Revisiting the Indian Financial Sector: Recent Issues and Perspectives (India Studies in Business and Economics)

This book provides perspectives on the latest developments and pertinent issues in the Indian financial sector in current times. The reforms initiated in the nineties in the financial sector have transformed the way financial markets and institutions function today. However, certain sectors like banking, and markets like the capital market have undergone sea changes. The research contributions in this book focus on the issues pertaining to such sectors like banking, NBFCs and the stock market. The opening up of financial markets and emergence of institutional investors have been a significant phenomenon in the Indian context. At this backdrop of increasing financial integration, the impact of financial liberalisation on the overall development of the sector, and how the global policies and events influence the Indian financial sector, are analysed in the book. The emergence of new regulations in the capital markets to instill more discipline and transparency, have also changed the way corporates take financing decisions. For example, regulatory authorities are continuously reviewing norms pertaining to issues like promoters’ shareholding owing to risks arising from excessive leverage and the linkages between financial intermediaries. Corporate governance, environmental aspects are some important additions in corporate financing norms in the recent past. The book incorporates a discussion on this, too. Apart from these, the book also has incorporated several aspects on an emerging concept called financial inclusion, its measurement and constraints to achieve the same. And finally, at the backdrop of the disruption created by the COVID-19 pandemic, the impact on the Indian capital market is also discussed. Contributions are based on rigorous empirical research and incorporate the perspectives of renowned academicians in the field of finance and financial economics across the country. Apart from the research community, this book will also be helpful for financial analysts working in the financial sector to have some idea about the current issues, the direction of research on those issues and different perspectives on them. Preface Contents Editor and Contributors Introduction 1 Background 2 Current Issues in Indian Financial Sector 3 Summary of Chapters References Financial Inclusion Measuring Financial Inclusion: A Survey 1 Introduction 2 Financial Inclusion: Individual Indicator Approach 3 Financial Inclusion: Index Approach 3.1 Index of Financial Inclusion: Parametric Method 3.2 Index of Financial Inclusion: Non-parametric Method 4 Summary and Conclusion Appendix 1: G 20 Financial Inclusion Indicators References Financial Inclusion: Measurement and Comparative Analysis of Countries from Europe and Asia 1 Introduction 2 Review of Literature 3 Data and Methodology 3.1 Selection of Variables 3.2 Selection of Countries 3.3 Data Sources and Sample Period 3.4 Research Methodology 4 Analysis and Findings 4.1 Estimating the Index of Financial Inclusion 4.2 Financial Inclusion of Selected Nations: A Comparative View 5 Conclusion and Policy Implications Appendix References Financial Liberalization, Development and the Economy Financial Constraints and Export Participation: A Case Study of Indian Textile Industry 1 Introduction 2 Financial Constraints and Export Participation: The Present State of Art 3 Export Performance of the Indian Textile Industry 4 Empirical Analysis: Data and Methodology 4.1 Data Source 4.2 Financial and Non-financial Variables 4.3 Econometric Specification 5 Empirical Methodology and Results 5.1 Summary Statistics 5.2 Extensive Margin of Exports 5.3 Intensive Margin of Exports 6 Conclusion and Policy Implications References Global Monetary Policies and Implications for Financial Flows to India and Other Emerging Markets 1 Introduction 2 Global Monetary Easing During Global Financial Crisis and COVID-19 Crises 3 Spillover Effects of Global Monetary Policies on India and Other Emerging Markets 4 Dealing with Advanced Economies’ Policy Spillovers to India and Other Emerging Markets 5 Conclusion References Financial Liberalization and Convergence of Financial Development Among BRICS Economies 1 Introduction 2 Financial Liberalization in BRICS 3 Literature Review: Convergence of Financial Development 4 Data and Methodology 4.1 Data 4.2 Financial Development in BRICS: A Comparative Analysis 4.3 Convergence Analysis 5 Results 6 Conclusion Appendix References Financial Intermediation: Banks and NBFCs Sectoral Growth and Sectoral Credit: Panel Evidence from Indian States 1 Introduction 2 Background Literature 3 Movement of Sectoral Growth and Sectoral Credit 3.1 Sectoral Growth: Few Observations 3.2 Sectoral Credit: Few Observations 4 Data and Methodology 4.1 Data Source and Variables 4.2 Econometric Methodologies 5 Estimation Results and Discussion 6 Summary and Conclusions Appendix References Are SHG Loans Demand Constrained in Backward Areas? 1 Introduction 2 A Glance at the Data 3 Characterizing the Equilibrium of the Safe Borrowers 4 Safe Versus Risky 4.1 Individual Lending 4.2 Group Lending 5 Asymmetric Information 5.1 Consequences of Adverse Selection in the Individual Lending Case 5.2 Group Lending 6 Conclusion Appendix 1 Group Lending Under Complete Information Group Lending Under Incomplete Information Appendix 2 Proof of Proposition 1 Proof of Proposition 2 Proof of Proposition 3 Proof of Proposition 4 Appendix 3 References The Effect of Changes in the Policy Rates on Borrowing and Lending of Banks in India 1 Introduction 2 Data and Methodology 3 Findings and Discussion 4 Concluding Remarks References Shadow Banking and Non-banking Financial Companies in India: An Overview 1 Introduction 2 Define Shadow Banking 3 Shadow Banking in India 4 Overview of Financial Intermediation Through Non-banking Finance Companies (NBFC) 5 Concluding Remarks References Issues in Corporate Finance The Impact of the Largest Shareholder on Dividend Payout Policy: Evidence from Indian Business Groups 1 Introduction 2 Methodology 3 Data and Variables 3.1 Key Variables of Our Study 3.2 Some Observations from the Sample 4 Empirical Analysis 5 Summary and Conclusion References Regime Switching Dynamic Currency Exposure of Indian Stock Market 1 Introduction 2 Current Literature in the Field 2.1 Literature on Time-Varying Exposure 2.2 Literature on Markov Switching Model in Foreign Exchange Market 2.3 Literature on Threshold Regression Model in Foreign Exchange Market 3 Data and Methodology 3.1 Data 3.2 Calculation of Time-Varying Exposure Diagonal VECH Model 3.3 Regime Switching Behaviour of Time-Varying Exposure 3.4 TVE and Movements in Stock Market and Foreign Exchange Rates 4 Results and Discussion 4.1 Descriptive Statistics and Unit Root Testing 4.2 Movements in TVE, Stock Market and Foreign Exchange Market: Frequency Band-Pass Filter and Conditional Correlation 4.3 Regime Switching Behaviour in Time-Varying Exposure 4.4 Time-Varying Exposure and the Markets 5 Conclusion References Measuring the Relationship Among Corporate Environmental Expenditure, Performance and Disclosure 1 Introduction 1.1 The Relation Between Environmental and Economic Performances 2 Minimum Sufficiency Approach of Environmental Performance 2.1 Standard Procedure 2.2 Incidence Ratio for Companies with Poor Sustainability Practices 2.3 Intensity Ratio of Poor Sustainability Practices 2.4 Constructing General Index of Poor Corporate Sustainability 2.5 Generalization of Poor Sustainability Performance Index 3 Application of the Index 4 Conclusion Annexure 1 Annexure 2 Annexure 3 References Assessing the Impact of COVID-19 on Interactions Among Stock, Gold and Oil Prices in India 1 Introduction 2 Indian Scenario 3 Literature Survey 4 Data and Methodology 4.1 Data 4.2 Methodology 5 Results 6 Conclusions Appendix References