Banks, Development Financial Institutions and Credit Markets in India: A Model of Financial Intermediation

Saibal Ghosh

Indian Economic Review, 2003, vol. 38, issue 1, 77-93

Abstract: The present paper examines the interaction between a bank and a development financial institution (DFIs) in a macroeconomic set-up both of whom can lend for working capital and investment finance purposes. Our analysis reveals that the reduction in the interest rate premium on bonds over the deposit rate is an important pre-requisite for the DFI to raise its market share in both investment finance and working capital lending. Also, greater corporate access to bond financing raises investment, output and the bond rate of interest.

Keywords: Universal Banking; Market Share; Investment Finance; Working Capital lending; Bond financing; Interest Premium (search for similar items in EconPapers)
JEL-codes: D82 O16 (search for similar items in EconPapers)
Date: 2003
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