financeФинансы: теория и практика/Finance: Theory and PracticeFinance: Theory and Practice2587-56712587-7089Financial University under The Government of Russian Federation10.26794/2587-5671-2023-27-1-138-149finance-1994Research ArticleФИНАНСОВЫЕ РЫНКИ И БАНКИFINANCIAL MARKETS AND BANKSПроцентная ставка и прибыльность коммерческих банков ИндииPolicy Interest Rate and Bank Profitability-Scheduled Commercial Banks in Indiahttps://orcid.org/0000-0002-4429-1677КасанаE.KasanaE.

Экта Касана — PhD в области коммерции, научный сотрудник Колледжа коммерции и финансов Амити

Ноида, Уттар-Прадеш

Ekta Kasana - PhD in commerce, Research Scholar at the Amity College of Commerce and Finance

Noida, Uttar Pradesh

ektakasana47@gmail.comhttps://orcid.org/0000-0002-9465-9273ЧауханK.ChauhanK.

Кшамта Чаухан - PhD, профессор, Международная школа бизнеса Amity

Ноида, Уттар-Прадеш

Kshamta Chauhan - PhD, Prof., Amity International Business School

Noida, Uttar Pradesh

https://orcid.org/0000-0002-4466-412XСахуБ. П.SahooB. P.

Бибху Прасад Саху - PhD, заведующий кафедрой экономики бизнеса, SGTB Khalsa College

Нью-Дели

Bibhu Prasad Sahoo - PhD, Head, Department of Business Economics, SGTB Khalsa College

New Delhi

bibhusahoodu@gmail.comУниверситет АмитиИндияAmity UniversityIndiaДелийский университетИндияUniversity of DelhiIndia202310032023271138149Copyright © Касана E., Чаухан K., Саху Б.П., 20232023Касана E., Чаухан K., Саху Б.П.Kasana E., Chauhan K., Sahoo B.P.Данная работа распространяется под лицензией Creative Commons Attribution 4.0.This work is licensed under a Creative Commons Attribution 4.0 License.https://financetp.fa.ru/jour/article/view/1994

Основная цель данного исследования заключается в выявлении взаимосвязи между процентной ставкой (денежнокредитной политикой) и прибыльностью банка наряду с присущими банку отраслевыми и макроэкономическими переменными. Методология исследования включает сбалансированные панельные данные 50 индийских акционерных коммерческих банков за 12 лет с 2008 по 2020 г. Использованы модели регрессии с фиксированным и случайным эффектом. В связи с наличием гетероскедастичности представлены результаты для робастной стандартной ошибки. Результат показывает положительную связь между спредом процентных ставок и двумя показателями прибыльности банков — рентабельностью активов (ROA) и рентабельностью собственного капитала (ROE), в то время как процентная ставка имеет незначительную отрицательную связь с прибыльностью банка. Сделан вывод, что центральный банк может увеличить или уменьшить процентный спред для поддержания профицита или дефицита ликвидности в экономике. Банкам рекомендовано вносить соответствующие изменения в кредитную или депозитную ставку по отношению к учетной ставке, чтобы сделать канал передачи информации эффективным. Также необходимо определить другие факторы, которые влияют на прибыльность банка. Это поможет менеджеру банка повысить его прибыльность.

The main aim of this research study is to inspect the relationship between interest rate (monetary policy) and bank profitability, along with some bank specific, industry specific, and macroeconomic variables. The research methodology includes balanced panel data comprising 50 Indian scheduled commercial banks for 12 years from 2008 to 2020. Fixed effect and random effect model regression have been used to know the required relationship. Due to the presence of heteroskedasticity, the results for robust standard error have been presented. The result shows a positive association between the interest rate spread and two banks’ profitability indicator return on assets (ROA), return on equity (ROE) while interest rate has an insignificant negative relationship on bank profitability. The study concludes that the central bank can increase or decrease the interest spread to maintain the surplus or deficit liquidity problem in the economy. Banks are advised to make the appropriate change in lending rate or deposit rate with respect to policy rate to make transmission channel efficient. Also, identify some other factors that affect the bank’s profitability. It will help the bank manager to improve the bank’s profitability.

