Deposit Mobilisation of Foreign Banks in India

Abstract
The process of economic growth needs development of capital resources. Banking sector plays a vital role on distributing the money for the development of trade, industry are commerce. In simple words bank is an institution, which deals in money are credit. The paper deals with trend and growth of deposits of foreign banks operating in India. The study mainly based on secondary data. Statistical tools have been used like mean, percentage, CAGR ands Trend analysis. The study covers a period of 13 financial years from 1999 to 2011. The finding revealed that the foreign banks recorded increasing trend in mobilizing total deposits. But growth rate is fluctuating trend during the study period. Introduction

Banks will have to play an important and larger role in proving support to economic development. According to proof Sayers, “Banks are institutions whose debts usually referred as ‘bank deposits’-are commonly accepted in final settlement of other people’s debts”. The Indian banking or financial system comprises commercial banks, co-operative banks, financial Institutions and Non-banking financial companies. The commercial banks include public sector banks, private sector banks and foreign banks. While the public sector banks are the creation of the enactments of the parliament, private bakes, under the Banking Regulation Act 1949 are deemed as banking companies. Foreign banks are a recent addition to the Indian banking system and their existence and operations are determined by the RBI guidelines of February 2005. Foreign banks should be allowed to open offices in India either as branches or as subsidiaries. This would improve competitive efficiency as well as upgrade work and technology. They should conform to or fulfill the same or similar social obligations as the Indian Banks. Foreign exchange banks are those banks which are incorporated outside India and their head offices are also situated outside India. These banks were established in India during the 19th century and the early 20th century.

The organized system of banking originated in India with the establishment of the exchange banks. These banks established in India mainly due to the development of trade with financing of foreign trade and associated activities, they opened branches only in the port towns like Bombay Calcutta and Madras. In the early 1990s has been water shed for the Indian economy under this model, foreign capital has been invited to the country to aid its growth and development. Foreign capital, in the form of foreign direct investment (FDI) and foreign Institutional investment (FII) , is permitted in almost all the sectors of the economy. The adoption of LPG (Liberalization, Privatization, Globalization) in India according to the guidelines of (WTO)World Trade Organization, foreign banks have been granted license to operate in India. In commensurate with this new development, FDI to extent of 74% (49% before the march 2004) in private banks and 20 % in public sector banks has been allowed. However voting right of the foreign investor is capped at 10% thereby ensuring that local banks are not taken over by foreign banks As on march 31,2012 there were 41 foreign banks operating in India and they account for 5% of the total banking business. Statement of the problem

Mobilization of savings through intensive deposit collection has been regarded as the major task of banking in India It implies tapping of potential savings and putting them into the banking sector for productive uses. Deposits constitute 78 percent of total liabilities of the banking sector. Bank deposits are of two types. They are current deposits which are used by businessmen, industrialists and others to settle debts. They are also known as cash deposits or demand deposits. The second type of bank deposits known as savings deposits, are maintained by most people as a form of savings so as to earn interest from the banks. The savings deposits are not only held to meet the needs of the present or the near future but are also kept by individuals as part of their total stock of wealth One type of savings deposits is known as fixed deposits, i.e., deposits of money which can be withdrawn only after a given period of time, Such deposits are also known as time deposits.

In contrast, current account and savings account (CASA) deposits, which are least, cost sources. it is pertinent to note that, despite the increased remuneration on savings deposits based on a daily product basis with effect from April 1, 2010.the savings deposit mobilization decelerated in 2010-11 across all the bank groups as compared with the previous year, the share of CASA deposits in total incremental deposits declined to 36 per cent in 2010-11 as compared with 48 per cent in the Previous year. The Indian economy is estimated to grow at a rate of was 6.7 percent the growth in real GDP in 2011-2012 has been the lowest in nine years (except 2008-2009) According to CSO, gross domestic savings as a ratio of GDP at current market prices (saving rate )declined from 38.8 per cent in 2009-10 to 32.3 per cent in 2010-11.This decline is accounted for by a reduction in private savings, primarily household savings in financial assets and somewhat by a reduction in corporate savings.

