Issues in liquidity management in banking system: An empirical evidence from Indian commercial banks

Figures & data

Table 1. Articles by intervention, strategy-wise

Mode of intervention	Count of works
Intervention through fiscal policy	11
Intervention through monetary policy	9
Intervention through Credit policies	10
Intervention through the combination of fiscal and monetary policies	7
Total	37

Source: As compiled from the literature review done by the authors

Table 2. List of banks considered for computing profit levels of Indian scheduled commercial banks

Name of the Bank	Ownership type	Online Source for-profits Data
State Bank of India	Public	https://sbi.co.in/web/investor-relations/reports
Punjab National Bank	Public	https://www.pnbindia.in/financials-archives.html
Bank of Baroda	Public	https://www.bankofbaroda.in/financial-reports.htm
Union Bank of India	Public	https://www.unionbankofindia.co.in/english/performace-archive.aspx
Canara Bank	Public	https://canarabank.com/User_page.aspx?othlink=379
Indian Bank	Public	https://www.indianbank.in/departments/financial-results/
Bank of India	Public	https://www.bankofindia.co.in/FinancialResult
Central Bank of India	Public	https://www.centralbankofindia.co.in/en/investor-relations
Bank of Maharashtra	Public	https://bankofmaharashtra.in/financial_results
Indian Overseas Bank	Public	https://www.iob.in/Financial_perf
ICICI Bank	Private	https://www.icicibank.com/aboutus/qfr.page?#toptitle
HDFC Bank	Private	https://www.hdfcbank.com/personal/about-us/investor-relations/financial-results
Axis Bank	Private	https://www.axisbank.com/shareholders-corner/financial-results-and-other-information/quarterly-results
YES Bank	Private	https://www.yesbank.in/about-us/investors-relation/financial-information/financialresults
Kotak Bank	Private	https://www.kotak.com/en/investor-relations/financial-results/quarterly-results.html
IDBI Bank	Private	https://apps.idbibank.in/idbiapp/idbi-bank-financial-result.aspx

Source: Compiled by Authors from the corresponding bank websites.

Table 3. Data description

Variable	Proxy and Source	Available frequency before transformation	Transformed Frequency	Method of frequency transformation	Count after frequency transformation	Total Average	Standard Deviation in
LD	Liquidity injected by the Reserve bank of India. Negative Sign Means Surplus Liquidity absorbed by RBI	Daily	Quarterly	Summation	41	USD 264.415 Billion (Surplus)	USD 1649.37 Billion (Deficit)
DR	1–3 year Term deposit interest rate	Weekly	Quarterly	Average	41	8.40 percent	1.25 percent
Nominal GDP	Not applicable	Quarterly	Quarterly	Not applicable	41	USD 441.13 Billion	USD 120.19 Billion
BMLR	Base rate	Weekly	Quarterly	Average	41	9.81 percent	0.84 percent
FD	Fiscal Deficit	Quarterly	Quarterly	Not applicable	41	USD 23.32 Billion	USD 21.22 Billion
BP	Total Profit of 17 representative banks	Quarterly	Quarterly	Not applicable	41	USD 4.411 Billion	USD 1.19.41 Billion
CG	Credit Lent During the period	Quarterly	Quarterly	Not applicable	41	USD973.97 Billion	USD 269.22 Billion

Source: Compiled by Authors ³

Table 4. Impact of selected interventions on liquidity deficit

Variable	Lag Number	Coefficient	Standard Error
LD	1	0.02	0.20
	2	−0.24	0.21
	3	−0.96**	0.19
FD	0	−49.09**	13.07
	1	−59.67**	21.46
	2	−72.82**	22.42
	3	−63.25**	19.96
	4	−29.51**	11.16
BMLR	0	15,252,142.00	11,747,598.00
	1	−12,954,928.00	10,790,430.00
	2	−13,952,032.00	10,652,714.00
	3	1,973,046.00	12,855,636.00
	4	7,738,872.00	5,515,119.00
CG	0	11.42	7.07
	1	18.72**	6.87
	2	3.88	8.21
	3	15.57	8.96
	4	−9.77	7.57
DR	0	8,043,196.00**	3,013,324.00
	1	−454,365.00	3,467,386.00
	2	3,708,198.00	2,801,853.00
	3	−5,555,312.00	3,770,858.00
DEMO	0	889,372.00	1,632,700.00
C		−7,638,933	4,666,191

Note: * significant at 10 percent level. ** significance at five percent level.

Table 5. Impact of interventions on GDP growth and bank profits

Impact on GDP growth				Impact on Bank Profits
Variables	Lag Number	Coefficient	Standard Error	Variables	Lag Number	Coefficient	Standard Error
D(GDP)	1	−0.44**	0.19	BP	1	0.05	0.19
	2	−0.45**	0.22		2	-	-
	3	−0.80**	0.29		3	-	-
FD	0	−1.97**	0.54	FD	0	0.07**	0.01
	1	−2.78**	0.80		1	0.11	0.02
	2	−2.61**	0.81		2	0.08	0.01
	3	−2.57**	0.76		3	-	-
	4	−1.78**	0.49		4	-	-
BMLR	0	491,090.00	546,720.00	BMLR	0	55,272.00**	21,898.00
	1	−357,896.00	464,699.00		1	-	-
	2	−1,015,583.00*	476,683.00		2	-	-
CG	0	0.01	0.27	CG	0	0.01	0.01
	1	0.54*	0.26		1	−0.01	0.01
	2	0.25	0.32		2	−0.05**	0.01
	3	0.03	0.36		3	−0.05**	0.01
	4	−0.46	0.36		4	-	-
DR	0	314,347.00**	135,269.00	DR	0	−7743.01**	3214.20
	1	−221,276.00	152,459.00		1	−16,533.00**	5612.00
	2	34,714.00	139,678.00		2	-	-
	3	−315,549.00*	160,765.00		3	-	-
DEMO	0	135,394.00*	66,402.00	DEMO	0	−10,559.00**	3377.00
C	-	76,052.00	183,626.00	C	-	28,654.00**	8552.00

Note: * significant at the 10 percent level. ** significant at the five percent level.

Table 6. Impact of liquidity management interventions on liquidity deficit/surplus, GDP, and bank profit levels

Instrument to Control Liquidity Deficit	Impact on Liquidity Deficit	Impact on Nominal GDP	Impact on Bank Profit Level
Fiscal Deficit	The current quarter and all the previous quarters have a negative impact	Negative impact	Has a positive effect
Credit Growth	Positive Effect	Has a positive impact	Negative impact
Benchmark Lending Rates	Insignificant	Negative impact	Positive impact
Deposit Rates	Positive Impact on liquidity deficit	current lag has a positive impact while third lag has a negative impact	Negative impact