Financial Institutions In India Research Articles

Examining non-performing assets in financial institutions in India

Examining non-performing assets in financial institutions in India

Systemic Risk in Indian Financial Institutions: A Probabilistic Approach

Systemic Risk in Indian Financial Institutions: A Probabilistic Approach

Systemically important financial institutions and drivers of systemic risk: Evidence from India

The aim of this study is twofold: (1) identify the systemically important financial institutions in India and their contributing role to Indian systemic risk during various global and domestic events; and (2) uncover the factors driving systemic risk in Indian financial institutions. To serve the first aim, we estimate financial institutions' involvement in the overall risk of the Indian financial market using the component expected shortfall approach. The results show that the State Bank of India, ICICI Bank, HDFC Bank, and HDFC Ltd. contribute more than 50% to the aggregate risk in India, demonstrating a significant systemic risk concentration. These financial institutions are also referred to as domestic systemically important banks (D-SIBs) by the Reserve Bank of India (the central bank in India). Financial institutions show an increased contribution to overall systemic risk after the systemic events considered in the study. Furthermore, results indicate that banks play a dominating role in contributing to systemic risk in India; however, the analysis also indicates the increasing contribution of non-banking financial companies and insurance firms to the gross risk of the Indian financial market in recent years. To serve the second aim, we apply panel data regressions and show that the probability of default, leverage, loan, liquidity, board size, and Basel norms are significant drivers of systemic risk. Besides the importance of our findings for investment and risk management decisions during crisis periods, our findings have implications for policymakers overseeing the financial system in India, assessing potential vulnerabilities and designing prudential regulatory and action plans to maintain financial stability.

A Study of the State Bank of India's Performance Using the CAMELS Method of Analysis

When judging the current state of the economy, it is essential to consider how vital the financial sector is to boost economic activity. It is crucial to the operation of an economy's banking system, which includes monetary and fiscal systems, all of which rely on how well that economy's banking system performs. We will use the CAMELS approach of analysis to the gathered data to evaluate the performance of the State Bank of India. The Reserve Bank of India was the first institution to suggest the CAMELS Rating System. The authors used data from reliable secondary sources for the SBI from 2012 to 2022 to conduct their study. The years 2012 through 2022 saw the utilization of this data. This research employed an OLS regression model to examine the variables' unit roots and the data's normality. This was done to find out what kind of relationship there is between the dependent variable and the other variables. The financial standing of models representing the performance of the banking sector is examined using the CAMELS analysis technique. These prototypes are used to explore the financial performance of the archetypes of Indian financial institutions that make up the banking industry. This investigation's primary target, the State Bank of India, can render a decision. The data provided in this study also helps future researchers comprehend how the CAMELS Approach impacted the effectiveness and profitability of financial organizations. Future researchers will have access to this study's financial measurements and the CAMELS Method, which may be used to assess the overall financial health of institutions. The links to these two contributions are provided below.

An overview of anti-money laundering practice in the indian financial system

Money laundering is a menace to economies and a central concern globally. The financial system remains the primary target of money launderers. While the risk of money laundering cannot be entirely eliminated, it can be mitigated through specific preventative measures. In this regard, FATF took its initial international step by presenting its 40 recommendations to combat Money Laundering and Terrorist Financing. These recommendations have since evolved into a model for successful national and global Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) controls. This paper aims to assess and describe the anti-money laundering (AML) practice and framework within the Indian financial system, as well as to examine how the Indian financial system has addressed FATF's recommendations on AML. The study utilizes secondary data obtained from books, annual reports, and selected websites to achieve its objectives. The findings of the study demonstrate that the Anti-Money Laundering (AML) regime in the Indian financial system is regulated by the Prevention of Money Laundering Act (PMLA) along with an established regulatory and supervisory framework to address FATF Recommendations. The AML framework of the Indian financial system includes FIU-India, which operates as a national agency for receiving, processing, analyzing, and disseminating information related to suspicious transactions. Additionally, the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), and Insurance Regulatory Development Authority (IRDA) serve as the regulatory and supervisory bodies for financial institutions in India. Regulating, supervising, and developing Anti-Money Laundering (AML) policies and practices for the Indian financial sector fall under the responsibilities of these three authorities.

