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A New Measure of Competition in Indian Loan Market

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  • Ansari, Jugnu

Abstract

This study endeavours at measuring bank competition in Indian loan market using a new competitiveness index, the Augmented Relative Profit Difference (ARPD), which quantifies the impact of marginal costs on performance, measured in terms of market shares. This study yields two major insights. First, the theoretical foundation of the ARPD is very robust as compared to other conventional measures. Second, applying this unbiased competition indicator to Indian bank loan markets shows that financial reform indeed has contributed to significant improvements in competition. As regards, the competition among specific types of banks, we found public sector banks and private sector banks are comparatively more competitive than foreign banks. The empirical finding indicates that the Indian loan market is monopolistic in nature.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50108.

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Date of creation: 06 Jan 2012
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Handle: RePEc:pra:mprapa:50108

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Keywords: Banking Industry; Competition; Loan market; Marginal Cost;

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