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The Impact of Foreign Banks on Market Concentration: The Case of India

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  • Sathye, M

Abstract

In this paper we examine whether foreign banks presence has helped reduce concentration in the Indian banking market and thus increased competition among banks. Concentration has been measured using the Herfindahl-Hirschman Index of concentration and regressed on a set of explanatory variables derived from relevant theory and prior studies. A dummy variable has been added to measure the impact of ownership on concentration to answer our research question most directly. The results of the study show that entry of foreign banks did not have significant impact on reducing the level of concentration in the Indian banking market. This may be because of many restrictions still in place on foreign bank activities in India. Hence the current efforts being made to establish level playing field among all banks need to be continued so as to make Indian banking market competitive.

Suggested Citation

  • Sathye, M, 2002. "The Impact of Foreign Banks on Market Concentration: The Case of India," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 2(1).
    • Handle: RePEc:eaa:aeinde:v:2:y:2002:i:1_1
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    References listed on IDEAS

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    1. HONIG, Adam & JAIN-CHANDRA, Sonali, 2006. "Micro-Level Evidence on the Role of MoralHazard in the Asian Financial Crisis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
    2. Rosa Portela Forte, 2016. "Multinational firms and host country market structure: A review of empirical literature," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(2), pages 240-265, March.
    3. Mansur Lubabah Kwambo & Ahmad Bawa Abdul-Qadir, 2013. "Dispersed Equity Holding and Financial Performance of Banks in Nigeria," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 238-247, January.

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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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