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A new measure of competition in Indian loan markets

Author

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  • Jugnu Ansari

    (Assistant Adviser, CAFRAL,C-7, RBI, Bandra-Kurla Complex, Bandra(East), Mumbai –400051, India)

Abstract

This study examines bank competition in the loan markets in India using a new competitiveness index, the Augmented Relative Profit Difference (ARPD). The ARPD quantifies the impact of marginal costs on performance, measured in terms of market shares. The theoretical foundation of the ARPD is robust when compared to other conventional measures. Applying this unbiased competition indicator to loan markets shows that financial reform has contributed to significant improvements in competition.Public sector banks and private sector banks are more competitive than foreign banks too. In addition, we find that the Indian loan markets are monopolistic in nature.

Suggested Citation

  • Jugnu Ansari, 2013. "A new measure of competition in Indian loan markets," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(4), pages 60-77, October.
    • Handle: RePEc:rbs:ijfbss:v:2:y:2013:i:4:p:60-77
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    1. Rakshit, Bijoy & Bardhan, Samaresh, 2023. "Does bank competition affect the transmission mechanism of monetary policy through bank lending channel? Evidence from India," Journal of Asian Economics, Elsevier, vol. 86(C).

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