Journal of Quantitative Economics

, Volume 3, Issue 1, pp 50–73 | Cite as

Depositor Discipline in the Banking Sector in India: An Empirical Investigation

  • Saibal GhoshEmail author
  • Abhiman Das


The paper traces the determinants of depositor discipline in Indian banking. Using annual data on commercial banks covering the period 1996 to 2003, the findings reveal that, while bank-specific factors are dominant in case of state-owned banks, systemic variables tend to overwhelm bank-specific factors in explaining behaviour of depositors of private banks. In case of private and foreign banks, policy announcements have an important bearing on the dependent variable. For state-owned banks, larger asset translates into higher deposit growth, suggesting that depositors are sensitive to the ‘too-big-to-fair effect. Finally, insured depositors tend to exercise discipline by compelling banks to pay a higher price on deposits.

JEL Classification

C33 G21 


depositor discipline contagion effect deposit insurance state-owned banks India 


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Copyright information

© The Indian Econometric Society 2005

Authors and Affiliations

  1. 1.Department of Economic Analysis and PolicyReserve Bank of IndiaMumbaiIndia
  2. 2.Department of Statistical Analysis and Computer ServicesReserve Bank of IndiaMumbaiIndia

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