28. But local incorporation of foreign banks is not without costs. A possible downside risk is that foreign banks will dominate the domestic banking system. This could have systemic implications during normal times which would amplify in times of crisis.
Many countries where foreign banks dominate have seen them vigorously acquiring business at the expense of local banks in boom times but retrenching their operations equally vigorously in times of stress. This has been the experience in varying degrees of all emerging economies, including countries like India where foreign banks are present only in the branch mode. 29.