Page 388 - Contributed Paper Session (CPS) - Volume 4

CPS2444 Avijit Joarder et al.
exclude negotiable loans. The IDS statistics are aggregated, among others, by
sector of issuer, currency, and nationality and residence of the issuer.
Finally, we use Probit regression model to check and predict the warning
signals of crises based on share of short-term international claims to foreign
reserves, share of long-term international claims to GDP and GDP growths for
six countries of our interest (India, Indonesia, Korea, Malaysia, Philippines and
Thailand).

3. Findings
3.1: Longer-term development in business by Scheduled Commercial
Banks (SCBs) in India
In order to understand long-term developments and emerging changes in
Indian banking system since early 1990s, we examine aggregated balance-
sheet positions of Indian SCBs comprising both domestic and foreign banks.
While banks adjusted their business model over the three decades to cope
with developments in domestic and international financial markets, the gross
amounts of claims and liabilities have grown exponentially. As expected,
deposits and advances are respectively the highest contributors to liabilities
and assets. When measured as a ratio of country’s GDP, total assets and total
liabilities fell from 49% in early 1990s to 42% in 1996 but continued to grow
thereafter to reach at 84% in 2018. It is noticeable that the growth in banking
business did not stop during the AFC as well as during the GFC.
The changes in portfolio of assets and liabilities shows that the share of
other assets has decreased significantly from 18.5% in end-March 1990 to
merely 5.8% in end-March 2018. Similarly, the share of cash in hand and
balances with the RBI also decreased by over 7% from 11.4% to 4.8% over the
same period. These shifts in portfolio of assets during the period allowed
banks to make more loans and advances, the share of which increased from
43.5% to 57.3%. On the liabilities side, other liabilities declined from 19.3% to
only 4.6%. This shift resulted significant increase in reserves and surplus from
below 1% to 7.1%, as well as increase in share of deposits from 70.6% to 77.3%.
The primary reasons for these shifts are regulatory changes to resilience of
Indian banking system. It is interesting to note that share of overall equity
capital nearly remained the same at about 0.8% of total liabilities.

3.2: Nature of international exposures: international claims and liabilities
of the SCBs
In comparison to total claims and liabilities of SCBs, the share of
international claims and liabilities declined over years. While total assets and
liabilities increased over years from ₹13 trillion in 2001 to over ₹140 trillion in
2017, the shares of international claims and liabilities in the total assets and
total liabilities respectively declined over years, from 7.3% in 2001 to 3.9% in

377 | I S I W S C 2 0 1 9