Profitability of Foreign Banks Operating in India

Abstract

Moving from the scenario that was dominated by nationalized banks, Indian commercial banking system has witnessed rapid spread of Foreign Banks (FBs). The operations of FBs received a considerable boost during the post-reform era beginning with the year 1993, providing opportunity for players to shape up and prepare for their growth. This paper is an attempt to determine the profitability of FBs operating in India, using the data for the period 1998-99 to 2007-08. The authors use Multi-Discriminant function analysis to identify the variables discriminating the high profitability bank groups from that of the low profitability groups. The study revealed that four ratios namely Burden to Working Fund, Burden to Total Income, Earning Assets to Shareholders Equity and Earning Assets to Working Fund discriminate significantly the high profitability group of FBs from the low profitability group Keywords : Foreign Banks, Profit, India

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