Interest Rate Modeling and Forecasting in India

The study develops univariate (ARIMA and ARCH/GARCH) and multivariate models (VAR, VECM and Bayesian VAR) to forecast short- and long-term rates, viz., call money rate, 15-91 days Treasury Bill rates and interest rates on Government securities with (residual) maturities of one year, five years and ten years. Multivariate models consider factors such as liquidity, Bank Rate, repo rate, yield spread, inflation, credit, foreign interest rates and forward premium. The study finds that multivariate models generally outperform univariate ones over longer forecast horizons. Overall, the study concludes that the forecasting performance of Bayesian VAR models is satisfactory for most interest rates and their superiority in performance is marked at longer forecast horizons.

Regulating Market Risks in Banks: A Comparison of Alternate Regulatory Regimes

Regulators have traditionally used simple models to measure the capital adequacy of banks. The growing internationalisation and universalisation of banking operations have meant that the same is no longer possible, as banks face increasing, and increasingly opaque, market risk. The significance of market risk has also been acknowledged in the New Capital Accord enunciated by the Basel Committee in 1999. The focus of the paper is on market risk, that is, any market related factor that affects the value of a position in the financial instrument or a portfolio of instruments. As it stands at present, the three commonly used approaches to regulating market risks in banks include the building block approach, internal model approach and precommitment approach. The paper evaluates the pros and cons of the various approaches and concludes with a discussion of the applicability of these models in the Indian context.VaR; banking; India; market risk

Bank response to capital requirements: Theory and Indian evidence

The paper discusses the theory of how banks' respond to risk-based capital standards and conducts an empirical estimation to ascertain the response of banks to capital requirements in the Indian contextcapital; banking; India

Capital Adequacy Requirements and the Behaviour of Commercial Banks in India: an Analytical and Empirical Study

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Regulating Market Risks in Banks: A Comparison of Alternate Regulatory Regimes

Regulators have traditionally used simple models to measure the capital adequacy of banks. The growing internationalisation and universalisation of banking operations have meant that the same is no longer possible, as banks face increasing, and increasingly opaque, market risk. The significance of market risk has also been acknowledged in the New Capital Accord enunciated by the Basel Committee in 1999. The focus of the paper is on market risk, that is, any market related factor that affects the value of a position in the financial instrument or a portfolio of instruments. As it stands at present, the three commonly used approaches to regulating market risks in banks include the building block approach, internal model approach and precommitment approach. The paper evaluates the pros and cons of the various approaches and concludes with a discussion of the applicability of these models in the Indian context

Regulating Market Risks in Banks: A Comparison of Alternate Regulatory Regimes

Regulators have traditionally used simple models to measure the capital adequacy of banks. The growing internationalisation and universalisation of banking operations have meant that the same is no longer possible, as banks face increasing, and increasingly opaque, market risk. The significance of market risk has also been acknowledged in the New Capital Accord enunciated by the Basel Committee in 1999. The focus of the paper is on market risk, that is, any market related factor that affects the value of a position in the financial instrument or a portfolio of instruments. As it stands at present, the three commonly used approaches to regulating market risks in banks include the building block approach, internal model approach and precommitment approach. The paper evaluates the pros and cons of the various approaches and concludes with a discussion of the applicability of these models in the Indian context

Bank response to capital requirements: Theory and Indian evidence

The paper discusses the theory of how banks' respond to risk-based capital standards and conducts an empirical estimation to ascertain the response of banks to capital requirements in the Indian contex

Bank response to capital requirements: Theory and Indian evidence

The paper discusses the theory of how banks' respond to risk-based capital standards and conducts an empirical estimation to ascertain the response of banks to capital requirements in the Indian contex

SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC DOI: 10.1177/0973801013519998 Financial Intermediation and Growth: Bank-Based versus Market-Based Systems

The article empirically evaluates the role of financial intermediation in India’s economic development. An assessment of various indicators of financial development reveals that both the bank-based and market-based intermediation processes have undergone remark-able improvements in the last six decades. While credit disbursement by Indian banks has increased sharply in the past decades, it is still below the world average level and even below the level of its emerging market and developing economies (EDEs) peers. However, in recent years, the market capitalisation of the Indian stock market has increased indi-cating greater reliance on market-based sources of funding. One-way Granger causality from private sector credit to real GDP confirms the supply-leading process of bank inter-mediation, while no causality was found between stock market capitalisation and real GDP. The ARDL co-integration test suggests that both the bank-based and market-based financial deepening have positive roles in driving India’s economic development, while the former has a stronger role in driving India’s economic growth. The findings indicate that in a relatively bank-centric financial sector, Indian banks have the potential of further channelisation of credit to productive sectors of the economy