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The financial crisis and Indian banks: Survival of the fittest?

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  • Eichengreen, Barry
  • Gupta, Poonam

Abstract

The Indian banking system was initially thought to be insulated from the global financial crisis owing to heavy public ownership and cautious management. It was thus a surprise when some banks experienced deposit flight, as depositors shifted their money toward government-owned banks and specifically toward the State Bank of India, the largest public bank. While there was some tendency for depositors to favour healthier banks and banks with more stable funding, the reallocation of deposits toward the State Bank of India cannot be explained by these factors alone. Rather it appears that the implicit government guarantee of the liabilities of the country's largest public bank dominated other considerations.

Suggested Citation

  • Eichengreen, Barry & Gupta, Poonam, 2013. "The financial crisis and Indian banks: Survival of the fittest?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 138-152.
  • Handle: RePEc:eee:jimfin:v:39:y:2013:i:c:p:138-152
    DOI: 10.1016/j.jimonfin.2013.06.022
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    References listed on IDEAS

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    Cited by:

    1. Shoaib Nisar & Ke Peng & Susheng Wang & Jaleel Ahmed, 2017. "Banking sector profitability, before, during and after Global Financial Crisis: Evidence from a developing economy," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(3), pages 22-38, April.
    2. Matteo Farnè & Angelos T. Vouldis, 2021. "Banks’ business models in the euro area: a cluster analysis in high dimensions," Annals of Operations Research, Springer, vol. 305(1), pages 23-57, October.
    3. Gulati, Rachita & Singh, Nirmal & Kumar, Sunil & Duppati, Geeta, 2023. "Bank stability in the Indian subcontinent region: Evolution and determinants," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    4. Rachita Gulati & Nirmal Singh, 2019. "Analysing bank stability in India: Evidence from 2007/08-2016/17," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-7.
    5. Saibal Ghosh, 2023. "Political connections and bank behaviour," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 52(1), February.
    6. Ghosh, Saibal, 2022. "Religiosity and bank performance: How strong is the link?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    7. Saibal Ghosh, 2022. "Does financial interconnectedness affect monetary transmission? Evidence from India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 15(3), pages 273-300, September.
    8. Pallavi Chavan & Leonardo Gambacorta, 2019. "Bank lending and loan quality: an emerging economy perspective," Empirical Economics, Springer, vol. 57(1), pages 1-29, July.
    9. Gulati, Rachita, 2022. "Global and local banking crises and risk-adjusted efficiency of Indian banks: Are the impacts really perspective-dependent?," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 23-39.
    10. Rachita Gulati, 2022. "Does regulatory under‐compliance with governance standards lead to bank instability? An exploration using Indian data," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 138-180, March.
    11. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.
    12. Saibal Ghosh, 2015. "Trade Credit, Bank Credit and Crisis: Some Empirical Evidence for India?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(4), pages 333-361, November.
    13. Ghosh, Saibal, 2022. "Elections and provisioning behavior: Assessing the Indian evidence," Economic Systems, Elsevier, vol. 46(1).
    14. Ghosh, Saibal, 2021. "How important is trust in driving financial inclusion?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    15. Saibal Ghosh, 2016. "Billionaire Wealth, Firm Performance and Financial Crisis: An Empirical Analysis for India," South Asian Journal of Macroeconomics and Public Finance, , vol. 5(2), pages 133-156, December.
    16. Pallavi Chavan & Leonardo Gambacorta, 2016. "Bank lending and loan quality: the case of India," BIS Working Papers 595, Bank for International Settlements.
    17. Mostak Ahamed, M., 2017. "Asset quality, non-interest income, and bank profitability: Evidence from Indian banks," Economic Modelling, Elsevier, vol. 63(C), pages 1-14.
    18. Ratna Barua & Malabika Roy & Ajitava Raychaudhuri, 2016. "Structure, Conduct and Performance Analysis of Indian Commercial Banks," South Asian Journal of Macroeconomics and Public Finance, , vol. 5(2), pages 157-185, December.
    19. Liu, Tianming & Xiong, Haifang & Li, Yifei & Wang, Zhiqiang, 2023. "The flight to safety during credit recovery: The role of implicit government guarantees," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    20. Ghosh, Saibal, 2017. "Why is it a man’s world, after all? Women on bank boards in India," Economic Systems, Elsevier, vol. 41(1), pages 109-121.
    21. Tzeremes, Nickolaos G., 2015. "Efficiency dynamics in Indian banking: A conditional directional distance approach," European Journal of Operational Research, Elsevier, vol. 240(3), pages 807-818.
    22. Navneet Kaur & Parneet Kaur, 2020. "Ownership structure, size, and interest income substitution by banks: An exploratory study in the Indian context," Australian Economic Papers, Wiley Blackwell, vol. 59(3), pages 279-301, September.
    23. Dibyendu Maiti & Chiranjib Neogi, 2020. "Endogeneity Corrected Stochastic Frontier with Market Imperfections," Working papers 313, Centre for Development Economics, Delhi School of Economics.
    24. Abid, Ammar & Gull, Ammar Ali & Hussain, Nazim & Nguyen, Duc Khuong, 2021. "Risk governance and bank risk-taking behavior: Evidence from Asian banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Banks; State-owned banks; Financial crisis; India;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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