Financial Development and Economic Growth: A VECM Approach

-- Boopendra Seetanah

Existing literature has dealt inadequately with the causality issue in the link between financial development and economic growth. The paper investigates the empirical link between financial development and economic performance for the case of the small island developing state of Mauritius, using a unique time series data set for the period 1952-2004. The analysis uses a Vector Error Correction Model (VECM) framework, which allows for dynamic and feedback effects. The results suggest that financial developments have been contributing to the output level of the economy in both short- and long-run. It, thus, highlights the economic importance of financial development and provides new evidence for the case of island economies using recent cointegration approach.

© 2007 IUP . All Rights Reserved.

Productivity of Indian Commercial Banks in the Pre- and Post-Liberalization Periods

-- H P Mahesh and Meenakshi Rajeev

The present study examines the changes in the Total Factor Productivity (TFP) of Indian commercial banks for the period 1985-2004, when TFP indices are estimated using Malmquist productivity index approach. Further, the TFP indices are decomposed into efficiency change and technical change to see what drives the TFP change. The results show that TFP has improved significantly after liberalization across bank groups. Foreign banks have experienced the highest TFP growth for the total study period. The results also suggest that, on an average, the TFP growth is more due to technological change than efficiency change. However, this does not apply to all years. For TFP, growth is due to efficiency change during some years, due to technical change during some years and due to both during some years. This shows that Indian banking sector has experienced efficiency change as well as technical change.

© 2007 IUP . All Rights Reserved.

A Study of Credit Deposit Ratio in Selected States of Western India

-- Puneet Verma and Nitin Kumar

The main objective of the study is to perform a comparative analysis of the Credit Deposit (CD) ratio of Scheduled Commercial Banks of the three major states of the western part of India, viz., Rajasthan, Gujarat and Maharashtra, and India as a whole as well as in consideration with a number of banks and per capita income of those states over the last 29 years (1977-2005). It is found that the behavior of CD ratio among all the three states is significantly different for the period of study. Maharashtra which is the backbone of growth and progress of Indian economy has been more volatile but performing well in terms of CD ratio, whereas Rajasthan and Gujarat are stable at lower level. There exists a lot of scope for branch expansion and improvement of service quality by the banks in Gujarat and Rajasthan.

© 2007 IUP . All Rights Reserved.

Examining Application of Lintner's Dividend Model in Indian Banking Industry

-- B S Bodla, Karam Pal and Jasvir S Sura

The present paper is an attempt to re-examine the applicability of Lintner's (1956) dividend policy in banking sector in India. The banks, listed on any of the Stock Exchange in India, constitute the sample for the present study. Here, a cross-sectional analysis have been carried out from the year 1996 to 2006 across ownership pattern of banks in India. The results are found in line with the Lintner model. The findings offer evidence that the dividend policy of Public Sector Banks (PSBs) is more stable than that of Private Banks (PBs). The results indicate that the major determinants of current dividend are lagged dividend and the current earnings in case of both PSBs and PBs. The above evidence is almost similar to those markets in developed countries such as the US. The study is also found giving support to the argument of `information content of dividend' in the context of dividend proceeds. Hence, dividend policy can be used as a signaling device by the managements of banks.

© 2007 IUP . All Rights Reserved.

Job Satisfaction in Banking: A Study of Private and Public Sector Banks

-- Monika Thakur

In this highly competitive world, success of any organization depends on its human resource. Banks are no exception to this. A satisfied, happy and hard working employee is the biggest asset of any organization, including banks. Workforce of any bank is responsible to a large extent for its productivity and profitability. Efficient human resource management and maintaining higher job satisfaction level in banks determine not only the performance of the bank but also affect the growth and performance of the entire economy. So, for the success of banking, it is very important to manage human resource effectively and to find whether its employees are satisfied or not. Only if they are satisfied, they will work with commitment and project a positive image of the organization. Once banking was confined to public sector only but it was opened to private sector in 1991 on the recommendations of the Narsimaham Committee. The present paper makes an effort to study the job satisfaction level among employees of selected private and public sector banks in Ludhiana. Bank jobs have always remained the first preference of the youth here. So, this study is also an effort to find out what they think of this job afterwards.

© 2007 IUP . All Rights Reserved.