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Disentangling demand and supply side determinants of post-GFC credit slowdown: an Indian perspective

Author

Listed:
  • Saurabh Ghosh

    (Reserve Bank of India)

  • Snehal Herwadkar

    (Reserve Bank of India)

  • Radheshyam Verma

    (Reserve Bank of India)

  • Pawan Gopalakrishnan

    (Reserve Bank of India)

Abstract

In an emerging market economy (EME) that depends largely on bank-credit, it is important to decipher whether supply-side or demand-side factors are responsible for a sluggish credit growth phase. A formal empirical analysis using Indian data and a disequilibrium model suggests that demand side factors have majorly contributed to the credit slowdown during the post-GFC period and prior to the pandemic. This could be because of adequate supply of funds, and several concerted policy actions taken by the regulatory authorities to mitigate concerns over the asset quality risks. In contrast, lower investment demand and global supply side bottlenecks have often contributed to demand side weaknesses, suggesting the need for strong policy support to uphold credit demand.

Suggested Citation

  • Saurabh Ghosh & Snehal Herwadkar & Radheshyam Verma & Pawan Gopalakrishnan, 2023. "Disentangling demand and supply side determinants of post-GFC credit slowdown: an Indian perspective," Indian Economic Review, Springer, vol. 58(2), pages 399-421, September.
    • Handle: RePEc:spr:inecre:v:58:y:2023:i:2:d:10.1007_s41775-023-00177-w
    DOI: 10.1007/s41775-023-00177-w
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    More about this item

    Keywords

    Bank credit; Financial intermediation; Credit demand; Disequilibrium model;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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