Service Production in Banking Sector: India Insights
Explore the ongoing work on the Index of Service Production in the banking sector in India led by Dr. Pradip Bhuyan from the Reserve Bank of India. Learn about the significance of the Index of Service Production, its challenges, and the proposed methodologies for measurement in the Indian banking industry.
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Presentation Transcript
Index of Service Production for Banking Sector in India - work in progress Dr. Pradip Bhuyan Director Banking Studies and Risk Modelling Division Dept. of Statistics and Information Management Reserve Bank of India, Mumbai
Index of service production from banking in India - work in progress Banking sector in India is dominated by scheduled commercial banks (SCBs). SCBs (including Regional Rural Banks) account for over 90 per cent of the total assets of the banking system in India. Index of service production (ISP) is a composite indicator that measures the short term changes in the volume of service production during a given period vis- -vis that in a chosen based period. Conceptually it is akin to the index of industrial production (IIP). As IIP requires measurement of industrial output, ISP requires measurement of services output. The challenge is that the ISP deals with services output which is not always directly observable. ISP for banking (ISPB) refers to the quantity index of banking output. Work on construction of ISPB for India would be initiated in RBI once the methodology is approved.
Index of service production from banking in India - work in progress Banks provide both direct services as well as intermediary services. Direct services pertain to issuing of letter of credit, bank guarantees, demand draft, foreign currency Intermediary services pertain to financial intermediation services viz. to accept deposits and to give loans. Total output generated by banks is compiled by adding direct services output to that of financial intermediation services. transaction services etc. Output from direct services is generated based on the fee income received. Output from financial intermediation services cannot be measured directly. It is measured following a widely used method known as financial intermediation services indirectly measured (FISIM). There is no standard prescription on a unique reference rate or a unique deflator to construct ISP.
Index of service production from banking in India - work in progress Several reference rates and several deflators are under consideration for construction of the ISPB for India. Laspeyres Chain Link index is proposed to construct the ISPB for India. Currently it is proposed to construct ISPB based on the data of Scheduled Commercial Banks in India based on balance sheet/P&L data. Thank You
