Business Freedom and Financial Development as Leading Determinants of Non-performing Assets: Evidence from the Indian Banking Sector
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Author: Bilal Khan
Author Address: Research Scholar, Department of Economics, Jamia Millia Islamia, Central University, Maulana Mohammad Ali Jauhar Marg, Jamia Nagar, New Delhi-110025 (Delhi)
Keywords: Business freedom, financial development, non-performing assets, panel data.
JEL Codes: C23, G21, O16, P10.
Abstract
This study is an attempt to enrich the existing literature on the determinants of non-performing assets (NPAs) for the Indian banking sector by explicitly investigating the role of the Business Freedom sub-component of the Economic Freedom Index (EFI) and Financial Development (FD) along with the traditional bank-specific and macroeconomic determinants. The study estimated panel data models for 38 Scheduled Commercial Banks (SCBs) from 2005-2020. The Fixed Effect Regression Model and Two-step System GMM approach were employed to perform the analysis. The results indicated that business freedom contributes to increased NPAs. It implied that the Indian banking sector could not be left to operate in a free market mechanism. Financial Development (FD) was found to have a negative relationship with the NPAs.
Description
Indian Journal of Economics and Development
Volume 19 No. 1, 2023, 112-121
DOI: https://doi.org/10.35716/IJED/22037
NAAS Score: 5.15 (2023)
Indexed in SCOPUS and ESCI (Clarivate Analytics)
Journal Citation Indicator: 0.04 (WoS)
UGC Approved