Das, Abhiman and Ghosh, Saibal (2007): Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation. Published in: Economic Issues , Vol. 12, No. 2 (September 2007): pp. 48-66.
Download (207kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation|
|Keywords:||credit risk; banking; state-owned banks; India|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages|
|Depositing User:||Saibal Ghosh|
|Date Deposited:||16. Sep 2009 14:09|
|Last Modified:||12. Feb 2013 08:11|
Aghion, P., P.Howitt and D.Mayer-Foulkes (2005): The effect of financial development on convergence: theory and evidence, Quarterly Journal of Economics, 120, 173-222.
Altman, E. and A.Saunders (1999): Credit risk measurement: developments over the last 29 years, Journal of Banking and Finance, 21, 1721-1742.
Arellano, M and S.Bond (1991): Some tests of specification for panel data: monte carlo evidence and an application to employment equation, Review of Economic Studies, 58, 277-297.
Baltagi, B. (2001): Econometrics of panel data, John Wiley and Sons: UK.
Berger, A.N. and G.Udell (2004). The institutional memory hypothesis and the procyclicality of bank lending behavior, Journal of Financial Intermediation, 13 (Special Issue), 458-95.
Berger, A.N. and R.DeYoung (1997): Problem loans and cost efficiency in commercial banks, Journal of Banking and Finance, 21, 849-870.
Caprio, G., I.Atiyas and J.A.Hanson (1994): Financial reform: theory and experience, Cambridge: Cambridge University Press.
Demirguc-Kunt, A., E.Detragiache and P.Gupta (2000): inside the crisis: an empirical analysis of banking systems in distress, IMF Working Paper No.156, Washington D.C.
Dewartipont, M and J.Tirole (1994): The prudential regulation of banks, Massachusetts: MIT Press.
Gabriel, J., V.Salas & J.Saurina (2006): Determinants of collateral, Journal of Financial Economics, 81, 255-81.
Gonzalez-Hermosillo, B., C.Pazarbasioglu and R.Billings (1997): Determinants of banking system fragility: a case study of Mexico. IMF Staff Papers 3, 42-66.
Government of India (1991): Report of the committee on the financial system (Chairman: Shri M.Narasimham), New Delhi.
Hawkins, J and P.Turner (1999): Bank restructuring in practice: an overview, BIS Policy Paper No.6, Basel.
Himmelberg, C., R.Hubbard and D.Palia (1999): Understanding the determinants of managerial ownership and the link between ownership and performance, Journal of Financial Economics, 53, 353-384.
Holmstrom, B and J.Tirole (2000): Liquidity and risk management, Journal of Money, Credit and Banking, 32, 295-319.
Honohan, P. (1997): Banking system failures in developing and transition countries: diagnosis and prediction, BIS Working Paper No 39, Bank for International Settlements: Basel.
Jalan, B. (2001): Banking and finance in the new millennium, Speech Delivered at the 22nd Bank Economists’ Conference, New Delhi.
Jimenez, G and J.Saurina (2006). Credit cycles, credit risk and prudential regulation, International Journal of Central Banking, 2, 65-98.
King, R and R.Levine (1993): Finance and growth: Schumpeter might be right, Quarterly Journal of Economics, 108, 717-738.
Kwan, S and R.Eisenbis (1997): Bank Risk, capitalisation and operating efficiency, Journal of Financial Services Research, 12, 117-131.
Levine, R (2003): More on finance and growth: more finance, more growth, Federal Reserve Bank of St.Louis, July/August, 31-46.
Ghatak, S. (1981): Monetary Economics in developing countries, New York: St.Martin’s Press.
Fry, M.J. (1988): Money, interest and banking in economic development, Baltimore: Johns Hopkins University Press.
Levine, R., N.Loayza and T.Beck (2000): Financial intermediation and growth: causality and causes, Journal of Monetary Economics, 46, 31-77.
Petersen, M.A. and R.G.Rajan (1994): The benefits of lending relationships: evidence from small business data, Quarterly Journal of Economics, 69, 407-443.
Rajan, R.G. (1994): Why banks credit policies fluctuate? A theory and some evidence, Quarterly Journal of Economics, 109, 399-441.
Rajaraman, I., S.Bhaumik and N.Bhatia (1999): NPA variations across Indian commercial banks: some findings, Economic and Political Weekly, 34, 16-23.
Reserve Bank of India (2001): Report on trend and progress of banking in India, RBI: Mumbai.
Reserve Bank of India (2002): Draft of the directions proposed to be issued to securitisation companies/reconstruction companies in the matter of asset reconstruction and matters related thereto, RBI: Mumbai.
Reserve Bank of India: Annual report (various years), RBI: Mumbai.
Reserve Bank of India: Report on trend and progress of banking in India (various years), RBI: Mumbai.
Reserve Bank of India: Statistical tables relating to banks in India (various years), RBI: Mumbai.
Salas, V and J.Saurina (2002): Credit risk in two institutional regimes: Spanish commercial and savings banks, Journal of Financial Services Research, 22, 203-224.
Santomero, A.M. (1997): commercial bank risk management: an analysis of the process, Journal of Financial Services Research, 2/3, 83-115.
Williamson, O. (1963): Managerial discretion and business behaviour, American Economic Review, 53, 1032-57.