At 2.8 per cent of GDP, the savings-investment gap during 2010-11 remained at the same level as in 2009-10.This reflected the need to finance the investment requirement from foreign savings. Deposit mobilization is an important issue currently faced by the Indian banking industry. Hence it is necessary to improve the operational efficiency and saving deposits of banks. In these circumstances Government of India allowed foreign banks in India. This present study makes an attempt to study the deposit mobilization of foreign banks operating in India. Review of literature

Selvaraj (2003) in his study main the objectives was to analyzed the progress of deposit mobilization and lending performance of the bank under study. The present study is confined to 5 years. It commences from April 1,1996 to March 31,2001. Required data for analysis are collected from secondary sources. The study conclude that deposit mobilization of the bank is good. But in order to mobilize more deposit the bank should come forward to open one deposit account for one home. Sakthi Srinivasan and Devi Lakshmi (2006),in their study examined the saving habits of individual and the awareness of people towards post office saving scheme. The sample size was collected from Karumathampati Panchayat which was considered to be a semi-rural area. The sample size was taken as 291.The analysis depicts that the majority of 34.7% of respondents were of business class, 27.1% were salaried people and 25.1% comprised of housewife. The analysis discloses that most of the respondents (38.7%) were not aware of the postal saving schemes.

The study recommended that the post offices should be computerized and more staff members are to be appointed. The interest rates have to be increased for the deposit schemes. There must be a change in the infrastructure facilities of post office and the staff should be more hospitable. Ramkrishan Vyas and Aruna Dhade (2007)Analyzed the impact of the arrival of new private sector banks on the performance of SBI based on the parameters, such as profitability performance, operating efficiency and productivity. The study analyzed the performance of the SBI on these four parameters and each parameter was again divided into financial ratios, which are then evaluated by statistical T-test to ascertain the signification differences. T-test results (proved by accepting the null hypothesis) indicated that the entry of private sector banks did not have any impact on the performance of the SBI in Madhya Pradesh.

The statistical tests applied on the banks data are statistical mean, standard deviation and T-test. The results indicated that the presence of new private sector banks does not pose any threat to SBI at the moment, however the same cannot be said in the future. Ram Pratap Sinha (2008) seeks to compare the Indian commercial banks (for the reform period) in respect of their ability to generate operating profit by using the data envelopment approach under both constant and variable return to scale the year of analysis are 1998-99, 2000-01, and 2002-03. The results show that the observed commercial banks have diverged in terms of technical and scale efficiency in 2000-01 as compared to 1998-88. However the trend has been somewhat reverved, in 2002-03. Further, most of the commercial banks exhibited decreasing return to scale for the years of study. The observed private sector banks have higher mean technical efficiency scores as compared to their public sector counter parts.

A comparison of the mean technical and scale efficiencies of the public sector commercial banks with regard to private sector commercial banks shows that for 1998-99 and 2002-03, the observed public sector commercial banks have higher mean scale efficiency scores than the observed private sector commercial banks. Anand Kodan Singh, Shailender Kumar and Vikas Kumar (2010) analyzed the both 1st and 2nd phase banking sector performs and also this paper analyzed the labor productivity of commercial banks, operating in India. They have used F-Fried-man Test for comparing the labor productivity of commercial banks operating in India.

The analyzers shown that the labor productivity of private sector banks is better than and foreign sector banks operating in India. Haresh Barot (2010), Evaluated impact of financial sector reforms in Indian economy with specific reference to banking sector considering certain definite key economic indicators. This study found that the financial sector reform have had a considerable impact on banking sector to mobilize financial savings. The restructuring of the banking sector and liberal entry and exit policies resulted in dynamic growth of banks. Hence the present study is important to examine that growth of deposits of foreign banks in India. Objectives of the study

The following are the main objectives of the present study
1. To study the trend and growth of deposits of foreign banks in India. 2. To analyze the pattern of deposits of foreign banks in India. 3. To find the forecasting of total deposits of foreign banks in India in the period from 2011 to 2023

Methodology
The present study is mainly based on secondary data .The study is an analytical in nature. The data were collected from RBI publications, reports and journals. The relevant websites mere also visited for collection of necessary literature and data from journals and books. Statistical tools like mean. Percentage, standard deviation, growth rate and trend analysis were used the study covers a period of 13 financial year from 1999-2011.

