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The Global Financial Crisis and Indian Banks: Survival of the Fittest?

  • Eichengreen, Barry

    ()

    (University of California)

  • Gupta, Poonam

    ()

    (National Institute of Public Finance and Policy)

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 a 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 the banks with more stable funding, the reallocation of deposits toward the State Bank of India in particular cannot be explained by these factors alone. Nor can it be explained by the impact of explicit capital injections by the government into some public-sector banks. Rather it appears that the implicit guarantee of the liabilities of the country's largest public bank dominated other considerations.

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File URL: http://www.nipfp.org.in/newweb/sites/default/files/WP_2012_113.pdf
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Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 12/113.

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Length: 28
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:npf:wpaper:12/113
Note: Working Paper 113, 2012
Contact details of provider: Web page: http://www.nipfp.org.in

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  1. Poonam Gupta & Kalpana Kochhar & Sanjaya Panth, 2011. "Bank Ownership and the Effects of Financial Liberalization; Evidence From India," IMF Working Papers 11/50, International Monetary Fund.
  2. Chava, Sudheer & Purnanandam, Amiyatosh, 2011. "The effect of banking crisis on bank-dependent borrowers," Journal of Financial Economics, Elsevier, vol. 99(1), pages 116-135, January.
  3. Coleman, Nicholas & Feler, Leo, 2014. "Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis," International Finance Discussion Papers 1099, Board of Governors of the Federal Reserve System (U.S.).
  4. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
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