Productive Efficiency and Non-performing Assets of Indian Banks in the Post-global Financial Crisis Period

2021 ◽  
Vol 22 (2) ◽  
pp. 186-204
Author(s):  
Karan Singh Khati ◽  
Deep Mukherjee
Keyword(s):  
Global Financial Crisis ◽  
Physical Capital ◽  
Productive Efficiency ◽  
Productive Performance ◽  
Undesirable Output ◽  
Public Sector Banks ◽  
Private Banks ◽  
Distance Model ◽  
Domestic Banks ◽  
Indian Banks

This study endeavours to augment the existing literature on the productive efficiency of Indian domestic banks in the presence of non-performing assets (NPAs), by employing the Weighted Russell Directional Distance Model (WRDDM). Following the intermediation approach, the banking technology set includes three inputs, three desirable outputs and one undesirable output, namely NPAs. Due to their inherent technological heterogeneity, public sector banks (PSBs) and private banks (PVBs) have been analysed as separate groups. Balanced panels of 26 PSBs and 18 PVBs are constructed from 2010-2011 to 2016-2017. The results indicate a considerable scope of improvement in the productive performance of both categories of banks. The break-up of overall inefficiency into input- and output-specific components reveals some stimulating information. For PSBs, the inefficiencies primarily result due to physical capital, while for PVBs they emerge mainly from other incomes. However, NPAs are also a key contributor to inefficiency for both the categories of banks. The inefficiency scores also indicate that, across ownership categories, medium-sized banks are poorer performers than their smaller and larger counterparts. JEL: C14, C61, D24, G21

Evaluating the Performance of Indian Domestic Banks Through the Lens of Pareto–Koopmans Efficiency

2020 ◽  
pp. 097215092097035
Author(s):  
Karan Singh Khati ◽  
Deep Mukherjee
Keyword(s):  
Banking Sector ◽  
Global Financial Crisis ◽  
Public Sector Banks ◽  
Management Quality ◽  
Input And Output ◽  
Output Efficiency ◽  
Physical Assets ◽  
Domestic Banks ◽  
Indian Banks ◽  
The Global Financial Crisis

In this article, we use data envelopment analysis to obtain Pareto–Koopmans (PK) measures of technical efficiency (TE) of India’s domestic commercial banks for the period between the global financial crisis and merger of the State Bank of India and its associates. This article aims to contribute to the growing body of literature on the efficiency of Indian banks by adopting the concept of PK efficiency to overcome the restrictive nature of radial and orientation-specific TE measures. To the best of our knowledge, this article is the first of its kind where one can disaggregate overall TE into two separate components by measuring input and output efficiency in the Indian banking sector. We assume a three-input three-output technology for both groups and utilize a balanced panel of 26 public sector banks (PSBs) and 19 private banks (PVBs) from 2010–2011 to 2016–2017. The mean PK efficiencies across the study period are 0.86 and 0.72 for PSBs and PVBs, respectively. Hence, there is considerable scope of improvement in the productive performance of PVBs. The disaggregation of PK efficiencies into input- and output-specific components reveals that for PSBs, the inefficiencies primarily result from physical assets, while for PVBs, they emerge mainly from other incomes. Hence, the management should specifically target these aspects of banking operations to improve their performance. Second-stage regression analysis reveals that PK-TE has a non-linear relationship with the size of a bank. Deposit to liability ratio and management quality negatively impact PK efficiency, while priority sector lending positively influences it.

Assessing the impact of global financial crisis on the intermediation efficiency of Indian banks in the presence of non-performing loans

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anju Goswami
Keyword(s):  
Public Sector ◽  
Financial Crisis ◽  
Technical Efficiency ◽  
Global Financial Crisis ◽  
Foreign Banks ◽  
Undesirable Output ◽  
Content Type ◽  
Public Sector Banks ◽  
Indian Banks ◽  
The Impact

