Foreign Banks Penetration in Domestic Market in Nepal

Foreign Banks Penetration in Domestic Market in Nepal:- Like other businesses in today’s world, banking business is also spread in market areas over foreign countries. All over the world, foreign banks have entered to add another dimension to domestic competition.

It alters significantly the structure of domestic banking markets. In Europe and the United States where foreign-owned banks have captured a growing share of key markets.

Foreign banks are more effective and able to capture especially the markets for like other business in today’s world, banking business is also spread in market areas over foreign countries.

All over the world, foreign banks have entered to add another dimension to domestic competition. corporate loans, security underwriting, and credit guarantees.

In order to penetrate the domestic market in foreign countries like the US and Europe as well as other nation’s foreign banks use a wide variety of organizational forms. It includes mainly shell branches, representative offices, full services branches, subsidiary firms, joint ventures, and selected other organizational forms.

Looking in the context of Nepal, foreign banks are penetrated in the domestic banking market as a joint venture.

It introduces Nepalese people with the latest banking technologies providing a wide variety of quick and qualitative services to banking customers. Such penetration of foreign banks in our cities forces old Nepalese banks to modify decades-old procedures of providing banking services.

Foreign Banks Penetration in Domestic Market in Nepal

The organizational forms of foreign banks in the domestic market can be classified into different types. They are as follows:

1.    Representative Office:

Representative office means such offices conduct service facilities and serve as points of contract for a bank’s existing overseas customers; routine customer service needs a bank to the home office.

They serve as the vehicle for surfacing new customers for the home office. They have very limited service facilities. These can’t accept deposits or make loans but can serve as marketing agencies to facilitate contact between a bank and their overseas customers.

2.    Full-Services Branches:

Especially large and well-established banks can open full-service branches in foreign countries. For this purpose, they have to get approval from the local authority.

They are like a small bank. This type of branch provides the complete lines of financial services similar to those available from the head office such as accepting the deposit, providing a loan, exchanging foreign currency, etc.

3.    Shell Branches:

They provide simply booking facilities for the customers. These are the branches of banks that can simply accept deposits and they are properly recorded, but they can’t invest the funds collected. The deposit amounts are loaned and they can be invested only by full-service offices.

4.    Joint Ventures:

One of the important methods of penetrating the domestic market by a foreign bank is a joint venture in the market across the counties. It is a very easy and secure policy of intervening foreign banking market and it is beneficial to both venturing banks.

This type of banks need not feel a lack of knowledge about the overseas market and local banks can also enjoy the superior banking technology and management from foreign large bank. Foreign banks need not be odd or hesitant in the foreign local markets in joint ventures.

5.    Subsidiary Firms:

Foreign banks can also set up or acquire subsidiaries which are corporation wholly or partly owned by a foreign banking company.

Frequently domestic banks are purchased to become subsidiaries of a foreign bank so that the foreign banking firm has immediate access to a substantial group of domestic customers or avoids regulations that limit the setting with a domestic banking firm in the market.

6.    Agency Offices:

Agency offices are those units usually that do not accept deposits but can offer credit and non-deposit services. Mainly this type of office is involved in buying and selling loans and transferring funds.