www.ijemr.net ISSN (ONLINE): 2250-0758, ISSN (PRINT): 2394-6962 734 Copyright © 2016. Vandana Publications. All Rights Reserved. Volume-6, Issue-3, May-June 2016 International Journal of Engineering and Management Research Page Number: 734-741 Impact of FDI on the Operational Efficiency of South Indian Bank Sheeba D L 1 , Dr. B. S Patil 2 , Dr. Srinivas K T 3 1 Research Scholar, CMR University, Bangalore, INDIA 2 Director, Department of Research and Innovation, CMR University, Bangalore, INDIA 3 Associate Professor, School of Economics and Commerce, CMR University, Bangalore, INDIA ABSTRACT This paper mainly focuses on the study of importance of Foreign Direct Investment (FDI) in banking sector, role of FDI in South Indian Bank (SIB) and its operational efficiency as a result of FDI. The analysis is done on the basis of secondary data. The operational efficiency of the bank is studied on the basis of productivity and profitability. The statistical tools used for testing of hypothesis are Regression analysis, Anova and Coefficients of Variance. This study found that the productivity and profitability of South Indian Bank is directly related to the inflow of FDI into the bank. More liberalisation of rules and regulations of banking sector would bring better growth in this sector like some other sectors, such as Construction and Development, Telecom Sector, Automobile Industry etc, who enjoys hundred percentage FDI. Keywords--- FDI, SIB, Operational efficiency etc. I. INTRODUCTION FDI acts as a long term source of capital as well as a source of advanced and developed technologies along with best global management. With the help of more investment, new industries set up or in the form of merger/acquisition of the existing industries or firms and ultimately this leads to more employment in the home country. FDI is considered as a non-debt and non- volatile investment and this huge investment is interest free so the host country can be benefitted from outgoing of cash in the form of interest to the source country. FDI brings major benefits like employment generation and increase in production, helps in better capital formation which helps to enlarge the business activities, transfer of new technologies, management skills and intellectual property, increase competition in the same field of business entities and bring better efficiency in the field. It also helps to increase exports by increasing production using better technologies and increases tax revenues.The major countries contributing FDI to India during 2006- 2007 are USA, Singapore, UK, Netherlands and Mauritius etc. During this period FDI fetched 2.31% of the GDP.FDI in India came from non- resident Indians, international companies, and other foreign investors. In 2008-09, due to global recession, the GDP growth was 6.7 percent but the service sector growth was 9.7 percent with its share in GDP at 57.3 percent. Due to the recession in 2008-09, the inflow of FDI in the subsequent year (2009-10) also declined. This trend continued till 2010-2011. It is pertinent to note that, even in the recession period, in 2008 India ranked 9 th However, in the year 2011-2012, there is an increase in the flow of FDI due to the New FDI Policy announced by the government for the broadcasting sector on September 14, 2012. Under this policy, FDI up to 74% has been allowed in broadcasting infrastructure services. Not only had this, on September 14, 2012, the Central Government announced that, foreign airlines would now be allowed to invest up to 49% in domestic airlines (FDI in Civil Aviation). Along with this India’s Foreign Direct Investment Policy opened its portal to Multi-Brand Retail trading up to 51% with the prior approval of FIPB (October 24, 2012). in global FDI inflows. The various factors related to the inflow of FDI during this period are strong financial structure of Indian economy, financial and economic stability, labour market conditions, rules and regulations of FDI etc. The Economic Times quoted on May 25, 2014, that Singapore has replaced Mauritius as the top source of Foreign Direct Investment into India, accounting for about 25 per cent of FDI inflows in 2013-14. During the financial year 2014-15, India attracted $5.98 billion in FDI from Singapore, whereas it was $4.85 billion from Mauritius, according to the data of the Department of Industrial Policy and Promotion (DIPP). According to experts, the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause which has provided comfort to foreign investors based there. Foreign investments are crucial for India, which needs about $1 trillion by March 2017 to overhaul infrastructure such as ports, airports and highways and boost growth.