The bank lending channel of monetary policy transmission: evidence from an emerging market, India

Saumitra Bhaduri and Toto Goyal

International Journal of Banking, Accounting and Finance, 2015, vol. 6, issue 1, 1-20

Abstract: In this paper, we analyses bank lending channel (BLC) of monetary policy transmission in India. We test for loan supply shifts, emanating as a direct effect of changes in the prime policy rate used by the Reserve Bank of India. Using yearly bank balance sheet data from 1996 to 2007, the paper provides evidence of an operational bank lending channel (BLC) in India. Further, segregating banks by asset size and liquidity, we find that small, illiquid banks are more affected by policy changes, and the effect is more pronounced in areas of non-priority sector lending. Finally, the domestically owned banks are more sensitive to policy rate changes vis-à-vis foreign banks.

Keywords: bank lending channels; BLC; monetary policy transmission; emerging markets; India; banking industry; loan supply shifts; prime policy rate; bank balance sheets; asset size; liquidity. (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Working Paper: The bank lending channel of monetary policy transmission: evidence from an emerging aarket, India (2012)
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