Ghosh, Saibal (2012): Foreign banks in India: liabilities or assets? Published in: Economic Papers , Vol. 31, No. 2 (June 2012): pp. 225-243.
Download (189kB) | Preview
Using data on Indian banks for 1996-2007, the 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.
|Item Type:||MPRA Paper|
|Original Title:||Foreign banks in India: liabilities or assets?|
|Keywords:||foreign banks; non-performing loans; credit allocation; interest rates; India|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages|
|Depositing User:||Saibal Ghosh|
|Date Deposited:||03. Jul 2012 12:59|
|Last Modified:||12. Feb 2013 18:05|
Beck, T., and A. Demirguc Kunt (2009). Financial institutions and markets across countries and over time – Data and Analysis. Policy Research Working Paper No. 4943. World Bank: Washington DC.
Berger, A. N., & Humphrey, D. B. (1997). Efficiency of financial institutions: International survey and directions for future research. European Journal of Operational Research 98, 175–212.
Barth, J., G.Caprio, Jr. and R.Levine (2001), ‘Bank Regulation and Supervision: What Works Best?’, Annual World Bank Conference on Development Economics, May.
Bonin, J.P., Hasan, I., Wachtel, P., 2005. Bank Performance, Efficiency and Ownership in Transition Countries. Journal of Banking and Finance, Vol. 29 (1), 31-53.
Claessens, S., Demirguc-Kunt, A. and Huizinga, H. (2001). How Does Foreign Entry Affect Domestic Banking Markets? −Journal of Banking and Finance, 25, 891–911.
Claeys, S. and C. Hainz, 2007. Acquisition versus Greenfield: the Impact of the Mode of Foreign Bank Entry on Information and Bank Lending Rates, mimeo
Clarke, G., R. Cull, and M. S. Martinez Peria, 2006. Foreign bank participation and access to credit across firms in developing countries, Journal of Comparative Economics, Vol. 34(4), 774–795.
Dages, B. G., Goldberg, L. and Kinney, D. Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina. − Federal Reserve Bank of New York Economic Policy Review, 6, 3, 2000, pp. 17–35.
De Haas, R, and I. Naaborg, 2006. Foreign banks in Transition Countries: To Whom do They Lend and How are they Financed? Financial Markets, Institutions & Instruments 15 (4), 159-199.
De Haas, R. and I. Lelyveld (2006). Foreign banks and credit stability in Central and Eastern Europe: A panel data analysis. Journal of Banking and Finance 30, 1927-52.
Demirguc-Kunt, A., Levine, R. and Min, H.-C. 1998, Opening to Foreign Banks. Issues of Stability, Efficiency, and Growth. In: Seongtae Lee (ed.) The Implications of Globalization of World Financial Markets. Bank of Korea, Seoul.
Denizer, C. (2000), ‘Foreign Bank Entry in Turkey’s Banking Sector: 1980-1997’, in S.Claessens and M.Jansen (eds.) The Internationalisation of Financial Services: Issues and Lessons for Developing Countries, Boston: Kluwer Academic Press.
Detragiache, E., Tressel, T. and P. Gupta (2008). Foreign banks in poor countries: Theory and evidence’, Journal of Finance 63, 2123-60.
Goldberg, L. B., Dages, G. and Kinney, D. Foreign and Domestic Bank Participation: Lessons from Argentina and Mexico. Federal Reserve Bank of New York Working Paper, 2000, pp. 17–36.
Goldberg, L.G. and A.Saunders (1981), ‘The Determinants of Foreign Banking Activity in the United States’, Journal of Banking and Finance, 5, 17-32.
Gormley, T., 2007b, The Impact of Foreign Bank Entry in Emerging Markets: Evidence from India, mimeo
Government of India (1991). Report of the Committee on the Financial System (Chairman: Shri M. Narasimham). Government of India: New Delhi.
Haselmann, R. (2006). Strategies of foreign banks in transition economies. Emerging Markets Review 7, 283-99.
Hermes, N. and R. Lensink (2003). The impact of foreign bank entry on domestic banks in less developed countries: an econometric analysis. In: Foreign Banks and Economic Transition, Poznań University of Economics, Working Papers, No 20.
International Monetary Fund (2007). Global Financial Stability Report (October). IMF: Washington DC.
Khwaja, A. I. Mian, A. 2005. Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market, Quarterly Journal of Economics Vol. 120 (4), 1371-1412
Kwan, S and R.A.Eisenbis (1997). Bank Risk, capitalization and operating efficiency. Journal of Financial Services Research 12, 117-31.
La Porta, R., F. Lopez-De-Silanez, 2002. Government Ownership of Banks. Journal of Finance, Vol. 57, No. 1, 265-301.
Laeven, L. and R. Levine (2007). Is there a diversification discount in financial conglomerates? Journal of Financial Economics 85, 331-67.
Lee, J (2002), ‘Financial Liberalisation and Foreign Bank Entry in MENA’, Financial Sector Strategy and Policy Division, The World Bank: Washington DC.
Martinez Peria, M. S. and A. Mody (2004). How Foreign Participation and Market Concentration Impact Bank Spreads : Evidence from Latin America. Journal of Money, Credit and Banking 36, 511-537.
Ortiz-Molina, H. and F. Penas, 2008. Lending to small business: The role of loan maturity in addressing information problems, Small Business Economics, Vol. 30(4), 316–383.
Rajan, R. G. and Zingales, L. Financial Dependence and Growth. American Economic Review, 88, 1998, pp. 559–586.
Reserve Bank of India. Report on Trend and Progress of Banking in India (various years). RBI: Mumbai.
Reserve Bank of India. Statistical Tables relating to Banks in India (various years). RBI: Mumbai.
Rime, B., (2001). Capital requirements and bank behavior: empirical evidence for Switzerland. Journal of Banking and Finance 25, 789-805.
Shrieves, R and D.Dahl (1992). The relationship between risk and capital in commercial banks. Journal of Banking and Finance, 16, 439-57.
Terrel, H (1986), ‘The Role of Foreign Banks in Domestic Banking Markets’, in H.Cheng (ed.) Financial Policy and Reform in Pacific-Rim Countries, Lexington Books; Lexington.
Unite, A. A., Sullivan, M. J. The effect of foreign entry and ownership structure on the Philippine domestic banking market – Journal of banking and Finance, 27, 2003, pp. 2323–2345.
Williams, B. Domestic and international determinants of bank profits: foreign banks in Australia. Journal of Banking and Finance, 27, 2003, pp. 1185–1210.