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Depositor discipline in Indian banking: Separating facts from folklore

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  • Ghosh, Saibal
  • Das, Abhiman

Abstract

The paper traces the determinants of depositor discipline in Indian banking. Using data for the period 1997:1 to 2002:4, the findings reveal that, while bank-specific factors are dominant in case of state-owned banks, systemic variables tend to overwhelm bank-specific factors in explaining behaviour of depositors of private banks. In case of private and foreign banks, policy announcements have an important bearing on the dependent variable. For state-owned banks, larger asset translates into higher deposit growth, suggesting that depositors are sensitive to the ‘too-big-to-fail’ effect. Finally, insured depositors tend to exercise discipline by compelling banks to pay a higher price on deposits.

Suggested Citation

  • Ghosh, Saibal & Das, Abhiman, 2006. "Depositor discipline in Indian banking: Separating facts from folklore," MPRA Paper 17427, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17427
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    References listed on IDEAS

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    Cited by:

    1. Allen Berger & Rima Turk-Ariss, 2015. "Do Depositors Discipline Banks and Did Government Actions During the Recent Crisis Reduce this Discipline? An International Perspective," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(2), pages 103-126, October.

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    More about this item

    Keywords

    depositor discipline; contagion effect; deposit insurance; banking; India;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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