денежно-кредитная политикапроцентная ставкаприбыльность банкаспецифика банкамакроэкономикапанельные данныефиксированный эффектслучайный эффектmonetary policyinterest ratebank profitabilitybank specificmacroeconomicpanel datafixed effectrandom effectReferencesKumar V., Acharya S., Ho L. T. Does monetary policy influence the profitability of banks in New Zealand? International Journal of Financial Studies. 2020;8(2):35. DOI: 10.3390/ijfs8020035Kumar V., Acharya S., Ho L. T. Does monetary policy influence the profitability of banks in New Zealand? International Journal of Financial Studies. 2020;8(2):35. DOI: 10.3390/ijfs8020035Bikker J. A., Vervliet T. M. Bank profitability and risk-taking under low interest rates. International Journal of Finance & Economics. 2018;23(1):3–18. DOI: 10.1002/ijfe.1595Bikker J. A., Vervliet T. M. Bank profitability and risk-taking under low interest rates. International Journal of Finance & Economics. 2018;23(1):3–18. DOI: 10.1002/ijfe.1595Borio C., Gambacorta L., Hofmann B. The influence of monetary policy on bank profitability. International Finance. 2017;20(1):48–63. DOI: 10.1111/infi.12104Borio C., Gambacorta L., Hofmann B. The influence of monetary policy on bank profitability. International Finance. 2017;20(1):48–63. DOI: 10.1111/infi.12104Dale S. Limits of monetary policy. Speech given at the 44th annual Money, Macro and Finance Conference at Trinity College, Dublin on September 08, 2012. URL: https://www.bankofengland.co.uk/-/media/boe/files/speech/2012/limits-of-monetary-policy.pdf?la=en&hash=B1BFD867A765B1E620A6B4EB891C27486C127C0E (accessed on 8.09.2012).Dale S. Limits of monetary policy. Speech given at the 44th annual Money, Macro and Finance Conference at Trinity College, Dublin on September 08, 2012. URL: https://www.bankofengland.co.uk/-/media/boe/files/speech/2012/limits-of-monetary-policy.pdf?la=en&hash=B1BFD867A765B1E620A6B4EB891C27486C127C0E (accessed on 8.09.2012).Hancock D. Bank profitability, interest rates, and monetary policy. Journal of Money, Credit and Banking. 1985;17(2):189–202. DOI: 10.2307/1992333Hancock D. Bank profitability, interest rates, and monetary policy. Journal of Money, Credit and Banking. 1985;17(2):189–202. DOI: 10.2307/1992333Samuelson P. A. The effect of interest rate increases on the banking system. The American Economic Review. 1945;35(1);16–27.Samuelson P. A. The effect of interest rate increases on the banking system. The American Economic Review. 1945;35(1);16–27.Stráský J., Hwang H. Negative interest rates in the euro area: Does it hurt banks? OECD Economics Department Working Paper. 2019;(1574). DOI: 10.1787/d3227540-enStráský J., Hwang H. Negative interest rates in the euro area: Does it hurt banks? OECD Economics Department Working Paper. 2019;(1574). DOI: 10.1787/d3227540-enMadaschi C., Pablos Nuevo I. The profitability of banks in a context of negative monetary policy rates: The cases of Sweden and Denmark. ECB Occasional Paper. 2017;(195). DOI: 10.2866/907727Madaschi C., Pablos Nuevo I. The profitability of banks in a context of negative monetary policy rates: The cases of Sweden and Denmark. ECB Occasional Paper. 2017;(195). DOI: 10.2866/907727Berument H., Froyen R. T. Monetary policy and interest rates under inflation targeting in Australia and New Zealand. New Zealand Economic Papers. 2015;49(2):171–188. DOI: 10.1080/00779954.2014.929608Berument H., Froyen R. T. Monetary policy and interest rates under inflation targeting in Australia and New Zealand. New Zealand Economic Papers. 2015;49(2):171–188. DOI: 10.1080/00779954.2014.929608Alessandri P., Nelson B. D. Simple banking: Profitability and the yield curve. Journal of Money, Credit and Banking. 2015;47(1):143–175. DOI: 10.1111/jmcb.12172Alessandri P., Nelson B. D. Simple banking: Profitability and the yield curve. Journal of Money, Credit and Banking. 2015;47(1):143–175. DOI: 10.1111/jmcb.12172Peek J., Rosengren E. Bank regulation and the credit crunch. Journal of Banking & Finance. 1995;19(3–4):679–692. DOI: 10.1016/0378–4266(94)00148-VPeek J., Rosengren E. Bank regulation and the credit crunch. Journal of Banking & Finance. 