We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Indian Banking System Essay Sample

  • Pages: 3
  • Word count: 671
  • Rewriting Possibility: 99% (excellent)
  • Category: economics

Get Full Essay

Get access to this section to get all help you need with your essay and educational issues.

Get Access

Introduction of TOPIC

India provides a unique case study whereby banking industry is characterized by a mixed ownership structure and the deregulation of the industry in the nineties had paved the way for a level playing field between the various ownership groups. Historically, the industry was dominated by the public sector banks while the activities of the private sector (both domestic and foreign) were severely controlled by India’s Central Bank, the Reserve Bank of India. However, failing profitability and inefficiency in the banking system precipitated the first set of banking sector reforms in 1992 that facilitated entry deregulation, branch de-licensing, deregulation of interest rates, and operational freedom for public sector banks.

This report basically assesses the relative performance of the state-owned banks, the old & new private banks and the foreign banks in India by analysing a large period of data (viz. 1990-2012). The period allows us to study the impact of various national and international events on the Indian banking performance.

Essentially, we would be doing the comparison in two parts. The first part further consists of two steps. The first step deals with estimation of efficiency using stochastic frontier analysis. In the next step, measures of productivity are computed based on the stochastic frontier estimates. In the second part, we would try to assess the performance and credit risk of all the banking groups of India by

using the simple Error Correction Model (ECM). Objective

Sorry, but full essay samples are available only for registered users

Choose a Membership Plan
style="text-align: justify;">• To estimate efficiency of Indian banks and then estimate a measure of productivity that includes an efficiency term • To compare the State-owned, Private and Foreign banks in India on the basis of efficiency and productivity • To see the impact of any significant events on Indian banking system by analysing the time series data • To explore the impact of privatization on the pace of performance and credit risk of state-owned, private and foreign banks of India


H0: The role of ownership exists in determining the performance of Indian banks in terms of efficiency, productivity and credit risk.


To test the hypothesis mentioned above, we adopt two approaches:

Stochastic Frontier Analysis:

As regards the specification of the frontier, banking being a multi-product industry, we take recourse to the cost function for estimating efficiency. We take deposits and loans as output, i.e. the output vector consists of value of fixed deposits (FD), saving deposits (SD), current deposits (CD), investments (INV) and loans and advances (ADV). Apart from these, we also include the number of branches (B) as an output variable, as a proxy for the quality of services. Labour (L) and Capital (K) are the two variable inputs. The dependent variable is total operating cost (C), which is the sum of labour and capital costs.

Regression Analysis:

We take the panel data of banks for the time period 1990-2012 and divide it into three categories each representing an ownership group of the banking industry. For each group, we’ll run a regression with Yt (RoE) used as the dependent variable while liquidity risk (LR), credit factor, (CF) and capital adequacy (CA) used as independent variables.

Data source

The dataset comprises annual data over the period 1990–2012 for the various banks in India.

To study the comparison of various ownership groups, we divide the panel data into three groups and have their separate analysis.

The dataset is primarily drawn from the websites of:

• Indian Banks’ Association
• Reserve Bank of India
• www.indiastat.com
Submitted by:

Ankita Grover

MBE 2011-13

We can write a custom essay on

Indian Banking System Essay Sample ...
According to Your Specific Requirements.

Order an essay

You May Also Find These Documents Helpful

Ten Principles of Economics

The administration of society\'s assets is vital in light of the fact that assets are rare. Scarcity alludes to the constrained idea of society\'s assets. Economics includes the investigation of how society deals with its rare assets In many social orders, assets are allotted through the consolidated choices and activities of a huge number of family units and firms. Hence, financial analysts must examination: 1) How individuals decide 2) How they connect with each other 3) Forces and patterns that influence the economy all in all 10 Principles of financial aspects The conduct of an economy mirrors the conduct of people that make up the economy. Henceforth, we start our investigation of financial matters with the four standards of individual basic leadership. Princple 1: People confront exchange offs Making choices require exchanging off one objective against another. Example: For consistently an understudy considers one subject, she surrenders a hour she could...

The key elements of the financial plan

One of the fundamental tools used in managing account, profit forecasting and pricing strategies is definitely the “break-even analysis”, that can be defined as “a technique for analysing how revenue, expenses and profit vary with changes in sales volume or simply it is the analysis that enables any professional organisation to determine the break-even point”. The “break-even point” or BEP can be considered as “the point (level of production) in which a company generates the same amount of revenues and expenses during an accounting period (Revenues = Total costs). No profit and no loss have incurred. Since revenues equal expenses, the net income is zero. The company did not lose money, but it also did not gain any money either. It simply broke even during that period” When computing the break-even analysis several pieces of information (variables) are needed: - Direct/indirect expenses; - Fixed/variable costs (considering that fixed costs incur...

Managing fixed and variable costs in a...

Explain the fixed and variable costs in relation to the organization In management accounting, cost management has a crucial role and finds its foundations in understanding “cost behavior”. “Cost behavior analysis” can be defined as “the study of how cost changes when there is a change in an organization’s level of activity”. Managers need to analyze the behavior of three different types of costs: - Fixed costs; - Variable costs; - Semi-Variable (or mixed) costs. A “Fixed cost” can be defined as “a cost that does not change with an increase or decrease in the number of goods or services produced or sold”. It is time-related. “Fixed costs remain constant as they are not affected by the changes in the activity. It does not make a difference if the organization is producing/selling or not. Fixed costs will still be paid. Example of fixed costs can be: Rent for the space...

Popular Essays


Emma Taylor


Hi there!
Would you like to get such a paper?
How about getting a customized one?