Journal Press India®

Banking Reforms and Competition Liability Structure of Indian Banking Segments

Vol 18 , Issue 1 , January - June 2017 | Pages: 55-70 | Research Paper  

https://doi.org/10.51768/dbr.v18i1.181201715


Author Details ( * ) denotes Corresponding author

1. * Renu Gupta, Assistant Professor, Sri Guru Gobind Singh College of Commerce, University of Delhi, Delhi, India (renuguptadu@gmail.com)

Purpose: The present paper focuses on the very core function of banking segments understudy. As a part of a larger study on applying Structure-Conduct-Performance approach to banking, this paper aims at understanding whether the new private banks have been able to mark their existence in terms of examining changes in conduct of Indian banking industry in terms of its liability structure, that is, ratio of demand deposits to total deposits, ratio of term deposits to total deposits and ratio of demand deposits to term deposits.

Design/Methodology/Approach: Fixed Effects Panel Regression Model has been used. For this purpose, balance panel has been constructed for the four banking segments understudy for the period ranging 1995-96 to 2009-10.

Findings: The results show that incumbents are losing business to new private sector banks in terms of demand deposits as ratio of demand deposits to total deposits is significantly waning in case of existing banking segments while the same is slowly and constantly rising for new private banks.

Research Limitations/Implications: The limitation of the study is that time-period is limited upto 2009-10 as data was available till 2009-10 when study was carried out.

Practical Implications: These results indicate that competition has actually ushered in Indian banking as a result of banking reforms by allowing entry to new banks in the private sector. As on the one hand, existing banks are losing to new banks in terms of demand deposits still maintaining their stability in form of term deposits and giving competition to new banks. On the other hand, new private banks have marked their presence as regards to demand deposits but losing in form of term deposits. Another interesting implication of these results is that competition has emerged in the form of incumbents vs. new banks rather than public banks vs. private banks.

Originality/Value: It is original piece of work. It tests the impact of liberalization on competition in the banking segments of India in terms of their liability structure specially demand deposits and term deposits.

Keywords

Banking Reforms, Competition, Banking Segments, Liability Structure, Demand deposits, Term Deposits

  1. Akrani, G. (2010). Narasimham Committee Report 1991-1998: Recommendations. Retrieved from: http://kalyan-city.blogspot.in/2010/09/narasimham-committee-report-1991-1998.html, Accessed on October 5, 2011.
  2. Amel, D.F., & Rhoades, S.A. (1988). Strategic groups in banking. Review of Economics and Statistics, 70(1), 685-689.
  3. Deb, A. T. (2005). The impact of deregulation on private banking industry. Unpublished Ph.D. thesis submitted to University of Delhi. 
  4. Ferguson, P., & Ferguson, G. (1994). Industrial Economics. London: Macmillan Press Ltd.
  5. Gupta, R. (2016). Banking reforms and competition: A comparative study of public and private banking industry in India. Journal of Business Thought, 7, 109-117. 
  6. Hay, D., & Morris, D. (1979). Industrial economics and organisation: Theory and evidence. London: Oxford University Press.
  7. Hayes, S., Spence, A.M., & Marks, D.V.P.  (1983). Competition in the investment banking industry. Cambridge: Harvard University Press.
  8. Kumar, S., & Gulati, R. (2010). Dynamics of cost efficiency in Indian public sector banks: A post-deregulation experience. Retrieved from http://www.igidr.ac.in/~money/ Dynamics%20of%20cost%20efficiency_sunil%20kumar.pdf, Accessed on June 15, 2016.
  9. Mason, E.S. (1939). Price and production policies of large-scale enterprise. The American Economic Review, 29(1), 61-74.
  10. Murthy, K.V. B., Gupta, R., & Deb, A.T. (2015). Conduct of banking segments in India: Spread and operating efficiency. Arthwan, 1(1), 1-10.  
  11. Murthy, K.V. B., Gupta, R., & Deb, A.T. (2016). Conduct of banking segments in India: Investment policy and asset structure. Paper presented at IIIrd International Conference titled “Booming Service Sector: From Achievements to Growth Prospects organized by Sri Guru Gobind Singh College of Commerce, University of Delhi on February 4-5, 2016.
  12. Murthy, K.V. B., Gupta, R., & Deb, A. T. (2016a). Market structure of Indian Banking Industry: A comparative analysis. Journal of Business Studies, 8(1), 14-29.
  13. Murthy, K.V.B., & Deb, A.T. (2008). Operational sign and measuring competition: Determinants of competition in private banking industry in India. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1073682, Accessed on June 13, 2016.
  14. Narasimham, M. (1991). Report of the committee on financial system. Mumbai: Reserve Bank of India. Retrieved from http://kalyan-city.blogspot.in/2010/09/narasimham-committee-report-1991-1998.html., Accessed on June 13, 2016
  15. Newman, H.H. (1978). Strategic groups and the structure-performance relationship. Review of Economics and Statistics, 60(1), 417-427. 
  16. Passmore, S.W. (1985). Strategic groups and the profitability of banking. Research Paper no 8507, Federal Reserve Bank of New York. Retrieved from http://www.amzon.com/strategic-profitability-banking-research-federal/dp/b00070WXWQ, Accessed on June 20, 2016
  17. Pastor, J.M. (1999). Efficiency and risk management in Spanish banking: A method to decompose risk. Applied Financial Economics, 9(4), 371-384.
Abstract Views: 2
PDF Views: 278

Advanced Search

News/Events

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

Department of Commer...

Department of Commerce, Faculty of Commerce & Business, University...

Birla Institute of M...

Birla Institute of Management Technology (BIMTECH) 3rd Pritam Singh M...

OP Jindal University...

OP Jindal University, India 4th International Conference on  ...

Department of MBA, N...

Department of MBA, Narayana Engineering College Nellore International...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management Conference Proceedings,...

Online Proceedings R...

Conference Proceedings, March 2023 ISBN: 978-81-956810-6-8 ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.