Important Facts
Kumkum Tamang Sep 27, 2024 1K Reads
Foreign banks have played a significant role in shaping the Indian banking System.Their entry into the Indian market has brought in new capital, advanced technologies, and international best practices.
By offering a wide range of financial products and services, foreign banks have contributed to increased competition, improved customer service, and the overall development of the Indian banking sector.
In the list of foreign banks in India, Hong Kong and Shanghai Banking Corporation (HSBC) is the oldest, established in 1853 also known as the 'Mercantile Bank of India'. During the British regime, foreign banks, such as Standard Chartered Bank, were in the country. In 1991, a committee called 'The Narasimha Committee Report' provided a path for foreign banks to open fully-owned banks, subsidiaries, or joint venture banks.
Furthermore, in 2005, the RBI also released a roadmap for the presence of foreign banks in India. To make sure that there is fair competition in the banking industry. It also gave insight into how the banking system in India should look in the coming decades to be very precise.
RBI basically provided ways for foreign banks to enter India. In 2005 only, RBI proposed the 'twin tracks' method which means two ways foreign banks can enter the Indian Banking system;
Let's understand the term banking first, banking is getting deposits as the savings from the public in low interest and lending money with high interest. For the economic development of a country, banking plays a crucial role. Indian banking system includes a varied range of Indian banks that provide financial services to the public, businesses, and governments.
The Reserve Bank of India (RBI) also comes under the Indian banking system. Money is the main factor of any growing startup or a well-settled organization, banks provide a flexible place for them to continue their businesses strategically. The main key factor of the Indian banking system includes the RBI, RBI is furthermore divided into two parts; Scheduled Banks and Unscheduled Banks. Scheduled banks are those banks that are registered by the IInd schedule of the RBI Act. These banks required a minimum 0.5 million reserve and followed RBI guidelines correctly.
Moreover, scheduled banks are divided into Commercial and cooperative banks. Commercial banks work the same as normal banks which mainly focus on the public sector. Banks covered in this sector are as follows;
The foreign bank provides financial services to customers outside its home country. The main head office of these banks is in another country, and they provide the facilities to the citizens of India. They basically open a varied range of branches in other countries.
Foreign banks need to follow the rules and regulations of their parent company as well as the host country. These banks are known as the foreign branch banks in India. The loan limits of these banks are completely based on the capital of foreign bank branches in India. Now, let's try to understand this with some top foreign banks in India;
Standard Chartered Bank's extensive network of 96 branches across India ensures widespread accessibility to its banking services first established in Africa. The name Standard Chartered Bank is a combination of two banks, Standard Bank (from Africa) and Chartered Bank (from India). The bank's headquarters is in London, UK.
Hong Kong and Shanghai Banking Corporation (HSBC) consists of 50 branches in India. The headquarters is in London, UK only. HSBC acquired the Mercantile Bank of India and brought the first-ever ATM facility in India (1987). It is the most successful foreign bank in India. HRBC is the third-largest owned bank in the world.
Citibank has 42 branches in 40 cities with more than 70 ATMs in India. In 1902, Citibank began operations, making it one of the oldest foreign banks in India, with a history of 119 years. It provides several financial services and lends money to foreign investors in India.
With the presence of foreign banks in India, technology, employment, and foreign exchange have developed massively which helped in the healthy increase in competitiveness of the Indian banking sector.
As we have already discussed how HSBC first introduced the ATMs in India. The quality of policies and facilities in banks is also getting better in the Indian banking system. Below we have discussed the major advantages of foreign banks in India.
Despite the varied range of advantages foreign banks need to face several challenges, which we have discussed further.
Now, let’s discuss some major roles of foreign banks in the Indian banking system.
In this blog, we have thoroughly discussed foreign banks as a whole. We are now well aware of the fact that foreign banks play a crucial role in the Indian banking system. Despite facing multiple challenges, foreign banks bring positivity to the system. It also increases the healthy competition among domestic and foreign banks which eventually enhances the quality experience of the Indian customers.
In all sectors, banks play a crucial role in each individual's life and business. People need to buy things they need and make payments for their expenses. The bank connects customers with the policies and facilities across the country and overseas.
The World Bank mainly works for the public and private sectors. It majorly includes the living quality, economic condition, and supporting the government of the developing or poor countries. In India World Bank universalized primary education, empowering rural communities, combating diseases, and revolutionizing agriculture.
International banks play a vital role in the field of finance and international trade. These banks also work in the improvement of financial services in a country will lead to healthy competition between banks, get to know about international standards, and many more. International banks include services like letters of credit, export credit, and foreign exchange.
Foreign banks are like a global citizen, who can travel to places of their choice. In simple words, a foreign bank is a bank that operates in countries other than its home country. It's like a bank that travels and offers its services to citizens of different countries.
Functions of Foreign banks include; Banking services, Currency exchange, International clients, Insurance and credit lines, and many more.
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