Structure, Conduct and Performance Analysis of Indian Commercial Banks

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

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Net Interest Margins of Banks in India

Margin The Journal of Applied Economic Research ◽

10.1177/0973801018812545 ◽

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

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Impacts of Financial Inclusion on Non-Performing Loans of Commercial Banks: Evidence from China

Sustainability ◽

10.3390/su10093084 ◽

2018 ◽

Vol 10 (9) ◽

pp. 3084 ◽

Cited By ~ 5

Author(s):

Feng-Wen Chen ◽

Yuan Feng ◽

Wei Wang

Keyword(s):

Financial Crisis ◽

Credit Risk ◽

Commercial Banks ◽

Local Governments ◽

Banking Sector ◽

Negative Impact ◽

Financial Inclusion ◽

Financial Industry ◽

Asset Quality ◽

The Impact

Non-performing loans of commercial banks have long hampered the development of the banking sector, and directly reflect the credit risk and asset quality. With the continuous development of the financial industry, the introduction of financial inclusion has greatly eased the shortage of funds, and narrowed the gap between poor and rich. However, whether the promotion of financial inclusion in the financial industry could affect the non-performing loans of commercial banks has not been verified. Therefore, this paper discusses the possible associations between financial inclusion and non-performing loans of commercial banks on the regional level, constructs a panel data model by selecting the data of 31 provinces (including 4 municipalities) in China from 2005 to 2016, and uses the fixed effect model for empirical test. The empirical results (from an overall national sample) reveal a negative impact of the financial inclusion on non-performing loans. Moreover, the development of the banking sector and the regional consumption could enhance the impact of financial inclusion, while government intervention and unemployment could reduce the impact of financial inclusion. From the analysis of the regional sample, when the development of financial inclusion reaches a high level, the lagged financial inclusion promote the non-performing loans of commercial banks; however, when the financial inclusion is underdeveloped, the development of commercial banks act as a disincentive to non-performing loans. Therefore, the local governments should pay more attention to the influences of financial inclusion on the financial industry, in order to maintain the stability of banking asset quality. In addition, the negative impact of financial inclusion on non-performing loans of commercial banks is significant in China central region, while its impacts in China eastern and western regions are not significant. This indicates that the development of the financial industry and economy can hamper the effects of financial inclusion. It is necessary to adjust the financial resource allocation according to the characteristics of different regions in China, so that the financial inclusion can effectively promote the regional financial industry upgrade, improve regional capital flow efficiency, and fundamentally reduce the non-performing loans of commercial banks. According to the sample analysis by time, there is a significant negative impact relationship between inclusive finance and commercial banks’ non-performing loans after the financial crisis, while the impacts before and during the financial crisis are not significant. This demonstrates that the impact of the global financial crisis on China’s regional economy has further enhanced the inefficiency of the inclusive financial system on credit risk, which in turn, helps commercial banks better maintain asset quality stability.

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Performance implications of board size, composition and activity: empirical evidence from the Indian banking sector

Corporate Governance ◽

10.1108/cg-03-2016-0058 ◽

2017 ◽

Vol 17 (3) ◽

pp. 466-489 ◽

Cited By ~ 10

Author(s):

Manas Mayur ◽

Palanisamy Saravanan

Keyword(s):

Emerging Economies ◽

Banking Sector ◽

Size Composition ◽

Curvilinear Relationship ◽

Bank Performance ◽

Board Size ◽

Content Type ◽

And Performance ◽

Indian Banks ◽

The Impact

Purpose The purpose of this paper is to examine the performance implications of board size, composition and frequency of board meetings on the performance of banks. Design/methodology/approach The performance of banks is assessed on various parameters such as return on assets (ROA), Tobin’s Q, non-performing asset ratio (NPA ratio) and the net write-off ratio (NWO ratio). The effects of changes in board size and composition and frequency of meetings on the performance of banks are investigated using feasible generalized least square (FGLS) estimation of panel data covering a time span of five years concerning 40 banks incorporated in India. Frequency of board meetings is taken as a proxy for board activity and involvement. The authors have also tested for endogeneity issues in the model. Findings A curvilinear relationship was found between the board size and performance of banks. The authors have modelled a cubic form of the relationship for Indian banks. The authors’ findings indicate that an increase in board size is associated with better bank performance within both low and high board size ranges. Alternatively, increased board size is negatively associated with bank performance in the intermediate board size range. The study did not find any significant relationship between performance and frequency of board meetings and board composition. Research limitations/implications The behavioural variables reflecting the involvement of the board have not been incorporated in the model to determine the impact of board involvement on the performance of banks owing to the availability of data. It is hoped that this paper will be useful for major regulatory bodies such as the Ministry of Corporate Affairs (MCA), Securities and Exchange Board of India (SEBI), Company Law Board (CLB) and stock exchanges in India and other emerging economies in devising listing norms and other governance-related aspects. Originality/value Non-linear relationships between the board size and performance are not normally prevalent in emerging economies, especially in the banking sector. However, such a relationship exists among the Indian banks. This paper is the first of its kind to identify and address the same.

