Briefing Papers

Entry of Foreign Banks in India and China: A Brief Note

The proponents of banking sector liberalization claim that the entry of foreign banks in the poor and developing world is highly desirable and beneficial. But recent empirical evidence suggests that the entry of foreign banks could lead to misallocation of credit, which in turn could negatively affect economic growth prospects as bank credit is a vital input for investment and growth. As the focus of the global banking industry appears to be on India and China, this note analyses some of the recent developments taking place in these countries.