Determinants of net interest margin under regulatory requirements: an econometric study

Ghosh, Saibal; Narain, Aditya and Kannan, R (2001): Determinants of net interest margin under regulatory requirements: an econometric study. Published in: Economic and Political Weekly (January 2001): pp. 337-344.

Abstract

Using data for the period 1995-96 to 1999-2000, this paper seeks to identify the factors influencing spreads of Scheduled Commercial Banks in India. Among the explanatory variables, we incorporate, in addition to the standard set of variables, regulatory requirement variables. Our analysis reveals that (i) size does not necessarily correlate with higher spread, and (ii) higher fee income enables banks to tolerate lower spreads. With regard to regulatory requirement variables, it is found that (i) capital plays an important role in affecting spreads of public sector banks, and (ii) non-performing assets is uniformly important across all bank groups in influencing spreads.

• Item Type: MPRA Paper
• Language: English
• Keywords: Net interest margin; regulatory requirements; banking; India
• Subjects: C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C23 - Models with Panel Data; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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