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The Global Financial Crisis and Indian Banks: Survival of the Fittest?

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  • Eichengreen, Barry

    ()
    (University of California)

  • Gupta, Poonam

    ()
    (National Institute of Public Finance and Policy)

Abstract

The Indian banking system was initially thought to be insulated from the global financial crisis owing to heavy public ownership and cautious management. It was thus a surprise when some banks experienced a deposit flight, as depositors shifted their money toward government-owned banks and specifically toward the State Bank of India, the largest public bank. While there was some tendency for depositors to favour healthier banks and the banks with more stable funding, the reallocation of deposits toward the State Bank of India in particular cannot be explained by these factors alone. Nor can it be explained by the impact of explicit capital injections by the government into some public-sector banks. Rather it appears that the implicit guarantee of the liabilities of the country's largest public bank dominated other considerations.

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File URL: http://www.nipfp.org.in/newweb/sites/default/files/WP_2012_113.pdf
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Bibliographic Info

Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 12/113.

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Length: 28
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:npf:wpaper:12/113

Note: Working Paper 113, 2012
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Web page: http://www.nipfp.org.in

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  1. Sudheer Chava & Amiyatosh Purnanandam, 2006. "The effect of a banking crisis on bank-dependent borrowers," Proceedings 1030, Federal Reserve Bank of Chicago.
  2. Poonam Gupta & Kalpana Kochhar & Sanjaya Panth, 2011. "Bank Ownership and the Effects of Financial Liberalization," IMF Working Papers 11/50, International Monetary Fund.
  3. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
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