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Competition and Market Power in the Indian Banking Industry in the Post-Reform Scenario

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  • Satish Verma
  • Rohit Saini

Abstract

This study focuses on the level of competition and market power in the Indian banking industry. Using an unbalanced panel for 15 years from 1992-2006, we find that Indian banking industry is characterized by a relatively higher degree of competition compared to that of its counterparts particularly in the European countries. The average mark-up over marginal cost has been 10% during the study period. We also find that the foreign banks charged nearly twice the mark-up as compared to that charged by Public and Domestic Private Banks. Further, the average mark-up level is found to decline substantially from 20% at the beginning of reforms to 5% in 2006, reflecting a sharp decline in market power with the banks during the period under consideration.

Suggested Citation

  • Satish Verma & Rohit Saini, 2008. "Competition and Market Power in the Indian Banking Industry in the Post-Reform Scenario," The IUP Journal of Bank Management, IUP Publications, vol. 0(1), pages 7-19, February.
    • Handle: RePEc:icf:icfjbm:v:7:y:2008:i:1:p:7-19
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