Indian banks going global: prospects and challenges

Abstract

Prior to 2000, very few Indian commercial banks had any foreign operations. During the last 8 years, Indian banking has undertaken its journey on the road to globalization with the leading Indian banks establishing foreign operations. In this paper, we argue that globalization is important for Indian banks to seize the underlying opportunity which has emerged with the increased activities of Indian firms abroad. The originality of the work lies in the development and testing of hypothesis to account for the establishment and expansion of foreign branches of Indian banks. The regression has significantly proved that Domestic Bank Credit and GDP are the significant domestic variables determining the globalization of Indian Banks. We further discuss the underlying opportunities and motivations for Indian banks to seek cross border movement mainly due to increase bilateral trade, remittance fee opportunities and the increased M and A activity of Indian firms over the year. We end this report with our recommendations and case studies of the overseas presence of two major Indian banks Bank of Baroda and ICICI Bank.