Net Interest Margins of Banks in India

2019 ◽  
Vol 13 (2) ◽  
pp. 192-207
Author(s):  
S. S. Barik ◽  
Nishita Raje
Keyword(s):  
Banking Sector ◽  
Positive Influence ◽  
Jel Classification ◽  
Operating Costs ◽  
System Level ◽  
Net Interest Margin ◽  
Main Determinants ◽  
Indian Banks ◽  
Asset Quality ◽  
The Impact

Net interest margin (NIM) is the raison d’être of banking. It is an important measure of efficacy of the banking sector. At the system level, it is indicative of the cost of financial intermediation, health of the banking sector and its pricing power. In recent years, the Indian banking sector has experienced a major metamorphosis, with increasing competition and changing norms of liquidity, income recognition and capital. The end of regulatory forbearance and asset quality review (AQR) unearthed significant non-performing assets. This article traces the influence of various factors on the NIM, using bank-level data for 42 Indian banks over 25 quarters from March 2011 to March 2017. The study employs a dynamic panel generalised method of moments (GMM) framework to trace the impact of three distinct set of factors in setting banks’ NIMs: bank-level factors (like the share of low interest-bearing deposits held, the extent of gross non-performing assets [GNPAs], the capital-to-risk weighted assets ratio [CRAR], size of the loan book, operating costs and lending rates); system-level factors such as the monetary policy rate, credit growth and yields on government securities and macro-variables such as GDP growth and inflation. The results indicate that the main determinants of NIMs are banks’ CRAR levels, the proportion of current account and savings account deposits (CASA) to total deposits, operating costs and size of the loan book. Macro-factors like the growth of the economy and repo rate have a positive influence on the NIM. JEL Classification: C23, E43, G21

Structure, Conduct and Performance Analysis of Indian Commercial Banks

2016 ◽  
Vol 5 (2) ◽  
pp. 157-185 ◽  
Author(s):  
Ratna Barua ◽  
Malabika Roy ◽  
Ajitava Raychaudhuri
Keyword(s):  
Commercial Banks ◽  
Structural Changes ◽  
Banking Sector ◽  
Negative Relationship ◽  
Market Concentration ◽  
Jel Classification ◽  
And Performance ◽  
Indian Banks ◽  
Asset Quality ◽  
The Impact

The market structure, conducts and performance of the Indian banking sector have changed since the introduction of banking sector reforms. Slower economic growth, coupled with asset quality problems in recent years, has taken a toll on the overall health of the Indian banking sector. Higher statutory capital requirement under Basel III has posed another major challenge to the Indian banks. The purpose of the study is to examine the impact of structural changes and conduct of Indian commercial banks on their profitability in the paradigm of structure–conduct–performance (SCP) framework. Market concentration, bank-specific/macroeconomic variables have been considered as important determinants of the profitability. The regression results find a negative relationship between profitability and market concentration and reject SCP hypotheses. The study found that capitalization, credit risk, leverage and ownership structure are the most important determinants of the profitability of Indian banks. The study also found that financial crisis had no significant impact on the profitability of Indian banks. JEL Classification: C4, G21, G28, L19

scholarly journals Impact of Financial Ratios on Stock Price: Evidence from Indian Listed Banks on NSE

2021 ◽  
Vol 11 (4) ◽  
pp. 5132-5144
Author(s):  
Nitish Rane ◽  
Pooja Gupta
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Banking Sector ◽  
Study Data ◽  
Capital Adequacy ◽  
Financial Ratios ◽  
Annual Reports ◽  
Earnings Per Share ◽  
Net Interest Margin ◽  
The Impact

This study aims to examine the impact of financial ratios on the stock prices of companies listed on NIFTY Bank. Nifty Bank is a sub-index of NIFTY 50 and has various listed banks included based on the criteria given by NSE. This study data has been taken from the period 2010-2019 and taken from the company annual reports. The analysis is done using panel data regression and other tests to verify the best model for the dataset. The results obtained from this study show that the capital adequacy ratio and the dividend payout ratio do not impact the stock price. In contrast, earnings per share, net NPA ratio, and basic earnings per share, net profit margin, and net interest margin exhibited a relationship with the stock price. In the Indian context, there is less research available on this topic, and the idea chosen for the study is original. Along with this, the data collected for the study and the code used for analysis is original work. New investors can use the results of this study in the Indian stock market to analyze a stock and take proper investment decisions. Another practical usage of this study is that banking sector companies can improve their ratios to attract new investors.

