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- Title
How Serious is India's Nonperforming Assets Crisis? A Structural Satellite Version of the Financial-Macroeconometric Model.
- Authors
Mani, Nithin; Mishra, Alok Kumar; Pandikasala, Jijin
- Abstract
This paper develops a Structural Satellite version of the Financial-Macroeconometric Model of India (SSFMMI) to examine whether the surge in Nonperforming Assets (NPAs) in Indian Public Sector Banks (PSUs) post-2015 is due to macroeconomic shocks or better classification of loans and cleaning of bank balance sheets. Specifically, the paper analyses the impact of a rainfall shock, domestic food price shock, world oil price shock, fiscal shock, and monetary shock using counterfactual policy simulations and an out-of-sample forecasting framework to validate the impact of these macroeconomic shocks on NPA levels. The paper's outcomes suggest that the late surges in NPAs are not due to macroeconomic shocks and, therefore, that Indian banks are resilient to such shocks. However, the study reveals that the rise in domestic fuel prices and world food prices can cause a surge in NPAs levels.
- Subjects
INDIA; FOOD prices; NONPERFORMING loans; GOVERNMENT ownership of banks; BANKING industry; BANK loans; FINANCIAL statements; CREDIT risk
- Publication
Asia-Pacific Financial Markets, 2023, Vol 30, Issue 4, p761
- ISSN
1387-2834
- Publication type
Article
- DOI
10.1007/s10690-023-09397-9