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Global Financial Crisis and Banking Sector Efficiency: The Indian Perspective

Journal of Business Management and Information Systems ◽

10.48001/jbmis.2014.0101008 ◽

2014 ◽

Vol 1 (1) ◽

pp. 90-109

Author(s):

Seema Garg

Keyword(s):

Data Envelopment Analysis ◽

Financial Crisis ◽

Commercial Banks ◽

Banking Sector ◽

Global Financial Crisis ◽

Data Envelopment ◽

Crisis Period ◽

International Financial Crisis ◽

Indian Banks ◽

The Impact

Banks play a crucial role in developing and least developed economies by facilitating in trade finance. Banks established an important linkage in international trade by guaranteeing international payments and thereby reducing the risk of trade transactions. The Banks in India has witnessed a significant growth, specialization and diversification since the initiation of financial sector reforms in 1991and further slowdown in the economy as a result of global financial crisis in 2008-2009. This study examines the performance of Indian banks using data envelopment analysis. Though, there are large number of literature have been published on banking efficiency, This is an attempt to investigate the impact of global financial crisis on performance of Indian banking sector. The sole objective of this study is to exhibit, utilizing empirical data, the quantum to which the global financial crisis had an impact on the performance of the Indian banking industry. This study gives a comparative empirical analysis of the technical efficiency of Indian commercial banks during pre and post crisis period covering 2005-2012 using non parametric technique i.e. Data Envelopment Analysis (DEA). This period is consisting of pre and post global crisis period which is characterized by far reaching experience of crisis period (2008-2009) and its impact on the efficiency of the Indian banking sector. Overall, the results reveal that the effect of international financial crisis on the Indian banks has not been significant. Instead, the analysis reveals there is a statistically insignificant improvement in the efficiency of Indian banks’ following international financial crisis. Furthermore, the paper shows that the commercial banks have a high degree of resilience and stability.

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Analysis of the Factors Affecting Bank Profitability: Evidence of Tanzania Commercial Banks

Studies of Applied Economics ◽

10.25115/eea.v39i8.4768 ◽

2021 ◽

Vol 39 (8) ◽

Author(s):

Lisa Estrada Ngweshemi ◽

Aliya Zhakanova Isiksal

Keyword(s):

Commercial Banks ◽

Banking Sector ◽

Management Control ◽

Capital Adequacy ◽

Internal Variables ◽

Factors Affecting ◽

External Data ◽

Private And Public ◽

Asset Quality ◽

The Impact

Only a successful and consistent banking sector can play the role of financial intermediary in the economy properly. As an intermediary in the modern economy, the bank must be profitable. The general aim of this study focuses on analyzing the factors that influence the profitability of private and public commercial banks in Tanzania. By the use of annual time series internal and external data for the period 2013 to 2019, and a quantitative approach methodology using GMM technique analysis of the impact of the selected determinants was made. The results from bank-internal variables comprised of four statistically significant variables which are capital adequacy, asset quality, loan composition, and cost efficiency while the rest is insignificant. Likewise, the macro-economic determining factors (growth domestic product (GDP) and inflation rate) were found to be non-significant. The empirical results have shown that profitability is more explained by bank-specific determinants that are directly controlled by the management than the macroeconomic factor variables which are beyond the reach of management control.

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Mock Bank practices and employee performance in the banking sector

International Journal of Business Ecosystem & Strategy (2687-2293) ◽

10.36096/ijbes.v1i3.280 ◽

2019 ◽

Vol 1 (3) ◽

pp. 1-9

Author(s):

Dennis Nwanyanwu ◽

Kevin Njoku ◽

Emeka Nkoro

Keyword(s):

Organizational Structure ◽

Commercial Banks ◽

Professional Ethics ◽

Banking Sector ◽

Employee Performance ◽

Institutional Arrangement ◽

Operational Experience ◽

Tertiary Institutions ◽

And Performance ◽

The Impact

The practice of mock bank is an institutional arrangement to expose potential bankers to basic rudiments of banking operations with the ultimate aim of increasing the profitability of the organization through employee performance. This study assessed the impact of mock bank practices on employee performance in the banking sector as a panacea for repositioning the Nigerian economy with a specific focus on Union Bank Plc. The objective is to examine the contributions of operational experience to staff, ascertain the impact of professional ethics on commercial banks in Nigeria and identify the contributions of knowledge of organizational structure on the operations of commercial banks. T-statistics was used to test the three hypotheses. Results showed that there is a significant relationship between experienced, knowledge of job ethics, and organizational structure by employees before recruitment and performance at the workplace when compared to those recruited before training. Further results revealed that employees that had mock bank experiences perform better with less supervision. It was recommended that reinforcement of mock bank practices in tertiary institutions in Nigeria and allotment of higher credit units to mock bank practice should be encouraged.

