Search results

1 – 10 of over 17000
Click here to view access options
Article
Publication date: 19 January 2021

Anju Goswami and Rachita Gulati

This 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…

Abstract

Purpose

This 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/approach

The 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.

Findings

The 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 implications

The 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/value

This 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.

Details

International Journal of Productivity and Performance Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-0401

Keywords

Click here to view access options
Article
Publication date: 23 January 2007

G. Barathi Kamath

The paper seeks to estimate and analyze the Value Added Intellectual Coefficient (VAIC™) for measuring the value‐based performance of the Indian banking sector for a…

Downloads
7089

Abstract

Purpose

The paper seeks to estimate and analyze the Value Added Intellectual Coefficient (VAIC™) for measuring the value‐based performance of the Indian banking sector for a period of five years from 2000 to 2004.

Design/methodology/approach

Annual reports, especially the profit/loss account and balance‐sheet of the banks concerned for the relevant years, were used to obtain the data. A review is conducted of the international literature on intellectual capital with specific reference to literature that reviews measurement techniques and tools, and the VAIC™ method is applied in order to analyze the data of Indian banks for the five‐year period. The intellectual or human capital (HC) and physical capital (CA) of the Indian banking sector is analysed and their impact on the banks' value‐based performance is discussed.

Findings

The study confirms the existence of vast differences in the performance of Indian banks in different segments, and there is also an improvement in the overall performance over the study period. There is an evident bias in favour of the performance of foreign banks compared with domestic banks.

Research limitations/implications

All 98 scheduled commercial banks are studied as per the information provided by the Reserve Bank of India (RBI)/India's Apex bank. Regional rural banks (RRBs), a segment of the indian banking sector, are not dealt with in the study since their number is large (more than 200), but they contribute only 3 percent of the market of Indian banks. This paper is a landmark in Indian banking history as it approaches performance measurement with a new dimension.

Practical implications

The paper has strong theoretical foundations, which have a proven record and applications. The methodology adopted has been research tested. Domestic banks in India are provided with a new dimension to understand and evaluate their performance and benchmark it with global standards. The paper also has policy implications, as it reflects the lop‐sided growth of a few sections in the Indian banking segment.

Originality/value

The paper represents a pioneering and seminal attempt to understand the implications of the business performance of the Indian banking sector from an intellectual resource perspective.

Details

Journal of Intellectual Capital, vol. 8 no. 1
Type: Research Article
ISSN: 1469-1930

Keywords

Click here to view access options
Article
Publication date: 10 October 2016

Sirus Sharifi, Arunima Haldar and S.V.D. Nageswara Rao

The purpose of this paper is to analyse the relationship between operational risk management (ORM), size, and ownership of Indian banks. This is important in the context…

Downloads
1923

Abstract

Purpose

The purpose of this paper is to analyse the relationship between operational risk management (ORM), size, and ownership of Indian banks. This is important in the context of financial crisis experienced by developed countries due to lax regulation.

Design/methodology/approach

ORM practices of Indian banks are proxied by excess capital (over the required minimum capital for operational risk). Size of a bank is measured as deposits plus advances. Our sample includes 61 Indian banks during the period from 2010 to 2013. The authors empirically examine the impact of bank size on excess capital using panel data regression model.

Findings

The results suggest that size of Indian banks is inversely related to excess capital held by them for managing operational risk. The inverse relationship implies that smaller banks hold higher excess capital over the required minimum as per Basel norms. There is no significant relationship between ownership (public, private and foreign) and excess capital held by banks for managing operational risk.

Practical implications

The study has implications for Indian banks given the high level of losses due to bad loans, and the implementation of Basel III norms by the central bank, i.e. Reserve Bank of India.

Social implications

The study has implications for Indian financial system as a large percentage (about 33 per cent) of household savings are deployed in deposits with commercial banks and other financial institutions. The bank failure(s) can have disastrous consequences for the Indian economy as the capacity of the Indian financial system to withstand such shocks is highly doubtful.

Originality/value

There is very little evidence on ORM practices of Indian banks, and its relationship with size and ownership. The study assumes significance in the context of significant changes in the institutional and regulatory framework.

Details

Managerial Finance, vol. 42 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Click here to view access options
Article
Publication date: 22 July 2021

Anju Goswami

By 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

Abstract

Purpose

By 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/approach

To 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.

Findings

Irrespective 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/value

This 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.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

Click here to view access options
Article
Publication date: 24 July 2020

Faizi Weqar, Ahmed Musa Khan and Syed Mohammed Imamul Haque

The purpose of this paper is to inspect the effect of intellectual capital (IC) on the financial performance (FP) of Indian banks.

Abstract

Purpose

The purpose of this paper is to inspect the effect of intellectual capital (IC) on the financial performance (FP) of Indian banks.

Design/methodology/approach

The study uses the data of 58 Indian banks, namely, 20 nationalised banks, 17 private Indian banks and 21 private foreign banks, for the period between 2009 and 2018. A modified value-added intellectual coefficient methodology was used for measuring the efficiency of the IC.

