ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By Commercial Banks

Does Competition Increase Bank Risk in India?

Using a sample of commercial banks in India, we examine the effect of competition on bank risk and then assess whether this effect is influenced by equity capital ratio and deposit share. Two main results emerge. First, greater competition increases insolvency risk, earnings volatility, net non-performing loan ratio, and gross non-performing loan ratio. However, competition does not affect total return risk, systematic risk, or unsystematic risk. Second, greater equity capital ratio reduces the effect of competition on insolvency risk, while greater deposit share increases it.

Formal Financial Outreach in Rural India

The conventional wisdom is that opening up new branches is the best way to extend outreach of the formal financial sector to rural areas. Using a survey data set, this paper challenges the conventional view by concluding that relatively resource-rich rural households from distant locations availed multiple loans from formal lenders rather than the households located closer to them as often believed.

Theoretical Analysis of ‘Demonetisation’

With the aid of simple theoretical tools used in classroom lectures, the implications of the recent “demonetisation” exercise in India are analysed. It lends support to conclusions reached by other authors on the impact of demonetisation with the aid of available data. Following Robert Lucas’s Nobel lecture, the merits of economic policies that assume the form of random shocks to an economic system are questioned.