scholarly journals THE IMPACT OF M&A TRANSACTIONS ON THE GROWTH OF THE BANKS’ MARKET VALUE

2021 ◽  
Vol 5 (40) ◽  
pp. 45-54
Author(s):  
L. Prymostka ◽  
N. Pantielieieva ◽  
I. Krasnova ◽  
V. Lavreniuk ◽  
O. Lytvynenko
Keyword(s):  
Economic Development ◽  
Mergers And Acquisitions ◽  
Banking Sector ◽  
Jel Classification ◽  
Economic Indicators ◽  
Level Of Economic Development ◽  
Banking Business ◽  
Economic Trends ◽  
The Impact ◽  
The Relationship

Abstract. The globalization of markets, the need to comply with modern economic trends and introduce new technological solutions to increase the profitability of the banking business have significantly intensified the processes of mergers and acquisitions in the banking sector. M&A processes are long and complex, their results are difficult to forecast in lack of actual detailed research. The diversity of the results of the available research requires updating the data based on larger volumes of transactions and larger time intervals. The purpose of the article is to substantiate two hypotheses: first, the impact of M&A agreements especially on the increase in the value of banks; and impact of factors that show economic development level on the value of banks. The object of the study is the relationship between the value of commercial banks in domestic and foreign financial markets, M&A agreements, as well as economic indicators published by the World Bank and measuring the level of economic development of countries. The article uses statistical modeling method. The constructed model of linear regression allows to state that the fact of influence of M&A on growth of cost of consolidated banks is fair for 54.8% of cases. The study shows that the M&A processes have the greatest impact on the value of banks in the interval of 3—5 years after the conclusion of the agreement. Analysis of the relationship between economic indicators and the growth of bank value shows that the greatest impact on the value of banks has percent of the growth of GDP and GDP per capita, but the low value of the determinant at 22.9% indicates a low dependence of bank value on the level of economic indicators in general. It was found that external factors do not directly affect the growth in the value of banks in the process of M&A transactions. The question of expanding the system of factors that will influence the M&A processes and, as a consequence, the value of the banks, will be the subject of further research. Keywords: globalization of markets, mergers and acquisitions of banks, consolidation, M&A dynamic, market capitalization, bank value. JEL Classification Е44, Е47, G14 Formulas: 2; fig.: 4; tabl.: 4; bibl.: 14.

Differentiating Adopters and Non-adopters of Smart Cards: Comparative Analysis of Public, Private and Foreign Sector Banks in India

2013 ◽  
Vol 38 (3) ◽  
pp. 67-78
Author(s):  
Kamalpreet Kaur ◽  
Mandeep Kaur
Keyword(s):  
Smart Card ◽  
Banking Sector ◽  
Smart Cards ◽  
Payment Systems ◽  
Progressive Development ◽  
Reserve Bank ◽  
Financing Pattern ◽  
Indian Banks ◽  
Asset Quality ◽  
Different Characteristics

Progressive development in the field of information technology (IT) has brought in remarkable changes in the products as well as methods of payment and settlement system in the banking sector. In India, various types of payment systems are functioning apart from the traditional payment systems where the instruments are physically exchanged and settled manually. Smart cards are a new form of retail payment instrument, installed to facilitate retail transactions through electronic means. In 1999, the Reserve Bank of India issued guidelines to the banks regarding introduction and usage of smart cards. Smart cards are currently being issued by several banks in India which have tied up with Financial Information Network and Operations Ltd. (FINO). The IDBI bank has introduced its smart card called MoneySmart; Corporation Bank has issued CorpSmart; and Bank of India has issued its e-purse cards. PNB, SBI, ABN Amro, ICICI Bank, Bank of Baroda and some other banks have also launched smart card-based banking solutions (Kaur & Kaur, 2008). The main objective of this study is to identify the factors that may vary between the adopters and the non-adopters of smart cards in Indian banks. Banks that have adopted the cards may have different characteristics from those that have not yet adopted the cards. In other words, with the exploration of various characteristics of the banks, the study tries to differentiate between the adopter and non-adopter categories of the banks regarding smart cards with respect to their profitability, size, competitive advantage, efficiency, asset quality, financing pattern, diversification, cost of operations, etc. The empirical results evidently reveal that the banks providing smart cards differ in their characteristics from that of the banks that have not yet adopted it. It shows that the banks that adopted smart cards are larger in size, more efficient, pay lesser wages, and have more industry advantage and thus, in terms of some characteristics, outperform the non-adopter banks.

