An Empirical Analysis on Nexus between Credit Risk of Nationalised Banks in India and Macroeconomic Factors – An Econometric Perspective

Management

This empirical study analyses the interaction between credit risk of nationalised banks and macroeconomic determinants for the period 2002-2003 to 2013-2014. The study aims to find the association between GNPA and macroeconomic factors with the help of econometrics tools such as Unit Root Test Analysis, Johanson Cointegration test, Granger Casualty Test and Auto Regressive Conditional Hetroscedasticity (ARCH Model). The analytical results revealed the long term relationship among GNPA of nationalised banks and macroeconomic factors during the study period. It is found that all the macroeconomic variables are cointegrated with GNPA and exogenous variable Inflation granger caused GNPA of nationalised banks in bi-directional mode. It is also observed from the results that exogenous variables such as GDP, inflation, credit growth, exchange rate, unemployment rate, annual growth of industrial production and weighted average lending rate are having significant relationship with GNPA of nationalised banks.

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