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Banks, Development Financial Institutions and Credit Markets in India: A Model of Financial Intermediation

Author

Listed:
  • Saibal Ghosh

    (Department of Economic Analysis and Policy, Reserve Bank of India, S.B.S. Marg, Fort, Mumbai 400001, India)

Abstract

The present paper examines the interaction between a bank and a development financial institution (DFIs) in a macroeconomic set-up both of whom can lend for working capital and investment finance purposes. Our analysis reveals that the reduction in the interest rate premium on bonds over the deposit rate is an important pre-requisite for the DFI to raise its market share in both investment finance and working capital lending. Also, greater corporate access to bond financing raises investment, output and the bond rate of interest.

Suggested Citation

  • Saibal Ghosh, 2003. "Banks, Development Financial Institutions and Credit Markets in India: A Model of Financial Intermediation," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 38(1), pages 77-93, January.
    • Handle: RePEc:dse:indecr:v:38:y:2003:i:1:p:77-93
    as

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    More about this item

    Keywords

    Universal Banking; Market Share; Investment Finance; Working Capital lending; Bond financing; Interest Premium;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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