Deepak Tandon

An Evaluation of the Technical, Pure Technical and Scale Efficiencies in the Indian Banking Industry using Data Envelope Analysis

A well-developed and efficient banking sector is the fundamental requirement for smooth functioning of any economy. The present study is an attempt to examine the technical, pure technical and scale efficiencies of the Indian banks across different ownership categories for the period 2009–2012. About 7 out of the 44 banks selected lie on the efficiency frontier and form the reference set for their peers. Further, it is observed that efficiency scores do not vary much across the public sector, private sector and foreign banks. Performance of the public sector and private sector banks is almost at par with respect to technical efficiency whereas in the case of foreign banks, there lays scope for improving scale efficiency. A second stage regression analysis is carried out using Tobit regression to examine the determinants of efficiency. Non-interest income emerges the most important determinant of efficiency of banks in India.

Measuring Intellectual Capital and Its Impact on Financial Performance: Empirical Evidence from CNX Nifty Companies

During the recent years, value of financial assets has grown exponentially when compared to physical assets indicating that intangibles are growing in importance in their contribution to economic growth. The evidence in support of this phenomenon can be found in the increasing gap between market and book valuation of firms. The present study attempts to measure the intellectual capital (IC) of publicly listed firms in India and empirically examine the relationship among IC, financial performance and market valuation of these firms. Value creation efficiency of the firms listed on CNX Nifty over the period ranging from 2004–2005 to 2013–2014 has been estimated using Pulic’s Value Added Intellectual Coefficient (VAIC). It was observed that firms operating in sectors such as financial services, mining and energy had the highest VAIC scores. Further, there was a positive association between VAIC and all the measures of financial performance—profitability, productivity and market valuations. Efficiency of physical capital employed had a significant positive relation with profitability, market valuation as well as productivity. Human capital efficiency was found to have a strong positive association with profitability, while structural capital efficiency did not have any significant impact on any of the measures of financial performance.

Drifts in Banking Business and Deepening Losses Amidst the Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (IBC) has been one of the most ground-breaking laws enacted in the country in recent times. It has already subsumed the existing Sick Industrial Companies Act (SICA), revamped the Debt Recovery Tribunals (DRT) and has emerged as a major legislation. Consequent to the implementation of IBC, there has been a paradigm shift in the debt-recovery scenario in India. Encompassing all companies, partnership firms and individuals, the code offers uniform, comprehensive insolvency legislation along with coherent and consistent provisions for the stakeholders affected by inability to pay debt or business failure. Unlike the time-consuming and never-ending process that used to be prevalent earlier, the code aims to attain time-bound and effective bankruptcy resolution. Now, the Insolvency and Bankruptcy Board of India (IBBI) has taken a pivotal role. This chapter analyses the IBC’s effectiveness in handling the situation that it was created for.

Capital expenditure and persistence of firm performance: an empirical study for the Indian automobiles industry

The purpose of the present work is to analyse the dynamic relationship between capital expenditure (CAPEX) intensity and firm performance for the automobiles industry in India. A dynamic panel methodology has been deployed. A sample of 95 listed automobiles firms in India for the period 2005 to 2014 has been considered. The results show that there exists a negative and persistent relation between performance and CAPEX. Also, a moderate level of persistence in the firm performance is observed for the sample companies. The results also indicate a possible U-shape relationship between CAPEX and firm performance. The study highlights the need for proper identification of the appropriate capital expenditure levels. This may lead to positive benefits for the Indian automobiles firms in the long-run.

Non-performing assets and profitability of Indian banks: an econometric study

The diminishing profitability of the Indian banking industry is owing to added stressed assets, wilful defaulters, and loss making assets depict massive bleeding of their balance sheets. The after effects can be now seen through the regulators implementing strictest vigilance, follow up with the banks, recovery measures such as Bankruptcy laws 2016, corporate debt restructuring (CDR), high provisioning, and heavy pecuniary penalties to the defaulters. The authors have estimated bank specific, macroeconomic determinants of the non-performing loans and their impact on the banking profitability. Multivariate panel data analysis for 35 Indian public and private sector banks over the period 2007-2016 has been done using panel data through fixed effect regression and modified ordinary least square and system GMM approach has been deliberated. Detailed estimation results in public vs. private sector banks have been given the conclusion. The NPA management in PSU banks needs attention as it affects the efficiency and profitability exponentially.

