BANK RISK, BANK COMPETITION AND MONETARY POLICY IN THE INDIAN BANKING INDUSTRY: A PANEL QUANTILE REGRESSION APPROACH

Salva and Sunny Kumar Singh ()
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Salva: Department of Economics and Finance, BITS Pilani, Hyderabad Campus, India
Sunny Kumar Singh: Department of Economics and Finance, BITS Pilani, Hyderabad Campus, India

The Singapore Economic Review (SER), 2024, vol. 69, issue 08, 2713-2753

Abstract: This study examines the relationship between monetary policy (MP), bank competition and risk-taking behavior for 69 commercial banks in India between 2005 and 2022. To the best of our knowledge, ours is the first study to examine the combined and differential effects of MP and bank competition on the risk-taking behavior of Indian banks. Furthermore, we extend our analysis by re-examining this relationship after the COVID-19 crisis. Based on the panel quantile regression model, our main findings suggest that increased concentration in the Indian banking system weakens the risk-taking channel of MP. Furthermore, the COVID-19 crisis has significantly impacted the relationship between MP, bank competition and bank risk. Finally, we also find that the effect of MP and bank competition on banks’ risk-taking behavior differs between high- and low-risk banks. Our findings are robust to alternative measures of bank risk and MP.

Keywords: Bank risk; bank competition; monetary policy; panel quantile regression (search for similar items in EconPapers)
JEL-codes: E50 E51 E52 G2 G21 G38 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0217590823500479

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