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| Article Name : | | | FOREIGN DIRECTINVESTMENT(FDI) & INDIAN BANKING SECTOR | | Author Name : | | | ABHA YB.T ARE | | Publisher : | | | Ashok Yakkaldevi | | Article Series No. : | | | ROR-213 | | Article : | |  | Author Profile | | Abstract : | | | debated in literatur e, but a consensus opinion has not emerged. Critics have attributed the Asian banking crisis to the growth of for eign direct investment following the liberalization of for eign investment restrictions. Generally, the argument runs that for eign investors create a destabilizing influence on stock prices. Stiglitz (1998) posits that unregulated capital flows render developing economies more vulnerable to fluctuations in supply of international capital. According to Dornbusch and Park (1995), for eign investors tend to follow positive feedback strategies which cause markets to overreact to fundamental changes in value. Radelet and Sachs (1998) attribute the Asian financial crisis to financial panic. Hamann (1999) concludes that currency crises lead to financial crises: collapse in exchange rates lead to the collapse of banks that underestimate exchange rate risk and accumulate vast currency reserves. Several other researchers including Delhaise (1998) blame the Asian crisis on overgenerous and indiscr eet lending by banks, especially western banks, and then switching to overly strict lending policies when market turned sour . Kim and Singal (2000) characterize “movement of hot money” as a major concern with policy makers in developing nations. Hot money investment is highly sensitive to inter est rate and futur e growth expectations, such that adverse changes in these factors result in lar ge changes in international flow of capital which exacerbates the shock, destabilizing the economy . The authors further point out that when markets are integrated, excess volatility in the for eign marke | | Keywords : | | - FOREIGN DIRECTINVESTMENT
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