Market Risk Management Practices of the Indian Banking Sector: An Empirical Study

Abstract

The primary objective of this paper is to examine the market risk and liquidity risk management techniques and practices followed by the Indian scheduled commercial banks (SCB) consisting of public sector banks (PSBs) and private sector banks (PVSBs) for five years from 2016-17 to 2020-21. The other objective is to compare market and liquidity risk management practices between the public sector banks (PSBs) and private sector of banks (PVSBs). The other purpose of the study is to review the strategies adopted by the SCBs in risk management practices. To study the risk management practices, six largest banks each from PSBs and PVSBs are taken for sample study. This study finds that the SCBs are facing credit risk, market risk (Interest rate risk, foreign exchange risk, commodity price risk and equity price risk,) liquidity risk and operational risk. It also finds that the PSBs are better reporting and presenting their risk management practices in their annual reports than that of PVSBs in risk identification, risk assessment and risk analysis. The results indicate that there is no significant difference between the PVSBs and PSBs in the policies and practices of market risk and liquidity risk assessment, evaluation, monitoring risk controlling and risk taking. This paper will be relevant and value to those interested in research in the risk management banking industry. This is a descriptive research based on secondary data.

Financial inclusion using corporate social responsibility: a socio-economic demand–supply analysis

“…bank branches per-100,000 people, ATM per 100,000 people), geographic penetration (bank branches per square kilometer, ATM booths per square kilometer), deposit-income ratio, credit-income ratio, availability of the appropriate financial products, e.g. emergency credit, payment product and entrepreneurial credit (Haldar et al, 2016;Ullah, 2013;Sarma and Pais, 2011;Allen et al, 2016). Again the demand side includes indicators on barriers that lead to financial exclusion (e.g.…”

“…The above discussion suggests that there are a lot of opportunities for CSR in the banking sector to help eradicate financial exclusion problems (Haldar et al, 2016;Camera and Tuesta, 2017;Azim et al, 2011;Siddik et al, 2014).…”

“…Banking penetration is the only dimension used in measuring the FI index. All indicators comprise the supply side, including geographic penetration (number of bank branches per thousand square km), demographic penetration (number of bank branches per 100,000 people, number of deposit accounts per 1,000 people, number of credit accounts per 1,000 people), depositincome ratio and credit income ratio (Chakravarty and Pal, 2013;Haldar et al, 2016;Sarma, 2008;Ullah, 2013). Recent studies include mobile banking and Internet banking as indicators of banking penetration.…”

“…The pertinence of FI is that current development theories suggest that greater FI can positively impact the lives of the poor and underprivileged (Bhattacharyya et al, 2021). It supports economically disadvantaged people through efficient allocation of productive resources and potentially reducing the cost of capital (Haldar et al, 2016), thereby allowing these people to increase their income and escape from poverty (Demirg€ uç-Kunt and Klapper, 2012). Consequently, people's social and economic inclusion has become a significant component of the global development agenda.…”

“…In India, Bhattacharyya et al (2021) found that CSR expenditure and a composite set of FI variables during the period 2015-2017 did not have an effect on the better financial performance of banks in accounting terms, but indulging in both initiatives led to a negative effect on the stock return of the banks. In Bangladesh, Haldar et al (2016) showed geographical as well as demographical penetration of banking services. However, the authors did not distinguish between needy people and fortunate ones and did not identify the actual beneficiaries of these extensive banking services.…”