An empirical analysis of the off-balance sheet activities of Indian banks

The paper traces the determinants of off-balance sheet activities in the Indian banking sector. Using data for the period 1996 to 2004, the paper finds that, not only regulatory factors, but also market forces, captured by banks-specific characteristics and macroeconomic conditions are at work in the diffusion pattern of OBS activities. From the regulatory standpoint, while capital adequacy is dominant in case of public sector banks, non-performing assets seem to a prime concern for foreign banks, in addition to the public sector banks. Among others, at the bank-specific level, size is an important consideration for public sector and foreign banks, while profits are a prime mover only for new private banks. Finally, the macroeconomic environment seems to have played an important role in affecting OBS diffusion, more so for public sector and new private banks.Off-balance sheet; regulatory pressure; interest spread; banking; India

Credit rating and bank behavior in India: Possible implications of the new Basel accord

The paper examines the impact of credit rating on capital adequacy ratios of Indian state-owned banks using quarterly data for the period 1997:1 to 2002:4. To this end, a multinomial logit model with multi credit rating indicators as dependent variable is estimated. The variables that can impinge upon capital adequacy ratio have been used as explanatory variables. Two separate models — one for long-term credit rating and another for short-term credit rating—have been estimated. The paper concludes that, both for short-term as well as for long-term ratings, capital adequacy ratios are an important factor impinging on credit rating of Indian state-owned banks.banknig; capital adequacy; credit rating; multinomial logit model; India

Off-balance sheet activities in banking: Theory and Indian experience

The paper examines the OBS activities of Indian banks, highlighting, in particular, thier growth, diversification and the factors leading to thier increased usageoff-balance sheet; banking; India

The Vanishing Role of Money in the Macroeconomy - An Empirical Investigation Based On Spectral and Wavelet Analysis

The recent de-emphasizing of the role of money in both theoretical macroeconomics as well as in the practical conduct of monetary policy sits uneasily with the idea that inflation is a monetary phenomenon. Empirical evidence has, however, been accumulating, pointing to an important leading indicator role for money and credit aggregates with respect to long term inflationary trends. Such a role could arise from monetary aggregates furnishing a nominal anchor for inflationary expectations, from their influence on the term structure of interest rates and from their affecting transactions costs in markets. Our paper attempts to assess the informational content role of money in the Indian economy by a separation of these effects across time scales and frequency bands, using the techniques of wavelet analysis and band spectral analysis respectively. Our results indicate variability of causal relations across frequency ranges and time scales, as also occasional causal reversals.Money, inflation, Cointegration, Causality, Decomposition, band spectra, wavelets

The new Basel capital accord: Rationale, design and tentative implications for India

The article surveys the literature pertaining to the Basel II and concludes with the concerns germane to India in this regardBasel II; capital adequacy; pro-cyclicality; banking; India

The New Basel Capital Accord: A Primer with an Indian Focus

The article examines the pros and cons of the implementation of Basel II in India and contextually, conducts an empirical exercise to examine the impact of capital requirements on the Indian banking systemBasel accord; banknig; India

Banking in India

The article traces the development of banking in India since independence and raises certain issues relevant to the sector at the present juncturebanking; India

Does monetary policy have differential state-level effects? an empirical evaluation

The paper examines whether monetary policy has similar effects across major states in the Indian polity. Impulse response functions from an estimated Structural Vector Auto Regression (SVAR) reveal two sets of states: a core of states that respond to monetary policy in a significant fashion vis-à-vis others whose response is less significant. The paper attempts to trace the reasons for the differential response of these two sets of states in terms of financial deepening and differential industry mix.monetary policy; regional effect; optimum currency area

Bank nominee directors and corporate performance: micro evidence for India

Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank nominee directors on boards and secondly, whether companies, with bank nominee directors exhibit better performance/governance than companies with no banker representation on their boards. A Probit model estimated over a cross-section of Indian manufacturing firms for 2003, indicates that bankers on boards seem to exert a healthy impact on the companies. In fact, large public limited companies are likely to exhibit banker representation, primarily in their role as expertise providers. The evidence from Tobit model reconfirms these results.Banker; corporate governance; debt equity ratio

Bank nominee directors and corporate performance: micro evidence for India

Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank nominee directors on boards and secondly, whether companies, with bank nominee directors exhibit better performance/governance than companies with no banker representation on their boards. A Probit model estimated over a cross-section of Indian manufacturing firms for 2003, indicates that bankers on boards seem to exert a healthy impact on the companies. In fact, large public limited companies are likely to exhibit banker representation, primarily in their role as expertise providers. The evidence from Tobit model reconfirms these results.Banker; corporate governance; debt equity ratio