COMPOSITION OF LOANS AND INVESTMENTS IN INDIAN BANKS - AN EMPIRICAL STUDY
COMPOSITION OF LOANS AND INVESTMENTS IN INDIAN BANKS - AN EMPIRICAL STUDY

Summary/Abstract: Banks mobilise majority of funds from deposits, nearly 78%. Deployment of bank funds is mainly in loans and investments. Banks extend a variety of loans, both secured and unsecured, after due process of credit appraisal. Similarly, banks take exposure in investment instruments as per their policy and regulatory guidelines. Investments supplement lending function in various ways as they are more liquid and can be shuffled easily. There is no optimal allocation for deployment of funds by banks and same is decided by individual banks as per business strategy. The return generated in banks from loans is better than that from investments. The proportion of two forms of bank assets varies from bank to bank in line with business strategy and regulatory norms. The private sector banks have tendency to take more exposure in loans vis a vis their public sector counterparts. On the other hands, foreign banks in India are inclined to take higher exposure in investments. This paper examines the pattern of division of bank assets as loans and investment, between different categories of banks in India.

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