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Credit Portfolio Assessment of Domestic Systemically Important Banks

Vol. 58, Issue No. 22, 03 Jun, 2023
Richa Verma Bajaj, Sagarika Rastogi, Rhythm Kumar

The credit portfolio of domestic systemically important banks in India from 2009–10 to 2019–20 is examined through an industry-wise analysis. The industry-wise default risk and bank-wise recovery risk estimates reflect on the expected and unexpected losses of D-SIBs. The study attempts to consider the Basel (2006) guidelines for the estimation of correlation, which is derived from asset correlations based on equity returns. The industry-wise analysis is important for lenders in monitoring the volatile industries. The analysis assesses the risk adjusted performance of lending institutions that are systemically important.

COVID-19 and Bank Behaviour

Vol. 57, Issue No. 35, 27 Aug, 2022
Saibal Ghosh

The article analyses the impact of the pandemic on the banking sector in India. Utilising data on Indian banks, it addresses two questions: fi rst, what was the magnitude of the impact on bank lending across ownership? Second, what was the impact on their costs and returns? This article is one of the early exercises to examine the impact on banks’ balance sheets in the Indian context.

Trade Credit and Bank Credit

Vol. 57, Issue No. 31, 30 Jul, 2022
Ramesh Bhat, Samveg Patel

The paper develops an empirical model to test the substitution of trade credit for bank credit using the annual financial data of 1,028 Indian manufacturing firms from 2011 to 2019. It further examines the impact of macroeconomic policy interventions on using these two financing sources.

How Should Banks Estimate Their Expected Loan Loss Provisions to Survive in Difficult Times?

Vol. 57, Issue No. 22, 28 May, 2022
Arindam Bandyopadhyay

This article explains how banks can use their forward-looking internal credit risk estimates and apply on loan cash fl ows over different time horizons and assess the impact on loss provisions. Such an estimate based on longer historical data will enable the banks to better foresee the uncertainty pertaining to repayment status of their loans and make loss provisions in a more proactive manner.

Measurement and Analysis of the Productivity of Indian Banks

Vol. 57, Issue No. 17, 23 Apr, 2022
Dilip Ambarkhane, Ardhendu Shekhar Singh, Bhama Venkataramani

The paper reveals that cash holdings, the “growth rate of assets,” the “incremental gross non-performing assets,” and the “incremental cost of funds” negatively impact the productivity of banks, whereas the net interest margin has a positive impact. The paper also benchmarks major banks in India that can be used as an input in strategic decision-making.

 

The Renewed Fear of Bad Debt

Vol. 57, Issue No. 3, 15 Jan, 2022
C P Chandrasekhar

The evidence of a decline in the non-performing assets ratio in India’s banking system points to a significant improvement in the health of banks. However, this may have occurred partly through the use of write-offs that erode the capital base of banks and also because of the time-bound moratorium on debt repayments announced as part of measures to address the effects of the pandemic on small units and other selected borrowers. In the circumstances, even though new pandemic-linked lending to micro, small and medium enterprises was partly guaranteed by the government, a rise in the NPA ratios and further erosion of bank capital seem inevitable.

 

Bad Bank, Bad Loans and the Indian Banking Mess

Vol. 56, Issue No. 13, 27 Mar, 2021
Nupur Pavan Bang, Vivek Kaul

This article looks into the reasons for the large non-performing assets of the Indian banks, particularly public sector banks, and the various steps taken by the government and the Reserve Bank of India to tackle the issue of bad debts.

Bank Privatisation

Vol. 55, Issue No. 49, 12 Dec, 2020
T T Ram Mohan

There is a buzz in the air about privatisation of some of the public sector banks (PSBs). There has been talk of privatising Industrial Development Bank of India (IDBI Bank) in financial year (FY) 2020–21.

Financial Misconduct, Fear of Prosecution and Bank Lending

Vol. 55, Issue No. 13, 28 Mar, 2020
Abhiman Das, Avijit Bansal, Saibal Ghosh

The issue and relevance of financial misconduct and fear of prosecution on the lending behaviour of Indian banks is investigated by combining bank-level financial and prudential variables during 2008–18 with a unique hand-collected data set on financial misconduct and fear of prosecution. The findings indicate that, in the presence of financial misconduct, state-owned banks typically cut back on credit creation and instead increase their quantum of risk-free investment. In terms of magnitude, a 10% increase in financial misconduct lowers lending by 0.2% along with a roughly commensurate increase in investment. In terms of the channels, it is found that private banks increase provisioning to maintain their credit growth, although the evidence for state-owned banks is less persuasive.

Bad Bank, a Bad Idea

Vol. 52, Issue No. 13, 01 Apr, 2017
Ketan K Shah

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Organisation of Regulatory Functions:A Single Regulator?

Vol. 37, Issue No. 05, 02 Feb, 2002
Nachiket Mor, Rupe Rege Nitsure

Since the beginning of the financial sector reforms in early 1990s, boundaries between products and intermediaries have been blurring rapidly. The entry of several large government-owned as well as non-governmental financial sector participants in a variety of related domains such as securities trading, investment banking, commercial and retail banking, insurance and asset management which are regulated by independent bodies has posed some unique supervisory challenges for the Indian financial system. The paper attempts to argue that such a system of regulation not only artificially fragments the financial markets but also exposes the system to the very real danger of participants behaving as mini-super-regulators as they seek to optimally allocate capital dynamically between these fragmented market

Risk and Productivity Change of Public Sector Banks

Vol. 37, Issue No. 05, 02 Feb, 2002
Abhiman Das

While the relationship between portfolio risk and capital and its interrelationship with operating efficiency has been explored elsewhere, limited evidence has been forthcoming on the interrelationships among capital, non-performing loans and productivity. The paper makes an attempt to examine the same in the Indian context. Using data on public sector banks (PSBs) for the period 1995-96 through 2000-2001, the paper finds capital, risk and productivity change to be intertwined, with each reinforcing and to a degree, complementing the other. The results imply that inadequately capitalised banks have lower productivity and are subject to a higher degree of regulatory pressure than adequately capitalised ones. Finally, the results lend some credence to the belief that lowering government ownership tends to improve productivity.

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