PurposeBy incorporating the role of nonperforming loans (NPLs), the study aims to assess the impact of global financial crisis (GFC) on the intermediation efficiency of Indian banks for the period of 1998/99 to 2016/17.Design/methodology/approachTo obtain efficiency level of Indian banks, this study applied sequential data envelopment analysis (DEA) based directional distance function (DDF) approach, which performed simultaneous expansion of desirable output and reduction of undesirable output in the bank's loan production structure. Additionally, using fixed effect regression approach in the panel data framework, this study assesses both the phenomenon of σ- and unconditional β-efficiency convergence in public sector banks (PSBs), private banks (PBs), foreign banks (FBs) and overall scheduled commercial banks (SCBs) during the pre-crisis, crisis and post-crisis years in India.FindingsIrrespective of the bank's production model, the evidence suggests that the accounting NPLs as an undesirable output significantly deteriorating the intermediation technical efficiency levels of Indian banks, especially after the crisis years until the last year of the study period. This reflects that Indian banks failed more to achieve their financial intermediation objective in the post-crisis years as compared to the crisis and pre-crisis years. In-depth, statistical evidence of commercial bank ownership groups reveals that public sector banks exhibit a higher level of efficiency in pursuance of traditional loan-based activity followed by private and foreign banks. The study also found the existence of sigma convergence in technical efficiency levels of Indian banks and ownership groups as well.Originality/valueThis study is perhaps the first one, which present the robust evolution of Indian banks intermediation efficiency by taking into account both endogenous (i.e. NPLs as an undesirable output and equity as a quasi-fixed input in the bank production process) crisis and exogenous (i.e. global financial and economic stress) crises. Moreover, none of the existing studies have conducted sub-period wise analysis to show the apparent occurrence of both convergence properties in technical efficiency, adding novelty in the literature.

Economic slowdown, NPA crisis and productivity behavior of Indian banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anju Goswami ◽  
Rachita Gulati
Keyword(s):  
Production Process ◽  
Global Financial Crisis ◽  
Banking Industry ◽  
Economic Stress ◽  
Productivity Index ◽  
Undesirable Output ◽  
Content Type ◽  
Tfp Growth ◽  
Robust Estimates ◽  
Indian Banks

PurposeThis paper aims to investigate the productivity behavior of Indian banks in the presence of non-performing assets (NPAs) over the period 1999 to 2017. The study examines whether Indian banks withstand the shocks of the global financial crisis (GFC) of 2007–2009 and sustain their total factor productivity (TFP) levels in the post-crisis economic turbulent period or not.Design/methodology/approachThe robust estimates of TFP and its components: efficiency change and technical change are obtained using the state-of-the-art and innovative sequential Malmquist-Luenberger productivity index (SMLPI) approach. The key advantages of this approach are that it explicitly allows the joint production of undesirable output (NPAs in our case) along with desirable inputs and outputs in the production process and precludes the possibility of spurious technical regress.FindingsThe empirical results of the study reveal that the Indian banking system has experienced a (−1) percent TFP regress, contributed solely by efficiency loss during the period under investigation. The GFC has slowed down the growth trajectory of TFP growth in the Indian banking industry. Among ownership groups, the effect of the GFC was pronounced on the public sector banks.Practical implicationsThe practical implication drawn from the study is that the Indian banks have not been able to successfully transmit the use of installed technology in a way to generate early warning signals and mitigate the risk of defaults so as to maximize their productivity gains in the banking industry.Originality/valueThis study is perhaps the first one to understand the productivity dynamics of the Indian banks in response to both endogenous (i.e. NPA crisis) and exogenous (i.e. global financial and economic stress) crises. Moreover, the authors obtain the robust estimates of TFP growth of Indian banks by explicitly accounting for NPAs as an undesirable output and equity as a quasi-fixed input in the bank production process.

Estimating the Basel III Capital Requirement for Indian Banks

2018 ◽  
Vol 64 (3) ◽  
pp. 253-277
Author(s):  
Vighneswara Swamy
Keyword(s):  
Commercial Banks ◽  
Study Groups ◽  
Basel Iii ◽  
Capital Requirement ◽  
Tier 2 ◽  
Public Sector Banks ◽  
Total Capital ◽  
Private Banks ◽  
Tier 1 ◽  
Indian Banks

