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Determinants of Efficiency of Fiji’s Commercial Banks: An Empirical Study, 2002-16

Jayaraman, T.K. and Singh, Baljeet and Sharma, Ajeshni (2017) Determinants of Efficiency of Fiji’s Commercial Banks: An Empirical Study, 2002-16. Fijian Studies: A Journal of Contemporary Fiji, 15 (2). pp. 13-26. ISSN 1728-7456

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Commercial banks function as intermediaries between savers and investors. Under a fractional reserve system, commercial banks have been empowered to step up money supply by creating demand deposits when they approve loans to the borrowers. In the process, rise in money supply is inevitable and inflationary potential is kept under control only when rise in output is faster than rise in money supply. Inflation affects the efficiency of the banks. But efficiency is also influenced by various other factors, which include efficient loan recovery and expenditure controls. This paper explores factors influencing the efficiency of commercial banks by utilizing an index developed and derived by the authors. The study finds that in Fiji, the real GDP, the margin between average lending rate and deposit rates, and bank credit to private sector were positively associated with bank efficiency, while inflation, bank expenditure, and non-performing loans were negatively associated with bank efficiency.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Business and Economics (FBE) > School of Economics
Depositing User: Fulori Nainoca - Waqairagata
Date Deposited: 08 Jun 2018 05:03
Last Modified: 20 Mar 2019 21:30

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