Credit Growth and Response to Capital Requirements: Evidence from Indian Public Sector Banks
This paper makes an attempt to assess the impact of imposition of uniform capital requirement norm on flow of credit to the business sector by the most important segment of the Indian banking sector, i.e., Indian public sector banks. A simple decomposition analysis of growth in assets portfolio as well as a model based analysis of credit growth for the Indian public sector banks corroborated that (a) in the post reform period, public sector banks did shift their portfolio in a way that reduce their capital requirements and (b) adoption of stricter risk management practice in respect of bank lending in the post reform period and its interplay with minimum capital requirements (regulatory pressure)have had a dampening effect on the overall credit supply.
|Date of creation:||01 Nov 2004|
|Date of revision:|
|Note:||Type of Document - pdf; pages: 8. Published in 'Economic and Political Weekly' August 10, 2002|
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"Did Risk-Based Capital Allocate Bank Credit and Cause a `Credit Crunch' in the U.S.?,"
Center for Financial Institutions Working Papers
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