TAILIEUCHUNG - Interest-Rate Risk in the Indian Banking System

Our empirical analysis of the cross-country determinants of bank fees is made possible by the availability of a unique dataset on bank fee levels in five Central European countries: Austria, the Czech Republic, Hungary, Poland and Slovakia. The structure of our dataset enables us to cope with heterogeneity and cross- subsidization by employing a representative fee index instead of using variables associated with individual fees. The socio-geographic region formed by these countries has several important advantages for our purposes. First, these countries are characterized by significant differences in the maturity of their banking sectors | WORKING PAPER NO. 92 Interest-Rate Risk in the Indian Banking System Ila Patnaik Ajay Shah December 2002 INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS Core-6A 4th Floor India Habitat Centre Lodi Road New Delhi-110 003 Foreword The banking sector was an important area of focus in economic reforms of the 1990s. The first phase of banking reforms were focused on credit risk dealing with the issues of recognition of bad assets appropriate provisioning for them and requiring adequate equity capital in banks. In recent years interest rates dropped sharply. Banks have profited handsomely from the increased prices of bonds and loans. However this has raised concerns about what could happen in the banking system in the event of an increase in interest rates. This paper offers some timely research inputs on these questions. It seeks to obtain measures of the vulnerability of banks in India in the event of an increase in interest rates. I am confident that it will help the shareholders and managers of banks board members supervisors and policy makers in thinking more effectively about the interest rate risk that banks face. Arvind Virmani Director Chief Executive ICRIER December 2002 Interest-rate risk in the Indian banking system Ila Patnaik ICRIER New Delhi and NCAER New Delhi ila@ Ajay Shah Ministry of Finance New Delhi and IGIDR Bombay ajayshah@ http ajayshah December 23 2002 Abstract Many observers have expressed concerns about the impact of a rise in interest rates upon banks in India. In this paper we measure the interest rate risk of a sample of major banks in India using two methodologies. The first consists of estimating the impact upon equity capital of standardised interest rate shocks. The second consists of measuring the elasticity of bank stock prices to fluctuations in interest rates. We find that many major banks in the system have economically significant exposures. Using the first approach we find that .

• Ngân hàng - Tín dụng
• inadequate funding
• facilities studied
• treatment outcomes
• reported complete national programme
• service delivery
• Tuberculosis Control
• jointly reviewed
• managerial weakness
• national programme