Disintermediation in Indian Commercial Banks: Evidences from Pre and Post-Liberalization Phases

Journal of Applied Research in Finance, Volume II Issue 2(4)/Winter 2010, Pp:181-191

Posted: 16 Apr 2014

See all articles by A. P. Pati

A. P. Pati

North Eastern Hill University

Date Written: Dec 15, 2010

Abstract

With the structural changes witnessed, particularly during post-liberalization phases, the possibility of disintermediation in commercial banking sector in India cannot be ruled out. With a set of secondary sources of data for 28 years divided equally into pre and post-liberalization phases, this article tries to trace the evidence of disintermediation, if any, in the banking industry with respect to their deposit taking and loan disbursal activities.

Quadratic trend analysis is made for the four indices developed for the purpose of the study. It is observed that there has been a significant structural shift in household savings in the form of bank deposits from pre-liberalization to post-liberalization period. The impact of shifting away from commercial banks to other intermediary institutions on either deposit or loan function of the banks is not clearly visible. Indices meant to capture the impact of capital market growth on the prime business of commercial banks provide some evidences of disintermediation. Further, when analyzed separately for the two phases, the result demonstrates that this phenomenon has taken place during pre-liberalisation only, re-establishes the supremacy of banking in post-liberalisation phase.

Suggested Citation

Pati, Ambika Prasad, Disintermediation in Indian Commercial Banks: Evidences from Pre and Post-Liberalization Phases (Dec 15, 2010). Journal of Applied Research in Finance, Volume II Issue 2(4)/Winter 2010, Pp:181-191, Available at SSRN: https://ssrn.com/abstract=2425058

Ambika Prasad Pati (Contact Author)

North Eastern Hill University ( email )

Umshing-Mawkynroh
Shillong
Meghalaya, 793022
India

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