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Measuring the Efficacy
of Monetary Policy in India
Using a Monetary Measure
-- Anuradha Patnaik
Keeping in view the financial sector reforms and introduction of a number of financial innovations,
the present study empirically examines the efficacy of monetary policy in achieving its objective of price
stability and growth in the post-1999 era. Unlike the conventional method of using the short-term interest rate or
the money supply as the stance of monetary policy, the present study constructs a narrative monetary
measure and uses the same as a stance of monetary policy. Using Impulse Response Functions (IRF) and Fixed
Error Variance Decomposition (FEVD) of Vector Autoregressive (VAR) Analysis, it is concluded that the
monetary policy has very little impact on the final target variables, i.e., growth and prices.
© 2010 IUP. All Rights Reserved.
Intellectual Capital Efficiency Analysis of Indian Private Sector Banks
-- G Bharathi Kamath
Banks happen to be one of the largest Intellectual Capital (IC)-intensive sectors. Measurement and
management of intellectual capital, therefore, become essential, as it reflects the true value of the firm. The main aim of
this paper is to estimate and analyze the Value Added Intellectual Coefficient (VAIC) for measuring the
value-based performance of the Indian private sector banks for a period of five years from 2002-2007. The source
of the data is the annual report, especially the profit/loss account and balance sheet, of the concerned banks
for the relevant years. The data was collected through the RBI online database on Indian economy. The
methodology was finalized based on an extensive review of international literature on intellectual capital with specific
reference to literature that reviews measurement techniques and tools of intellectual capital. This study applies the
VAIC method (propounded by Pulic Ante in 2000) in order to analyze the data of Indian private sector banks for the five-year period. It analyzes the intellectual or Human Capital (HC) and Physical Capital (CA) of the
Indian banking sector and discusses their impact on the banks' value-based performance. The significance of
this study is that it approaches the performance measurement and efficiency of banks in India with a new
perspective and dimension. The performance of the banks is closely linked to their valuation and also their future
strategies related to mergers and acquisitions.
© 2010 IUP. All Rights Reserved.
Basel Accord
and the Failure of Global Trust Bank:
A Case Study
-- Jahar Bhowmik and Soumasree Tewari
With the implementation of the Basel Accord II in Indian banks, a question has emerged as to how well
the accord will be able to fulfill its role of supervision of banks and also the role of checking crisis situation in
banks. The role of Basel II can be judged only when one looks into the success and failure of the Basel I Accord
and try to find out whether the accord actually led to the crisis in some of the banks, as has been pointed out
by some economists, and whether it failed to focus on areas which were causing crisis in banks. The study
has taken the case of Global Trust Bank as the focus area, since it was the most prominent example of a
crisis situation after Basel I was implemented. By using one of the most popular models of risk analysis,
CAMEL model, it has been concluded that the crisis was not the effect of strict capital norms under Basel I,
but nevertheless, it highlights the inability of the accord to take into account the operational risk which seems to
be the main reason for the liquidation of the bank.
© 2010 IUP. All Rights Reserved.
Determinants of Dividend Policy
in Indian Banks: An Empirical Analysis
-- M Sudhahar and T Saroja
This study analyzes the trends and determinants of the dividend policy of banks in India. The banks which
are actively traded under Bombay Stock Exchange (BSE) A and B Groups are considered as sample for the
study. A multiple regression model, in addition to Lintner model, extended version of Lintner model, such as
Brittain's cash flow model, Brittain's explicit depreciation model and Darling's model, have been used for testing
the independent variables. The period of study is for ten years, from 1997-98 to
2006-07. Brittain's explicit depreciation model is found to be the best model in explaining the dividend policy
of the banks. In other words, the last year divided followed by current year depreciation and current year
profit after tax play a positive role in the dividend policy for the current year among Indian banks.
© 2010 IUP. All Rights Reserved.
Assessing the Effect of Ownership on the Efficiency of Indian Domestic Banks
-- Sunil Kumar and Rachita Gulati
The study examines whether the effect of ownership on the efficiency of Indian domestic banks is
significant. The efficiency scores for public and private sector banks were computed using a deterministic,
non-parametric and linear programming based frontier technique, which is popularly known as Data Envelopment
Analysis (DEA). Using the cross-sectional data of the public and private sector banks, which operated in the
financial years 2005-06 and 2006-07, the study finds that (1) De nova private sector banks dominate the formation
of efficient frontier of Indian domestic banking industry; (2) The overall technical inefficiency stems primarily
from managerial inefficiency (as reflected by pure technical inefficiency) rather than scale inefficiency; and (3)
Though the efficiency differences between the public and private sector banks have been noted, these differences
are statistically insignificant in most of the instances. On the whole, the study concludes that ownership does
not matter in the Indian domestic banking industry.
© 2010 IUP. All Rights Reserved.
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