Foreign direct investment And its impact on Indian economy With respect to Banking and insurance sector

To find out the trends and patterns of FDI in India.

To find out the reasons for the flow of funds to India, more specifically, an attempt to find out the reasons for India being one of the favorites; amongst all Asian countries, for foreign investors. To find out various investment, policies and guidelines of FDI in India. To do the complete analysis and interpretation of inflows of FDI in two sectors in Indian economy. To find out the impact of FDI on GDP

Foreign direct investment is:

which is made to serve the business interests of the investor in a company, which is in a different nation distinct from the investor's country of origin.

 Foreign individual or company in productive

capacity of another country,

Movement of capital across national frontiers, Any

form of investment that earns interest in enterprises which function outside of the domestic territory of the investor

Investment of foreign assets into domestic

structures, equipments and organization.

A typical form of what is termed as 'inward investment; Investment of foreign capital occurs in local resources. The factors propelling the growth of Inward FDI comprises tax breaks, relaxation of existent regulations, loans on low rates of interest and specific grants.

Also referred to as direct investment abroad; The local capital, which is being invested in some foreign resource; use in the import and export dealings with a foreign country.

Greenfield Investment
It is the direct investment in new facilities or the expansion of existing facilities. It is the principal mode of investing in developing countries.

Mergers and Acquisition

It occurs when a transfer of existing assets from local firms takes place.

Key Role in economic development and important source of technology and global best practices The Government of India has put in place a liberal and transparent FDI policy. Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors including the services sector under automatic route.

It helps in the economic development of the particular country Countries with facing economic imbalance Helps in the creation of new jobs bring in advanced technology and skill set in a country

Matters related to operation, distribution of the profits made on the investment and the personnel Economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected. Certain foreign policies are adopted that are not appreciated by the workers of the recipient country

The differences of language and culture that exist between the country of the investor and the host country There is a chance that a company may lose out on its ownership to an overseas company

The FDI inflows in 2009-10 saw an increase of 56.50 per cent over 15.70 billion dollars in the previous year. India, which saw a GDP growth of 8.7 per cent in 2007-08, aims to more than double its FDI inflows between 2008-09 and end of the current financial year. During January-June 2009, inflows rose 216 per cent compared to $ 3.6 billion in the corresponding period last year.

The size as well as the growth prospects of the economy of the host country. The population of a host country
Available resources Infrastructural factors like the status of telecommunications and railways

Electrical Equipments (Including Computer Software & Electronic)

Telecommunications (radio paging, cellular mobile, basic telephone service) Transportation Industry Services Sector (financial & non-financial) Fuels (Power + Oil Refinery)

Chemical (other than fertilizers)

Food Processing Industries Drugs & Pharmaceuticals Cement and Gypsum Products

Retail trading (except Single Brand Product retailing) Atomic energy

Lottery business Gambling and Betting

India ranks second in the world in terms of financial attractiveness, people and skills availability and business environment..
The strong macroeconomic fundamentals, growing size of the economy and improving investment climate has attracted global corporation to invest in India

The 1991 resolution,

collaboration would be welcomed production base.

stated that foreign investment and technology to increase exports and to expand the

foreign investment would bring in attend

advantages of technology transfer, marketing expertise, introduction of modern managerial techniques

49% FDI is allowed from all sources on the automatic route subject to guidelines issued from RBI from time to time.
The ceiling of foreign direct investment in the Indian private sector banks to 49 percent. The ceiling of FDI in the country's public sector banks remains unchanged at 20 percent.

Foreign banks having branches in India are also entitled to acquire stakes up to 49% through "automatic routes".

ING Vysya Bank: 43.99% is held by Mauritius Holding and BBL Mauritius Investments (of Bank Brussels Lambert Group).
UTI Bank: 14.70%is held by HSBC Asia Pacific Holdings (UK) Ltd of HSBC Group. Centurion Bank: 46.53% is held by Bank Muscat, Kephinance Investment Pvt Ltd and sabre capital worldwide. HDFC Bank: 13.18% is held by JP Morgan Bank (ADS Depository).

ICICI Bank: 20.06% is held by Deutsche Bank Trust Company Americas (ADRs Depository).
IndusInd Bank: 31.10%is held by IndusInd International Holdings Ltd. Development Credit Bank: 49% is held by the Aga Khan Fund Ltd for Economic Development. Yes Bank: 45% is held by the Rabobank International, CVC International, Russell AIF Capital Inc and Chrys Capital LLC-2.

FDI up to 26% in the Insurance sector is allowed on the automatic route.

Twelve private sector companies have entered the life insurance business. Apart from the HDFC, which has a foreign equity of 18.6%, all the other private companies have foreign equity of 26%.

In general insurance, 8 private companies have entered, 6 of which have foreign equity of 26%. Among the private players in general insurance, Reliance does not have any foreign equity.

Bajaj Allianz Life Insurance: It is joint venture between Bajaj Finserv Limited and Allianz SE. Bajaj Finserv Limited Holds 74% of Stake and Allianz SE hold 26% stake
Tata AIG Life: A joint venture between Tata group and AIG starts from April 1, 2001. Tata group holds 74% and AIG holds 26% of stake. ICICI Lombard General Insurance Company Ltd: A joint venture between ICICI bank and Canada based Fairfax Financial Holdings Limited. It is the number one private insurance company in India Tata AIG General Insurance Company Limited: 74% holding by Tata group and remaining 26% holding by AIG group. Bajaj Allianz General Insurance Company Limited: It is a joint venture between Bajaj Auto Limited and Allianz AG of Germany came together on 2nd May 2001. 74% holding by Baja Auto.

One important method for developing the service sector is to allow more FDI into Indian economy. The justification is that the requirement for capital for upgrading, expanding and modernizing most services is so large that we just do not have the resources to invest in them. In some cases foreign investment is required for concomitant, beneficial in the area of infrastructure, another area India should seek benefits is in the export of remote processing services for which India has demonstrated its comparative advantage in recent years.

Thank You.!!!