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Emerging Challenges in Indian Banking

Author

Listed:
  • 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.

Suggested Citation

  • Bhide, M G & Prasad, A & Ghosh, Saibal, 2001. "Emerging Challenges in Indian Banking," MPRA Paper 1711, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1711
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    File URL: https://mpra.ub.uni-muenchen.de/1711/1/MPRA_paper_1711.pdf
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    References listed on IDEAS

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    Cited by:

    1. Abhiman Das & Ashok Nag & Subhash Ray, 2004. "Liberalization, Ownership, and Efficiency in Indian Banking: A Nonparametric Approach," Working papers 2004-29, University of Connecticut, Department of Economics.
    2. Ghosh, Saibal & Das, Abhiman, 2006. "Depositor discipline in Indian banking: Separating facts from folklore," MPRA Paper 17427, University Library of Munich, Germany.
    3. Anurag Sharma, 2008. "Incomplete reform or opportunity: the role of the banking sector in the credit transmission mechanism in India," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(4), pages 273-288.
    4. 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.
    5. Saibal Ghosh, 2007. "Promoting market discipline through interest rates: does financial liberalization matter?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(2), pages 135-143.
    6. Ghosh, Saibal, 2006. "Did financial liberalization ease financing constraints? Evidence from Indian firm-level data," Emerging Markets Review, Elsevier, vol. 7(2), pages 176-190, June.
    7. Anurag Sharma, 2008. "Incomplete reform or opportunity: the role of the banking sector in the credit transmission mechanism in India," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(4), pages 273-288.

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    More about this item

    Keywords

    banking; non performing loans; corporate governance; india;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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