<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to examine whether an increase in bank competition hindrances financial stability of commercial banks in India over the period 1996 to 2016. Findings reveal that in India, a higher degree of bank competition is positively associated with the prevalence of non-performing loans. Additionally, the positive impact of the Lerner index on Z-score lends support to competition-fragility hypothesis. However, we argue that both the views of competition-stability and competition-fragility can coexist in a single banking system like India.</p></abstract>

The primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to examine whether an increase in bank competition hindrances financial stability of commercial banks in India over the period 1996 to 2016. Findings reveal that in India, a higher degree of bank competition is positively associated with the prevalence of non-performing loans. Additionally, the positive impact of the Lerner index on Z-score lends support to competition-fragility hypothesis. However, we argue that both the views of competition-stability and competition-fragility can coexist in a single banking system like India.

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Department of Humanities and Social Sciences

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 Public License.

The primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to...

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Published Online: Jul 16, 2020

Page range: 75 - 102

DOI: https://doi.org/10.2478/jcbtp-2020-0024

Keywords
Bank competition, Competition-Stability, Competition-Fragility, Financial Stability

© 2020 Bijoy Rakshit et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 Public License.

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Published Online: Jul 16, 2020

Page range: 75 - 102

DOI: https://doi.org/10.2478/jcbtp-2020-0024

KeywordsBank competition, Competition-Stability, Competition-Fragility, Financial Stability

© 2020 Bijoy Rakshit et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 Public License.

Keywords
Bank competition, Competition-Stability, Competition-Fragility, Financial Stability