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Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector

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  • Ghosh, Saibal

Abstract

Using data on Indian banks for 1996-2008, the paper examines the interconnect among credit growth, bank soundness and financial fragility. The analysis appears to indicate that higher credit growth amplifies bank fragility. Besides, the results point to the fact that sounder banks increase loan supply. Coming to bank ownership, the evidence testifies that credit growth has been rapid in state-owned and de novo private banks. In terms of policy implications, the analysis appears to suggest the need for giving priority to risk-based supervision as a way to contain the potential risks associated with rapid credit growth

Suggested Citation

  • Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24715
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    5. Hao Thi Kim Do & Nguyet Thi Minh Nguyen & Trung Hai Le, 2017. "Effects of the Credit Boom on the Soundness of Vietnamese Commercial Banks," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(3), pages 57-73, July.
    6. Wang Yunyi, 2019. "The Banking Fragility Index Panorama in China," Proceedings of the 14th International RAIS Conference, August 19-20, 2019 031YW, Research Association for Interdisciplinary Studies.
    7. Onwioduokit, Emmanuel & O'Neill, Harold, 2023. "Bank credit dynamics and its influence on output growth in the Nigerian economy," MPRA Paper 119552, University Library of Munich, Germany.
    8. Pavla Vodová, 2012. "Liquidity of Czech and Slovak commercial banks," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(7), pages 463-476.
    9. Dat T. Nguyen & Tu D. Q. Le & Tin H. Ho, 2021. "Intellectual Capital and Bank Risk in Vietnam—A Quantile Regression Approach," JRFM, MDPI, vol. 14(1), pages 1-15, January.

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    More about this item

    Keywords

    Banking; Credit growth; Z-score; Non-performing loans; India;
    All these keywords.

    JEL classification:

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

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