International Journal of Commerce and Economics

authors
Aditya Raj

abstract
Foreign Direct Investment plays a vital role in the economy because it does not only provide huge opportunities to host countries to enhance their economic development but also opens new vistas to home countries to optimize their earnings by employing their ultimate resources. On the other hand, the banking sector in India has seen remarkable improvement in financial health and in providing jobs. Even in the wake of severe economic downturn, the banking sector continues to be a very dominant sector of the financial system. The aggregate foreign investment is a private bank from all sources is allowed to reach as much as 74% under Indian regulations. FDI in banking sector can address several issues pertaining to the sector like encouraging development of innovative financial products, improving the efficiency of the banking sector, better capitalization of banks and better ability to adapt to changing financial market conditions. Due to globalization, at present, local banks are competing in the global market, where an innovative financial product of multinational banks is the key factor in the development of local bank.