Thursday, May 6, 2010

Foreign Banks in China - 2010

Foreign Banks in China : 2010

Five Years back, in 2005, I did work on a Paper to study "Functioing of Foreign Banks in India" which was presented at a National Conference on WTO held by the Mangalore University.  It was a great learning about these banks present in India during British period for over a hundred years.  It was a fulfilling task.

During the same year, RBI and Government of India, announced a policy to invite more and more foreign banks to introduce a highly competitive and level playing scenario.  I wrote another Research Paper on "Sustainability of Foreign Banks in India"  in December 2005 and presented the same at an International Conference on Banking and Finance organised by ICFAI, Hyderabad. It was a revealing experience to me and and my co-author Dr K S Srinivasa Rao that over the years, several Foreign Banks have been appearing and withdrawing from the Indian scene.  The above policy of RBI / GOI was not all that encouraging because these banks were required to meet Capital Adequacy Standards, comply with Branch Licencing policy as also to lend at least 32 per cent of its credit portfolio (as against 40% for Indian Banks) to the Priority Sector lending.  My research findings dealt with their sustainability and their frequency of entering and leaving the Indian banking scenario.

Indian Financial Sector Reforms started in June 1991.  Several policy measures were taken by RBI / GOI on the advice of Narasimham Committee Recommendations then.  Some New Generation Banks like HDFC, UTI (now Axis), ICICI, IDBI, IndusInd, Kotak Mahindra, YES Banks were permitted to start. There have been several mergers and reverse mergers among these new generation banks too. Times, Global Trust, Bank of Punjab and Centurian Bank were merged with their private or public sector counter-parts.

Today, almost all the Public and Private Sector banks have become modern, price and customer conscious and have turned out to be productive and profitable. Simultaneously, Foreign Banks also have been asked to comply with several prudential norms. Interesting fact is that while India took up reforms in 1991, China was already on the path of reforms right from 1978.  Several India-China studies were commissioned to compare their respective performances in post-reforms era. Dr Manmohan Singh and other reformers have been endeavouring at making Mumbai an International Financial Centre on the lines of Shanghai, but there have been several obstacles in this task.

Today, I learnt that from the year 2005, PriceWaterhouse Coopers, China has been studying the working of Foreign Banks in China.  Recently they have released their fifth edition of the same.  Please click on the above link. 

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