Findings

The efficiency of IC significantly enhances the profitability and productivity of the Indian banks. Overall, human capital is the most substantial component of IC in augmenting the profitability and productivity of the Indian banking industry. Structural capital and physical capital are vital only for improving profitability while the contribution of relational capital towards the banks’ FP is nominal. The result also shows that amongst the three categories of Indian banks, private foreign banks are most efficient in leveraging their IC.

Research limitations/implications

The study results are only restricted to Indian banks and the data of only 58 banks are used for drawing the inferences.

Originality/value

The paper fills the void in the existing literature of IC and corporate FP by using the data set of Indian banks divided into the public sector, private Indian and private foreign banks.

Details

Measuring Business Excellence, vol. 24 no. 4
Type: Research Article
ISSN: 1368-3047

Keywords

Click here to view access options
Article
Publication date: 10 October 2016

Thanh Pham Thien Nguyen and Son Hong Nghiem

The purpose of this paper is to examine the operational efficiency and effects of market concentration and diversification on the efficiency of Chinese and Indian banks in…

Abstract

Purpose

The purpose of this paper is to examine the operational efficiency and effects of market concentration and diversification on the efficiency of Chinese and Indian banks in the 1997-2011 period.

Design/methodology/approach

This study employs the two-stage bootstrap procedure of Simar and Wilson (2007) to obtain valid inferences on the efficiency scores and the efficiency determinants.

Findings

Using data set for each country separately, the authors found that the bias-corrected cost efficiency displays an upward trend in Chinese and Indian banks. This trend is consistent with profit efficiency among Chinese banks, but the trend is unclear in Indian banks. Market concentration is negatively related to cost and profit efficiencies of Chinese banks. However, market concentration is positively associated with cost efficiency, but unrelated to profit efficiency of Indian banks. In Chinese banks, diversification of revenue, earning assets and non-lending earning assets are associated with increasing profit efficiency, but their effects to cost efficiency are not clear. In Indian banks, diversification of earning assets increases profit efficiency while there are cost efficiency losses from diversification of revenue and earning assets.

Practical implications

Bank regulators and supervisors in China should consider establishing policies to reduce market concentration and encourage diversification of revenue, earning assets and non-lending earning assets, while increasing concentration and diversification of earning assets should be encouraged in Indian banks.

Originality/value

To the best of the authors’ knowledge, this is the first study employing the double bootstrap procedure proposed by Simar and Wilson (2007) which can address the problem of the two-stage data envelopment analysis or SFA estimator in the efficiency literature on Chinese and Indian banks that efficiency scores obtained in the first stage are inter-dependent, and hence violating the basic assumption in regression analysis in the second stage.

Details

Managerial Finance, vol. 42 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Click here to view access options
Article
Publication date: 6 December 2018

Krishan Boora and Kavita Jangra

The purpose of this paper is to explore the preparation level of Indian public sector banks for the implementation of Basel III. It is mandatory for public sector banks in…

Abstract

Purpose

The purpose of this paper is to explore the preparation level of Indian public sector banks for the implementation of Basel III. It is mandatory for public sector banks in India to make adequate preparations to comply with the Basel III international regulations.

Design/methodology/approach

This study uses a modified questionnaire (Ernst & Young, 2013; AL-Tamimi et al., 2016) to examine the preparedness level of Indian public sector banks for implementing Basel III. Seven hypotheses are developed and tested.

Findings

The results show that Indian public sector banks are positively inclined toward Basel III, and the awareness level of Indian banks’ managers is adequate concerning Basel III. The banks have required resources for the proper implementation of Basel III, which is a prerequisite for its implementation. Banks know about the expected benefits that can be attained from implementing Basel III appropriately and banks are also aware of the high cost attached with Basel III. The capital adequacy ratio of public sector banks is above 11 percent, showing the banks’ readiness for Basel III.

Practical implications

The public sector banks need to concentrate on revising the existing policies to sharpen their risk management practices. Moreover, improving the level of education on Basel III is still required and the results also support the importance of advanced technology and trained human resources at all level as a basic requirement for the implementation of Basel III. It can be achieved by the support of government, Reserve Bank of India (RBI) and other concerned agencies. The enforcement of Basel III will also create various challenges for Indian public sector banks, in terms of declining profitability, increasing capital requirements and nonperforming assets. That is why the impact of Basel III norms on Indian public sector banks cannot be undervalued.

Originality/value

The findings would assist the Indian public sector banks to know about their preparedness level for Basel III and what are the necessary actions to encourage Basel III implementation process. The present study would be important for regulators and decision makers in banks, as the main purpose of this study is to increase their awareness of Basel III norms. The result would also help the regulators regarding the corrective measures that should be taken by RBI in order to motivate the banks for enforcing Basel III.

