important institution of the money market as it gives short-term loans to its customer Banks provide an array of services and benefits such as checking accounts and savings accounts, credit cards, ATM machines, home loans, business loans, and equity lines of credit. Banks are in business to offer general services to individuals, corporations, and to other businesses, whether the business is large or small.

CHAPTER 2 INTRODUCTION TO BANKING SECTOR
The Indian Banking system has a large geographic and functional Coverage. Presently the total asset size of the Indian Banking sector is US$ 270 billion while the total deposits amount to US$ 220 Billion with a branch network exceeding 66,000 branches across the country. Revenues of the Banking sector have grown at 6 percent CAGR over the past few years to reach a size of US$ 15 billion. While commercial Banks cater to short and medium term financing requirements, national level and state level financial institutions meet longer-term requirements. This distinction is getting blurred with commercial Banks extending project finance. The total disbursements of the financial institutions in 2001 were US$ 14 billion. In India the Banking sector is segregated as public or private sector Banks, cooperative Banks and regional rural Banks. Foreign Banks has been given a different head followed by upcoming foreign Banks in this section Banking today has transformed into a technology intensive and customer friendly model with a focus on convenience. The sector is set to witness the emergence of financial supermarkets in the form of universal Banks providing a suite of services from retail to corporate Banking and industrial lending to investment Banking. While corporate Banking is clearly the largest segment, personal financial services is the highest growth segment. The recent favorable government policies for enhancing limits of foreign investments to 49 per cent among other key initiatives have encouraged such activity. Larger Banks will be able to mobilize sufficient capital to finance asset expansion and fund. Today, Banks have diversified their activities and are getting into new products and services that include opportunities in credit cards, consumer finance, wealth management, life and general insurance, investment Banking, mutual funds, pension fund regulation, stock broking services, custodian services, private equity, etc. Further, most of the leading Indian Banks are going global, setting up offices in foreign countries, by themselves or through their subsidiaries. Employment Scenario in the Banking Sector. As reported in the Economic Times, the countrys leading public sector Bank, State Bank of India has plans to recruit 25,000 employees in the year 2009. Besides, its life insurance venture, SBI Life, has plans to hire 13,000 agents and 200 sales managers. Also, Punjab National Bank, the country's second largest public sector lender, and Union Bank of India have plans of hiring 5,000 people each. The financial year 2008-09 has already shown the Banking sector to be among the largest job providers in the country with over 50,000 vacancies being notified and filled up in the public sector Banks alone.

CHAPTER 3 HISTORY OF INDIAN BANKING
The first Bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian Banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

Early phase from 1786 to 1969 of Indian Banks
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three Banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders Banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and Banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 Banks, mostly small. To streamline the functioning and activities of commercial Banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of Banking in India as the Central Banking Authority. During those days public has lesser confidence in the Banks. As an aftermath deposit mobilization was slow. Abreast of it the savings Bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.
Nationalization of Indian Banks and up to 1991 prior to Indian Banking sector Reforms.
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive Banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle Banking transactions of the Union and State Governments all over
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the country.
Seven Banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial Banks in the country was nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more Banks. This step brought 80% of the Banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: 1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major Banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural Banks. 1980: Nationalization of seven Banks with deposits over 200 crore. After the nationalization of Banks, the branches of the public sector Bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
This phase has introduced many more products and facilities in the Banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of Banking practices. The country is flooded with foreign Banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone Banking and net Banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and Banks and their customers have limited foreign exchange exposure.

CHAPTER 4 TYPES OF BANKS
There are various types of Banks which operate in our country to meet the financial requirements of different categories of people engaged in agriculture, business, profession, etc. On the basis of functions, the Banking institutions in India may be divided into the following types:
Central Bank
A Bank which is entrusted with the functions of guiding and regulating the Banking system of a country is known as its Central Bank. Such a Bank does not deal with the general public. It acts essentially as Governments Banker; maintain deposit accounts of all other Banks and advances money to other Banks, when needed. The Central Bank provides guidance to other Banks whenever they face any problem. It is therefore known as the Bankers Bank. The Reserve Bank of India is the central Bank of our country. The Central Bank maintains record of Government revenue and expenditure under various heads. It also advises the Government on monetary and credit policies and decides on the interest rates for Bank deposits and Bank loans. In addition, foreign exchange rates are also determined by the central Bank. Another important function of the Central Bank is the issuance of currency notes, regulating their circulation in the country by different methods. No other Bank than the Central Bank can issue currency.
Commercial Banks
Commercial Banks are Banking institutions that accept deposits and grant short-term loans and advances to their customers. In addition to giving short-term loans, commercial Banks also give medium-term and long-term loan to business enterprises. Now-a-days some of the commercial Banks are also providing housing loan on a long-term basis to individuals. There are also many other functions of commercial Banks, which are discussed later in this lesson. Types of Commercial Banks: Commercial Banks are of three types i.e., Public sector Banks, Private sector Banks and foreign Banks.
(i)
Public Sector Banks:
These are Banks where majority stake is held by the Government of India or Reserve Bank of India. Examples of public sector Banks are: State Bank of India, Corporation Bank, Bank of Baroda and Dena Bank, etc.
(i)
Private Sectors Banks:
In case of private sector Banks majority of share capital of the Bank is held by private individuals. These Banks are registered as companies with limited liability. For example: The Jammu and Kashmir Bank Ltd., Bank of Rajasthan Ltd., Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank Ltd., Global Trust Bank, Vysya Bank, etc.
(ii)
Foreign Banks:
These Banks are registered and have their headquarters in a foreign country but operate their branches in our country. Some of the foreign Banks operating in our country are Hong Kong and Shanghai Banking Corporation (HSBC), CitiBank, American Express Bank, Standard & Chartered Bank, Grindlays Bank, etc. The number of foreign Banks operating in our country has increased since the financial sector reforms of 1991.
Development Banks
Business often requires medium and long-term capital for purchase of machinery and equipment, for using latest technology, or for expansion and modernization. Such financial assistance is provided by Development Banks. They also undertake other development measures like subscribing to the shares and debentures issued by companies, in case of under subscription of the issue by the public. Industrial Finance Corporation of India (IFCI) and State Financial Corporations (SFCs) are examples of development Banks in India.
Co-operative Banks
People who come together to jointly serve their common interest often form a co-operative society under the Co-operative Societies Act. When a co-operative society engages itself in Banking business it is called a Co-operative Bank. The society has to obtain a licence from the Reserve Bank of India before starting Banking business. Any co-operative Bank as a society is to function under the overall supervision of the Registrar, Co-operative Societies of the State. As regards Banking business, the society must follow the guidelines set and issued by the Reserve Bank of India. Types of Co-operative Banks:There are three types of co-operative Banks operating in our country. They are primary credit societies, central co-operative Banks and state co-operative Banks. These Banks are organized at three levels, village or town level, district level and state level.
(i)
Primary Credit Societies:
These are formed at the village or town level with borrower and non-borrower members residing in one locality. The operations of each society are restricted to a small area so that the members know each other and are able to watch over the activities of all members to prevent frauds.
(ii)
Central Co-operative Banks:
These Banks operate at the district level having some of the primary credit societies belonging to the same district as their members. These Banks provide loans to their members (i.e., primary credit societies) and function as a link between the primary credit societies and state co-operative Banks.
(iii)
State Co-operative Banks:
These are the apex (highest level) co-operative Banks in all the states of the country. They mobilize funds and help in its proper channelization among various sectors. The money reaches the individual borrowers from the state co-operative Banks through the central co-operative Banks and the primary credit societies.

