Page 394 - Contributed Paper Session (CPS) - Volume 4

CPS2444 Avijit Joarder et al.
economic upswing instead of a stagnation or a downswing. In other words, if
we exclude the growth in GDP as a control variable the qualitative results of
the both models are not influence, and the probability of 0.0000 associated LR
statistics = 164.59 rejects the null hypothesis that coefficients of all variables
are simultaneously equal to zero.
We conclude that short-term debt to foreign banks compared to foreign
exchange reserve and long-term debt to foreign banks compared to GDP,
could jointly serve as indicators for possible banking crisis at least years in
advance. These are not only the indicators to monitor but are worthwhile to
consider among other macro-economic and financial indicators.

4. Discussion and Conclusion
Starting from aftermath of Indian BoP crisis (in early 1990s), we covered
two subsequent crises namely AFC and GFC to find out the impact of crises on
domestic and international banking business of banks. The comparison of
most affected Asian countries in the region is useful to understand symptoms
before, during and after the crisis. In the detailed version of our paper, we
demonstrated through visual analysis (graphs) and regression analysis (probit)
that Thailand, Korea, Malaysia and Indonesia were severely affected by AFC,
whereas Philippines was slightly less affected.
On the other hand, there was virtually no effect of AFC on Indian economy.
In case of GFC, six countries in the region were not much affected. The RBI
banking statistics together with the BIS statistics are very useful to monitor
banking system and to get signals of overall developments in domestic and
international markets, especially the inflow and outflow of money through
banking channels. The analysis shows that not only foreign investors including
international banks finds India as one of the safe destination for international
investments but also banks and non-banks in India gradually increased their
transactions with international banks in foreign countries. The signals from
these statistics could thus be effectively utilised to monitor overall
developments in financial markets and take corrective actions to avoid stress
or crisis.
Further analysis could be considered to understand the signals arising
from other macro-economic factors and also the change in lending behaviour
of major creditors (e.g. bank nationalities) to India and other countries in the
region. Similarly, it would be interesting to understand the influencing factors
leading to change in behaviour of banks and non-banks of a country in the
region with their counterparts in foreign countries.

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