Press Release RBI Working Paper Series No. 10 Monetary Policy Transmission in India under the Base Rate and MCLR Regimes: A Comparative Study Sadhan Kumar Chattopadhyay and Arghya Kusum Mitra@ Abstract*The paper estimates the degree of pass-through of monetary policy to bank lending rates under both the base rate and the marginal cost of funds based lending rate (MCLR) regimes using dynamic panel data regression. Using nine different models for nine individual bank-sp

Press Release RBI Working Paper Series No. 09 Banks’ Credit and Investment Dynamics: Assessing Portfolio Rebalancing and Crowding-out Sanjay Singh, Garima Wahi and Muneesh Kapur@ Abstract 1 The paper analyses the asset portfolio dynamics of Indian banks with respect to loan growth and investment in government securities. The empirical analysis indicates that weak economic conditions and stressed asset quality encourage banks to increase their investments in government

Press Release RBI Working Paper Series No. 08 Towards Atma Nirbhar Bharat: An Exploration of Linkages and Leakages Saurabh Sharma, Ipsita Padhi and Deba Prasad Rath@ Abstract * Countries across the globe have undertaken unprecedented fiscal actions in response to the COVID crisis. India has also announced several rounds of fiscal stimuli under the umbrella scheme of Atma Nirbhar Bharat mission. In this context, it is important that the policy interventions are aligned

Press Release RBI Working Paper Series No. 06 Saving Banks from a Black Swan: Options and Trade-offs Saurabh Ghosh, Pawan Gopalakrishnan and Abhishek Ranjan@ Abstract 1In this paper, we analyse the best possible policy responses for banks facing a loan default because of an extreme and rare negative productivity shock. We use a finite-period framework with complete information to analyse the impact of such a shock on an economy with sticky deposit rates and bond yield

Press Release RBI Working Paper Series No. 07 Concentration, Competition and Soundness of the Banking System in India Pradip Bhuyan@ Abstract 1 This paper examined certain important aspects of concentration, competition and soundness of banks during the period from 1994-95 to 2019-20. Herfindahl-Hirschman Index suggested that the banking system in India did not have a high degree of concentration during the study period. Application of the Martinez-Miera and Repullo (

Press Release RBI Working Paper Series No. 05 Quantifying Survey-based Qualitative Responses on Capacity Utilisation – An Analysis for India G.P. Samanta and Sayantika Bhowmick@ Abstract *This paper examines the comparative utility of qualitative information collected on capacity utilisation (CU) through the Industrial Outlook Survey (IOS) of the Reserve Bank of India (RBI). The IOS, inter alia, collects two types of qualitative responses on CU: assessment for the sur

Press Release RBI Working Paper Series No. 03 India’s External Commercial Borrowings: Determinants and Optimal Hedge Ratio Ranjeev@ Abstract *This paper examines the determinants of External Commercial Borrowings (ECBs) raised by firms in India and identifies an optimal hedge ratio for the ECBs portfolio. It finds that domestic economic activity and movements in the exchange rate of the Indian rupee are the two major factors influencing the ECBs issuance. Depreciation

Press Release RBI Working Paper Series No. 04 States’ Fiscal Performance and Yield Spreads on Market Borrowings in India Ramesh Jangili, N.R.V.V.M.K. Rajendra Kumar and Jai Chander@ Abstract*State governments are borrowing significantly from the market to meet their budgetary requirements. As investors are risk-conscious, fiscal fundamentals may impact the yields, and states’ borrowing costs. Indicator-based assessment of the states’ performance is cumbersome, keeping

Press Release RBI Working Paper Series No. 02 Taking Cognisance of Households’ Inflation Expectations in India Devendra Pratap Singh, Aditya Mishra and Purnima Shaw@ Abstract *The paper studies the characteristics of inflation expectations in developed and emerging market economies. We find that the properties of inflation expectations in India share similarities to those in other economies, such as exhibiting weak rationality (by failing both the unbiasedness and eff

Press Release RBI Working Paper Series No. 01 Stock Price Reaction on the Announcement of Basel Implementation: Evidence from Indian Banks Gaurav Seth, Supriya Katti and B.V. Phani@ Abstract * The study evaluates the market reaction to the Reserve Bank of India’s policy decisions related to aligning its domestic banking regulations with global Basel capital adequacy norms. Using event study methodology, the study finds that in the initial phase, the Indian banks were