Impact of Ownership and Size on Operational Risk Management Practices: A Study of Banks in India

The financial crisis and resulting failure of large banks worldwide has shaken the entire world. Improper management of operational risk has been touted as one of the reasons for this failure. In light of the rising importance of operational risk management (ORM) in banks, the study explores the range of ORM practices followed by a cross section of Indian banks and compares them with the banks worldwide. The study also analyses the impact of size and ownership of banks on these practices. Reliability analysis using Cronbach alpha model, Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy and Bartlett’s test of sphericity was used to test reliability of questionnaire and justifies the use of factor analysis. Factor analysis was performed to extract the most important variables in ORM. The small size of bank was observed to be a deterrent to deep involvement of operational risk functionaries, collection and usage of external loss data and data collection and analysis. Further, the performance/preparedness of public sector and old private sector banks lagged behind peers in usage of key reporting components, such as risk and control self-assessment (RCSA), key risk indicators (KRI), scenarios, collection and usage of external loss data, data collection and analysis and quantification and modelling of operational risk.

Demonetization in India: The Good, Bad and Ugly Facets

Since 2014 onwards the Modi government is campaigning for curbing Black Money and has ad vented new schemes to curb the same. Even as the economic case for demonetization is strong, it is possible that there were also some political economy calculations that weighed with the Government. It is common knowledge that unaccounted for cash, especially in high denominations, plays a big role in financing election expenditure beyond the authorized limits. The authorshave critically examined the process of demonetization, boons and banes of demonetization, key impacts on various sectors and have concluded that necessary to put the economy on a high growth path that would generate more jobs and make housing in the urban area more affordable to the poor. For over one month, discussion all over India is going as to whether the move is good, with great execution or the move is bad and could have been better executed. The anti-demonetization forces seem to have rallied against the government citing common mans hardships. It is beyond prediction that whether the demonetization move started with great hope and enthusiasm will succeed or not. However, one can safely conclude that the intentions are very good.

Price discovery and dynamics of Indian equity exchange traded funds

The present study investigates the role of equity exchange traded funds (ETFs) in price discovery by studying a sample of nine equity ETFs following CNX Nifty and S&P BSE Sensex. The study reports an analysis based on the daily closing prices of ETFs and indices from the inception date of each ETF till December 2014. To examine the price discovery process, Johansens cointegration test, vector error correction model (VECM), impulse response function and variance decomposition test are employed. The results depicts that both the ETF price series and index price series are non-stationary at levels but are stationary at first difference. Johansen cointegration test results reveal the existence of long term relationship for all ETFs except Most Shares M50. There is ample evidence to suggest that unidirectional causality between ETF prices and index prices. The results of VECM depicts that index prices lead the ETF prices and the presence of error-correction term restores the equilibrium in the long-run. The impulse response function results indicate that ETFs responds to index price variation and shock decay period ranges between two to three periods. The results underscores the role of ETFs in price discovery process and in India ETFs still behave as passive instruments for hedging purpose.

Book Review: S. Subramanian, Essays in Economics and Other Cheerful Themes—A Dismal Scientist’s Occasional Reflections on the World around Him

S. Subramanian, Essays in Economics and Other Cheerful Themes—A Dismal Scientist’s Occasional Reflections on the World around Him. New Delhi: SAGE South Asia Edition, SAGE Publications India Pvt Ltd, 2014, 203 pp. ₹ 850 (ISBN: 978-81-321-1373-7 [HB])

Yes Bank: bringing sustainability in agriculture through Public-Private Partnerships (PPPs)

Structured abstract Subject Area: Strategy – dealing with a particular type of strategic alliance (Public Private Partnership) as a strategy to enter a new business segment. Study level/applicability MBA and other similar programs at the postgraduation level. Case overview The current case deals with Yes Bank, one of the largest private sector banks in India. The main objective of the case is to help the students to understand the banking industry, and the structure and implementation of Public–Private Partnership (PPP) at a large Indian Bank. The case also intends to highlight the cost and revenue drivers for a particular industry. Yes Bank is contemplating entering into the Indian Agricultural financing sector that has huge potential. The case describes how to analyze the sector using Porters five force model. Also, there are several modes of entering the sector, including joint-ventures, mergers, direct investments and PPPs. The case describes the benefits and issues associated with each of the mentioned strategies. Further, the case also describes the challenges and benefits of PPPs as a mode of generating growth opportunities. Expected learning outcomes The case can be a part of a banking course as well as a strategy course. The current case allows the students to make decisions while dealing with situations pertaining to sustainable development and implementation of PPPs. The major expected learning outcomes of the current case are: to be able to understand industry structure, using the banking sector as an example; to be able to list down the revenue and cost drivers for Indian banks; to be able to identify investment drivers for a particular industry, such as agriculture; to be able to analyze the agricultural financing industry using the Porters five force model; to be able to analyze different modes of entering a new sector and the challenges associated with each one of them; and to be able to comprehend the role of PPPs in entering new areas of business. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.