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Foreign Banks in India: Liabilities or Assets?
Author(s) -
Ghosh Saibal
Publication year - 2012
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/j.1759-3441.2011.00143.x
Subject(s) - business , asset quality , financial system , portfolio , profitability index , monetary economics , asset (computer security) , maturity (psychological) , interest rate , finance , economics , capital adequacy ratio , incentive , psychology , developmental psychology , computer security , computer science , microeconomics
Using data on Indian banks for 1996–2007, this article examines the impact of foreign banks on the domestic banking sector. The analysis suggests that foreign bank penetration improves profitability and asset quality, although it dampens spreads. The results are robust to alternate measures of foreign bank presence. In addition, foreign banks appear to impact the maturity of credit portfolio of domestic banks. Finally, the results also support the fact that foreign banks typically charge lower interest rates as compared to domestic banks.