Research

Pak. J. Commer. Soc. Sci. 2010 Vol. 4 (1), 40-55

Analyzing Financial Performance of Commercial Banks in India: Application of CAMEL Model
Prof. Dr. Mohi-ud-Din Sangmi Dean Faculty of Commerce and Management Studies University of Kashmir , Srinagar – 190006 Tel: [phone], E-Mail: [e-mail] Dr. Tabassum Nazir Assistant Manager, HDFC Bank , Srinagar Abstract Sound financial health of a bank is the guarantee not only to its depositors but is equally significant for the shareholders, employees and whole economy as well. As a sequel to this maxim, efforts have been made from time to time, to measure the financial position of each bank and manage it efficiently and effectively. In this paper, an effort has been made to evaluate the financial performance of the two major banks operating in northern India .This evaluation has been done by using CAMEL Parameters, the latest model of financial analysis. Through this model, it is highlighted that the position of the banks under study is sound and satisfactory so far as their capital adequacy, asset quality, Management capability and liquidity is concerned. Keywords: financial performance, commercial banks, capital Adequacy, asset quality, management capability, earnings analysis, liquidity analysis. 1. Introduction With the integration of Indian financial sector with the rest of the world, the concept of banks and banking has undergone a paradigm shift. Before financial reforms, Indian Banks were enjoying, in a protected environment with a strong cushion of the government and their banks. This had made them operationally inefficient and commercially almost wreck, as they had cumulated as much as Rs.37,000 Crores as Nonperforming advances. However, with the RBI taking strong measures based on the recommendations of the Narsimahan Committee, the landscape of Indian banking changed altogether. All the banks were directed to follow the norms of capital adequacy, asset quality, provisioning for NPAs, prudential

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