EVALUATING THE IMPACT OF CAMEL RATIOS ON THE EFFICIENCY OF SELECTED INDIAN BANKS

Abstract

The downfall of banks and financial institutions and the freezing of capital markets during the global financial crisis of 2007–2009 had a significant influence on the actual economy across the world. This crisis has made it apparent how crucial stability risk is and has emphasized the significance of performance evaluation. For the policy formulation and framing of strategies, it is essential to identify the sound and weaker aspects of the banks. Various ratios based models have been developed for the analyses of the banking sector, which helps in identification of strength and weakness of the banks. This study makes use of the CAMEL Model to analyze the different aspects of performance and soundness as well as the impact of the CAMEL ratios contributing to the efficiency of the selected public and private sector banks for the period of 17 years from 2005-2006 to 2021-2022. Based on the composite rating of the CAMEL Models, It has been found that HDFC bank Ltd. shows excellent performance. The study concluded that In order to be more efficient, selected public sector banks should concentrate on the value of NPAs and Liquidity and at the same time, these banks should pay attention to the Earnings Quality but not by compromising the efficiency of earnings while the selected Private sector banks should take proper steps to improve the operating profit, net profit, total interest income and net interest margin for becoming more efficient.