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Emerging Challenges in Indian Banking

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Author Info

  • Bhide, M G
  • Prasad, A
  • Ghosh, Saibal

Abstract

The paper examines the process of banking sector reforms in India. It notes the beneficial impact to the financial system consequent upon the reforms and highlights the current weaknesses in the banking system. Against this background, the paper identifies the emerging challenges and discusses ways in which they could be tackled. In order to evaluate the efficacy of the prudential norms, we conduct a stress test of credit risk. Our analysis reveals that, depending on the percentage of loans that graduate into non-performance and the provisioning made, the immediate hit is a loss of interest income between Rs.21-55 billion. The maximum level of additional provisioning that can support the present capital adequacy ratio is determined.

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File URL: http://mpra.ub.uni-muenchen.de/1711/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1711.

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Date of creation: 2001
Date of revision:
Handle: RePEc:pra:mprapa:1711

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Related research

Keywords: banking; non performing loans; corporate governance; india;

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References

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  1. 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.
  2. McKinnon, Ronald I, 1989. "Financial Liberalization and Economic Development: A Reassessment of Interest-Rate Policies in Asia and Latin America," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 5(4), pages 29-54, Winter.
  3. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
  4. Ghosh, Saibal & Saggar, Mridul, 1998. "Narrow Banking: Theory, evidence and prospects in India," MPRA Paper 17352, University Library of Munich, Germany.
  5. Joseph E. Stiglitz, 2000. "The Contributions Of The Economics Of Information To Twentieth Century Economics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(4), pages 1441-1478, November.
  6. Cordella, Tito & Levy Yeyati, Eduardo, 1998. "Public Disclosure and Bank Failures," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1886, C.E.P.R. Discussion Papers.
  7. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
  8. Patrick Honohan, 1997. "Banking system failures in developing and transition countries: Diagnosis and predictions," BIS Working Papers 39, Bank for International Settlements.
  9. Steven Riess Weisbrod & Liliana Rojas-Suárez, 1994. "Financial Market Fragilities in Latin America," IMF Working Papers, International Monetary Fund 94/117, International Monetary Fund.
  10. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(4), pages 689-721, August.
  11. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  12. Tolga Ediz & Ian Michael & William Perraudin, 1998. "The impact of capital requirements on U.K. bank behaviour," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Oct, pages 15-22.
  13. repec:fth:bfdipa:10/2000 is not listed on IDEAS
  14. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 147-165, March.
  15. Demetriades, Panicos O & Luintel, Kul B, 1996. "Financial Development, Economic Growth and Banker Sector Controls: Evidence from India," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(435), pages 359-74, March.
  16. Hyytinen, Ari & Takalo, Tuomas, 2002. "Enchancing Bank Transparency : A Re-assessment," Discussion Papers, The Research Institute of the Finnish Economy 828, The Research Institute of the Finnish Economy.
  17. Dr Donald Brash, 1997. "Banking soundness and the role of the market," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, Reserve Bank of New Zealand, vol. 60, March.
  18. Gerard Caprio & Patrick Honohan, 1999. "Restoring Banking Stability: Beyond Supervised Capital Requirements," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 13(4), pages 43-64, Fall.
  19. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series, The World Bank 1620, The World Bank.
  20. Franklin R. Edwards & Frederic S. Mishkin, 1995. "The decline of traditional banking: implications for financial stability and regulatory policy," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Jul, pages 27-45.
  21. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers, Financial Markets Group sp52, Financial Markets Group.
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Citations

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Cited by:
  1. Daya Shanker & IKM Mokhtarul Wadud & Harminder Singh, 2008. "A Comparative Study of Banking in China and India, Nonperforming Loans and the Level Playing Field," Economics Series 2008_25, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  2. Abhiman Das & Ashok Nag & Subhash Ray, 2004. "Liberalization, Ownership, and Efficiency in Indian Banking: A Nonparametric Approach," Working papers, University of Connecticut, Department of Economics 2004-29, University of Connecticut, Department of Economics.
  3. Ghosh, Saibal, 2006. "Did financial liberalization ease financing constraints? Evidence from Indian firm-level data," Emerging Markets Review, Elsevier, Elsevier, vol. 7(2), pages 176-190, June.
  4. Ghosh, Saibal & Das, Abhiman, 2006. "Depositor discipline in Indian banking: Separating facts from folklore," MPRA Paper 17427, University Library of Munich, Germany.
  5. Swamy, Vighneswara, 2011. "Does Government Intervention in Credit Deployment Cause Inclusive Growth? – An Evidence from Indian Banking," MPRA Paper 48100, University Library of Munich, Germany.

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