The Impact of Foreign Direct Investment on Indian Banking Sector

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ABSTRACT

This study is based on analyzing the impact that foreign direct investment has on the banking sector of India. It assesses the importance of foreign direct investment in the Indian banking sector and depicts that the due to the foreign direct investment the Indian economy has boosted. India tends to receive large amounts of foreign direct investment from numerous countries such as Singapore, United States, Untied Kingdom, Netherlands, Cyprus, Japan and etc.

CHAPTER 01: INTRODUCTION

India, with its constant level of growth has huge opportunities for foreign and domestic investment. It is the fourth largest economy in the world, the tenth most industrialized country and has a middle class of 300 million people and now is the second fastest growing economy in the world. Have taken many important initiatives such as industrial liberalization, simplification of procedures investment, enactment of competition laws, liberalization of trade policy, the total commitment to safeguard intellectual property rights, financial sector reforms, liberalization of regulations currency, and above all, a liberal, attractive and favourable to investors. India is one of the countries with more liberal policies for foreign direct investment (FDI) and transfer foreign technology. In most sectors are allowed up to 100% FDI under the automatic route. The entry under the automatic route only requires notification after entry and prior authorization Government has always been taken to simplify procedures for obtaining the various licenses.

The U.S. foreign direct investment (FDI) has steadily increased over the last twenty years in India. Many areas of Indian industries are increasingly opening up to the private sector. This, in turn, has enhanced competition and quality among services provided by businesses to the people of India. Infrastructure, power, telecommunications, the modernization and expansion of the ports, and the expansion of the road system have been major sectors for investment target areas in India.

Research Question

The study will answer the following research question:

What is the impact of Foreign Direct Investment on the Indian Banking sector?

CHAPTER 02: LITERATURE REVIEW

FDI

Foreign direct investment has multiple effects on the economy of India. FDI influences the production, income, employment, exports, prices, imports, balance of payments, general welfare, and economic growth of the receiving economy. The reasons, motivating foreign direct investment in other countries, are constantly being studied. There are innumerable factors motivating this type of investment and it is more complicated when the investment comes from a developed country to a developing economy such as India. Several empirical studies have drawn considerable attention on the determinants of foreign direct investment in the E.C. Relatively fewer attempts have been made to model and empirically examine foreign direct investment in the developing countries. Rising interest rate environment has adversely affected the banking sector.

Overview of the Indian Banking Sector

The banking sector in India is sufficiently funded and regulated. The economic and financial conditions are better here than in any other country. studies of liquidity, credit and market Indian banks have proven to be resilient. They negotiated a slowing global economy as ...