Dynamics of Credit Risk Management in India | Australian Academy of Business Research

<!DOCTYPE html> <html lang="en-US" xml:lang="en-US"> <head> <meta charset="utf-8"> <meta name="viewport" content="width=device-width, initial-scale=1.0"> <title> Dynamics of Credit Risk Management in India | Australian Academy of Business Research </title> <meta name="generator" content="Open Journal Systems 3.3.0.15"> <meta name="gs_meta_revision" content="1.1"/> <meta name="citation_journal_title" content="Australian Academy of Business Research"/> <meta name="citation_journal_abbrev" content="AABR"/> <meta name="citation_issn" content="2981-9504"/> <meta name="citation_author" content="Madhumathi Rajendran"/> <meta name="citation_author" content="Viswanathan Balakrishnan"/> <meta name="citation_author" content="Anganatham Madabhushi"/> <meta name="citation_title" content="Dynamics of Credit Risk Management in India"/> <meta name="citation_language" content="en"/> <meta name="citation_date" content="2023/10/09"/> <meta name="citation_volume" content="1"/> <meta name="citation_issue" content="1"/> <meta name="citation_firstpage" content="32"/> <meta name="citation_lastpage" content="43"/> <meta name="citation_abstract_html_url" content="https://aabr.com.au/index.php/aabr/article/view/4"/> <meta name="citation_keywords" xml:lang="en" content="Credit loss"/> <meta name="citation_keywords" xml:lang="en" content="Credit Risk"/> <meta name="citation_keywords" xml:lang="en" content="Credit Risk Management"/> <meta name="citation_keywords" xml:lang="en" content="Liquidity Risk"/> <meta name="citation_keywords" xml:lang="en" content="Operational Risk"/> <meta name="citation_keywords" xml:lang="en" content="Abnormal Loan Growth"/> <meta name="citation_keywords" xml:lang="en" content="Bank Competition"/> <meta name="citation_pdf_url" content="https://aabr.com.au/index.php/aabr/article/download/4/10"/> <link rel="schema.DC" href="http://purl.org/dc/elements/1.1/" /> <meta name="DC.Creator.PersonalName" content="Madhumathi Rajendran"/> <meta name="DC.Creator.PersonalName" content="Viswanathan Balakrishnan"/> <meta name="DC.Creator.PersonalName" content="Anganatham Madabhushi"/> <meta name="DC.Date.created" scheme="ISO8601" content="2023-10-09"/> <meta name="DC.Date.dateSubmitted" scheme="ISO8601" content="2023-10-09"/> <meta name="DC.Date.issued" scheme="ISO8601" content="2024-04-16"/> <meta name="DC.Date.modified" scheme="ISO8601" content="2024-04-16"/> <meta name="DC.Description" xml:lang="en" content="Introduction: Indian banking system is subject to similar global risk categories of credit, market, liquidity, and operational risk though credit risk requires substantial managerial commitment since it can impact other risk characteristics. This study investigates the credit risk in the banking sector which is represented in three forms viz. loan loss reserve, NPAs and capital provisions. Literature review/research gap: Earlier studies have not considered a wide variety of factors to examine the banks’ credit risk. Research method: Quantile regression estimates supported by a position distribution framework model identifies the impact of prior NPA provisions on loan loss. Findings: Operational risk, abnormal loan growth and business risk impact the loan provision. Bank competition, NPAs and abnormal loan growth negatively impact the return on asset and Liquidity risk and NPAs impact negatively the return on equity of banks. Theoretical and practitioner implications: The non-linear impact of intermediation cost suggests a strategic credit risk management process in Indian banks and hence their ability to offset reduction in bank performance. Limitations: Quantile regressions can identify the impact of variables without subjecting the data set to specific distribution assumptions and has the tendency to disregard the influence of outliers. Australian Academy of Business Research, volume 1, issue 1, September 2023, pp 32-43"/> <meta name="DC.Format" scheme="IMT" content="application/pdf"/> <meta name="DC.Identifier" content="4"/> <meta name="DC.Identifier.pageNumber" content="32-43"/> <meta name="DC.Identifier.URI" content="https://aabr.com.au/index.php/aabr/article/view/4"/> <meta name="DC.Language" scheme="ISO639-1" content="en"/> <meta name="DC.Rights" content="Copyright (c) 2023 Madhumathi Rajendran, Viswanathan Balakrishnan, Anganatham Madabhushi"/> <meta name="DC.Rights" content="https://creativecommons.org/licenses/by/4.0"/> <meta name="DC.Source" content="Australian Academy of Business Research"/> <meta name="DC.Source.ISSN" content="2981-9504"/> <meta name="DC.Source.Issue" content="1"/> <meta name="DC.Source.Volume" content="1"/> <meta name="DC.Source.URI" content="https://aabr.com.au/index.php/aabr"/> <meta name="DC.Subject" xml:lang="en" content="Credit loss"/> <meta name="DC.Subject" xml:lang="en" content="Credit Risk"/> <meta name="DC.Subject" xml:lang="en" content="Credit Risk Management"/> <meta name="DC.Subject" xml:lang="en" content="Liquidity Risk"/> <meta name="DC.Subject" xml:lang="en" content="Operational Risk"/> <meta name="DC.Subject" xml:lang="en" content="Abnormal Loan Growth"/> <meta name="DC.Subject" xml:lang="en" content="Bank Competition"/> <meta name="DC.Title" content="Dynamics of Credit Risk Management in India"/> <meta name="DC.Type" content="Text.Serial.Journal"/> <meta name="DC.Type.articleType" content="Articles"/> <link rel="stylesheet" href="https://aabr.com.au/index.php/aabr/$$$call$$$/page/page/css?name=bootstrapTheme-spacelab" type="text/css" /> </head> <body class="pkp_page_article