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Regulatory Pressure, Market Discipline, and Bank Spreads in India: An Empirical Exploration

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  • Saibal Ghosh

Abstract

Employing data on commercial banks for 1992 to 2006, the paper examines the factors influencing bank spreads in India. The findings indicate that variations in bank size, composition of loan portfolio and bank liquidity are important determinants of bank margins. Second, the evidence is strongly supportive of the relative market power hypothesis. Finally, the evidence reveals that state-owned, de novo private and old private banks exhibit lower spreads as compared to their foreign counterparts. The analysis concludes with the policy implications of the aforesaid findings.

Suggested Citation

  • Saibal Ghosh, 2008. "Regulatory Pressure, Market Discipline, and Bank Spreads in India: An Empirical Exploration," Global Economic Review, Taylor & Francis Journals, vol. 37(2), pages 227-247.
    • Handle: RePEc:taf:glecrv:v:37:y:2008:i:2:p:227-247
    DOI: 10.1080/12265080802021227
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    References listed on IDEAS

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    1. Mr. Ephraim W. Chirwa & Mr. Montfort Mlachila, 2002. "Financial Reforms and Interest Rate Spreads in the Commercial Banking System in Malawi," IMF Working Papers 2002/006, International Monetary Fund.
    2. Mr. Enrique A Gelbard & Mr. Sérgio Pereira. Leite, 1999. "Measuring Financial Development in Sub-Saharan Africa," IMF Working Papers 1999/105, International Monetary Fund.
    3. Beck, T.H.L. & Fuchs, M., 2004. "Structural issues in the Kenyan financial system : Improving competition and access," Other publications TiSEM 4559d6fc-c664-47d1-9de0-4, Tilburg University, School of Economics and Management.
    4. Mrs. Ruby Randall, 1998. "Interest Rate Spreads in the Eastern Caribbean," IMF Working Papers 1998/059, International Monetary Fund.
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    Cited by:

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    2. International Monetary Fund, 2014. "Republic of Azerbaijan: Selected Issues," IMF Staff Country Reports 2014/160, International Monetary Fund.

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