Pages: 15 (5881 words) Published: November 30, 2012
International Journal of Trade and Commerce-IIARTC January-June 2012, Volume 1, No. 1, pp. 23-33 ISSN-2277-5811 © SGSR. ( All right reserved.

A Camel Model Analysis of Nationalized Banks in India

Business School, Warangal, Andhra Pradesh, email-id:

K.V.N. Prasada*, G. Ravinderb

ITM Business School, Warangal, Andhra Pradesh, email-id:

Abstract Banking sector is one of the fastest growing sectors in India. Today’s banking sector becoming more complex. Evaluating Indian banking sector is not an easy task. There are so many factors, which need to be taken care while differentiating good banks from bad ones. To evaluate the performance of banking sector we have chosen the CAMEL model which measures the performance of banks from each of the important parameter like Capital Adequacy, Assets Quality, Management Efficiency, Earning Quality and Liquidity. After deciding the model we have chosen twenty nationalized banks. According to the importance of study each parameter is given equal weights. Results shown that on an average Andhra bank was at the top most position followed by bank of Baroda and Punjab & Sindh Bank. It is also observed that Central Bank of India was at the bottom most position. Keywords: Nationalized Banks, Performance Evaluation, CAMEL Model and Ranking Method. Reference to this paper should be made as follows :

RECEIVED ON: 25/02/2012 ACCEPTED ON: 30/05/2012

Prasad, K.V.N. and Ravinder, G.(2012) ”A Camel Model Analysis of Nationalized Banks In India” Int. J. of Trade and Commerce-IIARTC, Vol. 1, No. 1, pp.23–33

*Corresponding Author

A Camel Model Analysis of Nationalized Banks in India
K.V.N.Prasad, G. Ravinder

1. INTRODUCTION During the 20th century in most of the nations, domestic banking was generally subjected to heavy regulations and financial repression. The growth and financial stability of the country depends on the financial soundness of its banking sector. The Indian banking sector has been working in a more open and globalize environment for two decades since liberalization. The liberalization process of Indian Economy has made the entry of new private sector banks possible and allowed the foreign sector banks to increase their branches in the banking sector. Besides, following India’s commitment to the WTO, foreign banks have been permitted to open more branches with effect from 1998-99. With the increased competition and the emphatic on profitability, the public sector banks are now moving towards on economicoriented model departing from the social approach followed for decades. Thus, the restructuring of public sector banks and the emergence of new banks in the private sector as well as the increased competition from foreign banks, have improved the professionalism in the banking sector. The increased presence of the private and foreign banks during the past decade has made the market structure of the banking sector in terms of competitive pricing of services, narrow spreads, and improving the quality of the services. The public sector banks, which had dominated the banking sector for decades, are now feeling the heat of the competition from private and foreign sector banks. In the above back drop the present study is necessitated to examine the performance of nationalized banks during the period 2006-10. The study is based on twenty ratios of the variables relating to capital adequacy, assets quality, management efficiency, earnings quality and liquidity. 2. REVIEW OF LITERATURE In the process of continuous evaluation of the bank’s financial performance both in public sector and private sector, the academicians, scholars and administrators have made several studies on the CAMEL model but in different perspectives and in different periods. Cole et al. (1995) conducted a study on “A CAMEL Rating's Shelf Life” and their findings suggest that, if a bank has not been examined for more than...

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