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International Journal of Law and Management

Credit growth and macroprudential regulation: is ownership important?

Saibal Ghosh
( Reserve Bank of India Mumbai India )
Abstract :

The paper examines the impact of macroprudential policies (MPPs) on credit growth. Towards this end, we employ quarterly data on Indian commercial banks for the period 2002:1 to 2012:1 that subsumes the imposition of MPPs. .

The analysis employs dynamic panel data (DPD) methodology to test the relevant hypotheses regarding the interlinkage between credit growth, bank ownership and macroprudential policies. The DPD methodology has the advantage of being able to address the endogeneity between credit growth and macroprudential regulation.

The results appear to suggest that MPPs targeted on provisions are relatively more effective in limiting credit expansion. When considered in conjunction with bank ownership, they appear to have much more force in moderating the severity of the credit cycle

The lack of an extensive database on the relevant variables might hinder the robustness of the results. Second, it is possible that MPPs are effective in curbing loan extension to targeted sectors, which cannot be adequately examined using aggregate loan data.

The role and usefulness of macroprudential policies in limiting the build-up of risk has been widely discussed in recent times. Judged from that standpoint, the paper contributes to this literature by examining the issue for a leading emerging economy.

To the best of our knowledge, this is one of the earliest studies to examine this issue in a systematic manner for India.

Keywords :
Saibal Ghosh

Date Deposited : 28 Mar 2015 11:08

Last Modified : 28 Mar 2015 11:08

Official URL: http://www.emeraldinsight.com/journal/ijlma

Volume 57, Number 3, - 2015 , ISSN 1754-243X

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