ABSTRACT
Ramesh Chandra Das Katwa College, India
Soumyananda Dinda
Sidho-Kanho-Birsha University, India
The Indian economy has undergone different structural shifting in its history of development since 1947.
One major break was the liberalization of the economy in the period 1991-92 and the reforms in the banking and financial sectors deserved a special attention in the study. The banking sector reform was done under the intention to make more investible banking funds for real investment to raise credit-deposit ratio along with proper allocation of banking funds to all the states so that share of credit of each state is balanced. Literature shows the falling tendency of credit-deposit ratio in the immediate decade after the reform and the rising tendency of divergence in credit possession among the states. At the same time, the states lacking in credit-deposit ratio are either with higher, lower, or moderate shares of credits. This study, hence, tried to examine the direction of causalities between credit-deposit ratio and credit share for the major 16 states of India. Using the time series econometrics technique, this study found 4 states where the causality works for the entire period and less than half of the state where causality works in either pre-reform or post-reform periods.
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