Abstract The study estimates the Basel-III capital requirement for Indian banks employing the methodology incorporating the reported tier-1, tier-2 capital, total capital and risk-weighted assets (RWAs) sourced from the Basel disclosures made by the banks on their websites. In order to understand the strategy and the response of different bank groups based on their ownership styles, this study, groups the banks into scheduled commercial banks, public sector banks group, and private banks and considers the data for the period 2002 – 2011. The results suggest that with an assumed growth of RWAs at 10%, banks in India would require additional minimum tier-1 capital of INR 2.51 trillion. With an assumed RWAs growth at 12% and 15%, the requirement would be in the order of INR 3.36 trillion and INR 4.74 trillion respectively. JEL classifications: E44, E61, G2, G21, G28 Keywords: Basel III, capital and liquidity, commercial banks, capital, countercyclical capital buffers, financial (in)stability

Investing Productively: The Banking Sector

New India ◽  
2020 ◽  
pp. 145-178
Author(s):  
Arvind Panagariya
Keyword(s):  
Public Sector ◽  
Detailed Analysis ◽  
Banking Sector ◽  
Public Sector Banks ◽  
Formal Economy ◽  
Reserve Bank ◽  
Private Banks ◽  
The Government ◽  
Public Money ◽  
Indian Banks

Banks collect savings by households via deposits and channel them to the most productive investors in the form of credit. What happens to bank credit has a determining impact on growth, especially in the formal economy. A key feature of Indian banks has been repeated episodes of accumulation of non-performing assets followed by their recapitalization by the government using public money. These episodes have been concentrated in public sector banks (PSBs), which continue to account for two-thirds of banking assets. This chapter offers a detailed analysis of these episodes and argues that it is time for the government to give serious thought to privatization of PSBs. PSBs are subject to regulation by both the government and the Reserve Bank of India (RBI), but RBI has limited powers over them. On average, private banks outdo PSBs along nearly all dimensions in terms of efficiency.

Effect of Fairness on Employee Outcome: An LMX Perspective on Indian Banks

2018 ◽  
Vol 21 (4) ◽  
pp. 1113-1126
Author(s):  
Shalini Sahni ◽  
Chandranshu Sinha
Keyword(s):  
Organizational Justice ◽  
Social Exchange ◽  
Banking Industry ◽  
Employee Outcomes ◽  
Public Sector Banks ◽  
Proposed Model ◽  
Private Banks ◽  
Confirmatory Factor ◽  
Member Exchange ◽  
Indian Banks

The current study is proposed to test the mediated effect of social exchange mechanism of leader–member exchange (LMX) between organizational justice and employee outcomes in the Indian banking industry. Stratified random sampling was used to collect the data from 346 employees of two Indian public and two Indian private banks listed in the CNX index. Data were analysed using confirmatory factor analysis and path analysis of the proposed model. Findings reveal that LMX partially mediated between all justice dimensions and employee outcomes. However, procedural justice is the strongest predictor of employee outcomes in public sector banks and weakest in private sector banks. This study has implications for both academicians and practitioners and adds to the previous literature by testing the projected model in the Indian settings, thus providing some empirical validity to justice–LMX–employee outcomes relationships.

scholarly journals Systemic Risk Assessment: Aggregated and Disaggregated Analysis on Selected Indian Banks

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Mohammed Arshad Khan ◽  
Preeti Roy ◽  
Saif Siddiqui ◽  
Abdullah A. Alakkas
Keyword(s):  
Systemic Risk ◽  
Value At Risk ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Conditional Value At Risk ◽  
Public Confidence ◽  
State Variables ◽  
Global Risk ◽  
Private Banks ◽  
Indian Banks

Exposure of the banking system to the Global Financial Crisis attracted attention to the study of riskiness and spillover. This paper studies the pattern of systemic risk and size effect in the Indian banking sector. Based on market capitalization, three public sector banks and three from the private sector were taken. Data are taken from the year 2007 to 2020. The analysis is done through quantile- CoVaR  (Conditional Value at Risk) and TENET (Tail-Event-Driven Network) measure. State variables like Indian market volatility and global risk measures negatively influence the Indian banks’ returns. Liquidity risk is a crucial aspect of private banks. Public banks experience public confidence even in the distress period. Large banks like HDFC and SBI bank offer the highest degree of systemic risk contribution. The role of private banks in transmitting systemic risk has been intensifying since 2015. Small-sized banks like PNB and BOB have become significant receivers and transmitters of risk.

