Articles by Saibal Ghosh

This article develops an empirical model to explore the role that bank characteristics play in influencing the monetary transmission process. Employing data on Indian commercial banks for the period 1992-2004, the findings indicate that for banks classified according to size and capitalisation, a monetary contraction lowers bank lending, although large and well-capitalised banks are able to shield their loan portfolio from monetary shocks.

The policy debate with regard to financial intermediaries has focused on whether, and to what extent, governments should impose capital adequacy requirements on banks, or alternately, whether market forces could also ensure the stability of banking systems. This paper contributes to the debate by showing how market forces may motivate banks to select high capital adequacy ratios as a means of lowering their borrowing costs. If the effect of competition among banks is strong, then it may overcome the tendency for bank under-capitalisation that arises from systemic effects. If systemic effects are strong, regulation is required. An empirical test for Indian public sector banks during the 1990s demonstrates that better capitalised banks experienced lower borrowing costs. These findings suggest that ongoing reform efforts at the international level should primarily focus on increasing transparency and strengthening competition among banks.

This paper looks at empirically assessing the determinants of risk-weighted bank capital ratios of state-owned banks in India during 1996-2002. Bank-specific characteristics, variables at the banking industry level and general macroeconomic factors have been taken into consideration for this purpose. The findings suggest that bank specific factors play an important role in influencing bank capital ratios in India.

The debate on bank capital regulation has in recent years devoted specific attention to the role that bank loan loss provisions play as a part of the overall minimum capital regulatory framework. The new Capital Accord is also attempting to address provisioning practices within a broad capital regulatory framework. This paper contributes to the debate by exploring the available evidence about bank loan loss provisioning in the Indian context. Using data on state-owned banks for the period 1997-2002, we find that banks tend to delay provisioning for bad loans until too late, possibly magnifying the impact of the economic cycles on their income and capital.

The paper examines whether monetary policy has similar effects across major states in the Indian polity. Impulse response functions from an estimated Structural Vector Auto Regression (SVAR) reveal two sets of states: a core of states that respond to monetary policy in a significant fashion vis-à-vis others whose response is less significant. The paper attempts to trace the reasons for the differential response of these two sets of states in terms of financial deepening and differential industry mix.