RBI paper unpacks India’s non-performing loan troubles
Authors find bank risk-taking is procyclical
Non-performing loans (NPLs) in India vary throughout the economic cycle, with banks tending to behave procyclically and respond to changes in the interest rate environment, a working paper published on December 14 by the Reserve Bank of India (RBI) finds.
Pallavi Chavan and Leonardo Gambacorta study NPLs in the context of a system "beleaguered" by rising levels of bad debts. They find, by way of a dynamic panel regression, that banks take on more risk during an upturn in credit growth. A one
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