A Statistical Re-assessment of Capital Adequacy and Insolvency Risk in Commercial Banks of India

Nupur Moni Das () and Joyeeta Deb
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Nupur Moni Das: Assam University
Joyeeta Deb: Assam University

Chapter Chapter 7 in Current Issues in the Economy and Finance of India, 2018, pp 105-118 from Springer

Abstract: Abstract This paper is an attempt to empirically explore the association of capital adequacyCapital adequacy and insolvency riskInsolvency Risk of the Indian Commercial Banks, while controlling for various other bank specific and macro-economic factors which also affects the risk level of the banks. To find the inter-relationship of Capital AdequacyCapital adequacy Ratio (CAR) and insolvency riskInsolvency Risk , data of 21 years and 43 banks have been taken into consideration. Simultaneous EquationsSimultaneous equations Model (SEM) is used to examine the association between Risk and Capital AdequacyCapital adequacy Ratio and Two Stage Least Squares (2SLS)Two Stage Least Squares (2SLS) method is being used to estimate the parameters of the Simultaneous EquationsSimultaneous equations Model. The findings reflect that both variables have inverse impact on each other. The other micro and macro-economic variables also have significant impact on risk and capital of the banks.

Keywords: Capital adequacy; Simultaneous equations; Basel norms; Two stage least squares (2SLS); Insolvency risk (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/978-3-319-99555-7_7

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