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Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation

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  • Das, Abhiman
  • Ghosh, Saibal

Abstract

The determinants of credit risk of banks in emerging economies have received limited attention in the literature. Using advanced panel data techniques, the paper seeks to examine the factors affecting problem loans of Indian state-owned banks for the period 1994-2005, taking into account both macroeconomic factors as well as microeconomic variables. The findings reveal that at the macro level, GDP growth and at the bank level, real loan growth, operating expenses and bank size play an important role in influencing problem loans. The study performs certain robustness tests of the results and discusses several policy implications of the analysis.

Suggested Citation

  • Das, Abhiman & Ghosh, Saibal, 2007. "Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation," MPRA Paper 17301, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17301
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    References listed on IDEAS

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    Cited by:

    1. Louhichi, Awatef & Boujelbene, Younes, 2016. "Credit risk, managerial behaviour and macroeconomic equilibrium within dual banking systems: Interest-free vs. interest-based banking industries," Research in International Business and Finance, Elsevier, vol. 38(C), pages 104-121.
    2. Ekanayake E.M.N.N & Azeez A.A., 2015. "Determinants of Non-Performing Loans in Licensed Commercial Banks: Evidence from Sri Lanka," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(6), pages 868-882, June.
    3. Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
    4. Ghosh, Saibal, 2013. "Macroprudential regulation and bank performance:Does ownership matter?," MPRA Paper 65212, University Library of Munich, Germany.
    5. repec:abd:kauiea:v:28:y:2015:i:1:no:2:p:21-54 is not listed on IDEAS
    6. Erol Muzir, 2013. "Impact of Placement Choices and Governance Issues on Credit Risk in Banking: Nonparametric Evidence from an Emerging Market," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(4), pages 1-6, August.
    7. Sengupta, Rajeswari & Vardhan, Harsh, 2017. "Non-performing assets in Indian Banks: This time it is different," MPRA Paper 81403, University Library of Munich, Germany, revised 16 Sep 2017.
    8. Pallavi Chavan & Leonardo Gambacorta, 2016. "Bank lending and loan quality: the case of India," BIS Working Papers 595, Bank for International Settlements.
    9. repec:hrs:journl:v:x:y:2018:i:2:p:121-133 is not listed on IDEAS
    10. Biswajit PATRA & Puja PADHI, 2016. "Determinants of nonperforming assets-bank-specific and macroeconomic factors: A panel data analysis of different group of commercial banks operating in India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 215-236, Winter.
    11. Maxwell Sandada & Agness Kanhukamwe, 2016. "The study sought to analyse the factors that lead to rising credit risk in the Zimbabwean banking sector," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(1), pages 80-94, February.
    12. Ashima Goyal & Akhilesh Verma, 2018. "Slowdown in Bank Credit Growth: Aggregate Demand or Bank Non-performing Assets?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 257-275, August.
    13. Ali, Ashraf & M. Kabir, Hassan & Syed Abul, Basher, 2015. "Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks," MPRA Paper 61687, University Library of Munich, Germany.
    14. Iulia Andreea Bucur & Simona Elena Dragomirescu, 2014. "The Influence Of Macroeconomic Conditions On Credit Risk: Case Of Romanian Banking System," Studies and Scientific Researches. Economics Edition, "Vasile Alecsandri" University of Bacau, Faculty of Economic Sciences, issue 19.
    15. Biswajit PATRA & Puja PADHI, 2016. "Determinants of nonperforming assets-bank-specific and macroeconomic factors: A panel data analysis of different group of commercial banks operating in India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 215-236, Winter.
    16. Ghosh, Saibal, 2013. "Macroprudential Regulation and Bank Performance: Evidence from India," MPRA Paper 51226, University Library of Munich, Germany.
    17. Yong Tan & Christos Floros, 2013. "Market power, stability and performance in the Chinese banking industry," Economic Issues Journal Articles, Economic Issues, vol. 18(2), pages 65-90, September.

    More about this item

    Keywords

    credit risk; banking; state-owned banks; India;

    JEL classification:

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

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