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A Statistical Re-assessment of Capital Adequacy and Insolvency Risk in Commercial Banks of India

In: Current Issues in the Economy and Finance of India

Author

Listed:
  • Nupur Moni Das

    (Assam University)

  • Joyeeta Deb

    (Assam University)

Abstract

This paper is an attempt to empirically explore the association of capital adequacyCapital adequacy and insolvency riskInsolvency Risk of the Indian Commercial Banks, while controlling for various other bank specific and macro-economic factors which also affects the risk level of the banks. To find the inter-relationship of Capital AdequacyCapital adequacy Ratio (CAR) and insolvency riskInsolvency Risk , data of 21 years and 43 banks have been taken into consideration. Simultaneous EquationsSimultaneous equations Model (SEM) is used to examine the association between Risk and Capital AdequacyCapital adequacy Ratio and Two Stage Least Squares (2SLS)Two Stage Least Squares (2SLS) method is being used to estimate the parameters of the Simultaneous EquationsSimultaneous equations Model. The findings reflect that both variables have inverse impact on each other. The other micro and macro-economic variables also have significant impact on risk and capital of the banks.

Suggested Citation

  • Nupur Moni Das & Joyeeta Deb, 2018. "A Statistical Re-assessment of Capital Adequacy and Insolvency Risk in Commercial Banks of India," Springer Proceedings in Business and Economics, in: Aswini Kumar Mishra & Vairam Arunachalam & Debasis Patnaik (ed.), Current Issues in the Economy and Finance of India, chapter 0, pages 105-118, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-99555-7_7
    DOI: 10.1007/978-3-319-99555-7_7
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    References listed on IDEAS

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    Cited by:

    1. J. Navas & P. Dhanavanthan & D. Lazar, 2021. "Is Risk Based Capital Ratio a True Measure of the Soundness of Banks? Evidence From India," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 92-102, May.
    2. Nupur Moni Das & Bhabani Sankar Rout, 2020. "Banks’ capital adequacy ratio: a panacea or placebo," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(3), pages 303-318, September.

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