pkp_op_view has_site_logo"> <div class="pkp_structure_page"> <nav id="accessibility-nav" class="sr-only" role="navigation" aria-label="Quick jump to page content"> <ul> <li><a href="#main-navigation">Main Navigation</a></li> <li><a href="#main-content">Main 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role="search" method="post" action="https://aabr.com.au/index.php/aabr/search/search"> <div class="form-group"> <input class="form-control" name="query" value="" type="search" aria-label="Search Query" placeholder=""> </div> <button type="submit" class="btn btn-default">Search</button> </form> </div> </nav> </div> </header> <div class="pkp_structure_content container"> <main class="pkp_structure_main col-xs-12 col-sm-10 col-md-8" role="main"> <div class="page page_article"> <nav class="cmp_breadcrumbs" role="navigation" aria-label="You are here:"> <ol class="breadcrumb"> <li> <a href="https://aabr.com.au/index.php/aabr/index"> Home </a> </li> <li> <a href="https://aabr.com.au/index.php/aabr/issue/archive"> Archives </a> </li> <li> <a href="https://aabr.com.au/index.php/aabr/issue/view/1"> Vol. 1 No. 1 (2023): Australian Academy of Business Research </a> </li> <li class="active"> Articles </li> </ol> </nav> <article class="article-details"> <header> <h1 class="page-header"> Dynamics of Credit Risk Management in India </h1> </header> <div class="row"> <section class="article-sidebar col-md-4"> <h2 class="sr-only">Article Sidebar</h2> <div class="download"> <a class="galley-link btn btn-primary pdf" role="button" href="https://aabr.com.au/index.php/aabr/article/view/4/10"> PDF </a> </div> <div class="list-group"> <div class="list-group-item date-published"> <strong>Published:</strong> Oct 9, 2023 </div> <div class="list-group-item keywords"> <strong> Keywords:</strong> <div class=""> <span class="value"> Credit loss, Credit Risk, Credit Risk Management, Liquidity Risk, Operational Risk, Abnormal Loan Growth, Bank Competition </span> </div> </div> </div> </section> <div class="col-md-8"> <section class="article-main"> <h2 class="sr-only">Main Article Content</h2> <div class="authors"> <div class="author"> <strong>Madhumathi Rajendran</strong> </div> <div class="author"> <strong>Viswanathan Balakrishnan</strong> </div> <div class="author"> <strong>Anganatham Madabhushi</strong> </div> </div> <div class="article-summary" id="summary"> <h2>Abstract</h2> <div class="article-abstract"> <p><strong>Introduction: </strong>Indian banking system is subject to similar global risk categories of credit, market, liquidity, and operational risk though credit risk requires substantial managerial commitment since it can impact other risk characteristics. This study investigates the credit risk in the banking sector which is represented in three forms viz. loan loss reserve, NPAs and capital provisions.</p><br /> <p><strong>Literature review/research gap: </strong>Earlier studies have not considered a wide variety of factors to examine the banks’ credit risk.</p><br /> <p><strong>Research method: </strong>Quantile regression estimates supported by a position distribution framework model identifies the impact of prior NPA provisions on loan loss.</p><br /> <p><strong>Findings: </strong>Operational risk, abnormal loan growth and business risk impact the loan provision. Bank competition, NPAs and abnormal loan growth negatively impact the return on asset and Liquidity risk and NPAs impact negatively the return on equity of banks.</p><br /> <p><strong>Theoretical and practitioner implications: </strong>The non-linear impact of intermediation cost suggests a strategic credit risk management process in Indian banks and hence their ability to offset reduction in bank performance.</p><br /> <p><strong>Limitations: </strong>Quantile regressions can identify the impact of variables without subjecting the data set to specific distribution assumptions and has the tendency to disregard the influence of outliers.</p><br /> <p><strong>Australian Academy of Business Research, volume 1, issue 1, September 2023, pp 32-43</strong></p> </div> </div> </section> <section class="article-more-details"> <h2 class="sr-only">Article Details</h2> <div class="panel panel-default issue"> <div class="panel-heading"> Issue </div> <div class="panel-body"> <a class="title" href="https://aabr.com.au/index.php/aabr/issue/view/1"> Vol. 1 No. 1 (2023): Australian Academy of Business Research </a> </div> </div> <div class="panel panel-default section"> <div class="panel-heading"> Section </div> <div class="panel-body"> Articles </div> </div> <div class="panel panel-default copyright"> <div class="panel-body"> <a rel="license" href="https://creativecommons.org/licenses/by/4.0/"><img alt="Creative Commons License" src="//i.creativecommons.org/l/by/4.0/88x31.png" /></a><p>This work is licensed under a <a rel="license" href="https://creativecommons.org/licenses/by/4.0/">Creative Commons Attribution 4.0 International License</a>.</p> </div> </div> </section> </div> </div> </article> </div> </main> <aside id="sidebar" class="pkp_structure_sidebar left col-xs-12 col-sm-2 col-md-4" role="complementary" aria-label="Sidebar"> <div class="pkp_block block_custom" id="customblock-aabr-submission-site"> <h2 class="title">AABR Submission Site</h2> <div class="content"> <p>Please make a submission by using the "<strong>MAKE A SUBMISSION</strong>" link below. <u>You may not receive any notification of your submission in your email</u>. 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Dynamics of Credit Risk Management in India | Australian Academy of Business Research