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Does economic policy uncertainty affect banks’ non-interest income in India?

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  • Muthu Shanmugam

    (Thiagarajar College)

Abstract

This paper examines how economic policy uncertainty (EPU) affects the banks’ non-interest income for a sample of 61 scheduled commercial banks in India for the period from 2004–2005 to 2019–2020. Using a dynamic Generalized Method of Moment (GMM) approach, we find that EPU has a positive effect on the banks’ non-interest income. The findings regarding the positive association between economic policy uncertainty and non-interest income are robust for the alternative measure of bank diversification. The results show that the banks’ Mergers and Acquisitions have no effect on the shift away from interest earning activities and toward non-interest earning activities. Our results also show that bank size has no significant effect on their non-interest income.

Suggested Citation

  • Muthu Shanmugam, 2023. "Does economic policy uncertainty affect banks’ non-interest income in India?," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(2), pages 261-276, December.
    • Handle: RePEc:spr:jsecdv:v:25:y:2023:i:2:d:10.1007_s40847-023-00246-z
    DOI: 10.1007/s40847-023-00246-z
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    More about this item

    Keywords

    Economic policy uncertainty; Non-interest income; System GMM;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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