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Are public sector banks in India a government failure? : a comparative empirical analysis of public sector and private sector banks in India
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Autores
Orientador(es)
Resumo(s)
To extend banking services to the Indian rural sector, an act was passed in 1976 and
then in 1980 to nationalize the banks. Giving the name to such an approach as social
banking. Banking sector in India, therefore, has been bifurcated into public sector
banks, private sector banks, foreign banks, regional rural banks, urban cooperative
banks and rural cooperative banks.
Many studies have assessed the performance of private and public sector banks. Such
research has evaluated the performance of private and public sector banks by estimating
bank-specific and macroeconomic parameters. However, not many quantitative
literatures are available which have estimated the impact of ownership on bank
performance by considering ownership as one of the bank-specific independent variables
to evaluate the impact of ownership on bank profitability. This paper seeks to fill this gap
by examining the determinants of profitability on the account of ownership, and it uses
an independently constructed dataset containing all commercial public and private sector banks in India as on April 2020. The data ranges from 2004 to 2020. The justification to
measure the impact of ownership comes from the theory of Government failure, which
mainly points out how government intervention can result in costly solutions. Therefore,
by adding the independent variable in an already established model, we can assess the
impact of ownership.
Banks’ characteristics are collected from respective banks’ websites, and the hypotheses
are tested by estimating an econometric model, i.e. a pooled OLS model.
The results are promising: the banking industry as a whole is not performing well,
however government owned banks are showcasing the worst performances. The reason
for this can be the huge amount of loans sanctioned in priority sectors and fraudulent
cases which may be due to the presence of interest groups, corruption and inefficiency of
employees in public sectors.
Descrição
Palavras-chave
Government Failure Empirical Analysis Public Sector Banks Panel Data Pooled OLS model
Contexto Educativo
Citação
Chopra, Sahil (2022). "Are public sector banks in India a government failure? : a comparative empirical analysis of public sector and private sector banks in India". REM Working paper series, nº 0240/2022
Editora
ISEG - REM - Research in Economics and Mathematics