Determinants of Bank Performance in a Developing Economy

2012 ◽  
Vol 13 (1) ◽  
pp. 1-23 ◽  
Author(s):  
Fadzlan Sufian ◽  
Mohamad Akbar Noor Mohamad Noor
Keyword(s):  
Banking Sector ◽  
External Factors ◽  
Foreign Banks ◽  
Bank Performance ◽  
Asian Countries ◽  
Network Embeddedness ◽  
Indian Banks ◽  
Internal And External Factors ◽  
The Impact ◽  
Global Advantage

The article seeks to examine the internal and external factors that influenced the performance of banks operating in the Indian banking sector during the period 2000–08. The empirical findings from this study suggest that credit risk, network embeddedness, operating expenses, liquidity and size have statistically significant impact on the profitability of Indian banks. However, the impact is not uniform across banks of different nations of origin. During the period under study, the empirical findings do not lend support for the ‘limited form’ of global advantage hypothesis. Likewise, the liability of unfamiliarness hypothesis is also rejected, since we do not find significant advantage accruing to foreign banks from other Asian countries.

scholarly journals Importance of Corporate Governance: Evidence from Kosovo’s Banking Sector

2021 ◽  
Vol 23 (2) ◽  
pp. 5-32
Author(s):  
Esat A. Durguti ◽  
◽  
Nexhat Kryeziu ◽  
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Banking Sector ◽  
Good Practice ◽  
Secondary Data ◽  
Financial Indicators ◽  
Dynamic Approach ◽  
Net Interest Margin ◽  
Dependent Variables ◽  
The Impact

This study identifies and assesses the impact and effect of corporate governance (CG), as a good practice mechanism, as well as some specific financial indicators on the performance of the banking sector in Kosovo. The data used in the research are defined as secondary data that include nine (9) commercial banks and cover the period 2013–2020. The analysis applied to data processing is the dynamic approach through 2SLS estimation for the dependent variables ROA, ROE, and NIM. The results obtained at the end of the study show that all variables applied in this research, depending on the variable defined for evaluation, have a significant impact on the performance of the banking sector. The results also show that the most adequate measure for assessing a bank’s performance is the net interest margin (NIM). This research paves the way for debate and discussion on the governing structures of financial institutions and policymakers.

scholarly journals The Impact of Innovation on Banking Performance: Evidence from Lebanese Banking Sector

2020 ◽  
pp. 175-202
Author(s):  
Fatima Chalabi
Keyword(s):  
Cost Efficiency ◽  
Banking Sector ◽  
Weighted Least Squares ◽  
Computer Software ◽  
Mobile Banking ◽  
Return On Assets ◽  
Return On Equity ◽  
Asset Quality ◽  
The Impact ◽  
The Relationship

This study examines the impact of innovation on performance of the Lebanese banks during 7 years period from 2009 to 2015. Based on a sample of seventeen Lebanese owned commercial banks, a Weighted Least Squares model was employed to investigate the relationship between two banking innovations, namely mobile banking and investment in computer software and banks’ performance as measured by Return-On-Assets and Return-On-Equity. Four control variables were included in the study specifically bank’s capitalization, cost efficiency, asset quality and bank’s size. The findings of the study showed that the two innovations studied have both significant but opposite impact on banks’ performance.

scholarly journals The The Impact of Liquidity, Credit, and Financial Leverage Risks on Financial Performance of Islamic Banks: A Case of Sudanese Banking Sector

2020 ◽  
Vol 2 (2) ◽  
pp. p59
Author(s):  
Ahmed Nourrein Ahmed Mennawi
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Banking Sector ◽  
Negative Impact ◽  
Liquidity Risk ◽  
Positive Influence ◽  
Islamic Banks ◽  
Financial Leverage ◽  
Loan Financing ◽  
The Impact

