{"title":"Loan level loss given default (LGD) study of Indian banks","authors":"Arindam Bandyopadhyay","doi":"10.1016/j.iimb.2022.06.003","DOIUrl":null,"url":null,"abstract":"<div><p>Loss given default (LGD) is a critical element in estimating expected as well as unexpected credit losses in banking business. This article investigates written-off history of Indian banks and provides estimates of LGD on loans across sectors, loan facilities and collateral type. The study is based on internal loss data obtained from various scheduled commercial banks in India over twenty years. A multifactor tobit regression model has also been developed to capture the key determinants affecting LGD that will be helpful to predict future losses of Indian banks. LGD trends over various time periods have also been assessed to establish their linkage with probability of default.</p></div>","PeriodicalId":46337,"journal":{"name":"IIMB Management Review","volume":"34 2","pages":"Pages 168-177"},"PeriodicalIF":1.7000,"publicationDate":"2022-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0970389622000453/pdfft?md5=7eb22a1945d579d3d63f3e07891d45c2&pid=1-s2.0-S0970389622000453-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"IIMB Management Review","FirstCategoryId":"1085","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0970389622000453","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"MANAGEMENT","Score":null,"Total":0}
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Abstract
Loss given default (LGD) is a critical element in estimating expected as well as unexpected credit losses in banking business. This article investigates written-off history of Indian banks and provides estimates of LGD on loans across sectors, loan facilities and collateral type. The study is based on internal loss data obtained from various scheduled commercial banks in India over twenty years. A multifactor tobit regression model has also been developed to capture the key determinants affecting LGD that will be helpful to predict future losses of Indian banks. LGD trends over various time periods have also been assessed to establish their linkage with probability of default.
期刊介绍：
IIMB Management Review (IMR) is a quarterly journal brought out by the Indian Institute of Management Bangalore. Addressed to management practitioners, researchers and academics, IMR aims to engage rigorously with practices, concepts and ideas in the field of management, with an emphasis on providing managerial insights, in a reader friendly format. To this end IMR invites manuscripts that provide novel managerial insights in any of the core business functions. The manuscript should be rigorous, that is, the findings should be supported by either empirical data or a well-justified theoretical model, and well written. While these two requirements are necessary for acceptance, they do not guarantee acceptance. The sole criterion for publication is contribution to the extant management literature.Although all manuscripts are welcome, our special emphasis is on papers that focus on emerging economies throughout the world. Such papers may either improve our understanding of markets in such economies through novel analyses or build models by taking into account the special characteristics of such economies to provide guidance to managers.
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