Competition in Indian Banking
International Monetary Fund, Jul 1, 2005 - Business & Economics - 25 pages
It is widely perceived that competition in the Indian banking sector has increased since the inception of the financial sector reforms in 1992. Using annual data on scheduled commercial banks for the period 1996-2004, the paper evaluates the validity of this claim in the Indian context. The empirical evidence reveals that the Indian banking system operates under competitive conditions and earns revenues as if under monopolistic competition.
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bank group Bank of India bank’s banking industry Breshanan capital adequacy coefﬁcient contestable market control variables degree of competition Diagnostics Adjusted R-square F-value on Wald ﬁrm Forgn H statistic Indian banking sector Indian banking system Indian Commercial Banks input prices interest income interest revenues interest to non-interest INTERNATIONAL MONETARY FUND ln CRAR ln interest ln PF ln PK ln PL ln(LNASST marginal costs marginal revenue merger monopolistic competition monopoly natural logarithm non-interest income non-interest revenues Number of banks number of branches O O O O O O O O O Old Private Banks oligopoly Panzar and Rosse Panzar-Rosse perfect competition period price of capital price of funds price of labor private and foreign private sector banks public sector banks ratio Reserve Bank revenue function second sub-period signiﬁcant significantly different speciﬁcation State-owned Banks test for H=1 total assets total number Total panel observations total revenue Type of Bank unit price Wald test