Articles by Abhiman Das

The issue and relevance of financial misconduct and fear of prosecution on the lending behaviour of Indian banks is investigated by combining bank-level financial and prudential variables during 2008–18 with a unique hand-collected data set on financial misconduct and fear of prosecution. The findings indicate that, in the presence of financial misconduct, state-owned banks typically cut back on credit creation and instead increase their quantum of risk-free investment. In terms of magnitude, a 10% increase in financial misconduct lowers lending by 0.2% along with a roughly commensurate increase in investment. In terms of the channels, it is found that private banks increase provisioning to maintain their credit growth, although the evidence for state-owned banks is less persuasive.

It is believed that the working capital support extended by commercial banks to small-scale industry is far from adequate. Although the SSI is a part of the priority sector, its share in total priority sector advances of all scheduled commercial banks has been falling consistently from around 39 per cent in 1992 to around 24 per cent in 2004. This paper examines the trends in sectoral allocation of bank credit to the SSI vis-à-vis the non-SSI sector in the post-reform period. The paper also makes an attempt to understand the variations in bank credit to the SSI sector across bank groups, and also the influence of the size and performance of banks on credit to the SSI sector. The results indicate that the high incidence of bad loans arising out of SSI advances could be one of the reasons for the declining share of SSI loans of the commercial banks.

The policy debate with regard to financial intermediaries has focused on whether, and to what extent, governments should impose capital adequacy requirements on banks, or alternately, whether market forces could also ensure the stability of banking systems. This paper contributes to the debate by showing how market forces may motivate banks to select high capital adequacy ratios as a means of lowering their borrowing costs. If the effect of competition among banks is strong, then it may overcome the tendency for bank under-capitalisation that arises from systemic effects. If systemic effects are strong, regulation is required. An empirical test for Indian public sector banks during the 1990s demonstrates that better capitalised banks experienced lower borrowing costs. These findings suggest that ongoing reform efforts at the international level should primarily focus on increasing transparency and strengthening competition among banks.

The paper examines the issue of corporate governance in the Indian banking system. Using data on banking systems for the period 1996-2003, the findings reveal that CEOs of poorly performing banks are likely to face higher turnover than CEOs of well performing ones.