Do Markets Know More?: India’s Banking Sector through the Lens of PBR

Pratap, Bhanu; Neogi, Ranajoy; Jose, Jibin

Do Markets Know More?: India’s Banking Sector through the Lens of PBR

Pratap, B., Neogi, R. G., & Jose, J. (2021). Do Markets Know More? India’s Banking Sector through the Lens of PBR. Reserve Bank of India Bulletin, 75(2), pp. 85-92, Reserve Bank of India, Mumbai, India.

8 Pages Posted: 8 Jun 2021

See all articles by Bhanu Pratap

Bhanu Pratap

Reserve Bank of India

Ranajoy Neogi

Indian Statistical Institute, Kolkata - Economic Research Unit

Jibin Jose

Reserve Bank of India

Date Written: February 15, 2021

Abstract

This article is an enquiry into the determinants of price-to-book ratio (PBR) of scheduled commercial banks (SCBs) in India. Our empirical analysis indicates that variations in PBR have linkages with financial and economic cycles. It also captures the ‘franchise value’ of banks and shares a close correlation with indicators relating to profitability and viability of banks. This article, therefore, suggests that PBR may be considered as an alternative measure of bank value.

Keywords: Price-to-book ratio, Banking sector, India, Market valuation, Panel data

JEL Classification: G21, G32, C23

Suggested Citation: Suggested Citation

Pratap, Bhanu and Neogi, Ranajoy and Jose, Jibin, Do Markets Know More?: India’s Banking Sector through the Lens of PBR (February 15, 2021). Pratap, B., Neogi, R. G., & Jose, J. (2021). Do Markets Know More? India’s Banking Sector through the Lens of PBR. Reserve Bank of India Bulletin, 75(2), pp. 85-92, Reserve Bank of India, Mumbai, India., Available at SSRN: https://ssrn.com/abstract=3861481