Bank Competition and its Determinants: Evidence from Indian Banking

Rakshit, Bijoy; Bardhan, Samaresh

doi:10.1080/13571516.2019.1592995

Cited by 36 publications

(46 citation statements)

References 67 publications

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“…There was a trend reversal in 2012, and a decline in market power was observed. Our results are parallel to the study conducted by Rakshit and Bardhan (2019), which also observed a similar trend.…”

Section: Data Source and Methodologysupporting

confidence: 92%

Interrelationship Among Competition, Diversification and Liquidity Creation: Evidence from Indian Banks

Sinha

Grover

2021

Margin: The Journal of Applied Economic Research

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This study analyses the impact of competition on liquidity creation by banks and investigates the dynamics between diversification, liquidity creation and competition for banks operating in India during the period from 2005 to 2018. Using the broad and narrow measures of liquidity creation, an inverse relationship is determined between liquidity creation and competition. The study also indicates a trade-off between pro-competitive policies to improve consumer welfare and the liquidity-destroying effects of competition, and it highlights how diversification affects liquidity creation. Highly diversified banks in India create less liquidity compared with less-diversified banks, both public and private. The liquidity-destroying effects of competition is intensified among highly diversified private banks, which suggest that diversification has not moderated the adverse impact of competition. JEL Codes: G01, G18, G21, G28

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Section: Data Source and Methodologysupporting

confidence: 92%

Interrelationship Among Competition, Diversification and Liquidity Creation: Evidence from Indian Banks

Sinha

Grover

2021

Margin: The Journal of Applied Economic Research

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“…Currently, RBI's Financial Stability Report (2017) also acknowledged that Indian banking system has been facing risk in the post-recession period and the risk turns out to be higher in case of accumulating non-performing assets (NPAs). Prasad and Ghosh (2007) and Rakshit and Bardhan (2019) examine the competitiveness of Indian banking and assert that the banking system in India is characterized by competition conditions, and the degree of competition has been increasing since the financial sector deregulations Increased competition and deregulation measures have raised concerns about its implications for ensuring financial stability (Sarkar and Sensarma, 2016). In this regard, an important question arises, whether should the issue of competition be pursued as a goal for financial stability?…”

Section: Bank Competition and Financial Stability In Indiamentioning

confidence: 99%

“…Besides, the banking system in India, over the years, has also experienced the process of consolidation following the wave of mergers and acquisition (M&Q). The process of M&A post 1998s has made the banking system in India (Rakshit and Bardhan, 2019). Given the instances of competition and concentration, this study attempts to first assess the competitive conduct of Indian commercial banks over the last two decades and raises concerns about its implications for banking stability.…”

Section: Introductionmentioning

confidence: 99%

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Rakshit

Bardhan

2020

Journal of Central Banking Theory and Practice

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The primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to examine whether an increase in bank competition hindrances financial stability of commercial banks in India over the period 1996 to 2016. Findings reveal that in India, a higher degree of bank competition is positively associated with the prevalence of non-performing loans. Additionally, the positive impact of the Lerner index on Z-score lends support to competition-fragility hypothesis. However, we argue that both the views of competition-stability and competition-fragility can coexist in a single banking system like India.

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“…Hauner and Peiris (2005) too find that the level of competition has increased significantly in the banking system of Uganda and has been associated with a rise in efficiency. Many subsequent studies (Prasad and Ghosh (2005); Fu (2009) applied this approach in the context of developing countries.…”

Section: Empirical Background and The Conceptualizationmentioning

confidence: 99%

“…However, these results are consistent with previous studies. This is because, for most of the countries, price of labour and price of funds are most powerful variables affecting bank revenue (see Bikker et al 2006, Prasad andGhosh, 2005), but not the capital prices. None of the bank specific control variables included in the model was strong enough in explaining banks' revenue and thus contributing to H statistics.…”

Section: Measuring Competitionmentioning

confidence: 99%

Examining the competitiveness of banking sector in Sri Lanka

Liyanagamage

2021

IJRBS

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The banking sector in Sri Lanka has been portrayed by significant changes in the past few decades. It is widely perceived that competition in the Sri Lankan banking sector has improved since the introduction of the financial sector reforms in the 1990s. By applying Panzar-Rosse (PR) approach to test the degree of competitiveness, this paper assesses the validity of this claim in the context of the Sri Lankan banking sector during 1996-2018. The sample covers a broader set of bank-level panel data of the whole commercial banking sector which comprised of 25 licensed commercial banks. The EGLS procedure applied in this study revealed that during the stated period, the Sri Lankan banking sector had been moderately competitive. Further analysis also disclosed that there is no significant difference between the state-owned banks and private banks regarding their degree of competitiveness, as well as their temporal dynamics. Another striking observation revealed in this analysis is the lower level of competitiveness among foreign banks compared to the competitiveness of local banks. The Competitiveness of the Sri Lankan banking sector however is characterized by non-price competition, as on many occasions the interest rate depends on government policies. Hence, this study provides new insight into the nature of financial sector competitiveness in underdeveloped countries. The outcome of the research implies the necessity of attempts of all banks towards re-aligning their strategies to attract and retain customers. This would be the major challenge that banks face in accomplishing a higher level of competition in the banking industry in the future.

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Bank Competition and its Determinants: Evidence from Indian Banking

Cited by 36 publications

References 67 publications

Interrelationship Among Competition, Diversification and Liquidity Creation: Evidence from Indian Banks

Interrelationship Among Competition, Diversification and Liquidity Creation: Evidence from Indian Banks

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Examining the competitiveness of banking sector in Sri Lanka

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