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Erschienen in:
Indian Economics: Tragedy of a Forsaken Legacy Kapitel lesen Erstes Kapitel lesen

2022 | OriginalPaper | Buchkapitel

Are Bank Revenue Diversification Strategies Paying off for India?

verfasst von : Nagaraju Thota, Pranesh Bhargava, A. C. V. Subrahmanyam

Erschienen in: Studies in International Economics and Finance

Verlag: Springer Singapore

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Abstract

Banks worldwide are strategically diversifying their revenues to stabilize the earning profile and improve profitability. We revisit this hypothesis in the Indian context using a longer time series of bank performance data from 1999 to 2020, which coincides with the onset of 2nd financial reforms in the country. We observe that the increasing share of non-interest income in the total income of Indian banks reflects the adoption of revenue diversification strategies. We assessed the impact of non-interest income on profitability and risk of banks and find evidence that profitability and risk of the banks are positively associated with the non-interest income with varied trends for individual bank groups. We also investigated the impact of components of non-interest income, viz. fee, trading and miscellaneous income on bank profitability and risk, and observed that the impact is varied across banking groups. Overall, our findings suggest that the benefits from revenue diversification strategies for banks in India is positive, but it is dependent on bank ownership type and the components of the non-interest income. Our results are robust and provide measures of revenue diversification and its impact on profitability and risk.

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Fußnoten
1
The authors would like to thank Prof. Yoshino for his helpful comments.
 
2
Banking groups in the Indian context are defined based on the ownership as Public, Private and Foreign sector banks.
 
3
Data was extracted from various reports and statistical tables related to banks in India.
 
4
Three-year rolling standard-deviation.
 
5
Focus-1 = (share of interest income to total income)2 + (share of NII to total income)2.
 
6
Focus-2 = (share of interest income to total income)2 + (share of fee income to total income)2 + (share of trading income to total income)2 + (share of miscellaneous income to total income)2.
 
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Metadaten
Titel
Are Bank Revenue Diversification Strategies Paying off for India?
verfasst von
Nagaraju Thota
Pranesh Bhargava
A. C. V. Subrahmanyam
Copyright-Jahr
2022
Verlag
Springer Singapore
Buch
Studies in International Economics and Finance

Print ISBN: 978-981-16-7061-9

Electronic ISBN: 978-981-16-7062-6

Copyright-Jahr: 2022

DOI
https://doi.org/10.1007/978-981-16-7062-6_21

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