CHAPTER 5 VARIOUS BANK ACCOUNTS PROVIDED BY BANKS
A Bank account is a financial account with a Banking institution, recording the financial transactions between the customer and the Bank and the resulting financial position of the customer with the Bank Automatic transfer service account:
An automatic transfer service account is a deposit account that allows the transfers of funds from a savings account to a checking account in order to cover a check written or to maintain a minimum balance. Individual Savings Account:
An Individual Savings Account is a financial product available to residents in the foreign Bank. It is designed for the purpose '. of investment and savings with a favorable tax status. Joint account: Joint account is a Bank account shared by two or more individuals. Any individual who is a member of the joint account can withdraw from the account and deposit to it. Usually, joint accounts are shared between close relatives or business partners. Joint accounts are often created in order to avoid probate. If two individuals open a joint account and one of them dies, the other person is entitled to the remaining balance and liable for the debt of that account. Low-cost Account:
A Low-cost Account is a Canadian Bank account that costs $4 or less per month. In February 2001, an agreement was reached with the Canadian federal government, which involved eight of Canada's major Banks offering low-cost accounts to consumers, ensuring that every person has affordable Banking. The accounts have benefits that include free deposits, a free debit card, cheques, free monthly statements, and up to 15 transactions per month. Money market Account:
A money market account (MMA) or money market deposit account (MMDA) is a deposit account offered by a Bank, which invests in government and corporate securities and pays the depositor interest based on current interest rates in the money markets. Money market accounts typically have a relatively high rate of interest and require a higher minimum balance to earn interest or avoid monthly fees.
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Numbered Bank Account:
A numbered Bank account is a type of Bank account where the name of the account holder is kept secret, and he identifies himself to the Bank by means of a code word known only by the account holder and a restricted number of Bank employees, thus providing the holder with . a degree of Bank privacy in their financial transactions. Numbered Bank accounts are frequently associated in the public mind with a desire by the account holder to minimize governmental scrutiny and taxation, and perhaps to conceal an illegal or unethical origin of the money in the account. For this reason, numbered Bank accounts are illegal in most Banking jurisdictions, but are available (subject to heavy international regulations) in some Western European countries with a long tradition of specializing in international Banking, such as Switzerland and Austria. Negotiable Order of Withdrawal account:
In the Foreign- Banks; a Negotiable Order of Withdrawal account is a deposit account that pays interest, on which checks may be written. Nostro and vostro Accounts: Nostro and vostro are accounting terms used to distinguish an account you hold for another entity from an account another entity holds for you. The entities in question are almost always, but need not be, Banks. Personal Account:
A personal account is an account for use by an individual for their own needs. It is a relative term to differentiate the said accounts from those accounts for corporate or business use. The term "personal account" may be used generically for financial accounts at Banks and for service accounts such as accounts with the phone company, or even for e-mail accounts. Savings Account:
Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money. These accounts let customers set aside a portion of their liquid assets while earning a monetary return.
Time Deposit / Certificate of Deposit:
A time deposit is a money deposit at a Banking institution that cannot be withdrawn f or a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product. Transactional Account:
Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence do they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds. Tax-Exempt Special Savings Account.
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Transaction Deposit:
In the foreign -Banks, transactions deposit is a term used by the Federal Reserve for checkable deposits and other accounts that can be used directly as cash without withdrawal limits or restrictions. They are the only Bank deposits that require the Bank to keep reserves at the central Bank. This is in contrast to "time deposits".
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CHAPTER 6 SERVICES PROVIDED BY BANKS
Banks provided various services accepting deposit and lending money is basic function of Bank other than this it also conducts various services some of them are: FOREIGN CURRENCY LOANS
a) In India: The foreign currency denominated loans in India are granted out of the pool of foreign currency funds of the Bank in FCNR(B) Deposit etc. accounts as permitted by Reserve Bank of India. These loans are commonly known as FCNR (B) Loans. These loans are denominated in foreign currency such as US Dollars and are offered as short term loans. The interest is fixed with a reasonable spread over LIBOR b) From Outside India: With presence at two major financial centers of the world, Banks have foreign currency resources to arrange /grant Foreign Currency Loans to Indian as well as multinational corporate at the competitive rates. The foreign currencies denominated loans are granted by our overseas branches to Indian Corporate as per External Commercial Borrowing (ECB) Policy of Govt. of India/RBI. FINANCE/SERVICES TO EXPORTERS
a) Rupee Export Credit (pre-shipment and post-shipment): Banks provides both pre and post shipment credit to the Indian exporters through Rupee Denominated Loans as well as foreign currency loans in India. Credit facilities are sanctioned to exporters who satisfy credit exposure norms of. Exporters having firm export orders or confirmed L/C from a Bank are eligible to avail the export credit facilities. Rupee Export Credit is available generally for a period of 180 days from the date of first disbursement. In deserving cases extension may be permitted within the guidelines of RBI. The corporate may also book forward contracts with BANK in respect of future export credit drawls, if required, as per the guidelines/directives provided by RBI. b) Pre-shipment Credit in Foreign Currency (PCFC): Banks offers PCFC in the foreign currency to the exporters enabling them to fund their procurement, manufacturing/processing and packing requirements. These loans are available at very competitive international interest rates covering the cost of both domestic as well as import content of the exports. The corporate/exporters with a good track record can avail a running account facility with BANK for PCFC. PCFC is generally available for a period of 180 days
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from date of first disbursement. In deserving cases extension may be permitted within the guidelines of RBI. c) Negotiation of Bills under L/C BANK's Authorized Forex Branches are active in negotiation/discounting of sight/usance international export bills under L/Cs opened by foreign Banks as well as branches of Indian Banks abroad. BANK offers the most competitive rates. These transactions are undertaken by our branches within the Bank/Country Exposure ceilings prescribed by BANK. d) Export Bill Rediscounting: BANK provides financing of export by way of discounting of export bills, as post shipment finance to the exporters at competitive international rate of interest. This facility is available in four currencies i.e. US$, Pound Sterling, Euro and JPY. The export bills (both Sight and Usance) drawn in compliance of FEMA can be purchased/ discounted. Exporters can avail this facility from BANK to cover the bills drawn under L/C as well as other export bills. e) Bank Guarantees: BANK, on behalf of exporter constituents, issues guarantees in favor of beneficiaries abroad. The guarantees may be Performance and Financial. For Indian exporters, guarantees are issued in compliance to RBI guidelines. FINANCE/SERVICES TO IMPORTERS
a) Collection of Import Bills: BANK has correspondent relationship with reputed International Banks throughout the world and can thus provide valuable services to importers who may be importing from any part of the Globe. The import bills are collected by our Authorized Forex Branches at very competitive rates. The import bills drawn on customers of other branches are also collected through these branches. b) Letter of Credit: On account of BANK's presence in international market for decades, BANK has established itself as a well known international Bank. L/Cs of BANK is well accepted in the International market. For any special requirement BANK can get the L/C confirmed by the top international Banks. Thus BANK's L/C facility for the purchase of goods/services etc. fulfills the requirements of all importers to arrange a reliable supply. BANK offers this facility to importers in India within the ambit of FEMA and Exim policy of Govt. of India. BANK uses state of the art SWIFT network to transmit L/Cs and with a worldwide network of correspondents and our overseas branches
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facilitates prompt & efficient services to the importers. L/C facility is granted to the importers on satisfying credit exposure norms of the Bank. c) Financing of import Usance L/C facility BANK's Usance L/C facility provides the importer an opportunity to avail credit from their supplier/supplier's Bank. d) Deferred Payment Guarantee/Standby LC BANK's Deferred Payment Guarantee/Standby LC facility also provides the importer an opportunity to avail credit from their supplier/supplier's Bank. e) Rupee finance BANK also offers to Indian importers Rupee finance for payment of goods and services imported from abroad under its various Rupee credit facilities on satisfying credit exposure norms of the Bank. f) Foreign Currency Loans Short term External Commercial Borrowings or Trade Credits for less than three years as permitted by RBI for imports into India is allowed by our overseas branches to Indian importers at very competitive rates. These are generally backed by L/Cs opened by importer's Bank. Indian importers can also avail this facility from our overseas branches as roll-over credit on their Bank agreeing to extend the L/C in favor of our overseas branches. g) Bank Guarantees: BANK, on behalf of importer constituents or other customers, issues guarantees in favour of beneficiaries abroad. The guarantees may be both Performance and Financial. REMITTANCES
BANK, through its worldwide network of correspondents, Indian branches and overseas branches, offers prompt inward and outward foreign remittance facilities at very competitive rates. The use of SWIFT network adds to reliability and efficient handling. The remittances are handled by our Authorized Forex Branches. The outward remittances of customers of other branches are also remitted through these branches. Through our well-spread network of branches in India, inward remittances reach every nook & corner in India. BANK has tie-up arrangements with Western Union Money Transfer.
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FOREX & TREASURY SERVICES
BANK operates in the Forex Market in India as well as abroad. In India the inter-Bank forex operations is centralized at our Integrated Treasury Branch in Mumbai, country's undisputed financial hub. Bank's Authorized undertake customer transactions. The forex requirements of customers of other branches are also routed through these branches. Overseas branches undertake the forex treasury operations in Singapore and Hong Kong centre. All the forex treasuries are equipped with state of art technology and professionally skilled staff to handle forex treasury operations efficiently. Banks deals in all the important international currencies. Our Forex Treasuries generally undertake the following treasury related activities:Forex Inter Bank Placements/Borrowings Sale & Purchase of currency on behalf of customers Forward Cover Bookings Cross Currency Swaps Interest Rate Swaps (IRS) Forward Rate Arrangements (FRAs) Forex Money Market Operations
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CHAPTER 7 INTRODUCTION TO FOREIGN BANK
The foreign banks in India are slowly but steadily creating a niche for themselves. With the globalization hitting the world, the concept of banking has changed substantially over the last couple of years. Some of the foreign banks have successfully introduced latest technologies in the banking practices in India. This has made the banking business in the country more smooth and interesting for the customers. After the set up foreign banks in India the banking sector in India has also become competitive andaccurtive. The concept of foreign banks in India has changed the prevailing banking scenario in the country. The banking industry is now more competitive and customer-friendly than before. The foreign banks have brought forth some innovations and changes in the banking industry of the country. The Reserve Bank of India (RBI) is the supreme monetary authority of the country and tops the entire banking hierarchy. The scheduled banks under the authority of Reserve Bank of India are further categorized into two segments - commercial banks and co-operative banks. The commercial banks are then again subdivided into two classes - private sector banks and public sector banks. In the year 1994, the Government of India allowed the new private banks to operate in the country and this changed the face of banking in the country. According to the new rules set by Reserve Bank of India in the new budget, some decisions regarding foreign banks in India have been taken. The steps taken by the central monetary authority provide some extent of liberty to the foreign banks and they are hopeful to grow unshackled. The foreign banks in India are now allowed to set up local subsidiaries in the country. The policy also states that the foreign banks are not allowed to acquire any Indian bank unless the Indian bank is listed as a weak bank by the RBI. The Indian subsidiaries of the foreign banks are not allowed to open branches freely in the country. Standard Charted Bank, the oldest foreign bank that came to India 150 years ago, that is in the year 1858 and is also the first foreign bank in India now operates maximum number of branches i.e. 96. It is followed HSBC which entered in 1867 with 50 branches. Presently there are 37 (June 30, 2011) foreign banks in India with 320 branches. List of foreign bank in India as On June 30th 2011 is:-
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CHAPTER 8
