Credit Deposit ratio and ownership structure in the Indian banking sector: an empirical analysis

• Journal: Global Academic Society Journal: Social Science Insight, Vol. 1, No. 4, year 2008, pp. 4-17.
• Author(s): Nitin Kumar, Puneet Verma
• Category: Social Science Insight III
• Keywords: Indian banking sector, banking system, financial system, credits, bank loans, deposits, the Reserve Bank of India, public sector banks, Credit Deposit ratio (CD ratio), ownership structure

Abstract

For an emerging economy like India, it is vital to have sound financial intermediaries and commercial banking sector, which effectively mops up the savings available with the public and disburses credit to the productive sector in an efficient manner helping India to progress on the path of steady growth and prosperity. The study is an attempt to assess whether some bank groups are better at delivering the required outcome. Using the econometric techniques over the time horizon of 1991 to 2006 and controlling for certain structural characteristics, it is revealed that the foreign bank group has exhibited the best credit deposit ratio, whereas some attention is still required in case of public sector banks where further scope for improvement exists.
The paper provides a brief overview of banking structure in India, explains the model and the methodology, which has been applied in the study followed by empirical results. The summary of major findings and policy implications is provided in the paper as well.