Performance of Indian Banks - Does Ownership Matter?

12 Pages Posted: 15 Jun 2004

See all articles by Deepak Khatri

Deepak Khatri

Indira Gandhi Institute of Development Research (IGIDR)

Nitin Kumar

Indira Gandhi Institute of Development Research

Abstract

It has been argued since long time that private ownership of firms leads to better firm performance, since private ownership leads to better intra-firm allocation of resources. But it does not guarantee that privately owned firms would always perform better than public sector firms. For instance if firms are subjected to competitive forces, they would perform efficiently irrespective of the sector they belong to. In this paper we have divided the Indian banking industry into four sub-groups, viz., Public, new Private, Old Private, and Foreign and tried to study their performance in a panel data framework. The period of study is 1995 to 2001.

The result suggests that initially Private sector and Foreign banks were performing better but as the competition increased the Public sector has reduced the performance gap. Thus after 1999 neither competition nor ownership has any influence on banks performance. The evidence suggests that entry of Private and Foreign banks have increased the competition in the Indian banking sector.

Keywords: Banks, Ownership Structure, Performance

JEL Classification: G21, G32, P17

Suggested Citation

Khatri, Deepak and Kumar, Nitin, Performance of Indian Banks - Does Ownership Matter?. Available at SSRN: https://ssrn.com/abstract=556445 or http://dx.doi.org/10.2139/ssrn.556445

Deepak Khatri (Contact Author)

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Bombay 400065, Maharashtra
India
+91-22-28400919 (Phone)
+91-22-28402752 (Fax)

HOME PAGE: www.igidr.ac.in

Nitin Kumar

Indira Gandhi Institute of Development Research ( email )

Santosh Nager
Film City Road, Goregaon(East)
Mumbai, Maharashtra 400065
India
+91-022-28400919 (Phone)

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