Sr.no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Name Of Bank AB Bank Ltd. The Royal Bank Of Scotland Abu Dhabi Commercial Bank Ltd. American Express banking Corporation Antwerp Diamond Bank N V Bank Internasional Indonesia Bank Of America Bank Of Bahrain& Kuwait BSC Bank Of Ceylon Bank Of Nova Scotia Barclays Bank PIc. BNP Paribas Credit Agricole Corporate & Investment Bank Chinatrust Commercial bank Citibank N A DBS Bank Ltd Deutsche Bank HSBC Ltd. J P Morgan Chase Bank N A JSC VTB Bank Krung Thai Bank Public Co. Ltd Mashreq Bank PSC Mizuho Corporate Bank Ltd. Oman International Bank SAOG Shinhan Bank Societe Generale Sonali Bank Ltd. Standard Charted Bank State Bank Of Mauritius The Bank Of Tokyo-Mitsubishi UFJ Ltd. UBS AG First Rand Bank Ltd. United Overseas Bank Ltd. Common Wealth Bank Of Australia Sberbank Credit Suisse A G Australia & New Zealand Banking Group Ltd. Total No. of Branches Country Of Incorporation Bangladesh Netherland UAE USA Belgium Indonesia USA Bahrain Sri Lanka Canada United Kingdom France France Taiwan USA Singapore Germany Hong Kong USA Russia Thailand UAE Japan Sultanate of Oman South Korea France Bangladesh United Kingdom Mauritius Japan Switzerland South Africa Singapore Australia Russia Switzerland Australia No. of branches in India 1 31 2 1 1 1 5 2 1 5 10 8 6 1 42 12 16 50 1 1 1 2 2 2 3 2 2 96 3 3 1 1 1 1 1 1 1 320
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HISTORY OF FOREIGN BANKS
Banking in India started with setting up two banks in last decade of 18th century. The banks were The General Bank of India (1786) and Bank of Hindustan (1790) both of them are known defunct. Then came bank of Calcutta (June 1806) which finally became State Bank of India. The Allahabad bank established in 1865 and still functioning today is the oldest joint stock bank still functioning in India. At the time of bank nationalization in 1969, the entry of foreign banks in Indian was banned. The Ban was however lifted in 1980.The Bank of Tokyo, the chartered Banks, the first National City Bank Of New York, the Grind lays Bank, The Lloyds Bank, The Mercantile Bank In India, etc. are some of the prominent foreign banks which are presently operating in India Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire dEscompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. Standard Charted Bank started its operation in 1858 and citi bank opened its branch in India in 1902. Similarly Hong Kong and Shanghai Banking Corporation started functioning in India since 1953. However globalization and economic policies were implemented in late 1980s. Which encouraged many international banks to open there branches in India. At present almost all the international banks are operating in India. At the end-March 1987, there were 21 foreign banks with 136 branches in India. During 196080, the total assets of foreign banks have increased over five times from RS.411.4 corers to Rs.2, 261.0 corers. In 1980, their assets growth rate was 22.5 percent as against 4 percent in 1965.Initially these banks were started merely to finance Indias foreign trade. As on June 30th June 2011 there are 37.
CHAPTER 9
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GUIDELINES FOR PRESENCE OF FOREIGN BANKS ININDIA
The guidelines for setting up of wholly owned subsidiary by foreign banks and conversion of existing branches of foreign banks into wholly owned subsidiary are given below: GENERAL REQUIREMENT
a) Foreign banks applying to the RBI for setting up a WOS in India must satisfy RBI that they are subject to adequate prudential supervision in their home country regulator; the RBI will have regard to the Basel standards b) The setting up of a wholly-owned banking subsidiary in India should have the approval of the home country regulator. c) Other factors (but not limited to) that will be taken into account while considering the application are given below: Economic and political relations between India and the country incorporation of the foreign bank Financial soundness of the foreign bank Ownership pattern of the foreign bank International and home currency ranking of the foreign bank Rating of the foreign bank by international rating agencies International presence of the foreign bank. CAPITAL:-
a) The minimum start-up capital requirement for a WOS would be Rs. 3 billion and the WOS shall be required to maintain a capital adequacy ratio of 10 percent or as may be prescribed from time to time on a continuous basis, from the commencement of its operations. b) The parent foreign bank will continue to hold 100 percent equity in the Indian subsidiary for a minimum prescribed period of operation. CORPORATE GOVERNANCE:-
a) Not less than 50 percent of the directors should be Indian nationals resident in India. b) Not less than 50 percent of the directors should be non-executive directors c) A minimum of one-third of the directors should be totally independent of the management of the subsidiary in India, its parent or associates.
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d) The directors shall conform to the Fit and Proper criteria as laid down in RBIs extant guidelines dated June 25, 2004. e) RBIs approval for the directors may be obtained as per the procedure adopted in the case of the erstwhile Local Advisory Boards of foreign bank branches. ACCOUNTING, PRUDENTIAL NORMS AND OTHER REQUIREMENTS:-
a) The WOS will be subject to the licensing requirements and condition, broadly consistent with those for new private banks. b) The WOS will be treated on par with the existing branches of foreign banks for branch expansion. The Reserve Bank may also prescribe market access and national treatment limitation consistent with international practices and the countrys requirements. c) The banking subsidiary will be governed by the provisions of the Companies Act, 1956, Banking Regulation Act, 1949, Reserve Bank Of India Act, 1934, other relevant status and the directives, prudential regulations and other guidelines/instructions issued by RBI and other regulators from time to time. CAPITAL REQUIREMENTS:-
a) The minimum net worth of the WOS on conversion would not be less than Rs. 3 billion and the WOS will be required to maintain a minimum capital adequacy ratio of 10 percent of the risk weighted assets or as may be prescribed from time to time on a continuous basis. While reckoning the minimum net worth the local available capital including remittable surplus retained in India, as assessed by the RBI will qualify. b) Reserve Bank will cause an inspection/audit to assess the financial position of the financial position of the branches operating in India and arrive at the aggregate net worth of the branches. RBIs assessment of the net worth will be final.
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CHAPTER 10 ROAD MAP FOR PRESENCE OF FOREIGN BANKS IN INDIA
The banking sector in India is robust and its standards are broadly in conformity with international standards. In further enhancing its efficiency and stability to the best global standards a two-track and gradualist approach will be adopted. One track is consolidation of the domestic banking system in both public and private sectors. The second track is gradual enhancement of the presence of foreign banks in a synchronized manner. The policy decisions announced on March 5, 2004 on FDI, FII and the presence of foreign banks will be implemented in a phased manner. This will also be synchronized with the two-track approach and will be consistent with Indias commitments to the WTO. In this background, the road map for the implementation of the policy decisions is as follows: Phase I: (March 2005 to March 2009) New banks first time presence
Foreign banks wishing to establish presence in India for the first time could either choose to operate through branch presence or set up a 100% wholly owned subsidiary (WOS), following the one-mode presence criterion. (The guidelines are in the Annex). Existing banks Branch expansion policy
For new and existing foreign banks, it is proposed to go beyond the existing WTO commitment of 12 branches in a year. The number of branches permitted each year has already been higher than the WTO commitments. A more liberal policy for under banked areas will be followed. Branch licensing procedure will continue to be as per current practice. Conversion of existing branches to Wholly Owned Subsidiaries
In the first phase, foreign banks already operating in India will be allowed to convert their existing branches to WOS while following the one-mode presence criterion. (The guidelines on conversion of existing branches into WOS are in the country's requirements. Acquisition of Shareholding in Select Indian Private Sector Banks
In order to allow Indian Banks sufficient time to prepare themselves for global competition, initially entry of foreign banks will be permitted only in private sector Policy and Promotion. Banks that are identified by RBI for restructuring. In such banks, foreign banks would be allowed to acquire a controlling stake in a phased manner.
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In considering an application made by a foreign bank, for acquisition of 5 % or more in the private bank, RBI will take into account the standing and reputation of the foreign bank, globally as well as in India, and the desired level and nature of presence of the foreign bank in India. RBI may, if it is satisfied that such investment by the foreign bank concerned will be in the long-term interest of all the stakeholders in the investee bank, permit acquisition of such percentage as it may deem fit. The RBI may also specify, if necessary, that the investor bank shall make a minimum acquisition of 15 per cent or more and may also specify the period of time for such acquisition. The overall limit of 74 per cent will be applicable. Where such acquisition is by a foreign bank already having presence in India, a time bound plan covering a period not exceeding six months to conform to the 'one form of presence' concept will have to be submitted by the foreign bank along with the application for acquisition. Appropriate amending legislation will be proposed to the Banking Regulation Act, 1949, in order to provide that the economic ownership of investors is reflected in the voting rights. Simultaneous amendments will be proposed to provide for regulatory approvals from the RBI. Phase II: April 2009 According Full National Treatment to Wholly Owned Subsidiaries of Foreign Banks
In the second phase, the removal of limitations on the operations of the WOS and treating them on par with domestic banks to the extent appropriate will be designed and implemented after reviewing the experience with Phase I and after due consultations with all stakeholders in the banking sector. Dilution of Stake in Wholly Owned Subsidiaries
In this phase, the WOS of foreign banks on completion of a minimum prescribed period of operation will be allowed to list and dilute their stake so that at least 26 per cent of the paid up capital of the subsidiary is held by resident Indians at all times consistent. The dilution may be either by way of Initial Public Offer or as an offer for Sale. Mergers and Acquisition of any Private Sector Bank in India
In the second phase, after a review is made with regard to the extent of penetration of foreign investment in Indian banks and functioning of foreign banks, foreign banks may be permitted, subject to regulatory approvals and such conditions as may be prescribed, to enter into merger and acquisition transactions with any private sector bank in India subject to the overall investment limit of 74 percent.
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CHAPTER 11 PROPOSED FRAMEWORK FOR PRESENCE OF FOREIGN BANKS IN INDIA
There are currently 34 foreign banks operating in India as branches. Their balance sheet assets, accounted for about 7.65 percent of the total assets of the scheduled commercial banks as on March 31, 2010 as against 9.03 per cent as on March 31, 2009. In case, the credit equivalent of off balance sheet assets are included, the share of foreign banks was 10.52 per cent of the total assets of the scheduled commercial banks as on March 31, 2010, out of this, the share of top five foreign banks alone was 7.12 per cent. The policy on presence of foreign banks in India has followed two cardinal principles of (i) Reciprocity and (ii) Single Mode of Presence. These principles are independent of the form of presence of foreign banks. Therefore, these principles should continue to guide the framework of the future policy on presence of foreign banks in India. Following factors seem relevant for any framework for future policy on presence of foreign banks in India: Prima facie the branch mode of presence of foreign banks in India provides a ring-fenced structure as there is a requirement of locally assigned capital and capital adequacy requirement as per Basel Standards. Certain provisions of the BR Act1 also delineate the separate legal identity of branches of foreign banks in India. Further, under section 584 of the Companies Act, though the company incorporated outside India is dissolved, if it has ceased to carry on the business in India, it may be wound up as an unregistered company. However, except for the assets specifically ring-fenced under Section 11(4) of the BR Act, the claim of domestic depositors and creditors over other assets is yet to be legally tested. Keeping the above in view, on balance, the subsidiary model has clear advantages over the branch model despite certain downside risks. However, under the extant policy as laid down in 2005 Roadmap, no foreign bank has approached RBI, for setting up a subsidiary, may be due to lack of incentives. Hence there may be a need to incentivize subsidiary form of presence of foreign banks. From financial stability perspective there would be a need to mandate at entry level itself subsidiary form of presence (i.e. wholly owned subsidiary-WOS) under certain conditions and thresholds. It would likewise be mandatory for those fresh entrants who establish as branches to convert to WOS once they meet the conditions and thresholds referred to above or which become systemically important over a period by virtue of their balance sheet size. While deciding the approach towards conversion of existing foreign bank branches, Indias commitments to WTO will have to be kept in mind. It may not, therefore, be possible to mandate conversion of existing branches into subsidiaries. However, the regulatory expectation would be that those foreign banks which meet the conditions and thresholds mandated for subsidiary presence for new entrants or which become
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systemically important by virtue of their balance sheet size would voluntarily opt for converting their branches into WOS in view of the incentives proposed to be made available to WOS. The branch expansion of both the existing foreign banks and the new entrants present in the branch mode would be subject to the WTO commitments.
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CHAPTER 12 LICENSING OF FOREIGN BANKS
India issues a single class of banking license to banks and hence does not place any undue restrictions on their operations merely on the ground that in some countries there are requirements of multiple licenses for dealing in local currency and foreign currencies with different categories of clientele. Banks in India, both Indian and foreign, enjoy full and equal access to the payments and settlement systems and are full members of the clearing houses and payments system. Procedurally, foreign banks are required to apply to RBI for opening their branches in India. Foreign banks application for opening their maiden branch is considered under the provisions of Sec 22 of the BR Act, 1949. Before granting any license under this section, RBI may require to be satisfied that the Government or the law of the country in which it is incorporated does not discriminate in any way against banks from India. Other conditions as enumerated are required to be fulfilled. Unlike the restrictive practices of certain foreign countries, India is liberal in respect of the licensing and operation of the foreign bank branches as illustrated by the following:

