A Study of Impact of Demonetization on Private and PSU Bank Indices

The present study is undertaken to examine demonetization effect on public and private sector banking, represented by Nifty Private Bank Index and Nifty PSU Bank Index in India. The data consists of daily closing values of Nifty Private Bank Index and Nifty PSU Bank Index, obtained from official website of National Stock Exchange. Impact of demonetization on banking sector is studied by comparing the data of Nifty Private Bank Index and Nifty PSU Bank Index for 30 trading days and 10 trading days before and after November 8, 2016 (event date). To study the statistical significance of the impact of demonetization decision, paired t-test and wilcoxon signed ranks test are used. The results exhibited that demonetisation decision has significantly reduced value of Nifty Private Bank Index. On the contrary, Nifty PSU Bank Index has significantly increased (10 days) after demonetization. But there is no significant increase in Nifty PSU Bank Index (30 days) after demonetization decision. It may be due to the reason that people have more confidence in PSU banks owing to government backing.