This literature review aims to identify the issues regarding impact of globalization of banking sector of India on global and local level. The chapter is designed to present the rationale of study followed by the review of literature based on the research objectives. Moreover, in order to gain better insight of the research problems the chapter is divided into four major parts and each part addresses different issues related to objectives. The first part of the paper, presents the rationale or framework of the study, covering the reasons to need for conducting the research on the proposed topic. The second part of the chapter is the background of the study presenting the underlying concepts related to research study and discusses how these concepts are effective in terms of gaining the better insight of the research problem. The third part of the chapter identifies the previous literature for achieving the objectives and answers of the questions.
2.2 Rationale/Framework of Study
There is significant impact of globalization of banking sector on the global and local levels (Prasad, 2003), and this impact could further affect the process of globalization itself (Goldberg& Pavcnik, 2007). In past decade, there has been drastic change in the banking sector while remarkable reduction in the global barriers to competition in banking sector has led to increased globalization in the sector (Berger et al., 2002). The globalization of banking sector is associated with the benefits that globalization offers in the form of improved information processing, advanced telecommunication and financial technologies (Blanpain et al., 2007). These benefits greatly facilitate the banking sector to geographic reach by providing the opportunity to banks to manage their information flows from different locations and assess, manage the risks at the lowest cost without close to customer geographically (Busch, 2009).
However, the growing trend of globalization that banking sector has been experiencing by different developed economies, different emerging economies are also tended to become globalized and banking sector is the most active and rapid globalized sector (Cetorelli& Goldberg, 2008). Among different emerging economies, banking sector in India has been more tended to become globalized due to benefits that globalization offers (Porter, 2005). However, the banking sector is the most significant economic sector, influencing and responding to global changes both in internationally and locally (Nayak, 2008), the most essential changes taking place in the banking sector is the globalization of banks (Gupta, 2008 ). The banking sector in India has been passing through the process of liberalization while technological innovation has growing effects on the banking sector as it is leading it towards more globalization (Shrivastava et al., 2007). Get online assignment writing help by Expert Writers
Since the market power of banking sector in india is increasing due to globalization of the sector increasing globalization of banking has signfiicant impact on the local and global markets, due to their ablity to capture market power inside and ouside India (Sreenivas, 2006). Moreover, the globalization of banks can significantly change the econmic activity and regulations of the sectors, as banks to become globalized are tended to modify their regulations with the purpose of meeting the requirements of the operant country (Busch, 2009). Therefore, there is need to identify the motivations of the banking sector in india to become globalized except the beenfits offered by globalization. In this regard, it is also significant to find the trend or ways adopted to become globalized. The findings related to trend or ways adopted to become globalized will be effective in terms of idenifying the degree to which banking sector in india is globalized. Idenfiying the degree of globalization trend in the sector will help to determine the impact of globalization on the banking procedures and regulation while it is also effective for its impact on the competitiion levels on global and local levels.
2.3 Background of the Study
The background of the study presents the overview of Indian banking sector along with description about growing trend of globalization in the sector. It also presents the overview of the issues associated with the increasingly trend of globalization of the sector and its impact on the local as well as global levels. Moreover, it also presents the overview of other issues related to the impact of globalization of banking sector such as motivations of banking sector of India to become globalized, ways that are adopted to become globalized and the degree to which they are globalized.
Overview of Indian Banking Sector: The banking sector in India is comprised of a system that is the highly dominating in the financial sector (Kumar, 2008). The sector has continued to build under the regulations and has emerged differently from other Asian banking system. This level of differences is due to unique and distinct geography, social and economic structure in the country (Sreenivas, 2006). Moreover, the distinct banking system has contributed to achieve the economic goals of the country through five-year development plan and economic reform of 1991 (Shrivastava et al., 2007).
Globalization of the Banking Sector: According to Kapila (2006), the increasing globalization of Indian banking sector is due to enhanced role of banking sector in the Indian economy while growing trend of deregulations and competition have facilitated the globalization of Indian banking system (Kapila, 2006).