India issues a single class of banking license to foreign banks and does not place any limitations on their operations. All banks can carry on both retail and wholesale banking. Deposit insurance cover is uniformly available to all foreign banks at a non-discriminatory rate of premium. The norms for capital adequacy, income recognition and asset classification are by and large the same. Other prudential norms such as exposure limits are the same as those applicable to Indian banks.
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CHAPTER 13 OPENING OF BRANCHES IN INDIA BY FOREIGN BANKS
The policy for approving foreign banks applications to open maiden branch and further expand their branch presence has been incorporated in the Roadmap for presence of Foreign banks in India indicated in the Press Release dated February 28, 2005 as well as in the liberalized branch authorization policy issued on September 8, 2005. The branch authorization policy for Indian banks has been made applicable to foreign banks subject to the following:

Foreign banks are required to bring an assigned capital of US $25 million up front at the time of opening the first branch in India. Existing foreign banks having only one branch would have to comply with the above requirement before their request for opening of second branch is considered. Foreign banks may submit their branch expansion plan on an annual basis. In addition to the parameters laid down for Indian banks, the following parameters would also be considered for foreign banks : Foreign banks and its groups track record of compliance and functioning in the global markets would be considered. Reports from home country supervisors will be sought, wherever necessary. Weight age would be given to even distribution of home countries of foreign banks having presence in India. The treatment extended to Indian banks in the home country of the applicant foreign bank would be considered. Due consideration would be given to the bilateral and diplomatic relations between India and the home country. The branch expansion of foreign banks would be considered keeping in view Indias commitments at World Trade Organization (WTO). Licenses issued for off-site ATMs installed by foreign banks are not included in the ceiling of 12.
In terms of Indias commitment to WTO, as a part of market access, India is committed to permit opening of 12 branches of foreign banks every year. As against these commitments, Reserve Bank of India has permitted up to 17- 18 branches in the past. The Bank follows a liberal policy where the branches are sought to be opened in unbanked/under-banked areas. Off-site ATMs are not counted in the above limit. Including off-site ATMs, foreign banks are having ( as on October 15, 2007) place of business at 933 locations ( 273 branches + 660 off site ATMs). The procedure regarding approval of proposals for opening branches of foreign banks in India has been simplified and streamlined for the sake of expeditious disposal. A license under the provisions of B.R. Act, 1949 enables the foreign banks to carry out any activity which is permissible to a bank in India. This is in contrast with practices adopted in many countries, where foreign banks can carry out only a limited menu of activities. As against the requirements of achieving 40 per cent of net bank credit as target for lending to priority sector in case of domestic banks, it has been made mandatory for the foreign banks to achieve the minimum target of 32% of net bank credit for priority sector lending.
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Within the target of 32%, two sub targets in respect of advances (a) to small scale sector (minimum of 10%), and (b) exports (minimum of 12%) have been fixed. The foreign banks are not mandated for targeted credit in respect of agricultural advances. There is no regulatory prescription in respect of foreign banks to open branches in rural and semi-urban centers.
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CHAPTER 14 BRANCH EXPANSION BY FOREIGN BANKS IN INDIA
With a view to creating an environment for encouraging foreign banks to set up WOS, a less restrictive branch expansion policy, though not at par with domestic banks may be envisaged. Accordingly, differentially favorable treatment to WOS of foreign banks as compared to the branches of other foreign banks may be put in place on the grounds of regulatory comfort that subsidiaries would provide. Therefore, with a view to incentivize setting up of WOS/conversion of foreign bank branches into WOS, it is proposed that the branch expansion policy as applicable to domestic banks as on January 1, 2010, may be extended to WOS of foreign banks also. This would mean that the WOS would be enabled to open branches in Tier 3 to 6 centers except at a few locations considered sensitive on security considerations. Their application for setting up branches in Tier 1 and Tier 2 centers would also be dealt with in a manner and on criteria similar to those applied to domestic banks. The expansion of the branch net work of foreign banks in India both existing and new entrants that are present in branch mode would be strictly under the WTO commitments of 12 branches or as may be modified from time to time. The withdrawal of the current stance of permitting larger number of branches than the commitment under WTO of 12 branches each year is to incentivize the foreign banks with branch mode of presence to move to WOS structure.
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CHAPTER 15 CORPORATE GOVERNANCE OF FOREIGN BANK
Any global entity would manage its investments on the basis of their assessment of the risk / return trade-off and allocate resources across various subsidiaries. The interest of the shareholders of the parent is the driving force for such decisions. Concerns may arise when the decisions taken for a subsidiary affect domestic depositors (and domestic shareholders, if the subsidiary is listed). Independent board members play an important role in protecting the interests of all stakeholders. Banks must include independent directors on their boards in order to make sure that management acts in the best interest of the local institution. Independent directors also ensure sufficient separation between the board of a bank and its owners to ensure that the board does not have unfettered ability to act in the interests of the owners where those interests diverge from those of the bank. In some countries foreign bank subsidiaries operate like branches focusing above all on sales, with decision making powers being locally limited and risk management being located abroad. To address these tendencies Reserve Bank of New Zealand requires locally incorporated large entities conduct substantial portion of their business in and from New Zealand. As the international experience shows, some of the important factors to be taken into account before a foreign bank is allowed to set up a subsidiary is the commitment of its parent to support the subsidiary, the ability of the subsidiary to operate on a standalone basis even when the parent faces crisis and also that the subsidiary is managed from the host country with most of the systems and controls residing within its jurisdiction and not managed remotely from the Head Office. In order to ensure that the board of directors of the WOS of foreign bank set up in India acts in the best interest of the local institution, RBI may, in line with the best practices in other countries, mandate that (i) not less than 50 percent of the directors should be Indian nationals resident in India, (ii) not less than 50 percent of the directors should be non-executive directors, (iii) a minimum of one-third of the directors should be totally independent of the management of the subsidiary in India, its parent or associates and (iv) the directors shall conform to the Fit and Proper criteria as laid down in our extant guidelines contained in RBI circular dated June 25, 2004, as amended from time to time. This would be in line with our roadmap released in February 2005.
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CHAPTER 16 FUNCTIONS OF FOREIGN BANK FINANCING FOREIGN TRADE: They primarily finance Indias foreign trade. They under take two-way operations: Financing of exports and imports of India; and Financing of movement of goods from and to Indian ports/to or from the distributing or collecting centers in the interiors parts of the country. In this context, they discount or purchase foreign bills
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.
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CHAPTER 17 ROLE OF FOREIGN BANK IN INDIA
Foreign Banks in India always brought an explanation about the prompt services to Customers. After the set up foreign banks in India, the banking sector in India also become competitive and accurtive. Foreign banks play a relatively minor role in the Indian economy; this fact is relevant right now for two reasons. First, the Reserve Bank of India is likely to open up the Indian banking market further. Two, the global credit crisis has shown how problems in Western banks can reverberate through financial systems in emerging markets. The advantages of greater foreign bank participation are clear: They tend to increase the efficiency of the local banking system, bring in more sophisticated financial services and have the ability to nurse weak banks back to health. That underlies the case for greater freedom for foreign banks. The credit crisis has brought the dark underside into focus. Global banks that boast of the best practices in the way they allocate capital and manage risks are also prone to make elementary mistakes, partly because of the imperfect nature of regulations and partly because bankers have perverse incentives to be loose with other peoples money. New rules announced by the Reserve Bank of India for the foreign banks in India in this budget have put up great hopes among foreign banks which allow them to grow unfettered. Now foreign banks in India are permitted to set up local subsidiaries. The policy conveys that foreign banks in India may not acquire Indian ones (except for weak banks identified by the RBI, on its terms) and their Indian subsidiaries will not be able to open branches freely the options for foreign banks in India have increased. They have much more flexibility vies-a-vies the nature of their operations in India. Banks will take a choice on what option they would follow depending on their strategies and the way they operate in other markets. Some banks are comfortable operating as subsidiaries while some are comfortable with the merger and acquisition route. Some on the other hand, may prefer to stick to the branch operation route since this would maintain a status quo and not entail some of the additional burdens like increase priority sector lending and adhering to the Companies Act. This is the route that is likely to be followed by the smaller foreign banks who are niche players in the Indian banking sector. It is really difficult to give an opinion about what to expect from the new rules for setting up subsidiaries by foreign banks. It will be up to individual banks to take a call on the route that they want to take. Assessment is that some of the bigger foreign banks in India, especially the ones who have indicated they may want to take up a 49 per cent stake in a private bank, may go in for a subsidiary. But the smaller foreign banks will not go in for this kind of a set-up and will prefer to continue operating the way they have been.
