Slowdown in Bank Credit Growth: Aggregate Demand or Bank Non-performing Assets?

Goyal, Ashima; Verma, Akhilesh K.

doi:10.1177/0973801018768985

Cited by 4 publications

(5 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Banks were in a position to provide credit. The slowdown in bank credit was demand driven, not due to inability to lend as Goyal and Verma (2018) had shown. We now turn to the reasons for out‐performance.…”

Section: Preconceptions and Performancementioning

confidence: 98%

“…The composition of household savings is changing with the share of markets and household financial savings rising. Household gross financial savings were 15.5% of GDP in 2020-2021 compared with 11.8 in 2018-2019(RBI, 2022b.…”

Section: Benchmarking and Balancementioning

confidence: 99%

“…Without re-capitalisation, a major asset quality review undertaken by the Reserve Bank of India (RBI) only magnified a slowdown in credit growth. Criminal investigations of bankers who had sanctioned the loans further slowed credit growth; as did tight monetary-financial conditions and low demand (Goyal & Verma, 2018). Successive half-hearted restructuring attempts failed.Excess liquidity after the demonetization episode of 2016 and a crash in short rates had encouraged nonbank financial companies (NBFCs) to borrow short and lend long.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Lessons from outperformance in the Indian financial sector

Goyal

2023

Global Policy

Self Cite

View full text Add to dashboard Cite

We examine predictions and outcomes for the Indian financial sector in the pandemic period to (i) build a case for re‐examining our understanding of the sector and (ii) improve risk perceptions and policy design. Reasons for outperformance include reforms that led to a better balance between discretion from public sector dominance and the excess volatility of market‐based systems. This diversity, as well as divergence of the Indian credit cycle from the global credit cycle, was protective given the sustained external risks. It put the sector in a position to support the domestic recovery, despite global quantitative tightening. Public sector banks contribute to diversity. Non‐bank financial companies reach the unbanked sectors and improve financial inclusion. Regulatory excesses and absence of liquidity support contributed to persistence of financial stress. Policy lessons are for countries to avoid policy over‐reaction, aim for diversity, different types of exposures, some uniformity in financial sector regulation, with the appropriate balance between discipline and support, in order to reduce risks. There are lessons from India's more broad‐based regulation for the narrow bank‐based regulation in advanced economies, which is increasing global financial fragilities and risks. The share of markets has risen so much there that diversity is falling.

show abstract

Section: Preconceptions and Performancementioning

confidence: 98%

Section: Benchmarking and Balancementioning

confidence: 99%

mentioning

confidence: 99%

See 1 more Smart Citation

Lessons from outperformance in the Indian financial sector

Goyal

2023

Global Policy

Self Cite

View full text Add to dashboard Cite

show abstract

“…Based on the results of panel regression, they conclude that deteriorating asset quality of Indian banks has impaired monetary transmission through the lending channel. Goyal and Verma (2018) use firm and bank‐level panel data up to 2015 to estimate the determinants of NPAs and credit. They try to examine the credit supply (bank lending) channel and the aggregate demand channel as explanations for low credit growth.…”

Section: Review Of Literaturementioning

confidence: 99%

Macro‐economic determinants of non‐performing assets in the Indian banking system: A panel data analysis

et al. 2020

View full text Add to dashboard Cite

Over the last few years, the Indian banking sector has been ceaselessly adding increasingly huge piles of non‐performing assets (NPAs), also known as bad loans, to its balance sheet. As of March 2018, gross NPAs for all scheduled commercial banks (SCBs) stood at over ₹10 trillion, compared to merely 4 years back, that is, March 2014, when they were almost one‐fourth of this. Aimed at tackling the NPA problem, the Insolvency and Bankruptcy Code (IBC) was enacted in 2016 by the Parliament of India, which provides for initiation and quick resolution of bankruptcy proceedings against defaulters. In 2017, the RBI identified 12 Mega‐defaulters which accounted for nearly INR 1.75 trillion of the total NPAs of Indian banks. Targeting the NPA problem at the policy level requires extensive research and analysis in order to come up with effective action plans. This study tries to analyse NPAs of Indian banks using panel data regression models and identify their key determinants. It also examines the relative severity of the NPA problem in case of public banks as compared to private banks.

show abstract

“…In India this remained minuscule. Banks continued to be the dominant source of credit, but the all India commercial bank credit-deposit ratio fell to 70.6 per cent by end-December 2016 compared to 74.5 per cent a quarter earlier (Goyal and Verma 2018 ).…”

mentioning

confidence: 98%

Post Covid-19: recovering and sustaining India’s growth

Goyal

2020

Ind. Econ. Rev.

Self Cite

View full text Add to dashboard Cite

The paper discusses past virtuous growth cycles in India and argues that the post Covid-19 macro-financial package is an opportunity to trigger another such cycle by raising marginal propensities to spend above those to save. This is feasible since the major constraints that aborted such cycles in the past are waning. Among these constraints are commodity price shocks and other supply-side bottlenecks; financial repression and discretionary allocation; and fiscal space. While the first constraint is relieved, and there is adequate progress on the others, fiscal space is still constrained. Even so, the Covid-19 crisis necessitates a large macroeconomic stimulus. In order not to overstrain government finances it should be targeted, temporary and self-limiting. Financing features can aid this as well as improve financial stability. Large government assets can be monetized to help restructure towards more effective government spending. Specific policy implications are drawn out.

show abstract

Slowdown in Bank Credit Growth: Aggregate Demand or Bank Non-performing Assets?

Cited by 4 publications

References 22 publications

Lessons from outperformance in the Indian financial sector

Lessons from outperformance in the Indian financial sector

Macro‐economic determinants of non‐performing assets in the Indian banking system: A panel data analysis

Post Covid-19: recovering and sustaining India’s growth

Contact Info

Product

Resources

About