1995;19(3–4):679–692. DOI: 10.1016/0378–4266(94)00148-VKishan R. P., Opiela T. P. Bank size, bank capital, and the bank lending channel. Journal of Money, Credit and Banking. 2000;32(1):121–141. DOI: 10.2307/2601095Kishan R. P., Opiela T. P. Bank size, bank capital, and the bank lending channel. Journal of Money, Credit and Banking. 2000;32(1):121–141. DOI: 10.2307/2601095Kashyap A. K., Stein J. C. What do a million observations on banks say about the transmission of monetary policy? The American Economic Review. 2000;90(3):407–428. DOI: 10.1257/aer.90.3.407Kashyap A. K., Stein J. C. What do a million observations on banks say about the transmission of monetary policy? The American Economic Review. 2000;90(3):407–428. DOI: 10.1257/aer.90.3.407Ali M., Puah C. H. The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review. 2019;42(1):49–67. DOI: 10.1108/MRR-04–2017–0103Ali M., Puah C. H. The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review. 2019;42(1):49–67. DOI: 10.1108/MRR-04–2017–0103Almaqtari F. A., Al-Homaidi E.A., Tabash M. I., Farhan N H. The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance & Economics. 2019;24(1):168–185. DOI: 10.1002/ijfe.1655Almaqtari F. A., Al-Homaidi E.A., Tabash M. I., Farhan N H. The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance & Economics. 2019;24(1):168–185. DOI: 10.1002/ijfe.1655Ebenezer O. O., Omar W. A.W.B., Kamil S. Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Nigeria. International Journal of Finance & Banking Studies. 2017;6(1):25–38. DOI: 10.20525/ijfbs.v6i1.627Ebenezer O. O., Omar W. A.W.B., Kamil S. Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Nigeria. International Journal of Finance & Banking Studies. 2017;6(1):25–38. DOI: 10.20525/ijfbs.v6i1.627Loh C. Z. Specific risk factors and macroeconomic factor on profitability performance an empirical evidence of Top Glove Corporation Bhd. Munich Personal RePEc Archive. MPRA Paper. 2017;(78339). URL: https://mpra.ub.uni-muenchen.de/id/eprint/78339Loh C. Z. Specific risk factors and macroeconomic factor on profitability performance an empirical evidence of Top Glove Corporation Bhd. Munich Personal RePEc Archive. MPRA Paper. 2017;(78339). URL: https://mpra.ub.uni-muenchen.de/id/eprint/78339Zampara K., Giannopoulos M., Koufopoulos D. N. Macroeconomic and industry-specific determinants of Greek bank profitability. International Journal of Business and Economic Sciences Applied Research. 2017;10(1):13–22. DOI: 10.25103/ijbesar.101.02Zampara K., Giannopoulos M., Koufopoulos D. N. Macroeconomic and industry-specific determinants of Greek bank profitability. International Journal of Business and Economic Sciences Applied Research. 2017;10(1):13–22. DOI: 10.25103/ijbesar.101.02Naeem M., Baloch Q. B., Khan A. W. Factors affecting banks’ profitability in Pakistan. International Journal of Business Studies Review. 2017;2(2):33–49.Naeem M., Baloch Q. B., Khan A. W. Factors affecting banks’ profitability in Pakistan. International Journal of Business Studies Review. 2017;2(2):33–49.Brei M., Borio C., Gambacorta L. Bank intermediation activity in a low-interest-rate environment. Economic Notes. 2020;49(2): e12164. DOI: 10.1111/ecno.12164Brei M., Borio C., Gambacorta L. Bank intermediation activity in a low-interest-rate environment. Economic Notes. 2020;49(2): e12164. DOI: 10.1111/ecno.12164Genay H., Podjasek R. What is the impact of a low interest rate environment on bank profitability? Chicago Fed Letter. 2014;(324). URL: https://www.chicagofed.org/publications/chicago-fed-letter/2014/july-324Genay H., Podjasek R. What is the impact of a low interest rate environment on bank profitability? Chicago Fed Letter. 2014;(324). URL: https://www.chicagofed.org/publications/chicago-fed-letter/2014/july-324Romer C. D., Romer D. H. A new measure of monetary shocks: Derivation and implications. American Economic Review. 2004;94(4):1055–1084. DOI: 10.1257/0002828042002651Romer C. D., Romer D. H. A new measure of monetary shocks: Derivation and implications. American Economic Review. 