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Bank lending channel of monetary policy transmission: India and the global financial crisis

Author

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  • M. Shahidul Islam
  • Ramkishen S. Rajan

Abstract

This paper examines the role of bank lending channel of monetary policy in India during the global financial crisis, especially following the collapse of Lehman Brothers in late 2008. Contrary to popular perceptions, and in contrast to the USA, this paper shows that following the Reserve Bank of India's aggressive monetary easing measures, bank credit growth in India maintained robust growth even in the midst of severe global financial crisis. However, there is a clear distinction between the private and public sector bank's lending behaviour. The crisis has clearly shown that banks will remain an important channel of monetary transmission in India.

Suggested Citation

  • M. Shahidul Islam & Ramkishen S. Rajan, 2011. "Bank lending channel of monetary policy transmission: India and the global financial crisis," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 3(5), pages 557-575.
    • Handle: RePEc:ids:ijecbr:v:3:y:2011:i:5:p:557-575
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    Cited by:

    1. Apanisile Olumuyiwa Tolulope, 2024. "Revisiting the effect of financial crisis and banking reforms on the effectiveness of monetary policy transmission mechanism in Nigeria," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 69(241), pages 95-128, April – J.
    2. Aysun, Uluc & Brady, Ryan & Honig, Adam, 2013. "Financial frictions and the strength of monetary transmission," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1097-1119.
    3. Ramkishen S. Rajan, 2009. "Crises, Private Capital Flows and Financial Instability in Emerging Asia," MPDD Working Paper Series WP/09/06, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    4. Pavel Chakraborty, 2024. "Bank ownership and firm performance," Economica, London School of Economics and Political Science, vol. 91(361), pages 238-267, January.

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