A Game Theoretic Approach to Corporate Lending by the Banks in India

A series of corporate loan defaults facing the Indian banks in the post-crisis period of 2008 led to the downgrading of India's global credit rating in 2012. Against this backdrop, this chapter delivers an insight to the reader into the games that occur between lending banks and corporate borrowers in addition to the games between the banks themselves in lending competition. The chapter covers various strategies of actions in the structures of bilateral monopoly, duopoly, and oligopoly, the Nash equilibrium, prisoners' dilemma, decision trees, and binomial analysis. In modeling the default probability, the profits of the lender and the borrower, a number of corollaries, one lemma, and one theorem are deduced in this chapter