Competition and Market Power in the Indian Banking Industry in the Post-Reform Scenario

Satish Verma and Rohit Saini

The IUP Journal of Bank Management, 2008, vol. VII, issue 1, 7-19

Abstract: This study focuses on the level of competition and market power in the Indian banking industry. Using an unbalanced panel for 15 years from 1992-2006, we find that Indian banking industry is characterized by a relatively higher degree of competition compared to that of its counterparts particularly in the European countries. The average mark-up over marginal cost has been 10% during the study period. We also find that the foreign banks charged nearly twice the mark-up as compared to that charged by Public and Domestic Private Banks. Further, the average mark-up level is found to decline substantially from 20% at the beginning of reforms to 5% in 2006, reflecting a sharp decline in market power with the banks during the period under consideration.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjbm:v:7:y:2008:i:1:p:7-19

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