This study aims to investigate the impact of liquidity, credit, and financial leverage risks on the financial performance of Islam banks in Sudan during the period of 2008 - 2018. Panel dataset of 143 observations from (13) banks has been used in this study. Two models of ROA and NPM have been constructed using robust random effects estimates for testing the study hypotheses. The independent variables consist of liquidity and credit risks plus the financial Leverage ratio. Credit risk that measured by nonperformance of loan (financing) and provision of loan (financing) loss ratios; while the liquidity risk measured by cash to deposits ratio, liquid assets to total assets ratio and total loan (financing) to total deposits ratio. The financial performance of Islamic banks in Sudan measured by the ratios of return on assets and net profit margin. The results reveal that the credit risk and financial leverage have significant and negative impact on the financial performance of Islamic banks in Sudan, whereas the liquidity risk generally found to be insignificant. Despite that, the liquidity risk in term of liquid assets to total assets ratio provides a significant and positive influence on the financial performance of Sudanese banks. Finally, the importance of this study is that it touches the most significant types of risks that Sudanese Islamic banks face during their operational cycles.

scholarly journals Macroeconomic aspects of banks’ credit ratings

Equilibrium ◽  
2017 ◽  
Vol 12 (1) ◽  
pp. 101 ◽  
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Banking Sector ◽  
Credit Rating ◽  
Risk Estimation ◽  
Credit Ratings ◽  
Value Added ◽  
Positive Influence ◽  
Macroeconomic Factors ◽  
New Information ◽  
Standard And Poor's ◽  
The Impact

Research background: The practical analysis suggests that credit ratings are especially significant for banks. The literature review suggests that in previous analysis researchers usually took into consideration financial factors of the banks’ credit ratings methodology. This article analyses the impact of macroeconomic factors on the banks’ credit ratings. Purpose of the article: The paper examines and analyses the impact of the macroeconomic risk factors on the credit ratings received by banks. In the article, the methodology of credit risk assessment proposed by Moody’s Investor Service and Standard and Poor’s Financial Service is presented. Two hypotheses are put herein. The first one is: Changes in countries’ credit ratings convey new information and influence on banks’ financial condition. The second hypothesis is: A highly-developed, stable economy with an advanced financial market has a positive influence on banks’ credit rating assessment. Methods: The study used banks’ and countries’ ratings assigned by Standard and Poor's and Moody's for the period from 1 January 2005 to 1 January 2016. To verify the hypotheses static panel data models have been applied. Findings and Value added: In credit rating agencies guidelines and previous research, the impact of countries’ credit ratings on those received by banks is not indicated. The impact of macroeconomic factors has not been verified. The analysis confirms that changes in countries’ credit ratings convey new information and influence the banks’ environment condition. But only for the assessment given by S and P the condition of banking sector is an important group of factors. For all verified types of credit ratings the risk of country is presented by countries’ credit rating, not by particular factors. These analyses suggest that during the risk estimation process prepared by banks, a country’s risk represented by its credit ratings should be taken into consideration more often than particular macroeconomic factors.

scholarly journals Performance of Banks in Pakistan based on determinants of Profitability

2021 ◽  
Vol 2 (2) ◽  
pp. 139-148
Author(s):  
AQSA SIDDIQ ◽  
KHURSHEED IQBAL ◽  
SHAMS UR REHMAN
Keyword(s):  
Banking Sector ◽  
Random Effect ◽  
Random Effect Model ◽  
Fixed Effect Model ◽  
Positive Influence ◽  
Strategic Decision ◽  
Return On Assets ◽  
Return On Equity ◽  
Effect Model ◽  
Main Determinants

The study aims to seek the internal factors that affect the profitability of banks in Pakistan from a period of 2009 to 2013 by using two proxies i.e. Return on Assets (ROA) and Return on Equity (ROE). The panel data of fifteen banks have been obtained from the financial statements of the banks. Therefore, Hausman test has verified that random effect model is most appropriate model for Return on Assets (ROA), conversely fixed effect model is prominent for Return on Equity (ROE) for the current study. The empirical results confirm that investment to total assets, leverage, Net Performing Loan (NPL) to gross advances, capital ratio and total deposits to total equity are the main determinants of profitability across both proxies (i.e. ROA and ROE). Leverage and capital ratio have significantly negative, however net performing loan to gross advance and total deposit to total equity have significantly positive influence on profitability of banks across both models. Moreover, NPL to gross advance is insignificant determinant of Return on Equity. The results are worthy for bankers and all stakeholders to make strategic decision for the competitiveness of banking sector in Pakistan.

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