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The option of setting up a subsidiary will have its own pros and cons. It will allow foreign banks to raise subordinate debt in the local market. But it would also mean adhering to the provisions of the Companies Act, changes in the quantum of directed lending and in the remuneration of senior bankers in tune with guidelines of the Indian law. It will be up to individual banks to use the subsidiary option. However, it may not affect the taking over of 49 per cent in an Indian private sector bank. Foreign bankers are of the view that one of the major draws for setting up a subsidiary would have been the ability to set up branches without requiring a Reserve Bank of India (RBI) license (like other Indian banks), but now getting a license for a branch from the central bank has also become much easier. Foreign banks in India now, have three options before them. The first, of course, is to continue as a branch operation with the necessary RBI approvals and grow the business organically. This option would have ramifications for tier-1 and tier-2 capital and they will have to either bring in capital or retain their profit to carry on the same level of business. Some banks may decide that it is better to be a bank in this category i.e. is a better but different bank and grow its business. The second option is to continue in India and then take a stake of 49 per cent in a private bank in India. But this option is not an easy option since it would entail two brands in the same country and dilute the brand equity. It may be a good option for a bank from outside, since it can take control of a local bank with an existing infrastructure. But the bank will have to take the third option is local incorporation. But a network will still have to be build since an existing network will not be present. But the bank will have access to capital with the choice of raising tier-2 capital in the local market like the Indian banks. Finance minister in the Budget had allowed foreign banks the option to function as a subsidiary as against a branch set up in India, which is what the foreign banks have at the moment. But foreign banks will have to adhere to the rules and regulations which the private and state run banks follow. The operational guidelines have not yet come out and the RBI is said to be in the process of formulating the same. Some economists are of the view that Foreign Banks should, not be allowed to operate in the country. But permission to such banks to operate in the country is unavoidable on the basis of reciprocity. This is certainly the view of the Reserve Bank of India, and it is justified by the success of Indian Banks operating in foreign countries. Indian Banks have been rapidly expanding their overseas operations. Between 1975 and 1978, the number of offices of Indian Banks in foreign countries had increased by 48, from 77 to 125.
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This is in contrast with the stagnant number of Foreign Bank Offices in India. As a consequence, the growth of business of Indian Banks has been phenomenal as compared to that of the branches of their foreign counterparts in India. Deposits and advances of Indian Banks abroad have increased by 14% and 18% respectively, whereas the corresponding figures of Foreign Banks in India are 28% and 30% respectively. In terms of remittances of the present banks also, Indian banks are ahead. In 1976, they remitted Rs. 90 millions to India, where their counterparts remitted Rs. 70 millions only. Indian Banks abroad are involved in many new banking activities. State Bank of India and Bank of Baroda, the two leaders in the sphere, are raising foreign currency funds, for both private and public sector concerns. In addition, these banks are funding many joint ventures in South East Asia. For instance, SBI is funding joint ventures in Singapore, Indonesia and Malaysia. The Bank has arranged finances to the tune of $ 750 million dollars we can see clearly that Indian Banks are indeed generating a lot of business overseas. At present they are operating in as many as 26 countries of which only eight countries have their own bank branches in India. Thus, the question of reciprocity does indeed have relevance, because, if we want to seek profitable opportunities overseas, we must be prepared to open our own gates also. In short, the operation of foreign banks in India is fully justified. It is in our own national interest.
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CHAPTER 18 DETAILS OF SOME MAJOR FOREIGN BANKS IN INDIA
Foreign Banks in India always brought an explanation about the prompt services to customers. After the set up foreign banks in India, the banking sector in India also become competitive and accusative. New rules announced by the Reserve Bank of India for the foreign banks in India in this budget that foreign banks in India are permitted to set up local subsidiaries. The policy conveys that foreign banks in India may not acquire Indian ones (except for weak banks identified by the RBI, on its terms) and their Indian subsidiaries will not be able to open branches freely.
ABN-AMRO BANK:
ABN AMRO Bank is among the top 10 foreign banks in Indi a around the world with an asset of over US $504 billion.ABN AMRO global network consists of more than 3500 branches in 320 cities spanning 76 countries. ABN AMRO Bank in India: ABN AMRO Bank started its Indian operations in 1991 in Delhi and subsequently expanded to other cities such as Chennai, Bangalore, Hyderabad, Baroda, Pane and Naiad. The bank focuses mainly on three business segments namely Wholesale Clients, Commercial & Consumer Clients and High Net Worth individual clients. ABN AMRO enjoys high patronage corporate customers due to its. Comprehensive Global Transactions Services. ABN AMRO provides investment banking solutions through its strong team of experts in Corporate Finance & Global Financial Markets and is currently one of the best banks in India. Financial Services: ABN AMRO Bank has recently introduced its Individual Banking Solution with bunch of services such as Portfolio Advisory & Management services and Custodial Services. ABN AMRO introduced two types of Credit Cards in India and has considerable customer base in this segment. These credit cards come with lots of packages and insurance offers. The bank is also actively involved in providing microfinance solutions to socially weaker sections. Under this scheme the bank provides credit facilities to economically backward women in rural areas. ABN AMRO Bank has received various awards for its excellence. ABN AMRO Bank has been adjudicated as India's Top Banks of 2009 in Priority Sector Lending by Dun & Bradstreet. It was the recipient of Best Cash Management Award in 2001 and Best Foreign Bond House Award in 2000. Interest Rate Period Of deposit 15 to 30 Days 31 to 60 Days 61 to 90 Days Amount 1-1500000 1-1500000 1-1500000 Interest Rate 2.50% 2.50% 3.00%
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121 to 187 Days 188 to 1 Year 1 Year to 399 Days 400 Day up to 18 Months 3 Year 1 Day up to 4 Years 4 Years 1 Day up to 5 Years 1-1500000 1-1500000 1-1500000 1-1500000 1-1500000 1-1500000 3.75% 4.00% 4.50% 4.75% 6.50% 6.75%
ABU DHABI COMMERCIAL BANK:
Abu Dhabi Commercial Bank (ADCB) is one of largest commercial banks in United Arab Emirates (UAE). ADCB was incorporated in UAE in July 1985 merging three major UAE banks such as Emirates Commercial Bank, the Federal Commercial Bank as well as Khalid Commercial Bank. Abu Dhabi Commercial Bank in India Besides UAE, the Abu Dhabi Commercial Bank has branches only in India. ADCB is one of the most frequently used foreign banks in India by people working in the Middle East. ADCB has two branches one at Mumbai, the commercial capital of India and the second the other at Bangalore, the Silicon Valley of India. Strong trading tie between India and UAE and the large number NRI population in Emirates are the boosting factors for ADCB growth in India. Opening up of economy and globalization has facilitated growth of foreign banks in India. Taking advantage of favorable economic climate, ADBC has spread its wings in India. Financial Services Abu Dhabi Commercial Bank offers various financial services to different segments such as Individuals, SMEs, and Big Corporate. As a customer centric organization ADCB India provides efficient bank services to its customers and enjoys a strong customer hold of over 14,000 consisting individual professionals as well business firms. ADCB has very strong reputation among NRI due to its excellent financial services. Abu Dhabi Commercial Bank services and products include Deposit Accounts, ATM Services, and Corporate Banking, Loans, NRI Banking, Depository Services and Portfolio services. ADBC has recently introduced specialized NRI service, Portfolio Investment Scheme. The new Foreign Currency Loans in India against "FCNR (B)" Deposits scheme received good response from NRI. Under this scheme now NRIs can apply for a foreign currency loan in India against FCNR (B) deposits. ADCB is also providing Foreign Exchange facilities to resident Indians for undertaking travel aboard. An individual can avail up to $100,000 Foreign Exchange for travel with self certifications. Students can also benefit by this scheme to fund their study abroad. ADCB provides International Credit cards that can be used anywhere in the global A TM network.
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Interest Rate Period Of deposit 7 Days to 14 Days 15 Days to 45 Days 46 Days to 90 Days 91 Days to 179 Days 180 Days to less than 1 yr 1 year to less than 499 Days 500 Days 501 Days to less than 2 Years 2 Years to less than 3 years 3 yrs to 5 yrs (Rates are expressed in % p.a.) 0.50% extra for senior citizens Interest Rate(June 1, 2011) 4.50 4.50 6.00 7.00 7.75 9.00 9.25 9.00 9.00 8.50
JPMORGAN CHASE BANK:
JPMorgan Chase Bank is one of the leading banks in the world with an asset of US$2.2 trillion operating around 60 countries. This bank is it leader in investment banking and financial services in the United States. In 2000 JPMorgan & Co -merged with Chase Manhattan Corp., Chemical & Manufacturers Hanover and known as JPMorgan Chase & Co. JP Morgan Chase Bank in India JPMorgan Chase Bank started its operations in India date back to 1930. JPMorgan Chase Bank is one of the foreign banks in India to fund the shareholders of ICICI since 1955. JPMorgan Chase Bank core areas of business are whole sale investment banking and financial advisory services for FII. This bank is also an important player in future, options and derivative markets and also a leading dealer to RBI. Other specialty areas include treasury services and money market operations. JP Morgan Chase Bank has appointed more than 250 highly qualified financial professionals in India and also over 7000 offshore facility. Financial Services JPMorgan Chase Bank provides various financial services including investment Banking, Equities, Futures, Options, Money Markets, Treasury services, Cash Management Services, Asset Management Services, Invest Research Analysis, etc. As a leading global investment banker JPMorgan Chase Bank provides full fledged access to Indian investors to various financial markets such as New York, London, and Hong Kong. JPMorgan Chase Bank also provides advisory services to corporate to restructure their finances, raising finance through various instruments and place them in proper utilization. JPMorgan Asset
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Management Co, as subsidiary of JPMorgan Chase & Co has launched and managed various Mutual Fund schemes in India.
BANK OF CEYLON:
Bank of Ceylon is one of the largest banks in Sri Lanka, fully owned by the Government of Sri Lanka. The bank was founded in 1939 by Sri Ernest de Silva and started its first operation in Kandy in 1941. Bank of Ceylon opened its overseas operation in London in 1949, and in 1961 the bank was nationalized by the then Sri Lankan Government. Bank of Ceylon in India Bank of Ceylon in India opened its office at Chennai in 1995. This is an important foreign bank in India as there are large numbers of Indian origin Tamil ethnic people living in Sri Lanka. The bank provides easy access to funds and resources to both Sri Lankan and Indian citizens. It provides complete range of banking and financial services with professional touch. The offerings of this bank ranges from Retail and wholesale banking, investment banking, credit/debit cards, custodial services and an array of value added services. Financial Services The NRE Savings Banks Accounts feature foreign currency remittance and balance transfer. NRE Term deposits can be done with the foreign currency and subsequently can be converted to Indian rupees. This bank in India is specialized in corporate banking in various industries such as tea, manufacturing, healthcare, rubber, construction, shipping, financial services and consumer durable. The bank plays a leading role in foreign exchange market. Bank of Ceylon clientele includes many large multinational corporations. The bank gets significant business from its migrant employees working aboard through their remittance of foreign currency. The international division of Bank of Ceylon manages the network of Gold and Silver shops in leading international airports. Interest rate Period Of deposit 1 Month 3 Month 6 Month 1 Year 2 year 3 Year 4 Year 5 Year Interest Rate 5.00 6.00% 6.75% 8.00% 8.25% 8.50% 9.00% 9.50%
CHINA TRUST COMMERCIAL BANK:

