Banking services price index: An exploratory analysis for India

In this paper we examine the issues involved for constructing a bank output price index for India. As well know, traditionally, the major part of banks' revenue comes from their activities in relation to financial intermediation, though in recent years, banks are increasingly tending to provide many direct services. Thus, an ideal price index for banking services would cover prices of both direct and intermediation services. As direct services are charged explicitly, measuring and pricing these banking services pose no special conceptual problem, except possibly the difficulties due to certain data deficiencies. But the issue is very complex conceptually for intermediation services. Besides, the implementation of the existing theory of price index of financial intermediation services is limited mainly due to the lack of required data and/or pronounced estimation problems. In this context, this paper presents some empirical results in respect to prices of banks' intermediation services for India.