The Risk Aversion of Banks in Emerging Credit markets: Evidence from India
AbstractUsing bank-level data from India, for nine years (1995-96 to 2003-04), we examine banks’ behavior in the context of emerging credit markets. Our results indicate that the credit market behavior of banks in emerging markets is determined by past trends, the diversity of the potential pool of borrowers to whom a bank can lend, and regulations regarding treatment of NPA and lending restrictions imposed by the Reserve Bank of India. Finally, we find evidence that suggest that credit disbursal by banks can be facilitated by regulatory and institutional changes that help banks mitigate the problems associated with enforcement of debt covenants and treatment of NPA on the balance sheets. On the basis of these results, we speculate on some possible policy recommendations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp774.
Date of creation: 01 Aug 2005
Date of revision:
Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Indian banking; Development; Credit-to-deposit ratio; Risk aversion;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-03 (All new papers)
- NEP-CBA-2006-06-03 (Central Banking)
- NEP-CWA-2006-06-03 (Central & Western Asia)
- NEP-DEV-2006-06-03 (Development)
- NEP-FIN-2006-06-03 (Finance)
- NEP-FMK-2006-06-03 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sumon Kumar Bhaumik & Ralitza Dimova, 2003.
"How Important is Ownership in a Market with Level Playing Field? The Indian Banking Sector Revisited,"
William Davidson Institute Working Papers Series
2003-569, William Davidson Institute at the University of Michigan.
- Bhaumik, Sumon Kumar & Dimova, Ralitza, 2004. "How important is ownership in a market with level playing field?: The Indian banking sector revisited," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 165-180, March.
- 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.
- Acemoglu, Daron, 2001.
"Credit market imperfections and persistent unemployment,"
European Economic Review,
Elsevier, vol. 45(4-6), pages 665-679, May.
- Daron Acemoglu, 2000. "Credit Market Imperfections and Persistent Unemployment," NBER Working Papers 7938, National Bureau of Economic Research, Inc.
- Gertler, Mark & Gilchrist, Simon, 1993.
"The cyclical behavior of short-term business lending: Implications for financial propagation mechanisms,"
European Economic Review,
Elsevier, vol. 37(2-3), pages 623-631, April.
- Mark Gertler & Simon Gilchrist, 1993. "The cyclical behavior of short term business lending: implications for financial propagation mechanisms," Finance and Economics Discussion Series 93-6, Board of Governors of the Federal Reserve System (U.S.).
- Bell, Clive & Rousseau, Peter L., 2001.
"Post-independence India: a case of finance-led industrialization?,"
Journal of Development Economics,
Elsevier, vol. 65(1), pages 153-175, June.
- Clive Bell & Peter L. Rousseau, 2000. "Post-Independence India: A Case of Finance-Led Industrialization?," Vanderbilt University Department of Economics Working Papers 0019, Vanderbilt University Department of Economics.
- Ales Bulir, 1996.
"Business Cycle in Czechoslovakia Under Central Planning: Were Credit Shocks Causing it?,"
IMF Working Papers
96/129, International Monetary Fund.
- Bulir, Ales, 1998. "Business Cycle in Czechoslovakia under Central Planning: Were Credit Shocks Causing It?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 226-245, June.
- Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2002.
"Bank lending to small businesses in Latin America : does Bank origin matter?,"
Policy Research Working Paper Series
2760, The World Bank.
- Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M, 2005. "Bank Lending to Small Businesses in Latin America: Does Bank Origin Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 83-118, February.
- Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank.
- Clarke, George R. G. & Cull, Robert & D'Amato, Laura & Molinari, Andrea, 1999. "The effect of foreign entry on Argentina's domestic banking sector," Policy Research Working Paper Series 2158, The World Bank.
- Ma, Chien-Hui & Smith, Bruce D., 1996. "Credit market imperfections and economic development: Theory and evidence," Journal of Development Economics, Elsevier, vol. 48(2), pages 351-387, March.
- Muneesh Kumar & Padmasai Arora, 2010. "Bank efficiency measurement using alternative techniques of frontier analysis: evidence from India," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 2(1), pages 40-69.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).
If references are entirely missing, you can add them using this form.