Competition in the Indian Banking Sector: A Panel Data Approach

Zhiheng Li,Shuangzhe Liu,Fanda Meng,Milind Sathye

doi:10.3390/jrfm12030136

Zhiheng Li, Shuangzhe Liu + Show 2 more

Open Access

https://doi.org/10.3390/jrfm12030136

Copy DOI

Abstract

The paper aims to assess the level of competition in the Indian banking sector overall as well as within the three groups of banks: foreign owned, state owned (public sector), and privately owned. We use panel data for the period from 2005–2018. We found that the overall competition in the Indian banking sector is strong, although there are differences by type of bank ownership. The Indian banking market continues to be characterized by monopolistic competition. The various policy measures taken by the Indian government in recent years appear to have helped boost competition. A policy suggestion would be to further liberalize the banking sector for foreign investment.

Highlights

This paper aims to assess the competitive conditions in the Indian banking sector overall and within the three sets of banks: state-owned, foreign-owned and privately-owned
The present study aimed to assess the competition in the Indian banking sector overall and within the three bank groups by ownership, that is, state-owned, foreign-owned, and privately-owned
Following from Apergis et al (2016), we empirically estimated the level of banking competition

Summary

Introduction

This paper aims to assess the competitive conditions in the Indian banking sector overall and within the three sets of banks: state-owned, foreign-owned and privately-owned. The research is motivated by the following: First, though there is a vast literature on banking competition in the US and Europe, India, the 6th largest economy in the world (IBEF 2019a), has received limited attention. We use the most recent panel data for the years 2005–2018 to study competition in the Indian banking sector and analyze the competition by bank ownership type. Given the importance of India in the world economy and the size of its banking sector, and the liberalized foreign investment policy, several international banks are contemplating entry in India’s banking sector. We extend the methodology proposed by Apergis et al (2016) and apply it to the Indian banking sector

Objectives

Methods

Results

Discussion

Conclusion