Impact of banking sector competition on emerging market banks’ safety and soundness – A study on Indian Banks

The literature is unsettled on the simultaneous existence of Competition-Stability and Competition-Fragility phenomena in banking system. Our study has extended debate where we have incorporated accounting-based information along with 2-SLS system equation modeling to further explore linkages between competition, systemic risk, stability prevailing Indian revealed that for banks competition risk are inversely related. Systemic build-up occurs during business growth cycle, it spillovers onto economic down-cycle. article finds while a healthy would support overall banks, fierce exerts competitive pressure system, hence negatively contributes bank’s stability. It supported financial fragility hypothesis envisages increased capital restricts aggressive loan creation increases fragility.