Details

Managerial Finance, vol. 45 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

Click here to view access options
Article
Publication date: 6 July 2015

Rachita Gulati

The purpose of this paper is to examine the trends of cost efficiency (CE) of Indian banks in response to financial deregulation programme launched in early 1990s. More…

Abstract

Purpose

The purpose of this paper is to examine the trends of cost efficiency (CE) of Indian banks in response to financial deregulation programme launched in early 1990s. More specifically, the findings of this paper offer empirical testing of the basic underlined hypothesis that the CE of banks will rise in the more liberal and competitive environment.

Design/methodology/approach

The study employs input-oriented data envelopment analysis (DEA) models that incorporate the quasi-fixed inputs to compute the cost, technical, and allocative efficiency scores for individual banks. The unbalanced panel data spanning from the financial year 1992-1993 to 2007-2008 are used for obtaining efficiency measures. In addition, the panel data Tobit model has been applied to investigate the bank-specific factors explaining variations in the CE.

Findings

The empirical findings pertaining to the trends of efficiency measures suggest that: first, deregulation programme has had a positive impact on the CE of Indian banks, and the observed increase in CE is entirely due to improvements in technical efficiency (TE); second, the ranking of ownership groups provides that public sector banks are more cost efficient along with the foreign than private banks; and third, there is a strong presence of global advantage hypothesis in the Indian banking industry. The results of post-DEA analysis reveal that size and exposure to off-balance sheet activities are the key determinants of CE. The results also support the existence of bad luck or bad management hypothesis in Indian banking industry.

Practical implications

The practical implication of the research findings is that the financial deregulation programme seems to be successful in achieving the CE gains in the Indian banking industry. This explicitly signals that the cautious approach of banking reforms adopted by Indian policy makers has started bearing fruit in terms of the creation of an efficient banking system, which is immune to any sort of financial crisis, and resilient to both internal and external shocks.

Originality/value

The present study offers new evidence on the time-series properties of cost, allocative, and TEs of Indian banks. The DEA models used in this study explicitly incorporate the equity as a quasi-fixed input, which accounts for “risk” in the bank efficiency measurement.

Details

Benchmarking: An International Journal, vol. 22 no. 5
Type: Research Article
ISSN: 1463-5771

Keywords

Click here to view access options
Article
Publication date: 21 May 2020

Ankur Shukla, Sivasankaran Narayanasamy and Ramachandran Krishnakumar

The purpose of the paper is to explore the impact of board size on the accounting returns and asset quality of Indian banks.

Abstract

Purpose

The purpose of the paper is to explore the impact of board size on the accounting returns and asset quality of Indian banks.

Design/methodology/approach

This paper uses ordinary least squares regression, robust regression and panel data methods for estimation, based on data collected for a sample of 29 Indian banks that are listed on the National Stock Exchange (NSE) and form part of the NSE-500 index over a period of eight financial years 2009-2016. The data pertaining to the board size of the sample banks is collected from the annual reports of banks, whereas the data relating to return on assets (ROA) and ratio of the gross non-performing assets to total assets and control variables (bank age and bank size) is extracted from ACE Equity database.

Findings

This paper concludes that the size of the governing board has a positive impact on the accounting returns (measured through ROA) of the Indian banks. Further, board size is observed to be insignificant in determining the asset quality of Indian banks.

Originality/value

This paper contributes to the literature and practitioners in a number of ways. First, to the best of the authors’ knowledge, this is the first study on the impact of board size on the accounting returns and asset quality of Indian banks. The findings of the study contribute new theoretical insights to the body of knowledge on the influence of the size of the board, which may be useful for future researchers. Second, banks may enhance their financial performance by taking cognizance of the findings of this study. Finally, equity investors may make use of the findings of this article in deciding on whether to invest in a bank’s stock/lend to the bank based on board size of the bank.

Details

International Journal of Law and Management, vol. 62 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

Click here to view access options
Article
Publication date: 6 February 2017

Jacqueline Birt, Mahesh Joshi and Michael Kend

The purpose of this paper is to investigate the value relevance of segment information for both public and private sector banks in India. In doing so, this paper examines…

Abstract

Purpose

The purpose of this paper is to investigate the value relevance of segment information for both public and private sector banks in India. In doing so, this paper examines a rapidly developing economy and perhaps its most critical sector during this period of strong economic growth.

Design/methodology/approach

In this study uses the simplified Ohlson model, for a sample of 136 private sector and public sector banks for the period 2007-2010 in India.

Findings

The paper finds that public sector banks have higher share prices, higher earnings and more equity compared with private sector banks. Segment earnings data is highly value relevant for both sectors; however, segment equity data is only marginally value relevant for Indian banks. The number of segments is also value relevant and associated with higher share prices.

Originality/value

The results of this study contribute additional evidence to the literature on segment reporting by studying the effect of adoption of segment reporting in an emerging market. Findings from the paper are particularly relevant as India is currently in the process of changing its segment reporting requirements and moving to an IFRS-based segment standard.

Details

Asian Review of Accounting, vol. 25 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

1 – 10 of over 17000