Vol 7 , Issue 2 , July - December 2020 | Pages: 91-116 | Research Paper
Published Online: November 30, 2020
( * ) denotes Corresponding author
This paper examines the role of demand and sup ply-side factors that can influence the cross-border trade credit availed by Indian importers from domestic and foreign banks. Using a panel data of 55 banks for period 2007-08:Q1 to 2017-18:Q4, the paper finds that the size of imports – being a demand-side factor –positively influences the flow of trade credit. Among the supply-side factors, banks’ financial health, size of their overseas network as well as funding cost in the international market are important. In light of the empirical findings, the paper suggests that domestic banks need to expand their overseas network and shift towards the use of globally accepted trade finance instruments instead of indigenous instruments, which, however, may push up the cost.
Trade finance; Indian banks; Imports; Panel data.