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Analysis of Financial Performance of Public Sector Banks in India: CAMEL

Arthaniti-Journal of Economic Theory and Practice ◽

10.1177/0976747920966866 ◽

2020 ◽

pp. 097674792096686

Author(s):

Yudhvir Singh ◽

Ram Milan

Keyword(s):

Public Sector ◽

Banking Sector ◽

Positive Impact ◽

Secondary Data ◽

Capital Adequacy ◽

Factors Affecting ◽

Public Sector Banks ◽

The Government ◽

And Performance ◽

Asset Quality

Public sector banks have been merged by the government in the last few years. This is the rationale behind conducting this study. The purpose of this article is to determine the factors affecting the performance of public sector banks in India and the interrelationship between bank-specific determinants and performance of public sector banks. In this article, we shall analyse the financial data of all the public sector commercial banks for a period spread across 11 years (2009–2019); Capital adequacy, Assets quality, Management efficiency, Earning, and Liquidity (CAMEL) has been used as a performance determinant; system generalised method of moments (GMM) analysis has been used to find the effect of determinants on the performance measurement of public sector banks; and CCA (canonical correlation analysis) has been used to find the interrelationship between the bank-specific determinants and the performance of public sector banks. The finding has important implications in terms of performance in the banking sector. Certain limitations of this study are: It is based on secondary data. The study only covers the financial aspects and not the non-financial aspects. It is found that the asset quality is negatively related with performance of public sector banks. Liquidity and inflation are inversely related to performance of public sector banks in India. Capital adequacy is positively related with banks’ performance, but inversely related with banks’ interest margin. GDP growth has a significant positive impact on banks’ performance, but inversely related with banks’ interest income. Inflation rate is inversely related with banks’ performance. Banking sector reforms are insignificantly related with banks’ performance.

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Does the target market affect bank performance? Evidence from the geographic diversification of city commercial banks in China

Frontiers of Business Research in China ◽

10.1186/s11782-021-00104-x ◽

2021 ◽

Vol 15 (1) ◽

Author(s):

Xiaonan Li ◽

Chang Song

Keyword(s):

Commercial Banks ◽

Banking Sector ◽

Capital Adequacy ◽

Bank Performance ◽

Chinese Government ◽

Target Market ◽

Geographic Diversification ◽

Cross Sectional ◽

The Impact ◽

Geographical Diversification

AbstractAfter the opening up of the banking sector to domestic and foreign capitals which is approved by the Chinese government, the China Banking Regulatory Commission (CBRC) has permitted city commercial banks to diversify geographically. Since this deregulation in 2006, city commercial banks began to geographically diversify to occupy the market and acquire more financial resources. To examine the causal relationship between geographical diversification and bank performance, we construct an exogenous geographical diversification instrument using the gravity-deregulation model and a policy shock. We find that bank geographical diversification negatively affects bank performance. Moreover, we conduct some mechanism tests in the Chinese context. We find that the target market with several large- and medium-sized banks and a high level of local protectionism in the target market decreases the performance of city commercial banks. Finally, cross-sectional analyses show that the impact of geographical diversification on banks’ performance is more notable among city commercial banks that are younger, and have a lower capital adequacy ratio and a higher non-performing loan ratio.

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The Relationship between Person Organization Fit, Person-Job-Fit and Turnover Intention in Banking Sector of Pakistan: The Mediating Role of Psychological Climate

International Journal of Human Resource Studies ◽

10.5296/ijhrs.v2i3.2286 ◽

2012 ◽

Vol 2 (3) ◽

pp. 172 ◽

Cited By ~ 12

Author(s):

Masoodul Hassan ◽

Ammara Akram ◽

Sana Naz

Keyword(s):

Organizational Behavior ◽

Turnover Intention ◽

Banking Sector ◽

Negative Relationship ◽

Psychological Climate ◽

Job Fit ◽

Mediating Role ◽

Person Organization Fit ◽

The Impact ◽

The Relationship

In last few decades, employees’ job related attitudes and behaviors have remained topics of considerable interest in the fields of organizational behavior and human resource management. This study aims to explore the impact of person-organization-fit and person-job-fit on employee turnover intention while considering psychological climate as a mediating variable. Sample for this research is consisted of 260 employees from top five commercial banks of large cities of Pakistan. SPSS 17 is used for analyzing the data. Correlation and regression analysis is used to test the direct and mediating relationship between key variables. Results indicate that both person-organization-fit and person-job-fit have negative relationship with turnover intention. Psychological climate partially mediates the relationship between person-organization-fit and turnover intention while fully mediates the relationship between person-job-fit and turnover intention.

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