Banks

Topics: Banks of India, Government-owned banks in India, Bank Pages: 18 (5679 words) Published: April 19, 2014
World Journal of Social Sciences
Vol. 3. No. 3. May 2013 Issue. Pp. 71 – 88

Performance Appraisal of Indian Public Sector Banks
Parvesh Kumar Aspal * and Naresh Malhotra**
The strength of economy of any country basically hinges on the strength and efficiency of financial system, which, in turn, depends upon a sound banking system. The regulators have recommended bank’s supervision through CAMEL rating model to assess the performance of banks, which is better than the earlier systems. The prime objective of CAMEL model of rating banking institutions is to make their comparative performance analysis. It is basically a ratio based model for evaluating the performance of banks. The basic purpose of the present study is to evaluate the financial performance of Indian public sector banks excluding State Bank Group for the period of 2007-11. The study found that Bank of Baroda was at the first position with overall composite ranking average of 6.05 due to its better performance in the areas of liquidity and asset quality, closely followed by Andhra Bank with average of 6.15 because of its strength in the spheres of

management efficiency, capital adequacy and asset quality. United Bank of India holds the bottom most rank with average of 14.60 due to management inefficiency, poor assets and earning quality. The study recommends that United Bank of India has to improve its management efficiency, assets and earning quality. Similarly Bank of Maharashtra should improve its liquidity position and management efficiency.

JEL Classification: G21, G24 and G28

1. Introduction
A sound financial system is indispensable for the growth of a healthy and vibrant economy. The banking sector, being a crucial constituent of financial system is the lifeline of any modern economy. It is one of the important financial pillars of the financial system which plays a vital role in the success /failure on an economy. Banks are one of the oldest financial intermediaries in the financial system. They play an important role in the mobilization of deposits and disbursement of credit to various sectors of the economy. The banking system is the fuel injection system which spurs economic efficiency by mobilizing savings and allocating them to high return investment. Research confirms that countries with a well developed banking system grow faster than those with a weaker one. Fase and Abma (2003) argued that the expansion of the financial system could have a positive repercussion on economic growth of a country. Levine (2005) suggested five channels through which financial systems may have an effect on economic growth: Financial intermediaries, monitor investment, manage risk, mobilise savings and facilitate the exchange of goods and services. In a study on banks and ____________________________________________________________________ *Mr. Parvesh Kumar Aspal, Assistant Registrar, Department of Finance and Accounts, Punjab Technical University, Jalandhar, India. Email: pk_aspal.ptu@hotmail.com **Dr. Naresh Malhotra, Associate Professor and Head, Post Graduate Department of Commerce and Business Management, Doaba College, Jalandhar, India. Email: profmalhotra@yahoo.com

Aspal & Malhotra
stock market it was found that they positively influenced economic growth (Beck and Levine, 2004). The strength of an economy hinges on the strength and efficiency of the financial system, which, in turn, depends upon a sound and solvent banking system. A sound banking system efficiently deploys mobilized savings in productive sectors and a solvent banking system ensures that the bank is capable of meeting its obligation to the depositors. Patrick (1996) opined that financial sector acts as supply leading to transfer of resources from traditional, low growth sector to high growth sector and to promote and stimulate an entrepreneurship response in the high growth sector. As it is clear from above discussion that the role of banking is very significant in the economy...


References: Management, vol. 6, no. 25, pp. 7601-11.
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