In many countries and especially in developing economies, the presence of foreign banks has increased dramatically, particularly during the 1990s. Such presence of foreign banks has raised the question as to how does foreign bank presence impinge on domestic profitability. The paper examines the issue in the Indian context, examining, in particular, whether growing presence of foreign banks improves or retards domestic bank profitability. The analysis suggests that the income and cost-reducing effects of foreign bank entry on domestic banking markets take place only after the level of foreign bank entry reaches a certain threshold, judged in terms of either numbers (of foreign banks) or their market share.

Foreign, domestic, profitability, countries, analysis, economies, banking, growing, impinge, threshold,developing economies,foreign banks, domestic profitability, profitability,cost-reducing.