Influence Between Bank Spread Rate and NPA

This research aimed to determine how interest rate dispersion affects the quantity of bad loans at Indian financial institutions. The research strategy used in this analysis of Indian Bank data was descriptive in nature. The Bank Supervision Report was employed as a secondary source for this study’s data collection. The correlation between interest rate spread and loan default was investigated using quantitative and qualitative methods of data analysis. Charts, tables, and pie diagrams were used to illustrate the information. The research found that the cost of loans paid to borrowers is affected by interest rate spread, and that interest rate regulations have far-reaching implications on asset non-performance since they determine the interest rate spread in banks and assist alleviate moral hazards incidental to NPAs. As interest rates are benchmarked against the associated non-performing assets and non-performing assets are attributed to high cost of loans, credit risk management techniques indirectly affect the value of a bank’s interest rate spread. Since an inefficient interest rate policy might raise interest rates and, in turn, NPAs, the study suggests that commercial banks in RBI should evaluate their clientele and charge interest rates properly. To lower the number of nonperforming loans (NPAs), they implement strict rules on interest rates charged by banks in order to regulate their interest rate spread and improve periodic/regular credit risk monitoring of their loan portfolios.

Impact of COVID-19 on systemic risk for Indian financial institutions

Impact of COVID-19 on systemic risk for Indian financial institutions

Impact of Covid-19 on Systemic Risk for Indian Financial Institutions

Impact of Covid-19 on Systemic Risk for Indian Financial Institutions

Fintech In Indian Capital Markets

The advent of advanced digital technologies has already caused disruptions across many industries. The financial services sector is also collaborating with Fintech to transform digitally. Post- demonetization, the Indian government created a favorable environment for Fintech. Many new financial products are brought in by new start-ups. Fintech has created a paradigm shift in availingof Financial Services. The primarily data-driven capital markets have been positively affected by Fintech. However, the technology implementation is still at a very nascent stage, and there are impediments and challenges along the way. This paper studies the application of advanced digital technologies in Indian capital markets through secondary research. It analyses gaps addressed by advanced digital technologies. It opens new avenues for potential breakthroughs and the impediments and challenges for implementing the technology. Fintech is an abbreviation for financial technology, which offers alternative technologies for banking and non-banking finance services. Fintech is a new term in the finance sector. The primary goal of this paper is to examine the opportunities and problems in the fintech sector. It describes the fintech industry’s evolution and the current financial technology (Fintech) in the Indian finance market. Fintech makes transfers safer for consumers by digitizing them. The advantages of Fintech platforms include lowering operating costs and a user-friendly interface. Indian Fintech services have the maximum growth in the country. Its services will alter the habits and behavior of Indian financial institutions.

Impact of Strategic Alliance Management on Competitive Advantage among Financial Institutions in India

More studies indicate that businesses becomes very competitive in an emerging market when they give importance to innovative activities that build their reputation in the market environment. Essentially, the key reason for innovativeness is the desire of firms to obtain increased business productivity and increased competitive edge and the ultimate goal of strategic alliance is to improve business productivity. Strategic alliance management is critical for firms that are in pursuit of improved productivity and their reward is often an increase in their profits and their market share. Process of strategic alliance management is strongly associated with organizational learning and refers to ability of organization to generate, accept and implement new ideas, processes, products or services. The primary goal of process strategic alliance is to generate a notable increase in productivity or to drive down costs significantly. This approach can help organizations achieve major reductions in process cost, improvements in quality, service levels and other business objectives. Strategic alliance management is contributor to creation of new markets and products for the market, however even after the benefits of strategic alliance management has been established the impact of strategic alliance management on productivity of Businesses has remained misunderstood. The study adopted the use of mixed method approach research design which is the application of both qualitative and quantitative approaches. The study used a desk study review methodology where relevant empirical literature was reviewed to identify main themes. Result findings from literature-based review indicated that strategic alliance had positive and significant influence on the productivity of businesses. It was recommended that strategic alliance information should be available particularly to regulatory and advisory bodies for guidance to the Businesses on the need to craft and employ sound strategies geared towards continuously embracing innovativeness since strategic alliance leads to improved financial productivity. Keywords: Product Strategic alliance, Service Strategic alliance, Productivity.