Source : Basic statistical Return of Schedule commercial Bank, RBI Various issues. Note: Figures given in parentheses indicate percentage to total. Table1 indicates that the current deposits of foreign banks in India have varied between 19.17 per cent and 35.32 per cent during the research period. The proportion of savings deposits of foreign banks in India varied between 8.90 percent and 18.64 percent during the study period. The share of term deposits was fluctuated over the study period. The highest rate was 71.93 percent in 1999 and the lowest rate 47.89 percent in 2005.The total deposits increased from Rs 4328163 Lakhs to Rs 23476051 Lakhs during the research period. It was also found that the annual compound growth rate of current, savings and term deposits of foreign banks in India are 1.2, 2.21 and 1.12. The mean of current, savings and term deposits of foreign banks in India are Rs. 3260432 Lakhs, Rs.1755827 Lakhs and Rs.6579883 Lakhs .and the standard deviation of current, savings and term deposits of foreign banks in India are Rs. 2190088 Lakhs, Rs.1211815 Lakhs and Rs. 4006427 Lakhs in during the study period.

Source : Basic statistical Return of Schedule commercial Bank, RBI Various issues. It is revealed from table 3 that the total deposits of foreign banks during the study period has increased from Rs 829751 lakhs on 31st March 1999 to Rs 7107845 lakhs on 31st March 2011. Similarly, the total number of deposit accounts has also increased from 185 on 31st March 1999 to 302 on 31st March 2011. It shows that the number of deposits account has increased by 1.63 times and it is also found that there is a maximum of 53.68 per cent increase in total deposits in 2006 during the study period.

Conclusion
The present study considered the deposit mobilization by foreign banks in India for the period of 13 years from 1999 to 2012. It is found that foreign banks recorded increasing trend in mobilizing total deposits. But growth rate shows a fluctuating trend during the study period. Hence deposit mobilization efforts by banks has not been adequate to meet the needs of the present economic environment. In 2023 foreign deposits may increased to Rs.43826823.98 Lakhs. Yet there is a vast scope for foreign banks to mobilize deposits from different sectors of the economy particularly in rural areas. Let us hope and aim that banks achieve the desired results by increasing number of deposit customers and deposit mobilization in the ensuring years.

References

1.Selvaraj (2003), “Performance Evaluation of Mukupori co-operative urban bank Ltd”. Indian journal of marketing. Vol.XXXII, No.11, PP.20-29.
2.Sakthi Srinivasan and S.Devi Lakshmi (2006), “Post Office Saving Schemed – An Impetus for Rural Investment”, Indian Journal of marketing. Vol.XXXVI, No.1, PP.21-38. 3. Ramkrishna Vyas and Aruna Dhade (2007), “A study on the Impact of new private sector banks on State bank of India”, The IcFai Journal of Bank Management, Vol.VI, No.3, pp.61-76. 4.Ram Pratap Sinha (2008), “Profit efficiency of Indian Commercial Banks: A Non-Parametric Approach”. The ICFAI journal of applied finance,
Vol.14,No.17,PP.62-77. 5.Anand Kodan Singh, Shailender kumar and Vikas kumar (2010), “Comparison of Growth Rate of Labour Productivity of commercial bank operating in India”. “(In post reform period)” Economic affairs. Vol.55, No.2, PP.121-128.

6.Haresh Rarot (2010), “ Impact of financial reform on banking sector – evidence from India”. International Journal of research in commerce & management. Vol.1, No.8,PP.120-125.