2004;94(4):1055–1084. DOI: 10.1257/0002828042002651Busch R., Memmel C. Banks’ net interest margin and the level of interest rates. Deutsche Bundesbank Discussion Paper. 2015;(16). URL: https://www.econstor.eu/bitstream/10419/111920/1/830116079.pdfBusch R., Memmel C. Banks’ net interest margin and the level of interest rates. Deutsche Bundesbank Discussion Paper. 2015;(16). URL: https://www.econstor.eu/bitstream/10419/111920/1/830116079.pdfEnglish W. B. Interest rate risk and bank net interest margins. BIS Quarterly Review. 2002;(Dec.):67–82. URL: https://www.bis.org/publ/qtrpdf/r_qt0212.pdfEnglish W. B. Interest rate risk and bank net interest margins. BIS Quarterly Review. 2002;(Dec.):67–82. URL: https://www.bis.org/publ/qtrpdf/r_qt0212.pdfGujarati D. N., Porter D. Basic econometrics. New York, NY: McGraw-Hill Education; 2009. 1027 p. URL: http://www.uop.edu.pk/ocontents/gujarati_book.pdfGujarati D. N., Porter D. Basic econometrics. New York, NY: McGraw-Hill Education; 2009. 1027 p. URL: http://www.uop.edu.pk/ocontents/gujarati_book.pdfRashid A., Jabeen S. Analyzing performance determinants: Conventional versus Islamic banks in Pakistan. Borsa Istanbul Review. 2016;6(2):92–107. DOI: 10.1016/j.bir.2016.03.002Rashid A., Jabeen S. Analyzing performance determinants: Conventional versus Islamic banks in Pakistan. Borsa Istanbul Review. 2016;6(2):92–107. DOI: 10.1016/j.bir.2016.03.002Al-Homaidi E.A., Ahmad A., Khaled A. S., Qaid M. M. External factors and banks’ performance: An empirical examination of commercial banks listed on Bombay Stock Exchange (BSE). Journal of Emerging Technologies and Innovative Research. 2019;6(6):368–371. DOI: 10.1729/Journal.22618Al-Homaidi E.A., Ahmad A., Khaled A. S., Qaid M. M. External factors and banks’ performance: An empirical examination of commercial banks listed on Bombay Stock Exchange (BSE). Journal of Emerging Technologies and Innovative Research. 2019;6(6):368–371. DOI: 10.1729/Journal.22618Gaur D., Mohapatra D. R. Non-performing assets and profitability: Case of Indian banking sector. Vision: The Journal of Business Perspective. 2021;25(2):180–191. DOI: 10.1177/0972262920914106Gaur D., Mohapatra D. R. Non-performing assets and profitability: Case of Indian banking sector. Vision: The Journal of Business Perspective. 2021;25(2):180–191. DOI: 10.1177/0972262920914106Bindseil U., Jablecki J. The optimal width of the central bank standing facilities corridor and banks’ day-to-day liquidity management. ECB Working Paper. 2011;(1350). URL: https://www.econstor.eu/bitstream/10419/153784/1/ecbwp1350.pdfBindseil U., Jablecki J. The optimal width of the central bank standing facilities corridor and banks’ day-to-day liquidity management. ECB Working Paper. 2011;(1350). URL: https://www.econstor.eu/bitstream/10419/153784/1/ecbwp1350.pdfBodla B. S., Verma R. Determinants of profitability of banks in India: A multivariate analysis. Journal of Services Research. 2006;6(2):75–89.Bodla B. S., Verma R. Determinants of profitability of banks in India: A multivariate analysis. Journal of Services Research. 2006;6(2):75–89.Misra S. D. Determinants of bank profitability in India. International Journal of Indian Culture and Business Management. 2015;10(2):193–211. DOI: 10.1504/ijicbm.2015.068170Misra S. D. Determinants of bank profitability in India. International Journal of Indian Culture and Business Management. 2015;10(2):193–211. DOI: 10.1504/ijicbm.2015.068170Bougatef K. Determinants of bank profitability in Tunisia: Does corruption matter? Journal of Money Laundering Control. 2017;20(1):70–78. DOI: 10.1108/JMLC-10–2015–0044Bougatef K. Determinants of bank profitability in Tunisia: Does corruption matter? Journal of Money Laundering Control. 2017;20(1):70–78. DOI: 10.1108/JMLC-10–2015–0044Yahya A. T., Akhtar A., Tabash M. I. The impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks: An empirical evidence. Investment Management and Financial Innovations. 