A Study on Emotional Intelligence on the Decision Making by the Employees of Financial Institutions in India

A Study on Emotional Intelligence on the Decision Making by the Employees of Financial Institutions in India

Recovery of Non-performing assets- A challenge for Indian Financial Institutions

The financial institutions or the banks involve in the lending activities with the aim of generating some returns instead that the banks need to wait for many a time to get interest payment by the borrowers, because the borrowers were not running with the good. This leads to banks have a positive growth of the NPAs and negative growth of the profit since the NPAs ultimately affect the profit. These NPAs will not only affect the profit but also give birth to so many problems, such as problem in liquidity, loss of shareholders interest, capital in adequacy, insolvency, etc., there should be a strict requirement of strict action to be taking on control and recovery of the NPAs. An attempt was made to understand the reasons contributed for the NPAs and impact of NPAs on the banks as well as on the market, and also to give possible suggestions for the recovery of NPAs. For the purpose of the study secondary data was collected from the SBI and Canara Bank website about the statistics of the NPAs and also referred articles and journal. The findings of the study reveals that improper recovery channels and the unpredictable market trends make the borrowers not to make the settlement, for that it is suggested that to formulate the effective strategies so that the smooth recovery can be done, and also recommended to use the following suggestions which are listed below for the betterment of the banks in recovery of NPAs.

Goods and services tax shock on small and medium enterprises working capital in India

Goods and Services Tax (GST) reform introduced by the Indian government in 2017 was considered as the utmost radical and comprehensive indirect tax regime undertaken since independence. The new tax reform had creataed a shock wave among the Indian business houses, especially to the Small and Medium Enterprises short term working capital requirements. This research paper analyzes the working capital constraints created by the implementation of GST on the SMEs. Three research models have been developed by including the major working capital components namely average collection period, average payables period, inventory conversion period and a dummy variable to capture the effect of GST. The mathematical model presented in the paper has been tested using Random effects GLS method. The results of the study reveals that during the sample period the SMEs production capacity had deteriorated, collections and payments were delayed, profit margins were diminished and the credit requirements had escalated. This research outcome will provide an insight to the policymakers and financial institutions in India to implement and revamp strategies that will enable the SMEs to revive from this challenging environment successfully.

The Role and Perception of Customer on Buying Behaviour Towards Real Estate Industry

This present study aims to explore the various dimensions and role of customer perception and buying behavior towards the growth of real estate industry in Chennai city of Tamil Nadu. The researcher has adopted survey method to gather the primary information from individuals those who shown interest to purchase and invest in real estate industry. The statistical tools such as, percentage analysis, descriptive statistics, mean based ranking, cluster and discriminant analysis has been applied for 148 samples collected in the study area. The result indicates that three dominant dimensions are significantly determine the purchase of real estate such as, Economic consideration factor, Livilihood Consideration factor and growth factor. Further, the result indicates that two types of purchasers are in the realm of real estate industry namely, individual investor and return seekers significantly differentiated with three purchase consideration factors. The real estate industry provides higher earnings to the buyers across the country to have better investment decisions and economic growth. Thus, leads to higher industrial growth, enhancement in socio economic conditions, strengthening the financial system, increase in financial leverages and lending among the individuals through different types of financial institutions in India.

Self help group model and credit linkage: A study with reference to State bank of Mysore

Financial inclusion, empowerment of women are part of a strategy to alleviate poverty and reach the millennium development goals(MDG). Since the 1990‘s the formal financial institutions in India have ventured into microfinance on a large scale by adopting the SHG-Bank linkage program model. The present paper attempts to analyze the SHG model and evaluate the performance of credit linkages of State Bank of Mysore, (now merged into State Bank of India since 2017.

Metamorphosis of Financial Institutions in India

Metamorphosis of Financial Institutions in India

Social Media and Financial Institutions in the Indian context

This paper aims to identify the extent to which social media is used by Indian financial institutions (FIs) for various purposes including generating financial awareness. We consider a total 32 FIs which are listed with Bombay stock exchange (BSE)/national stock exchange (NSE), India; 22 of them being banks and ten non-banking financial companies (NBFCs). Managers of all the FIs were interviewed using self-administered questionnaire. The result shows that Facebook, Twitter and LinkedIn are the most widely used social media platforms for exploring new markets, developing new ideas, selling financial products, connecting with the customers and customer relationship management (CRM). Further, banks and NBFCs are found to adopt these media pages to post important financial announcements, which increases customer's interest in investment options. The study provides a view on social media usage in terms of cost reduction and customer satisfaction. However, there are some risks associated with social media such as reputational risks, operational risks, data and information risks etc. Furthermore, managerial discussions highlighted their contribution to the use of social media to increase financial literacy.

