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Measuring Performance of Commercial Banks in India (Bhattacharjee S., Hariprasad C. G.)

Bank Efficiency Bank Profitability Stability&Soundness

Abstract In this study the multivariate Principal Component Analysis have been used to measure the performance of commercial banks in India for the year 2008-09. The commercial banks in India have been classified into three different categories namely nationalized banks, private banks and foreign banks. The Reserve Bank of India and government of India have been taking various reform measures over the years thereby injecting competition in the banking sector. Such liberalization and competition policies induce banks to indulge into some kind of risky activities to earn profit. However, Reserve Bank of India time to time has issued several guidelines to the commercial banks so as to maintain stability in the banking sector to achieve macroeconomic stability. There exists a trade-off between profitability and stability. Thus, the bank that is maintaining a good balance between the two conflicting goals of stability and profitability should be viewed as a good performing bank. The present study tried to capture the overall performance of each individual bank in terms of both profitability and soundness. The study used Principal Component Analysis to develop a composite index for each individual bank under a particular category — using various indicators reflecting soundness, asset quality and profitability — and then ranked the banks according to the index score obtained with respect to other banks in the category.
External link
Libref/ Bhattacharjee S., Hariprasad C. G. (2010) "Measuring Performance of Commercial Banks in India", pp. 1 - 14
© Программирование — Александр Красильников, 2008
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