Are Public Sector Banks in India a Government Failure? A Comparative Empirical Analysis of Public Sector and Private Sector Banks

Les banques du secteur public en Inde sont-elles un échec pour le gouvernement ? Une analyse empirique comparative des banques du secteur public et du secteur privé

Sahil Chopra (sahil.chopra@emle.eu)
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Sahil Chopra: CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord

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Abstract: This paper seeks to examine the relation between banks' profitability and ownership in India. The justification to measure the impact of ownership comes from the theory of government failure. An independently constructed dataset containing all commercial public and private sector banks in India as of April 2020 is used. The data ranges from 2004 to 2020. Banks' characteristics are collected from respective banks' websites, and the hypotheses are tested by estimating an econometric model, i.e., the pooled OLS mod- el. In conclusion, the government owned banks' performance is inferior compared to pri- vate banks. This can be accredited to the huge amount of loans sanctioned in priority sec- tors and fraudulent cases due to the presence of interest groups, corruption, and ineffi- ciency of employees in public sectors.

Keywords: government failure; empirical analysis; public sector banks; panel data; pooled OLS model (search for similar items in EconPapers)
Date: 2022-12-29
New Economics Papers: this item is included in nep-eff
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Published in Analyses and Studies of CASP, 2022, 14 (2), pp.41-53

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