Abstract:
The banking sector plays an important role in the development of the country, and for
this reason the country's financial advisers place high priority on the growth of the
banking sector. An effective banking system provides guidance to basic policies on
micro and macro level stability and instability. There is a huge range of literature that
confirms that the banking system is an important indicator of economic growth. Even
some early literature found an active relationship between financial development and
economic growth. Some recent research has also found that financial development
increases economic growth. In thesecontext, the participation of foreign banks also has
increased steadily in developing countries since the mid-1990s. The most of the
countries in the world have seen an expansion of the adoption of reform, economic
transformation and market mechanisms trend towards liberalization of trade in financial
services as a result of the growth of the global trend of financial services. Some
researchers found that the entry of foreign banks has different impact in different
economies and it is hinged upon the level of economic development. Therefore, this
study aimed to understand the extent of the importance of the presence of foreign banks
in developing countries using descriptive method of analysis and also this study forms
this tendency and surveys current literature to explore the drivers and consequences of
this phenomenon, paying special consideration to the changes observed across counties
in the degree of contribution of foreign banks and the impact of this process. This study
concluded that developing countries are striving to attract foreign investments to the
banking sector to improve and modernize the banking system and make its performance
more effective to be able to play an active role in redistribution of capital flows to the
most productive economic sectors.
