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Non-performing loans of PSU banks: Some panel results

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Author Info

  • Rajaraman, Indira

    ()
    (National Institute of Public Finance and Policy)

  • Vasishtha, Garima

Abstract

The paper performs a panel regression on the definitionally uniform data now available for a five-year period ending in 1999-2000, on non-performing loans of commercial banks. The exercise is confined to 27 public sector banks, so as to investigate variations within a class that is homogenous on the ownership dimension. The exercise groups banks with higher than average NPAs into those explained by poor operating efficiency, and those where the operational indicator does not suffice to explain the high level of NPAs, and leaves an unexplained intercept shift. Two of the three weak banks identified by the Varma Committee, Indian Bank and United Bank of India, fall in this category. Recapitalisation of these banks with operational restructuring may therefore not be the solution, since there is clearly a residual problem even after controlling for operating efficiency.

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File URL: http://www.nipfp.org.in/working_paper/dp_2001_04.pdf
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Bibliographic Info

Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 01/4.

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Length: 15
Date of creation: Nov 2001
Date of revision:
Handle: RePEc:npf:wpaper:01/4

Note: Working Paper 4, 2001
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Web page: http://www.nipfp.org.in

Related research

Keywords: Non-performing loan ; Banking reform ; Fixed effects;

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References

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  1. Joon-Ho Hahm & Frederic S. Mishkin, 2000. "Causes of the Korean Financial Crisis: Lessons for Policy," NBER Working Papers 7483, National Bureau of Economic Research, Inc.
  2. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
  3. Sarkar, Jayati & Sarkar, Subrata & Bhaumik, Sumon K., 1998. "Does Ownership Always Matter?--Evidence from the Indian Banking Industry," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 262-281, June.
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Cited by:
  1. Vasiliki Makri & Konstantinos Papadatos, 2014. "How accounting information and macroeconomic environment determine credit risk? Evidence from Greece," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 7(1), pages 129-143, April.

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