Press Release RBI Working Paper Series No. 05 Reassessing Investment Dynamics – Newer Insights into Leverage and Investment of the Indian Corporate Sector Deba Prasad Rath and Sujeesh Kumar@ Abstract * Given the criticality of investment in achieving durable growth in the context of ongoing subdued investment, globally as well as in India, this paper revisits investment dynamics in India from the standpoint of the ‘augmented accelerator’ hypothesis and examines whethe

Press Release RBI Working Paper Series No. 06 An Alternative Perspective on Demand and Supply to Forecast Inflation Saurabh Sharma and Ipsita Padhi@ Abstract *Measuring macroeconomic demand and supply is important for a variety of reasons and is especially useful for gauging inflationary pressures. In this context, this paper departs from the standard Blanchard-Quah technique and proposes a novel identification strategy to extricate demand-supply from the business cyc

Press Release RBI Working Paper Series No. 04 Does Offshore NDF Market Influence Onshore Forex Market? Evidence from IndiaHarendra Behera, Rajiv Ranjan and Sajjid Chinoy@ Abstract*The paper uses a VECM-MGARCH approach to examine the interrelationship between onshore and offshore NDF markets for the Indian Rupee in view of price discovery, mean and volatility spillovers. The empirical results suggest a stable long-run relationship between onshore and NDF markets with p

Press Release RBI Working Paper Series No. 03 Monetary Policy Transparency and Anchoring of Inflation Expectations in India G. P. Samanta and Shweta Kumari@ Abstract * This study provides a measure of the degree of monetary policy transparency in India using text-mining techniques and, examines the impact of transparency on anchoring of inflation expectations. Inflation expectations are sourced from two RBI surveys - Survey of Professional Forecasters and Survey of In

Press Release RBI Working Paper Series No. 02 Regional Economic Convergence in the Manufacturing Sector: An Empirical Reflection Madhuresh Kumar@ Abstract 1 This paper uses data on registered manufacturing from the Annual Survey of Industries (ASI) for the post global financial crisis period (2008-09 to 2017-18) and examines the convergence pattern of 21 major states in India and their key drivers. While poorer states are found to have exhibited convergence to the m

Press Release RBI Working Paper Series No. 01 Monetary Policy Transmission in India: New Evidence from Firm-Bank Matched Data Saurabh Ghosh, Abhinav Narayanan and Pranav Garg@ Abstract *This paper uses a unique firm-bank matched data set for India to provide new insights into the monetary policy transmission mechanism. We first show that monetary policy transmission works with a lag when we focus on bank credit and balance sheet items of firms. An assessment of the bank

Press Release RBI Working Paper Series No. 15 Measuring Trend Inflation in India Harendra Kumar Behera and Michael Debabrata Patra@ Abstract *Central to monetary policy is the concept of trend inflation to which actual inflation outcomes are expected to converge after short run fluctuations die out. Accordingly, the inflation target needs to be fixed in alignment with trend inflation to avoid unhinging inflation expectations and flattening the aggregate supply curve

Press Release RBI Working Paper Series No. 14 Asset Quality and Credit Channel of Monetary Policy Transmission in India: Some Evidence from Bank-level Data Janak Raj, Deba Prasad Rath, Pratik Mitra and Joice John@ Abstract 1This paper evaluates the impact of asset quality of scheduled commercial banks in India on the credit channel of monetary policy. The study finds that a robust credit channel of monetary transmission exists in India. Its efficacy, however, is impa

Press Release RBI Working Paper Series No. 13 Price Discrimination in Over-the-Counter Currency Derivatives ΨAbhishek Kumar and Vidya Kamate Abstract *This paper provides empirical evidence on the presence of considerable price discrimination in the Indian over-the-counter (OTC) currency derivatives market through an analysis of transaction level data. The average markup paid on USD/INR forward contracts declines with an increase in the level of sophistication of clie

Press Release RBI Working Paper Series No. 12 Bank Capital and Monetary Policy Transmission in India Silu Muduli and Harendra Behera@ Abstract *This paper examines the role of bank capital in monetary policy transmission in India during the post-global financial crisis period. Empirical results show that banks with higher capital to risk-weighted assets ratio (CRAR) raise funds at a lower cost. Additionally, banks with higher CRAR transmit monetary policy impulses smo