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

2021 ◽  
Vol 15 (2) ◽  
pp. 183-204
Author(s):  
Pankaj Sinha ◽  
Naina Grover
Keyword(s):  
Inverse Relationship ◽  
Consumer Welfare ◽  
Adverse Impact ◽  
Public And Private ◽  
Jel Codes ◽  
Trade Off ◽  
Private Banks ◽  
Indian Banks ◽  
The Impact

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

Critical Perspectives to Non-performing Assets of Indian Banks, Shrinking Balance Sheet, Challenges and Way Ahead

2021 ◽  
pp. 231971452110402
Author(s):  
Pramahender
Keyword(s):  
Banking Sector ◽  
Balance Sheet ◽  
High Rate ◽  
Balance Sheets ◽  
Coverage Ratio ◽  
Public Sector Banks ◽  
Bad Loans ◽  
Bankruptcy Code ◽  
Indian Banks ◽  
Debt Recovery

Indian banking sector is facing the problem of rising bad loans as gross non-performing assets (GNPA) of Indian banks is on continuous rise. The present study is an attempt to analyse rising bad loans scenario of Indian banks, various factors that contributes to non-performing assets (NPA), along with the present state of Indian banks. This study found that poor recovery measures, lack of proper credit and risk management system at bank level, wilful default by borrowers, lack of stringent regulation, poor level of corporate governance and misuse of funds by borrowers are the key factors behind the rising level of bad loans of Indian banks. It was found that public sector banks (PSB) are suffering the most from rising level of NPA, high rate of NPA of banks have adverse impact on banks’ balance sheets, their assets quality, increased provisioning coverage ratio of banks and low return on assets. Although various concerned stakeholders have taken numerous measures to curb the situation, such as recapitalization of PSB, construction of assets reconstruction companies (ARC), Debt Recovery Tribunals for speedy recovery of bad loans and enactment of insolvency and bankruptcy code (IBC),still there is much more to do, and have a huge scope to bring reforms in banking sector, especially in PSB of India.

Morpho-structural and physiological response of container-grown Sangiovese and Montepulciano cvv. (Vitis vinifera) to re-watering after a pre-veraison limiting water deficit

2014 ◽  
Vol 41 (6) ◽  
pp. 634 ◽  
Author(s):  
Alberto Palliotti ◽  
Sergio Tombesi ◽  
Tommaso Frioni ◽  
Franco Famiani ◽  
Oriana Silvestroni ◽  
...  
Keyword(s):  
Yield Components ◽  
Deficit Irrigation ◽  
Fruit Set ◽  
Water Shortage ◽  
Co2 Exchange ◽  
Productive Efficiency ◽  
Productive Performance ◽  
Single Leaf ◽  
Leaf Yellowing ◽  
Use Efficiency

A better physiological and productive performance of cv. Montepulciano versus cv. Sangiovese under well-watered conditions has been recently assessed. The objective of this study was to verify that this behaviour is maintained when a pre-veraison deficit irrigation (vines held at 40% pot capacity from fruit-set to veraison) followed by re-watering (pot capacity reported at 90%). Single leaf assimilation rate and stomatal conductance, diurnal and seasonal whole-canopy net CO2 exchange (NCER) and water use efficiency were always higher in Sangiovese under deficit irrigation. Due to water shortage Montepulciano displayed a more compact growing habit due to decreased shoot and internode length. Sangiovese showed excellent recovery upon re-watering as NCER resulted to be higher than the pre-stress period; however, this might also relate to early and severe basal leaf yellowing and shedding. Early deficit irrigation affected xylem characteristics of Montepulciano more than in Sangiovese; vessel density increased (37 vs 29%, respectively, compared with well-watered vines) and the hydraulic conductance decreased more (–13 vs –3% respectively) compared with well-watered vines. Yield components and technological maturity were similar in the two cultivars, whereas Montepulciano grapes had lower anthocyanins and phenolics. Higher physiological and productive efficiency under non-limiting water conditions showed by Montepulciano compared with Sangiovese was basically reversed when both cultivars were subjected to an early deficit irrigation.

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