Bank Capital and Monetary Policy Transmission in India

Arbeitspapier

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 smoothly, while stressed assets in the banking sector hinder transmission. Bank recapitalization to raise CRAR can improve the transmission; however, CRAR above a certain threshold level may not help as the sensitivity of loan growth to monetary policy rate reduces for banks with CRAR above the threshold. Therefore, it can be concluded that monetary policy can influence credit supply of banks depending on their capital position.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: RBI Working Paper Series ; No. 12/2020

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Money Supply; Credit; Money Multipliers ; Monetary Policy
• Subject: Monetary policy ; Bank capital ; Bank lending

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Muduli, Silu ; Behera, Harendra
• Event: Veröffentlichung
• (who): Reserve Bank of India, Department of Economic and Policy Research
• (where): Mumbai
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/225238
• Last update: 10.03.2025, 11:43 AM CET