Evaluation of Financial Performance of Banking Sector in India – A Camel Approach

Abstract

Purpose: The study examines the financial performances of selected Public Sector Undertaking Banks (PSUB) and Private Sector Banks (PSB). Furthermore, this study examines banks' efficiency concerning various financial aspects such as stability, liquidity, and profitability and their impact on financial performance.
 
 Theoretical framework: Numerous studies have been conducted to evaluate the financial performance of commercial banks. But after the COVID pandemic, only a few studies were conducted on the performance of banks. However, there is still much to assess regarding the comparative financial performance of public and private sector banks in India.
 
 Design/methodology/approach: The study of financial performance of banks conducted on six PSUB and six PSB are selected based on advances as a percentage of deposits with the top three and bottom three banks from the PSUB and PSB. This research compares PSUB to PSB using a T-test for independent samples. The data is collected from secondary sources gathered from annual and RBI annual reports from 2017 to 2021.
 
 Findings: Results from a comparison test show that, even though PSUB has made a lot of progress, they are still not performing up to the standard that PSB set. According to the report, PSB outperformed PSUB in the areas of CAR, NPA to NA, PPE, ROA, and liquid assets to total deposits concerning the CAMEL approach.
 
 Research, Practical & Social implications: Future studies can consider other indicators of CAMEL components, like the percentage of gross NPA, net profit margin, interest income to total funds, operating expenses to total funds, credit deposit ratio, cash to deposit ratio, and some other samples of banks, to assess the financial performance of banks.
 
 Originality/value: This research focuses on the financial performances of selected PSUBs and PSBs. The findings of this scholarly article state that the performances of the PSBs are the best, which means the PSUBs are lacking towards the customers in their performances. This research may be helpful to the policymakers in the PSUBs to identify their problems and rectify them.