ABSTRACT

In the last few years, due to a drastic increase in bad loans, the credit quality of banks has degraded in India. Along with national policies designed by banking regulator Reserve Bank of India (RBI) for management of credit quality, international best practices have also been implemented by the banking institutions. The Basel Accords proposed by the Basel committee have been provided for strengthening the banking sector and making it more resilient to any economic or financial shocks. Thus, the present study has been carried out with the objective to analyze the association between the recommendations of the most recent Accord by the Basel committee, that is, Basel III, and the credit quality of Indian banking industry. The study has undertaken a sample of 37 domestic commercial banks, examined over a time frame of 5 years (2015–2019). In order to address the endogeneity issue between capital regulations and credit quality representative, non-performing assets (NPA), the two-step system generalized method of moments has been applied for the purpose of regression analysis. The study has found that stringent capital requirements imposed by RBI are helpful in improving the credit quality of banks by reducing NPA. The results have further shown that the non-risk-based leverage ratio brings additional bad loans and, thus, bears an adverse influence on the asset quality of banks. The liquidity risk measure provided by Basel III, liquidity coverage ratio, does not carry any significant impact on NPA of domestic Indian banks. Results of the present study have implications for policymakers and bank management. Iinvestors can also benefit from the study. They can take the results presented on which banks are expected to be faced with a higher credit risk in future and the banking entities holding higher capital buffers which can protect the institutions from future loan losses.

摘要

在过去几年中，由于不良贷款急剧增加，印度银行的信用质量下降。除了银行监管机构印度储备银行 (RBI) 为管理信贷质量而制定的国家政策外，银行机构还实施了国际最佳实践。巴塞尔委员会提议的巴塞尔协议旨在加强银行业，使其更能抵御任何经济或金融冲击。因此，本研究旨在分析巴塞尔委员会最新协议（即巴塞尔协议 III）的建议与印度银行业信用质量之间的关联。该研究对 37 家国内商业银行​​进行了抽样调查，时间跨度为 5 年（2015-2019 年）。为解决资本监管与信用质量代表不良资产（NPA）之间的内生性问题，采用两步系统广义矩量法进行回归分析。研究发现，印度储备银行实施的严格资本要求有助于通过减少 NPA 来提高银行的信用质量。结果进一步表明，非风险杠杆率会带来额外的不良贷款，从而对银行的资产质量产生不利影响。巴塞尔协议 III 提供的流动性风险衡量指标，流动性覆盖率，对印度国内银行的 NPA 没有任何重大影响。本研究的结果对政策制定者和银行管理层有影响。投资者也可以从这项研究中受益。