Assessment of Competition in Indian Banking

Abstract

During the post 1991, financial system regulators have initiated many policy measures to enhance competition in the Indian Banking Sector. In the Indian context, competition has not been rigorously studied and hence, there is a need for more comprehensive analysis of competition in Indian banking sector. The article has applied PRH statistic for the panel data involving 36 banks for the period of 1994-2009 after the penetration of private banks. The article has found that there has been improvement in the degree of competition since 1994. Equity capital, as a control variable is influencing the level of competition. Analysis of competition allows the policy formulators to design proper liberalization measures, designing of financial products and business models to ensure greater competition in the banking sector.

Keywords: Competition, Market structure, Indian Banking, Panzar-Rosse H-statistic, Concentration.