Social media and financial institutions in the Indian context

This paper aims to identify the extent to which social media is used by Indian financial institutions (FIs) for various purposes including generating financial awareness. We consider a total 32 FIs which are listed with Bombay stock exchange (BSE)/national stock exchange (NSE), India; 22 of them being banks and ten non-banking financial companies (NBFCs). Managers of all the FIs were interviewed using self-administered questionnaire. The result shows that Facebook, Twitter and LinkedIn are the most widely used social media platforms for exploring new markets, developing new ideas, selling financial products, connecting with the customers and customer relationship management (CRM). Further, banks and NBFCs are found to adopt these media pages to post important financial announcements, which increases customer's interest in investment options. The study provides a view on social media usage in terms of cost reduction and customer satisfaction. However, there are some risks associated with social media such as reputational risks, operational risks, data and information risks etc. Furthermore, managerial discussions highlighted their contribution to the use of social media to increase financial literacy.

Fraudulent Corporate Transactions: Reworking Regulating Silos

Recent times are witness to corporate frauds of various kinds and dimensions. They effect companies and financial entities of all size, sector and region and have taken for surprise the law enforcement agencies of the very advanced and developed economies as well as the developing or the developed ones, with high growth rate. Stringent penal provisions in the capitalist west was unable to contain the malaise of fraud. Post liberalization of the economy, the occurrence of corporate fraud has increased manifold in India. The regulations introduced often lagged behind the pace of corporate development. In fact, the system of regulating financial institutions in India was always highly fragmented, outdated and ineffective. It managed regulations with the help of multitude of agencies, self-regulatory organizations and state authorities who share oversight of the financial system under a sort of adhocism, often symptomatic of a framework uncomfortably saddled with gaps in regulatory silos, legal complexities and institutional inefficiencies.

Interest Rate Sensitivity of Non-banking Financial Sector in India

Executive Summary Before financial liberalization, interest rates were administered and exhibited near-zero volatility. The easing of financial repression in the 1990s generated experiences with interest rate volatility in India. Administrative restrictions on interest rates in India have been steadily eased since 1993. This has led to increased interest rate risk for financial firms. Most research studies have almost exclusively focused on the developed countries especially the banking sector of the United States. The present study attempts to examine the interest rate risk of non-banking financial institutions in India by using the methodology of panel regression and generalized autoregressive conditional heteroscedasticity (GARCH) (1, 1) model for the period from 1 April 1996 to 30 August 2014. The sample used in the study consists of all non-banking financial companies (NBFCs) listed in the S&P CNX 500 index which has continuous availability of share prices over the study period. The study also examines the impact of unanticipated changes in interest rate on stock returns of NBFCs. The Box–Jenkins methodology is applied to calculate unanticipated changes in interest rate variable, autoregressive integrated moving average (ARIMA) (24, 1, 0) model. The time series used in the present study is found to be stationary at the first logarithmic difference. Stock returns exhibit significant exposure with both market returns and interest rate changes. The interest rate sensitivity of large, medium, and small financial institutions is also found to be different. Estimation results for the variance equation in GARCH (1, 1) model suggest that the volatility for individual firm stock returns is time-variant. The ARCH and GARCH coefficients are found to be significant, providing evidence against using traditional model (ordinary least square (OLS)) that assumes time-invariant volatility. This implies that the market has a memory longer than one period and volatility is more sensitive to its own lagged values than it is to new surprises in the market. This study also investigates the possible determinants that account for cross-sectional variation in the interest rate sensitivity of NBFCs. It is found that the size of the firm is the preferred determinant that accounts for cross-sectional variation in the interest rate sensitivity of finance companies. When unanticipated changes in interest rate are used in lieu of actual interest rate changes, not much difference is observed in the significance coefficients. The only significant difference observed is in the magnitude. The impact of actual interest rate changes is more than the impact of unanticipated interest rate changes in absolute terms. This difference in the magnitude of impact arises because actual data incorporate movement in both anticipated and unanticipated components of interest rate. Hence, NBFCs managers and regulators should adopt policies and strategies to avoid the transmission of interest rate risk in their stock returns.