Table 5 Impact of large deposits on the...

Table 5

Impact of large deposits on the net interest margin and Z-Score of banks in India, 2013–2022

Variables	Description	(1)	(2)	(3)
		NIM	Z-Score	Z-Score
T20DEP	Top 20 depositors share	0.019*	−0.049***	−0.050***
T20DEP		(0.010)	(0.018)	(0.018)
CDR	Credit-to-deposit ratio	−0.002*	0.004	0.003
CDR		(0.001)	(0.012)	(0.013)
CASAR	Current account and savings account ratio	0.037***	−0.023*	−0.026*
CASAR		(0.010)	(0.014)	(0.014)
NNPAR	Net nonperforming assets ratio	−0.087***	−0.174***	−0.169***
NNPAR		(0.015)	(0.035)	(0.034)
SLSS	Lending to sensitive sector-to-total assets ratio	0.442	4.579	4.685
SLSS		(1.208)	(2.976)	(2.974)
SPRIO	Lending to priority sector-to total assets ratio	4.969***	−0.231	−0.589
SPRIO		(1.237)	(1.483)	(2.154)
SUSL	Unsecured lending-to-total assets ratio	2.273	−0.304	−0.572
SUSL		(1.630)	(1.737)	(1.978)
NLTA	Natural log of total assets	−0.138*	−0.959***	−0.945***
NLTA		(0.073)	(0.112)	(0.120)
GDPR	Gross domestic product growth rate	−0.007**	0.018	0.018
GDPR		(0.003)	(0.018)	(0.018)
REP	Repo rate	0.071**	0.200**	0.197**
REP		(0.035)	(0.098)	(0.099)
CTA	Cash-to-total assets ratio	2.385*	2.454	2.271
CTA		(1.323)	(1.831)	(2.089)
NIM	Net interest margin	–	–	0.070
NIM				(0.238)
Constant	Constant	1.487	10.325***	10.272***
Constant		(1.194)	(1.818)	(1.829)
Number of bank id		49	49	49
Entity effects		YES	YES	YES
Prob > F		0.00***	0.00***	0.00***
Overall R²		0.667	0.561	0.562

Variables	Description	(1)	(2)	(3)
		NIM	Z-Score	Z-Score
T20DEP	Top 20 depositors share	0.019*	−0.049***	−0.050***
T20DEP		(0.010)	(0.018)	(0.018)
CDR	Credit-to-deposit ratio	−0.002*	0.004	0.003
CDR		(0.001)	(0.012)	(0.013)
CASAR	Current account and savings account ratio	0.037***	−0.023*	−0.026*
CASAR		(0.010)	(0.014)	(0.014)
NNPAR	Net nonperforming assets ratio	−0.087***	−0.174***	−0.169***
NNPAR		(0.015)	(0.035)	(0.034)
SLSS	Lending to sensitive sector-to-total assets ratio	0.442	4.579	4.685
SLSS		(1.208)	(2.976)	(2.974)
SPRIO	Lending to priority sector-to total assets ratio	4.969***	−0.231	−0.589
SPRIO		(1.237)	(1.483)	(2.154)
SUSL	Unsecured lending-to-total assets ratio	2.273	−0.304	−0.572
SUSL		(1.630)	(1.737)	(1.978)
NLTA	Natural log of total assets	−0.138*	−0.959***	−0.945***
NLTA		(0.073)	(0.112)	(0.120)
GDPR	Gross domestic product growth rate	−0.007**	0.018	0.018
GDPR		(0.003)	(0.018)	(0.018)
REP	Repo rate	0.071**	0.200**	0.197**
REP		(0.035)	(0.098)	(0.099)
CTA	Cash-to-total assets ratio	2.385*	2.454	2.271
CTA		(1.323)	(1.831)	(2.089)
NIM	Net interest margin	–	–	0.070
NIM				(0.238)
Constant	Constant	1.487	10.325***	10.272***
Constant		(1.194)	(1.818)	(1.829)
Number of bank id		49	49	49
Entity effects		YES	YES	YES
Prob > F		0.00***	0.00***	0.00***
Overall R²		0.667	0.561	0.562

Note(s): Robust standard errors are in parentheses

***p < 0.01, **p < 0.05, *p < 0.1

Figures in brackets are standard errors. ***, ** and * indicates statistical significance at 1%, 5% and 10%, respectively. The Hausman test was conducted for the NIM and Z-Score. The p-value for NIM was 0.0000, signifying fixed effects. The p-value for Z-Score was 12.98, signifying random effects. The key coefficients are qualitatively and directionally consistent under both the models. We have retained random effects in line with our econometric approach

The table shows the panel regression using random effects model results using equations (1) and (2). Equation (1) examines the regression model with the net interest margin (NIM) being the dependent variable. Equation (2) examines the regression model with natural logarithm of Z-Score as the dependent variable. The independent variables are large deposits (T20DEP), credit-to-deposit ratio (CDR), CASAR, net nonperforming assets ratio (NNPAR), lending to sensitive sectors (LSS), priority sector lending (SPRIO), unsecured loan (USL), natural log of total assets (NLTA), growth in gross domestic product (GDPR), benchmark repo rate (REP) and cash to total assets (CTA)

Source(s): Authors' estimates

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