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China Trust Commercial Bank is one of the leading private sector banks in Taiwan. Origin of this bank can be traced to 1966 when China Securities Investment Corporation (CSIC) was established. China Trust Commercial Bank in India China Trust Commercial Bank is one of the_ prominent branches among the foreign banks in India. It opened its office in J 996ahd-_since then is playing a major role in promoting trade and commerce between India and China. As India and China are the emerging economic powers of the world, the China Trust Commercial Bank has got a very active role in future. This bank offers various banking and financial services to Indian public and business community. With its innovative products and world class services, this bank is regarded as one of the most efficient foreign banks in India. This bank has the highest credit rating as A3. Financial Services The main thrust area of China Trust Commercial Bank in India is whole sale banking. The bank has positioned various ranges of products for corporate and institutional clients. The bank offers various financial services such as working capital, foreign exchange services, treasury management, cash management, etc. The bank also provides non fund based services such as issue of Letter of Credit, Bank Guarantee, Collection of documents etc. There is good number of value added services such as loan syndication services, Project Financing, Channel Financing, Vendor Financing and Corporate Salary Accounts. Interest Rate Period Of Deposit 7 14 Days 15- 30 Days 31-60 Days 61-90 Days 91-150 Days 151 -180 Days 181-1Year Above 1Year-2 Year Interest Rate (27th July 2011) 5.00% 5.00% 5.50% 5.75% 6.25% 6.75% 8.50% 9.25%
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CITI BANK: Citi Bank is the largest international bank having its operations more than 100 countries. The origin of City Bank is traced to 1812 when the City Bank of New York was founded. Citi Bank in India Citi Bank is a pioneer private bank. It started its Indian operations way back in 1902 at Kolkata, the erstwhile capital of British Raj in India with an investment of around US $ 1 billion. Citi Bank N.A. is the largest foreign banks in India and operates more-than 30 brandies spanning across 20 cities offering various financial services and products under its various wings. Citi Bank offers complete range of financial products and services to corporate and industries under the brand name of "Citigroup". "Citi Bank" and "Citi Financials" are other wings of Citi Bank offering various ranges of consumer finance and investment banking. Citi Bank has a very strong customer base in India with 3,500,000 retails customers, over 23,000 5MB and 950 large corporate customers. Financial Services Citi Bank is prominent commercial banks in India and plays a very important role in Indian banking system. Citi Bank financial services include treasury management, cash management, trade finance, foreign exchange services, portfolio management and securities management. Apart from traditional banking services Citi Bank offers Insurance products, Housing Loans, Vehicle loans and other type of retail consumer loans. The bank offers various types VISA and MASTER credit cards and one of the largest credit card companies in India. This bank also issues exclusive cards on behalf of certain airlines, hotels, and oil companies. Citi Bank is the pioneer in providing Net Banking and Online Banking services in India. Citi Bank N.A. was selected as the best foreign bank in India in 2009 by Dun & Bradstreet for its best performances in 2008. Interest Rate Period Of deposit 7-14 Days 15-25 Days 26-35 Days 36-45 Days 46-60 Days 61-90 Days 91-120 Days 121-150 Days 151-180 Days 181-270 Days 365-400 Days 541-731 Days >=1096 Days Interest (September 19th 20110 3.50% 3.75% 4.00% 4.50% 6.25% 7.25% 7.25% 7.75% 7.75% 8.25% 9.00% 8.75% 8.75%
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HSBC:-
HSBC Bank is the second largest banks in the world only after Citi Group. It was originated as The Hong Kong and Shanghai Banking Corporation Limited founded in 1865 by Scotsman named Thomas Sutherland. HSBC Bank in India HSBC Bank started operation in India at Bombay (Mumbai) in 1953 after acquiring Mercantile Bank of India. Subsequently offices were opened in major cities such as Madras (Chennai), Calcutta (Kolkata), Kandy, Singapore, Hong Kong and London. Today HSBC Bank is a major foreign bank in India and having offices more than 47 locations and 131 A TM Centers across India. This bank in India offers complete range of products with world class service to its corporate as well as individual customers. HSBC has a steadily growing customer base, due to its sophisticated and efficient financial services. HSBC Bank operates in India under various wings such as, HSBC Asset Management (India), HSBC Global Resourcing, HSBC Electronic Data Processing (India), HSBC Insurance Brokers (India), etc. Financial Services HSBC Bank provides various types of banking and financial products aiming at different type of customer segments. In the Personal Banking front HSBC offers Personal Banking, Credit Card and Debit Card, Consumer loans, etc. Technologically advanced HSBC cards provide instant access from large number of domestic and international A TMs. It also provides online banking systems and Anywhere Banking System. HSBC offers wide range of consumer banking products such as Housing loans, Vehicle loans and Personal loans. For corporate customers HSBC offers various types of Banking Accounts, loans and advances. Treasure management, c-ash management, investment banking, and foreign exchange management, foreign trade credit is some of the services offered to business sector. HSBC Bank has won various awards for is excellence and services. Recently HSBC was adjudicated as the best bank in 2009 for SME Financing and also for Best Asset Quality. Interest Rate Period Of deposit 15 to 29 Days 30 to 59 Days 60 to 89 Days 90 to 179 Days 180 to 269 Days 270 to 364 Days 365 Days 366 to 399 Days 400 Days 401 Days to less than 18 months Interest Rate(2nd August 2011) 4.75 4.75 5.00 7.00 8.00 8.50 9.00 8.10 8.00 8.00
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18 months to 730 days 731 Days 732 Days to less than 36 months 36 months to less than 37 months 37 months to less than 48 months
48 months to 60 months
7.50 8.00 7.50 7.75 8.50

