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Banks Competition, Managerial Efficiency and the Interest Rate Pass-through in India

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  • Jugnu Ansari
  • Ashima Goyal

Abstract

If banks solve an inter-temporal problem under adverse selection and moral hazard, then bank specific factors, regulatory and supervisory features, market structure, and macroeconomic factors affect banks loan interest rates and their spread over deposit interest rates. To examine post financial-reform interest rate pass through for Indian banks after controlling for all these factors, we estimate the determinants of commercial banks loan pricing decisions, using dynamic panel methods. The several factors commercial banks consider, apart from the policy rate, limit policy pass through. More competition reduces policy pass-through but it can improve monetary transmission provided it improves managerial efficiency. [IGIDR - WP-2014-007]

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  • Jugnu Ansari & Ashima Goyal, 2014. "Banks Competition, Managerial Efficiency and the Interest Rate Pass-through in India," Working Papers id:5715, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:5715
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    Cited by:

    1. Shijaku, Gerti, 2016. "Does bank competition affect bank stability after the global financial crisis?," MPRA Paper 79084, University Library of Munich, Germany.
    2. Shijaku, Gerti, 2016. "Does Primary Sovereignty Risk Matter for Bank Fragility? Evidence from Albanian Banking System," MPRA Paper 79097, University Library of Munich, Germany.
    3. Gerti Shijaku, 2017. "How Does Competition Affect Bank Stability After the Global Crises in the Case of the Albanian Banking System?," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(2), pages 175-208.
    4. Bhavish SHARMA, 2020. "Monetary policy and exchange rate pass-through in India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(625), W), pages 275-288, Winter.
    5. Gerti Shijaku, 2018. "Does Primary Sovereignty Risk Matter for Bank Stability? Evidence from the Albanian Banking System," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 16(2), pages 115-145.

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    More about this item

    Keywords

    Banks; panel data; interest rates; net interest income; operating cost;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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