2017;14(4):30–39. DOI: 10.21511/imfi.14(4).2017.04Yahya A. T., Akhtar A., Tabash M. I. The impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks: An empirical evidence. Investment Management and Financial Innovations. 2017;14(4):30–39. DOI: 10.21511/imfi.14(4).2017.04Athanasoglou P. P., Brissimis S. N., Delis M. D. Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money. 2008;18(2):121–136. DOI: 10.1016/j.intfin.2006.07.001Athanasoglou P. P., Brissimis S. N., Delis M. D. Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money. 2008;18(2):121–136. DOI: 10.1016/j.intfin.2006.07.001Salike N., Ao B. Determinants of bank’s profitability: Role of poor asset quality in Asia. China Finance Review International. 2018;8(2):216–231. DOI: 10.1108/CFRI-10–2016–0118Salike N., Ao B. Determinants of bank’s profitability: Role of poor asset quality in Asia. China Finance Review International. 2018;8(2):216–231. DOI: 10.1108/CFRI-10–2016–0118Jara-Bertin M., Moya J. A., Perales A. R. Determinants of bank performance: Evidence for Latin America. Academia Revista Latinoamericana de Administración. 2014;27(2):164–182. DOI: 10.1108/ARLA-04–2013–0030Jara-Bertin M., Moya J. A., Perales A. R. Determinants of bank performance: Evidence for Latin America. Academia Revista Latinoamericana de Administración. 2014;27(2):164–182. DOI: 10.1108/ARLA-04–2013–0030Albulescu C. T. Banks’ profitability and financial soundness indicators: A macro-level investigation in emerging countries. Procedia Economics and Finance. 2015;23:203–209. DOI: 10.1016/S 2212–5671(15)00551–1Albulescu C. T. Banks’ profitability and financial soundness indicators: A macro-level investigation in emerging countries. Procedia Economics and Finance. 2015;23:203–209. DOI: 10.1016/S 2212–5671(15)00551–1Al-Omar H., Al-Mutairi A. Bank-specific determinants of profitability: The case of Kuwait. Journal of Economic and Administrative Sciences. 2008;24(2):20–34. DOI: 10.1108/10264116200800006Al-Omar H., Al-Mutairi A. Bank-specific determinants of profitability: The case of Kuwait. Journal of Economic and Administrative Sciences. 2008;24(2):20–34. DOI: 10.1108/10264116200800006Naceur S. B. The determinants of the Tunisian banking industry profitability: Panel evidence. Universite Libre de Tunis Working Papers. 2003;(10). URL: https://www.mafhoum.com/press6/174E11.pdfNaceur S. B. The determinants of the Tunisian banking industry profitability: Panel evidence. Universite Libre de Tunis Working Papers. 2003;(10). URL: https://www.mafhoum.com/press6/174E11.pdfMasood O., Ashraf M., Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets. 2012;4(2/3):255–268. DOI: 10.1108/17554171211252565Masood O., Ashraf M., Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets. 2012;4(2/3):255–268. DOI: 10.1108/17554171211252565Gul S., Irshad F., Zaman K. Factors affecting bank profitability in Pakistan. Romanian Economic Journal. 2011;14(39):61–87. URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2011–02–28/2101/guletal-je39.pdfGul S., Irshad F., Zaman K. Factors affecting bank profitability in Pakistan. Romanian Economic Journal. 2011;14(39):61–87. URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2011–02–28/2101/guletal-je39.pdfOngore V. O., Kusa G. B. Determinants of fi nancial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues. 2013;3(1):237–252. URL: https://www.econjournals.com/index.php/ijefi /article/view/334/pdfOngore V. O., Kusa G. B. Determinants of fi nancial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues. 2013;3(1):237–252. URL: https://www.econjournals.com/index.php/ijefi /article/view/334/pdfTeng K. Y., Wei T. K., Yong T. S., Siew Y. M. The determinants of Islamic bank profi tability in Malaysia. Bachelor thesis. Kampar: University Tunku Abdul Rahman; 2012. 58 p. URL: http://eprints.utar.edu.my/583/1/BF-2012–0905796–1.pdfTeng K. Y., Wei T. K., Yong T. S., Siew Y. M. The determinants of Islamic bank profi tability in Malaysia. Bachelor thesis. Kampar: University Tunku Abdul Rahman; 2012. 58 p. URL: http://eprints.utar.edu.my/583/1/BF-2012–0905796–1.pdf

The authors declare that there are no conflicts of interest present.