Restructuring assets reform, 2013: Impact of operational ability, liquidity, bank capital, profitability and capital on bank credit risk

Abstract

We analyse and employ a model that captures the inter-temporal relationship between Indian banks’ operational ability, bank capital, liquidity and profitability for a sample of 45 Indian banks during the period 2006–2016. The Generalised method of moments (GMM) model captures the bank risk through non-performing assets (NPA) over the periods 2006–2015, 2013–2016 (revised restructuring assets recognition guideline implemented) and 2015–2016 (deadline to implement revised restructured assets guideline) using restructured assets as an explanatory variable. Our findings suggest that banks with higher restructured assets levels witness higher risk and lower profits.