RAROC & EVA :The New Drivers of Business Growth in Indian Banks

Through RAROC and EVA tools, Banks can establish a good risk management culture that can create competitive advantage and improve shareholder valueRAROC; EVA; Integrated Risk Management, Banking

Factors Driving Demand and Default Risk in Residential Housing Loans: Indian Evidence

This paper empirically examines the functional role of various micro and macro economic as well as situational factors that determine residential housing demand and risk of borrower default. Using 13,487 housing loan account sanctioned from 1993-2007) data from Housing Finance Institutions (HFIs) in India, we investigate the crucial factors that drive demand for housing and its correlation with borrower characteristics. Next, we examine housing loan defaults and the major causative factors of the same. Our empirical results suggest that borrower defaults on housing loan payments is mainly driven by change in market value of the property vis-à-vis the loan amount and EMI to income ratio. A 10 percent decrease in the market value of the property vis-à-vis the loan amount raises the odds of default by 1.55 percent. Similarly, a 10 percent increase in EMI to income ratio raises the delinquency chance by 4.50 percent. However, one cannot ignore borrower characteristicslike marital status, employment situation, regional locations, city locations, age profile and house preference which otherwise may inhibit lender to properly assess credit risk in home loan business as our results show that these parameters also act as default triggers.Housing Demand, Risk Management, Financial Institutions and Banks

Evaluation Of Performance Of Malaysian Banks In Risk Adjusted Return On Capital (Raroc) And Economic Value Added (Eva) Framework

As Malaysian banks step into Basel-III era, a close look at their performance on risk adjusted basis using RAROC and EVA would throw significant light on their relative strengths and weaknesses. Post restructuring during 1999–2000, the regulatory framework of Bank Negara Malaysia (BNM) throughout 2001–2010 was mainly centered on capitalisation, risk management and governance practices in banks. Financial Sector Blue Print is viewed as the reference framework for growth of banks in the current decade. Though numerous studies have evaluated the performances of Malaysian banks in terms of efficiency and productivity gains before and after the merger and also at various phases during the last decade, no study has so far been reported to evaluate their performances using the above framework. This paper intends to fill up this gap. The period covered is 2001 to 2013. Findings of this paper would be of keen interest to the policy planners, investors and researchers alike

Deciphering drivers of efficiency of bank branches: Malaysian reality

Measuring and bench marking efficiency of bank branches has always been one of the key areas of concern of the top management of banks.It has also been on the research agenda of many scholars across many countries who have published their work in various academic journals.In Malaysia, a country which is one of key emerging nations in south-east Asia, there are many studies which dealt with measuring efficiency and productivity of banks using various operational research techniques including non-parametric Data Envelopment Analysis (DEA) technique.However, so far there is no published work which addressed the efficiency drivers at the branch level.Present paper aims to fill-in this gap in the literature. A two-stage approach has been adopted in analyzing the financial performance of 247 branches in 2014 spread over 14 states of the country of a large commercial banking group in Malaysia. In the first stage of analysis, the study has adopted DEA technique input oriented variable returns to scale formulation to estimate the technical efficiency of these branches.Four input parameters viz., Interest Expense, Personnel Expenses, Establishment expenses and Other Operating Expense have been used as input parameters and Total Deposit, Total Loan, Amount of Wealth Management Business, Interest Income and Non-Interest Income have been used as output parameters.These parameters are reflective of the Inter mediation and Profit efficiency of the branches.In view of potential bias in the estimation process, the efficiency scores obtained in Stage-1 of the analysis were bootstrap corrected using the formulation of Bogetoft & Otto before they were used as dependent variable in Stage-2 of the analysis where Tobit Regression was carried-out to decipher the drivers of efficiency of bank branches.Four possible driver variables like log of total business (to assess the effect of ‘size’ on efficiency), log of Current and Savings account deposit (CASA) to Total deposits (to assess the impact of deposit mix on efficiency), log of Deposit per employee, log of Loans per employee and Income per employee (to assess the impact of Productivity of manpower on efficiency), Business per transaction (to assess the impact of Transaction efficiency) have been used in the Tobit regression.In addition, two environmental dummies viz., Per Capita State Gross Domestic Product and the level of Competition in garnering business in each state (measured in terms of percentage of branches in each state of the country) to reflect the impact of spatial parameters as possible drivers of efficiency have been used at this stage of the analysis.Results suggest that deposit per employee is significant(at 1%) driver of efficiency of branches; size has a negative effect (significant at 5%) in determining branch efficiency probably reflecting of the aim of the Bank to focus more on revenue growth at the aggregate level rather than cost efficiency at the branch level. Other significant ( at 10%) drivers of branch efficiency are CASA to total deposits and Business per transaction with CASA playing dominant driver amongst all the drivers of efficiency of branches of the bank.Loan per employee was not found to be significant probably due to the fact that branches do not have power to sanction loan. Per capita GDP was found to be positive driver of efficiency; the effect however, is more dominant in branches which are located in states in top 25th percentile GDP per capita.Similarly, competition was found to be positive driver of efficiency in branches located States in top25th and 50th to 75th percentile in terms of branch concentration.The results reported in the study would not only be of key interest of the top management of banks but also to Bank Negara Malaysia, the central bank of the country which is keenly fostering efficiency in the Malaysian banking arena ever since it carried out the merger and consolidation in the financial services sector in 2000. The results would also attract the attention of future researchers in the arena of Malaysian banking

