EconPapers    
Economics at your fingertips  
 

Interest-rate risk in the Indian banking system

Ila Patnaik () and Ajay Shah ()

Risk and Insurance from EconWPA

Abstract: Many observers have expressed concerns about the impact of a rise in interest rates upon banks in India. In this paper, we measure the interest rate risk of a sample of major banks in India, using two methodologies. The first consists of estimating the impact upon equity capital of certain interest rate shocks. The second consists of measuring the elasticity of bank stock prices to fluctuations in interest rates. We find that as of 31 March 2002, many major banks had economically significant exposures. Using the first approach, we find that roughly two-thirds of the banks in the sample stood to gain or lose over 25% of equity capital in the event of a 320 bps move in interest rates. Using the second approach, we find that the stock prices of roughly one-third of the banks in the sample had significant sensitivities.

Keywords: Interest rate risk; interest rate volatility (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa and nep-fin
Date: 2005-01-20
Note: Type of Document - pdf; pages: 40. This paper measures interest rate risk in banking using maturity statements of banks(MVE approach) and stock market data (AMM models)
References: View complete reference list from CitEc
Citations View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://econwpa.repec.org/eps/ri/papers/0501/0501003.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpri:0501003

Access Statistics for this paper

More papers in Risk and Insurance from EconWPA
Series data maintained by EconWPA ().

 
Page updated 2017-04-09
Handle: RePEc:wpa:wuwpri:0501003