8.00
DEUTSHE BANK:
Deutsche Bank was 'established by Adelbert Delbruck in Berlin in the year 1870. The main aim of this bank was to transact all kinds of business banking transactions and also to create smooth business relations between Germany and other European countries. Deutsche Bank in India Deutsche Bank started its operation in India in 1980 at Mumbai. Today this bank is one the strongest foreign banks in India having its branches in all major cities such as Delhi, Bangalore, Chennai, Kolkata, Noida, Gurgoan and Aurangabad. This bank is one of the major players in investment banking services. Deutsche Bank in India provides various types of trade credits to large and medium business enterprises. It also acts as a window to access global financial resources for Indian companies. It started its retail banking solutions in 2005 and enjoys a great patronage among Indian retail customers. Financial Services Deutsche Bank plays a vital role in Indian banking systems with its various financial products and services. Its personal banking services include Saving Accounts, Fixed Deposits, Payroll Accounts, Insurance, Mutual funds, Debit & Credit Cards and Demat Accounts. For business community, Deutsche Bank offerings include various types of CUlTent Accounts, Business Credit, Working Capital, Foreign Exchange Services, etc. Deutsche Bank offers various financial services to NRIs such as easy NRI Banking accounts, Foreign Currency Remittance, Money Transfers, etc. Besides its normal banking activities Deutsche Bank provides various types of loans such as Home loans, Over Draft facilities, loan against properties and securities. Deutsche Bank has won various awards for its excellence. In 2007 it was adjudicated as the best investment banks in India. STANDARD CHARTERED BANK:
Standard Chartered is British bank established in the year of 1969 by merging two 'Banks namely Chartered Bank of India. Australia and China and the Standard Bank of British South Africa. Basically, it is a product of colonial period and its main business concentrated on former British colonies.
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Standard Chartered Bank in India The first branch of Standard Chartered was opened in Calcutta (Kolkata) in the year 1858, the erstwhile commercial capital of India. The opening of Suez Cannel in 1869 for trade facilitated opening of 2nd branch at Bombay (Mumbai) and was made as the head office for Indian operations. The bank today operates over 83 locations. Its customer base has grown steadily and today it enjoys a customer base over 2.4 million including corporate as well as retail customers. Financial Services Standard Chartered offers various financial products and services aiming different types of customers. This bank in India provides spectrum of services with its sophisticated and technologically advanced infrastructure and fully trained staff. The services include Personal Banking, Debit / Credit Cards, Portfolio Management, etc. Apart from conventional banking services, it also is engaged "in providing Insurance, Mutual Funds, Finical Advisory Services, Asset and Wealth management services. For business and corporate customers it offers an array of products arid services such as Cash Management, Treasury Management, Custodian Services, Trade Finance, Foreign Exchange Management, Venture Capitals, etc. Besides regular banking services, it also provides round the clock Phone Banking Services and Online Banking services Interest Rate Period Of Deposit 7- 14 Days 15-29 Days 30-45 Days 46-59 Days 90-120 Days 261 Days 1 Year <=371 Days 2 < 3 Years 4 < 5 Years Interest Rate( 17th August 20110 4.00% 5.25% 5.75% 6.25% 7.75% 9.50% 8.00% 8.25% 8.25%
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SCOTIA BANK:
Scotia Bank is the second largest bank in Canada and one of the leading North American financial institutions. Established in 1832, Scotia Bank offers varied range of products to covering all section of clientele such as individual, business, corporate, invest banking. Scotia Bank has employed 47,000 staff in over 2000 branches wor1dwide Scotia Bank in India Scotia Bank is one of the main foreign banks in. India. This bank operates five branches in India located in New Delhi, Mumbai, Bangalore, Hyderabad and Coimbatore. Under the brand name of "Scotia Mocatta" Scotia Bank offers various range products and financial services to all type of customers such as loans, mortgages, credit cards, investment products, insurance products. Financial Services: For small and medium sectors, this bank in India provides working capital, medium and long term loans, bank guarantee, over draft facilities, etc. For business houses Scotia Bank offers Investment Banking, Financial Advisory Services, Treasury Management, Cash Management, Over Draft, Foreign Exchange, Currency Conversion and Letter of Credit. Recently Scotia Bank has planned to enter into bullion market for whole sale trading and hedging commodities such as gold, silver, platinum, etc. This bank also has teamed up with banks such as HDFC Bank for mutual customer reference. As HDFC bank has large customer base in India, the tie-up will benefit Scotia Bank to access local customers, on the other hand Scotia's strong international customer base will benefit HDFC Bank as well. Scotia Capital is another wing of Scotia Bank group that provides whole sale banking solutions to corporate, institutions and Governments as well. Scotia Capital's offerings include corporate lending, advisory services on sale, merger and acquisition, equity underwriting, etc. The bank also gives access to capital markets through derivatives, debt instruments, fixed income, etc. Interest Rate Period Of Deposit 1 - 2 month 6 - 8 months 12 months BNP PARISBAS BANK: Interest Rate(May 16th , 2011) 3.05% p.a. 3.10% p.a. 3.20% p.a.
BNP Paribas Bank is one of the oldest banking and financial institutions in Europe and largest in Eurozone.BNP Paribas Bank operates more than 87 countries and has the largest international banking networks with total employ strength of 173,000.
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BNP Paribas Bank in India BNP Paribas Bank is one of the earliest foreign banks in India. It opened its office at Calcutta (Kolkata) as early as 1860, and the bank operated in the name of Compote National d'Escompte de Paris (CNEP). At present BNP Paribas Bank have its offices in all major cities such as New Delhi; Mumbai, Chennai, Bangalore, Ahmadabad, Pane and Hyderabad. BNP Paribas Bank offers spectrum of products and services to cater every section people. Its product ranges cover Corporate Banking, Personal Banking and Retail Banking. Apart from traditional banking services, this bank in India also provides various value added services such as net banking, anywhere banking, insurance, mutual funds, credit cards, etc. Financial Services PNB Paribas Bank offers Personal Banking solutions such as wealth management services, financial advisory services, equity trading, custodian services etc. For the corporate customers the bank offers Trade Finance, Treasury Management services, Cash Management services, Asset management Services and Foreign Exchange Services. It also helps large corporate and business entities to access foreign financial resources from various international markets through its international banking networks. In the Retail banking section it provides various investment options such as mutual funds, equity investing, home loans and leasing services.
TAIB BANK:
TAIB Bank a Bahrain based private sector bank established in 1979. TAIB Bank works as per regulations of Bahrain Monetary Agency. This bank provides wealth management solutions and identifies innovative investment avenues for its customers. Taib Bank in India Realizing the favorable investment climate and significance of foreign banks in India in 90s, Taib Bank opened its first subsidiary Taib Capital Corporation Ltd (TCCL) in 1995. Taib Bank was the first gulf based financial institution to set up its subsidiary in India. Since then it performed as an active Foreign Intuitional Investor in Indian stock markets. As an expert in wealth management services TCCL offered its advice sorry services to Taib Securities Mauritius who are naive to Indian markets. Taib Bank has launched an India specific Mutual Fund called Everest Fund mainly aimed at retail investors. Everest Fund is managed by TSML with the assistance and guidance from TCCL. Financial Services TCCL is a leading merchant bank in India. With its offices in Bangalore, Mumbai, Bahrain, Turkey, UK, US, Taib Bank is providing world class investment and wealth management solutions to HNI Clients, Corporate and Institutional Investors.
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TCCL offerings in India include managing funds, private placements, brokerage services and advisory services. Taib Securities Ltd is a member in National Stock Exchange proving access to NSE securities. TAIB group's other services include Personalized Trust Services; include wealth management Services, TCCL has resisted with SEBI for portfolio management. It provides advisory services to international investors on various investment options in India.
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CHAPTER 19 ADVANTAGES OF FOREIGN BANKS
There is no denying the fact that the foreign banks are playing a pivotal role in Indian economy. They help the economy by financing the import and export trade of the country. They also receive deposits from the public as fixed deposits and Current account deposits. They also give Loans and advances to the traders and Businessmen. They also issue bank drafts, cheques and Mail Transfers to the Customers. Further, they also help in internal trade, by giving credit facilities to their customers for the procurement of raw materials for transporting goods between manufacturing and trade centers in the country. In this way, they are offering a stiff competition to the Indian commercial banks. Foreign banks have opened up' several options for the developi'1g countries to attain economic growth. The achievement of this objective has been made possible partly by foreign exchanges transactions. Like every other facility, the foreign banks also create both advantages and disadvantages. The advantage is that the foreign banks help finance exports and imports under letter of credit, the medium of D.A. Bills and D.P. Bills, and by promoting internal trade. In this way they help in earning foreign exchange. As the foreign banks have branches in almost all the other countries of the world, they are able to maintain business links with all those countries for various purposes. Thus, through these banks, Indian businessmen are also able to maintain their contacts with. Their counterparts in other countries. So far as standard of performance is concerned foreign banks are considered to' be more' efficient and more competent than their Indian counterparts. However, one great disadvantage of foreign banks is that their attitude towards Indian businessmen is discriminatory. These banks have more or less monopolized the financing of India's external trade through which they earn large sums of money as commission or brokerage, etc. They also extend preferential treatment to foreign institutions in the matter of grant of loans and advances. They also charge excessive commission for the currencies of those countries which do not have their own bank branches in India. The Indian capital invested in these banks is misused in the sense that their capital, instead of being utilized for the benefit of Indian business, is used for the purchase of shares and bonds from road, thus diminishing the profit share of India. Foreign banks are required to obtain license from the Reserve Bank of India but the RBI has failed to exercise an effective control over these banks, with the result that these banks have acquired large amounts of money in the London money market, thus rendering the Indian money market ineffective. It will thus be seen that the foreign banks have played a significant role in the growth of Indian economy during the post-Independence period. But at the same time, it is also a fact that in
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conditions of political and financial instability, especially in developing countries including India, foreign banks, with their vast resources and political in fluency abroad, can hold the national currencies and economies to .ransom. The banking scams of the harsh ad Mehta fame could not have been made possible 'without the manipulation of foreign banks operating within the country. The Indian commercial banks have neither the resources nor the freehand to finance such gigantic and scandalous transactions and deals. In the East-Asian countries also, when the foreign banks found the national economies in a state of confusion, they played havoc with the economies of the host countries by suddenly withdrawing huge amounts of money from the national economies thereby engineering economic disasters in those countries. Foreign banks are very helpful in the development of India. It is necessary and desirable for us to maintain and encourage foreign balances in India to promote investments and finance international trade. But we should utilize their loans properly in the productive way as after economic development we have to repay their loans in time. It in equally important to exercise strict vigilance and control over their activities lest they should create another Indonesia or Thailand in India.
CHAPTER 20
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EFFECTS OF FOREIGN BANKS ON INDIAN ECONOMY
Foreign banks have brought latest technology and latest banking practices in India. They have helped made Indian Banking system more competitive and efficient. Government has come up with a road map for expansion of foreign banks in India. There are various advantages and disadvantages of having foreign banks in India. Some of them are given below:
Globalization:
The entry of foreign banks in India has made India to be at an international level. It has given India an international status. Thus India is moving towards globalization. Competitiveness:-
After the set up foreign banks in India, the banking sector in India also become competitive and accurtive. Employment:-
As new foreign banks are doing business in India and the number of branches of foreign banks is increasing day by day. So it creates job opportunities for many people. Thus it makes a lot of educated unemployed people employed. Increase in standard of living:-
As foreign banks have created job opportunities the standard of living of people have improved. They have become aware of the international standards. Improved technology:-
The foreign banks have brought in new and more sophisticated technology. This has improved the working of banks and the work can be now done within few seconds
CHAPTER 21
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COMPETITION FROM FOREIGN BANK
The presence of foreign banks does not imply negligence of particular sectors of the economy. In India, foreign banks are required to comply with priority sector lending norms, where the commitments are lower than those applicable to domestic banks under a tailor-made structure suitable to them. The experience is that foreign banks adhere to the Reserve Bank prescriptions. Generally, however, due to their limited knowledge of the local industry and branch network, foreign banks are very conscious about their asset quality and a major shift in the share of foreign banks may result in neglect of the credit requirements of small and medium-sized businesses, whose development is crucial for emerging markets, but which are perceived as carrying relatively higher risks. Foreign banks constantly evaluate the political, economic and financial climate in financial markets and vary their investment/lending decisions. While the credit risk management processes and practices vary among banks, all internationally active banks have centralized policies and country and transfer risk monitoring, reporting and limiting mechanisms. While the traditional scope encompassed only sovereign and transfer risk, large flows of loans to non-G10 countries commercial entities have induced banks to broaden the scope of country and transfer risk management to incorporate the potential default of foreign private sector counterparties arising from country-specific economic factors. In response to the Asian crisis and more recent events, banks in India are required to strengthen their country and transfer risk monitoring and analysis in an effort to identify incipient problems and to adjust exposures more promptly and systematically. While entry of foreign banks is bound to affect the overall competitive situation in the market, much depends on the policy of the sovereign in regard to their entry/expansion, the existing share of domestic banks, etc. One of the main thrusts of the banking sector reforms in India has been to introduce more competition in the banking industry. With regard to mergers, only very few foreign banks operating in India have gone through the process of global mergers. The impact of megamergers taking place at the global level on the competitive position of the Indian banking system has been minor, in view of foreign banks limited share in the financial system. At the same time, foreign banks have the potential, even without megamergers, to improve their market share, given their use of sophisticated technology and capability of introducing innovative products
CHAPTER 22 COMPARISON OF INDIANS BANKS WITH FOREIGN BANKS