RAROC & EVA :The New Drivers of Business Growth in Indian Banks

Through RAROC and EVA tools, Banks can establish a good risk management culture that can create competitive advantage and improve shareholder valu

Assessment of Economic Capital: An Equity Market approach

Assessment of individual bank’s need for economic capital will enable them to understand their actual solvency position for internal management of capital and evaluating the larger strategic issues like expanding or contracting its risk appetite to generate returns. This paper is an attempt to empirically demonstrate the process of estimating bank's mark to market measure of economic capital on an integrated basis. Such measure will help the bank as well as the regulator to understand the bank's solvency position on a regular basis. The top down approach followed in this paper will also assist the bank to measure Risk Adjusted Return on its entire business and examine its economic value addition on an integrated basis

Assessment of Economic Capital: An Equity Market approach

Assessment of individual bank’s need for economic capital will enable them to understand their actual solvency position for internal management of capital and evaluating the larger strategic issues like expanding or contracting its risk appetite to generate returns. This paper is an attempt to empirically demonstrate the process of estimating bank's mark to market measure of economic capital on an integrated basis. Such measure will help the bank as well as the regulator to understand the bank's solvency position on a regular basis. The top down approach followed in this paper will also assist the bank to measure Risk Adjusted Return on its entire business and examine its economic value addition on an integrated basis

Factors Driving Demand and Default Risk in Residential Housing Loans: Indian Evidence

This paper empirically examines the functional role of various micro and macro economic as well as situational factors that determine residential housing demand and risk of borrower default. Using 13,487 housing loan account sanctioned from 1993-2007) data from Housing Finance Institutions (HFIs) in India, we investigate the crucial factors that drive demand for housing and its correlation with borrower characteristics. Next, we examine housing loan defaults and the major causative factors of the same. Our empirical results suggest that borrower defaults on housing loan payments is mainly driven by change in market value of the property vis-à-vis the loan amount and EMI to income ratio. A 10 percent decrease in the market value of the property vis-à-vis the loan amount raises the odds of default by 1.55 percent. Similarly, a 10 percent increase in EMI to income ratio raises the delinquency chance by 4.50 percent. However, one cannot ignore borrower characteristicslike marital status, employment situation, regional locations, city locations, age profile and house preference which otherwise may inhibit lender to properly assess credit risk in home loan business as our results show that these parameters also act as default triggers

Factors Driving Demand and Default Risk in Residential Housing Loans: Indian Evidence

This paper empirically examines the functional role of various micro and macro economic as well as situational factors that determine residential housing demand and risk of borrower default. Using 13,487 housing loan account sanctioned from 1993-2007) data from Housing Finance Institutions (HFIs) in India, we investigate the crucial factors that drive demand for housing and its correlation with borrower characteristics. Next, we examine housing loan defaults and the major causative factors of the same. Our empirical results suggest that borrower defaults on housing loan payments is mainly driven by change in market value of the property vis-à-vis the loan amount and EMI to income ratio. A 10 percent decrease in the market value of the property vis-à-vis the loan amount raises the odds of default by 1.55 percent. Similarly, a 10 percent increase in EMI to income ratio raises the delinquency chance by 4.50 percent. However, one cannot ignore borrower characteristicslike marital status, employment situation, regional locations, city locations, age profile and house preference which otherwise may inhibit lender to properly assess credit risk in home loan business as our results show that these parameters also act as default triggers

Aggressive salivary duct carcinoma with widespread dissemination: a case report

Salivary duct carcinoma is a rare and aggressive salivary gland malignancy with a poor prognosis. Due to the paucity of literature, very little is known about this neoplasm. We have described such a case in this case report and highlighted the clinical and histopathological features associated with this disease. A sixty-year old male patient reported in the outpatient department of a regional dental college and hospital with a circular firm growth in the mandibular anterior region and mobility of adjacent mandibular teeth. An array of investigations including radiographic, tomographic, ultrasonographic as well as histopathological were performed. It was diagnosed as invasive salivary duct carcinoma with distant metastases in the shoulder joint, ribs as well as pelvic bones. Currently, no National Comprehensive Cancer Network guidelines for the specific treatment of salivary duct carcinomas exist. National Comprehensive Cancer Network guidelines recommend complete surgical excision of tumors for major salivary gland tumors without nodal involvement (N0) with or without neck dissection for high-grade and T3/T4 salivary gland tumors.