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Banking Reform in India∗ - page 52 / 57

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Table 7: Determinants of working capital limit and interested ratea

Independent variables log(previous granted limit)

previous interest rate

log(maximum limit as per bank's rule)b

log(ltb), calculated by the bank

log(ltb, calculated by us) using turnover projected by bank log(LWC)

log(profit/asset)

dummy for negative profit

log(tnw/debt)

log(asset)

log(interest earned/granted limit) for previous year

constant

r2 n

0.240 (.046) 0.021 (.017) -0.037 (.115) -0.104 (.029) 0.080 (.056)

0.102 (.025) 0.279 (.061) -0.001 (.021) 0.053 (.129) -0.112 (.032) 0.143 (.065) 0.005 (.037)

0.091 (.083) -0.048 (.043) -0.045 (.272) -0.064 (.076) 0.063 (.104)

-0.025 (.09) 0.083 (.084) -0.036 (.044) -0.037 (.266) -0.087 (.07) 0.168 (.118)

0.011

-0.009

-0.021

2.547

2.180

(.079) 0.952

(.154) 0.955

(.195) 0.962

(.749) 0.878

(.843) 0.881

298

241

145

198

194

0.757

0.540

0.455

-0.198

-0.260

(.04)

(.059)

(.084)

(.108)

(.124)

(1)

0.145

-0.019

(.036)

(.102)

Dependent variable log(granted limit)

Interest rate

0.823

0.832

(.038)

(.041)

(2)

(3)

(4)

(5)

0.256 (.042)

Source: Authors' caculation from account level data from a Public Sector bank in India. a - All variables in logarithm. Standard errors (corrected for clustering at the account level), in parentheses below the coefficient. b - The maximum limit as per bank's rule is max(ltb calculated by bank, lwc).

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