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Credit Concentration Risk in the Indian Banking Industry

International Journal of Banking, Risk and Insurance

Volume 4 Issue 2

Published: 2016
Author(s) Name: Mihir Dash, Bhavna Ranjan Ahuja | Author(s) Affiliation: School of Business, Alliance University, Bangalore, Karnataka, India
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Abstract

Risk concentration has arguably been the single most important cause of major problems in banks. Banks should be particularly attentive to identifying credit risk concentrations and ensuring that their effects are adequately assessed. There have been many instances where large borrowers have caused sizable losses to many banks and jeopardized the health of many financial institutions. The current study attempts to compare and contrast the levels of concentration risk in the Indian banking industry in terms of concentration of deposits, advances, exposures and NPAs in the period 2010-2014, and to study the relationship between concentration risk and NPAs of the banks in the Indian scenario along with its relationship of concentration levels with age, return on net worth (RONW), capital adequacy ratio (CAR, Cost of Borrowings and Cost of Deposits.

Keywords: Credit Risk Concentration, Correlated Defaults, Indian Banking Industry, Deposits, Advances, Exposures and NPAs

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