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In term of size Bank of America is the largest Bank in the world, while SBI 11th position in Asia. Globally, however SBI Stands 93rd. In terms of asset base Bank of America is $2.25 trillion against SBIs $110bn. When it comes to capital & parameter to ascertain a banks size & its risk taking ability Bank of America is bigger than SBI. If we look at the worlds 10 largest banks, the comparison becomes even more glaring. Last year Citigroup the worlds biggest conglomerate had asset base of $1.93 trillion. Each of bank in global top 10 list i.e. JP Morgan Chase & Co., HSBC, Bank of America, BNP Paribas has higher capital and asset base than the entire Indian banking industry. Except for bank of America and Citigroup, not too many global giants can match Indian banks in terms of RoA. Last year Bank of America RoA was 1.91% while that of Citigroup was 1.63%. Andhra Banks RoA was not far behind at 1.59%, it was highest among all Asian Banks. Among other Indian banks, Oriental Bank of Commerce RoA was 1.41%, HDFC bank 1.29%, ICICI Bank & Allahabad Bank -1.20%, Punjab National Bank-1.12%, Canara Bank -1.01% & SBI -0.94%. Globally the ratio of non-performing Loans (NPL) to total assets ranges from 0.3% to 3.00% in developed countries to 10% in Latin America. In India, the NPL ratio of schedule commercial banks declined to 5.2% in 2004-05 from 7.2%.
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HS
Topics Personal Loans HSBC Bank Home Improvement Loan, Housing Loan, Loan Against Property, Personal Loan ICICI Bank, Agricultural Loan Schemes, Commercial Vehicle Loan, Consumer Goods Loan, Educational Loan, Four Wheeler Loan, Home Improvement Loan, Housing Loan, Loan Against Deposit, Loan Against Gold, Loan Against Property, Loan Against Share, Loan Against Vehicle, Personal Loan, Two Wheeler Loan Monday to Friday-9:00am-4:00pm, Saturday9:00am-1:00pm Business Loans, Loan Against Deposit, Professional Loan, Project Finance, Term Finance, Trade Finance Current Account, Demat Account, Fixed Deposit Account, Recurring Deposit Account, Saving Account Bonds,Equity,Fixed Deposit, Flexible Deposit,Insurance,Mutual Fund, Stock Invest Private Corporate Credit Card, Credit Card, Debit Cadre-Shop Card, Loyalty Cards, Remittance Card, Travel Currency Card Card To Card Money Transfer, Currency Exchange, Demat Services, Direct Tax Payment, Electronic Clearing Service, Mobile Phone Banking,Multi City Cheque Facility, Net Banking, Pension Disbursement, Personal Tax Assistance & Investment, Portfolio Management, Retail Sale Of Gold Coin, Wealth Management Service 8.25% 8.75% (senior citizen) 4.00% 10000/-
Business Hours Business Loans Account Types Investment Products Bank Type Cards Services
Monday to Friday-10:00am-4:30pm, Saturday-10:00am-1:30pm Business Loans, Professional Loan, Project Finance, Term Finance, Trade Finance Current Account, Demat Account, Fixed Deposit Account, Recurring Deposit Account, Saving Account Equity, Fixed Deposit, Flexible Deposit,Insurance,Mutual Fund, Stock Invest Foreign Corporate Credit Card, Credit Card, Debit Cadre-Shop Card, Remittance Card Demat Services, Direct Tax Payment, Electronic Clearing Service, Mobile Phone Banking,Multi City Cheque Facility, Net Banking, Over Draft Facility, Personal Tax Assistance & Investment, Portfolio Management, Wealth Management Service 9.00% 9.50% (senior citizen) 4.00% 25000/-
Interest rates on fixed deposit of 1 year Interest saving account Minimum Balance Required to be kept in Account
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CHAPTER 23 SHORTFALLS IN WORKING OF FOREIGN BANK
Many complaints have been made against the functioning of the exchange bank in India. Several defects have been noticed in the working of the exchange banks. Some of them have been stated below: NO LEGAL RESTRICTIONS:-
For several years in the past, they where no subject to legal restrictions or statutory obligations. FOREIGN DIRECTORS:-
Their directors, governing bodies and shareholders were entirely foreign. INADEQUATE CASH RESERVE: -
For several years in the past, exchange bank did not maintain adequate cash reserve. MONOPOLY:
Till recently, the exchange bank enjoyed a substantial monopoly in financing foreign trade of the country. They exploited their advantage and earned high profits. They also forced Indian exporters and importers to give business to the foreign shipping companies, insurance companies, while accommodating them. This restricted the scope of growth of Indian enterprises in shipping and insurance. UNFAIR COMPETITION:-
They have entered into unfair competition with the Indian bank by attracting Deposits in India by under quoting Indian bank DIFFERENTIAL TREATMENT:
Exchange banks give differential treatment in financing the export trade of the country by D/A bills (i.e. documents against acceptance) and the import trade by D/P bills ((i.e. documents against payments).They, thus discriminate between Indian and foreign firms. They give foreign importers the benefits of lower rates of interest prevailing in the London money markets, which is denied to Indian importers.
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NO PROPER INFORMATION:
They do not provide any guidance information regarding foreign market, prices, etc. to the Indian exporter. HAMPERING THE DEVELOPMENT OF INDIAN BANKS: -
By extending their business from financing of foreign trade to banking in the upcountry centers, they restrict the growth of Indian commercial banks. SPLTTING THE MONEY MARKET: -
The exchange bank due o their monopolistic in the financed of foreign trade have split the money market into European and Indian. LACK OF INDIANISATION:-
Still, now the exchange bank did not have any Indian in the higher posts, expects on the clerical side.
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CHAPTER 24 WHY ARE FOREIGN BANKS ENTERING INDIA?
Foreign banks have been in India for more than 150 years but more overseas lenders are now queuing up to set up operations, amid signs that tough restrictions on entry may be eased. Five to eight foreign banks are seeking to come to India, a source familiar with the industry said, with the country viewed as attractive because of gaps in the market and a buoyant economy that has created wealthier clients. India is in focus. It is a high-growth market, added Abizer Diwanji, head of financial services at consultancy KPMG India. Foreign banks are building their base here, focusing on high-networth clients. Britains Standard Chartered Bank raised $530 million in a novel share sale through Indian Depository Receipts, which gives Indians an opportunity to get a global exposure to banking. The London-based lender, which as The Chartered Bank opened its first overseas bank in the eastern city of Calcutta in 1858, called the fund-raising issue which was oversubscribed by more than double a homecoming. Australias third-largest bank, ANZ, has been given the go-ahead for retail and wholesale banking operations. Credit Suisse, which already has an Indian investment banking, wealth management and mutual fund arm, is following suit. Embattled bank Goldman Sachs is also keen to enter India. India is a real market of substance, ANZs chief executive for Asia Pacific, Europe and America, Alex Thorsby, has said. The presence of foreign banks has brought changes to the way India banks. They were instrumental in bringing automated teller machines (ATMs) and credit cards to India. But they have still played a limited role in Indias vast lending space, which has traditionally been dominated by state-run banks, mainly due to restrictions and entry barriers in place until economic liberalization in the early 1990s. Operations still cater to a niche market of wealthy clients in big cities, offering specialised products, forex and financial transaction facilities, advisory and wealth management services. Thirty-four foreign banks are currently operating in India with Citibank, Standard Chartered and HSBC currently accounting for 70% of their total business.
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In the last five years to March 2009, foreign banks have seen a net profit compounded annual growth of 27%, led by interest and fee-based income, a report from Mumbai-based HDFC Securities shows. India has concentrated on consolidating its domestic banking system over the last five years but the Reserve Bank of India says the next phase of expansion will see foreign banks role gradually enhanced in a synchronized manner. A spokeswoman declined to comment on how many overseas banks are looking to set up but said they would clear applications as they come in. The RBI has approved an average 15 bank-branch licenses every year for the past few years, which is above its commitment of 12 to the World Trade Organization. One issue that could delay entry is the current trouble in the euro zone, which could affect strategic decision-making. Typically, foreign banks are dependent on the fortunes of their head office, said one banking analyst. Foreign banks could also face stiff competition from Indian lenders, despite the country having a relatively low penetration of financial services, as more private banks have come into the sector in the last decade. Interest margins for banks have been falling since 2000, according to a report by investment bankers and securities firm Execution Noble, as banks fight for market share across the board. In the decade to September 2009, private banks doubled their market share to 20%, while foreign banks slipped from 8% to 6%, said Execution Nobles Aditi Thapliyal.
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CHAPTER 25 DOES INDIA FAVORS FOREIGN BANKS?
At present, there are 37 foreign banks operating in India with a network of a number of branches and off-site ATMs. The facts indicate that the regulatory regime followed by the RBI in respect of foreign banks is non-discriminatory, and is, in fact, very liberal by global standards. India issues a single class of banking license to foreign banks and does not require them to graduate from a lower to a higher category of banking license over a number of years as is the practice followed in certain other jurisdictions. This places them virtually on the same footing as an Indian bank and does not place any restrictions on the scope of their operations. This is in contrast with practices in many other countries. No restrictions have been placed on the establishment of non-banking financial Subsidiaries in India by foreign banks or their group companies. Deposit insurance cover is uniformly available to all foreign banks at a discriminatory rate of premium. In many other countries there is a discriminatory regime. The prudential norms applicable to foreign banks for capital adequacy, income Recognition and asset classification are, by and large, the same as for the Indian banks. Unlike some of the countries where overall exposure limits have been placed on the Foreign-country related business, India has not placed any restriction on the kind of Business that can be routed through the branches of foreign banks. This has been advantageous to foreign bank branches as the entire home country business is generally routed through these branches. Substantial FII business is also handled exclusively by foreign banks. In fact, some Indian banks contend that a certain amount of positive discrimination exists in favor of foreign banks by way of lower priority sector lending requirement at 32 per cent of the adjusted net bank credit as against a level of 40 per cent required for Indian banks. Unlike in the case of Indian banks, the sub-ceiling in respect of agricultural advances is also not applicable to foreign banks whereas export credit granted by foreign banks can be reckoned towards priority sector lending obligation, which is not permitted for Indian banks. At the end of June 2007, foreign banks had a 6.11 per cent share in total deposits in the Indian commercial banking system and 6.83 per cent in terms of advances. Foreign banks were far more dominant in the off-balance sheet business with a market share of as high as 72.66percent. Besides foreign banks, there are also two large Indian private sector banks in which the nonresident ownership is very close to the 74 per cent permitted, which is why they can be considered as incorporated in India but predominantly foreign-owned banks. These banks together with the foreign banks have a combined market share in the deposits, advances and offbalance-sheet business of 17.46, 18.65 and 76.63 per cent, respectively, which, by no means, are
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insignificant levels. Moreover, there are also about 10 large listed public sector banks (PSBs) in which the non-resident/FII shareholding was close to the permitted ceiling of 20 per cent, as at March-end 2007. In these PSBs, resident private shareholding would thus be close to 30 per cent only. In the foreign exchange market, these banks had a 41 per cent share in the total forex turnover in 2005-06 and this rose to 52 per cent in the first half of 2007-08. Another dimension of the foreign banks' functioning in India is the returns generated from their Indian operations. The net profit per branch for foreign banks in India for the year 2005-06 was Rs 11.99 corer (Rs 119.9 million) as against the corresponding figure of Rs.33crore (Rs3.3million) for PSBs. Further, for the year 2006-07, the Return on Assets (ROA) of foreign banks was 1.65 Per cent while the Return on Equity (ROE) was 14.02 per cent, as against the Corresponding figures of 0.82 per cent and 13.62 per cent for PSBs. These returns need to be viewed in the context of the international benchmarks for these Parameters, which are generally considerably, lower. Yet another aspect of the foreign banks' operations is the authorization of their branches in India. As per India's existing WTO commitments, our obligation is to permit to foreign banks only 12 licenses per year, including new entrants and existing banks this does not include ATMs. During the period 2003 to October 2007, RBI authorized as many as 75 branches of foreign banks in India, excluding the off-site ATMs set up by them. In this context, an illustration would be revealing of the ground realities. Between 2003 and October 2007, India had granted 19 authorizations to US based banks, most of which also stand utilized. However, during the same five-year period, the US did not authorize any office of Indian banks in US territory, vis--vis the requests for setting up three branches, two subsidiaries and nine representative offices. Some of the requests have been pending with US authorities for more than five years. Yet another aspect of foreign participation in the Indian financial sector is the foreign ownership of NBFCs operating in India. As of August 2007, in systemically important non-deposit-taking (ND-SI) NBFCs, those with some element of foreign ownership had an asset base of Rs 87,542 corer (Rs 875.42 billion) and accounted for more than 26 per cent of the total assets of this class of NBFCs. Of these, the NBFCs with majority foreign ownership had an asset base of Rs 34,095 corer (Rs 340.95 billion) accounting for 9.2 per cent of the total assets of this class of companies. The NDSI NBFCs, which are not closely regulated by the RBI, therefore, provide in certain ways a means of expanding the reach of the foreign banks in India. Thus, the current policy environment enables a fair level of foreign participation even in the non-banking financial sector of the country
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CHAPTER 26 FUTURE OF FOREIGN BANKS IN INDIA
More Foreign Banks Rush to India, a large number of foreign banks are now keen on opening shop in India to gain a critical mass by April 2009, when private banking space is expected ' to open up for foreign players . The latest addition to the list of foreign banks wishing to set foot in India is the Royal Bank of Scotland, which has total assets of over $806 billion. The sudden interest in India follows the Reserve Bank of India's roadmap for according foreign banks greater freedom in India. Switzerland's UBS, ranked the world's best private bank by Euro Money magazine, and has been preparing itself for India launch. Merrill Lynch and Goldman Sachs too are believed to be showing interest. It is not known whether they will go alone or partner with an Indian entity in the new venture. Some of the new players are targeting the derivatives market to grow in India. The huge retail space is also an enticing factor. Merrill Lynch has a joint venture in Indian investment banking space DSP Merrill Lynch. Goldman Sachs holds stakes in Kotak Mahindra arms. US-based GE Capital last week announced its intention to set up a bank last week soon after the ' banking sector roadmap was unveiled. It already has wide presence in consumer finance through GE Capital India. The RBI roadmap said the removal of limitations on the operations of wholly-owned subsidiaries of foreign banks and treating them on a par with domestic banks to the extent appropriate will be designed and implemented after reviewing the experience till April 2009. A total' of 33 foreign banks are present in India and had total assets of Rs 1, 36,315 cores (Rs 1363.15 billion) as at end-March 2004. Roughly they account for about 7 per cent of the total banking space. The list of foreign players includes banks like Citibank, Bank of America, and Bank of Nova Scotia, ABN-AMRO Bank, Deutsche Bank and JPMorgan Chase Bank, which figure in the top 25 global banks ranked by The Banker magazine The other top banks like Credit Suisse Group, Industrial and Commercial Bank of China, are still to start banking business in India. India is expected to find a place in the strategy of these banks given the country's growth prospects. There have been cases of foreign banks closing shops in India too. Dresdner Bank and Commerz bank fall in this category. India's GDP is seen growing at a robust pace of around 7 per cent over the next few years, throwing up opportunities for the banking sector to profit from. The credit of banks in India has risen by over 25 per cent in 2004-05 and the growth momentum is expected to continue over the next few years.
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Participation in the growth curve of the Indian economy in the next four years will provide foreign banks a launch pad for greater business expansion when they get more freedom after April 2009.The foreign banks in India are slowly but steadily creating a niche for themselves. With the globalization hitting the world, the concept of banking has changed substantially over the last couple of years. Some of the foreign banks have successfully introduced latest technologies in the banking practices in India. This has made the banking business in the country more smooth and interesting for the customers. The concept of foreign banks in India has changed the prevailing banking scenario in the country. The banking industry is now more competitive and customer-friendly than before. The foreign banks have brought forth some innovations and changes in the banking industry of the country. The Reserve Bank of India (RBI) is the supreme monetary authority of the country 'and tops the entire banking hierarchy. The scheduled banks under the authority of Reserve Bank of India are further categorized into two segments - commercial banks and co-operative banks. The commercial banks are then again subdivided into two classes - private sector banks and public sector banks. In the year 1994, the Government of India allowed the new private banks to operate in the country and this changed the face of banking in the country. The foreign banks in India are now allowed to set up local subsidiaries in the country. The policy also states that the foreign banks are not allowed to acquire any Indian bank unless the Indian bank is listed as a weak bank by the RBI. The Indian subsidiaries of the foreign banks are not allowed to open branches freely in the country.
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CHAPTER 27 UPCOMING FOREIGN BANKS IN INDIA
By 2009 few more names is going to be added in the list of foreign banks in India. This is as an aftermath of the sudden interest shown by Reserve Bank of India paving roadmap for foreign banks in India greater freedom in India. Among them is the world's best private bank by Euro Money magazine, Switzerland's UBS he following is the list of foreign banks going to set up business in India: Royal Bank of Scotland Switzerland's UBS US-based GE Capital Credit Suisse Group Industrial and Commercial Bank of China Merrill Lynch is having a joint venture in Indian investment banking space DSP Merrill Lynch. Goldman Sachs holds stakes in Kotak Mahindra arms GE Capital is also having a wide presence in consumer finance through GE Capital India. India's GDP is seen growing at a robust pace of around 7% over the next few years, throwing up opportunities for the banking sector to profit. The credit of banks has risen by over 25% in 2004-05 and the growth momentum is expected to continue over the next four to five years. Participation in the growth curve of the Indian economy in the next four years will provide foreign banks a launch pad for greater business expansion when they get more freedom after April 2009.
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CHAPTER 28 CONCLUSION
The banking system is one of the institutions that impinge on the economy and affect its performance for better or worse. Banks as the development agency are the source of hope and inspirations to the masses. Indian banking system is increasingly becoming competitive & is getting integrated with global baking. Foreign banks started doing business in India as there are many business opportunities available. India is potential of business. Foreign banks have great impact on the Indian economy. They have brought in new and sophisticated technology. The Indian scenario of banking is changed with the evolution of foreign banks in India. The services of foreign banks are very sophisticated. However, it would be advisable to allow the foreign banks to continue their operations within the framework of the restrictions imposed on them by the Reserve Bank Of India in such a manner that they do not encroach upon the fields allocated to Indian banks. Foreign banks in India have significantly improved the Indian foreign exchange market. During 2005-06 foreign -banks registered a turnover of 41 % where as in 2007-08 their share raised to 52 %. Foreign banks in India have brought competition among public sector banks in terms or efficiency and customer service. Participation in the growth curve of the Indian economy in the next four years will provide foreign banks a launch pad for greater business expansion when they get more freedom. Indian banks are far behind their foreign counterparts in disclosing information to the public. There is lot of talk about corporate governance in the banking industry which requires banks to be more transparent in their operations and make disclosures which can help investors in making informed decisions. However the study shows that new disclosures mandated by RBI do not really have any significant impact on the share prices of these banks. Still, in the wake of increased competition from foreign banks disclosure norms can serve to be important differentiating factor to attract and retain big corporate clients. Thus I would like to conclude that India is better off with its current policy of caution about the entry of foreign banks. While we agree that banking markets tend to be prone to crises and, hence, need tighter regulation than markets in goods and services, India needs more foreign bank participation.
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Scenario of Foreign Banks in India

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Early phase from 1786 to 1969 of Indian Banks

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Public Sector Banks:

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Primary Credit Societies:

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Time Deposit / Certificate of Deposit:

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FINANCING INLAND TRADE: -

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ABU DHABI COMMERCIAL BANK:

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JPMORGAN CHASE BANK:

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CHINA TRUST COMMERCIAL BANK:

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7.50 8.00 7.50 7.75 8.50

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