000			01667nam a2200181Ia 4500
008			181130s2018 xx 000 0 und d
100			_aGoyal, Ashima
100			_aVerma, Akhilesh
245			_aSlowdown in bank credit growth: _baggregate demand or bank non-performing assets?
260			_c2018
300			_ap.257-275.
504			_dAug
520			_aWe estimate the determinants of credit and of non-performing assets (NPAs) using a firm and a bank panel with data up to 2015 in order to test bank lending against the aggregate demand channel as an explanation for slow Indian credit growth. The results support demand as the key constraint. Only demand variables affect corporate credit for a broad set of firms. Balance sheet weakness reduced credit only for a narrow subset of indebted firms in a difference-in-difference type analysis. Even so, sales remained the dominant variable. From the bank panel, the asset quality review (AQR) did have a strong negative effect on advances but gross NPAs did not. While high interest rates and low growth raised NPAs, so did past credit. Low demand not only reduced credit, it also increased NPAs. That the capital adequacy ratio (CAR) significantly reduces NPAs points to the productivity of fund infusion. When other determinants are controlled, bank ownership does not affect NPA ratios, again supporting external shocks as causal. The results suggest that apart from structural reform to clean balance sheets, recovery of demand is necessary for revival of credit growth. - Reproduced.
650			_aBank credit - India
650			_aBank loans - India
773			_aMargin
906			_aBank loans - India
999			_c506998 _d506998