What are Foreign Banks

What are Foreign Banks

Foreign Banks refer to those banks that are registered and have headquarter in some foreign country, but operates branches in our country as well. These are the type of banks, required to follow the rules and regulations of both their home as well as host country. Generally, the foreign banks open their foreign branches in order to better serve the banking needs of their multinational corporate clients. Also, these foreign bank branches are technically part of a larger bank, and therefore has loan limits based on total bank capital that helps them in offering more loans as compared to subsidiary banks.

The foreign bank branches are more effective in nations having high taxation policy and where it is quite easy for international firms to enter the market. However, the operating of foreign bank branches may be considerably complicated as they need to mandatorily follow the dual banking regulations. These branches may also face some difficulties during the economic or political crisis in host country. Currently, in India there are around 45 foreign banks operating in the form of foreign bank branches and 34 foreign banks functioning in the form of representative offices. These banks account for less than 1% of country’s total bank branches. Foreign banks represent approximately 7% of total banking sector assets and approximately 11% of profits in India.

Pros of Foreign Bank account

The pros of foreign bank account are discussed in points given below: – 

  • Foreign banks enable customers to open account in any currency or a multi-currency account. This is very convenient for peoples engaged in doing business with foreign partners from distinct countries.  
  • These banks offer complete flexibility to their customers in terms of account usage. Regardless of their location and time zone, the accountholder can easily access his/her account using the Internet banking option. In addition to this, one can easily doing payments via payment cards at point of sales, do purchases on Internet and withdraw cash from any ATM around the world.
  • Foreign banks carry high degree of confidentiality with regard to the sensitive information of their clients and guarantees confidentiality. The residents of any country can be sure the information regarding their foreign bank accounts is under the reliable protection. 
  • These banks provide wider options to customers when they are placing their deposits. If customer is willing to put deposit in foreign bank account, but rate of interest is too low then he/she can issue a fiduciary deposit with this bank, where bank put your funds on its own behalf with some other bank at better rates. 

Cons of Foreign Bank

  • Foreign banks have a very strict policy for their customers with regard to minimum deposit and balance maintenance in their accounts. Fortunately, not all foreign banks carry such requirements. Therefore, this issue should be studied separately for each bank.
  • These banks have higher service rates for non-residents as compared to residents. However, among foreign banks, there is fairly large selection such that you choose a bank with most suitable tariffs.
  • The foreign banks have higher requirements for opening account as a part of their ‘’Know Your Customer’’ procedure. They may request additional documents from beneficiary such as resume, documents confirming the origin of funds, educational diploma, etc.