Foreign Banks

Foreign banks are registered and have their headquarters in another country, but they have branches in our country. A foreign bank branch is a type of foreign bank that is required to follow both the home and host country’s regulations. Banks frequently open a foreign branch in order to better serve their multinational corporate clients.

Advantages

• Foreign banks enter host countries with new technology that contributes to the country’s technological development.
• The entry of foreign banks has a positive impact on the regulatory and supervisory regimes of the host country because they will be able to learn about the regulatory and supervisory regimes of foreign banks’ home countries.
• Foreign banks have a greater ability to invest in more sectors than domestic banks in the host country because they have a larger economic scale and risk diversification techniques.
• The presence of a foreign bank in a developing country also contributes to the transmission of best practices in the banking industry.
• The entry of a foreign bank increases competition, which has an automatic positive impact on the development of the country’s banking sector.
• Over the years, foreign banks have made significant contributions to the banking sector by bringing capital and global best practices, as well as grooming talent.

Disadvantages

• Sinceforeign banks are profit-driven; they focus primarily on large cities with high business potential, and in such a case, foreign banks would be ineffective in achieving government policy to make banking services available throughout the country.
• While foreign banks bring a large amount of capital to the host country, they also bring the potential to transfer financial shocks from their home country.
• During an economic or political crisis, foreign bank branches may face various challenges.
• They will be harmed by events in that foreign country because they are operating there during a crisis.
• A crisis-stricken government is more likely to use its limited resources to assist domestic banks. Foreign banks may be forced to bail out their own subsidiaries.

Some foreign banks in India:

• Citi Bank
• Standard Chartered Bank
• HSBC India
• Deutsche Bank
• NatWest Markets PLC
• DBS Bank
• Barclays Bank
• Bank of America
• Bank of Bahrain and Kuwait
• Doha Bank