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Journal of Quantitative Economics

, Volume 3, Issue 1, pp 74–87 | Cite as

Collateralized Lending by Indian Banks: Some Explanations and Policy Implications

  • Abhaysingh Chavan
  • Rajendra R. Vaidya
Article

Abstract

This paper draws a parallel between the extent of unsecured lending that a bank does and the screening effort extended by the bank. Since unsecured lending requires screening on the part of the bank, higher the percentage of unsecured loans in total loans, higher is likely to be the screening effort while processing loan applications. Using panel data relating to banks in India, we find that on an average a higher extent of screening effort or unsecured loans is likely to be provided by banks that are large, have low level of non-performing assets, and are in the private sector. Further, persistence in the extent of unsecured lending seems to suggest that any change in unsecured lending/ screening effort is likely to be rather slow.

Keywords

Banks Collateralized lending Screening effort 

JEL classification

E44 G21 

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Copyright information

© The Indian Econometric Society 2005

Authors and Affiliations

  • Abhaysingh Chavan
    • 1
  • Rajendra R. Vaidya
    • 2
  1. 1.The Stock Exchange (BSE), FortMumbaiIndia
  2. 2.Indira Gandhi Institute of Development ResearchMumbaiIndia

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