Abstract
-
The purpose of this paper is to identify the determinants of liquidity among government owned
nationalised banks in India. Nationalised banks in India are the biggest group of banks and any
issue with nationalised banks can have the potential of affecting liquidity of entire banking system
in India. The data covers a period from 1996 to 2012. Results of OLS regression show that the
most significant factors influencing liquidity in nationalised banks of India are: call rate, cash
reserve ratio and statutory liquidity ratio, gross domestic products, among the macroeconomic
factors and capital to total assets and log of total assets for bank specific factors. Others factors
have very little influence on liquidity of banks in India. Cash reserve ratio has a positive and
expected relationship with liquidity ratios. As such statutory liquidity ratio are not very effective
instruments of managing liquidity in nationalised banks of India. Supervision of each bank may
become necessary for proper implementation of regulatory measures in India.