Factors Influencing on Bank Credit: A Comparative Study of Leading Banks Operating in India and Indonesia

This paper empirically investigates the determinants of bank credit in commercial banks of India and Indonesia from 2005 to 2017and to compares findings of both these countries. Results revealed that interest rate, deposit, and loan deposit ratios have a significant positive impact on bank credit for both countries. However, gross domestic product (GDP) and capital adequacy ratio have a significant positive impact on Indonesia and Indian banks respectively. It was revealed that bank credit growth was more declined in Indian banks compared to Indonesian banks after the global financial crisis. Further, the study revealed that the growth of bank credit and deposit both were higher in private banks in India after and before the recession period which was lower in private banks than public banks during this period. Opposite results were found in Indonesian banks compared to Indian banks. This study indicated that the deposit and loan deposit ratio has a positive significant impact on bank credit both in public and private banks in India and Indonesia. Moreover, GDP has a negative and significant impact on the public banks of India, while the same factor has a positive and significant impact on bank credit granted by public banks in Indonesia.