An Analysis of Public Sector Banks Performance using CAMEL Rating Model

Abstract

Banks form the fundamental component of the financial system of any economy. Soundness of the banking sector is, therefore, essential for a healthy and vibrant economy. Nowadays, the financial system of the Indian economy is completely interlinked with the banking sector. If something goes wrong with the banking industry, the entire financial system will collapse. So, it is necessary to evaluate and measure the strength of the banking industry so that our economy improves efficiently. In this study, an attempt has been made to measure the financial position and performance of public sector banks, ranking them accordingly. For this purpose 21 Indian public sector banks have been taken into consideration, over a period of ten years, i.e. 2008-2009 to 2018-2019. The study is based on secondary data which has been collected through capitaline database and annual financial statements of the respective banks. The CAMEL model has been used to measure the performance of the banks. Findings from the analysis indicates that Indian public sector banks are making an effort toward maintaining adequate capital, and in years to come, all banks should strive toward achieving more than the required level. Public sector banks need to brainstorm innovative ideas, which can help them deploy funds after proper analysis of the risk exposure.

Keywords: Public Sector Banks, Financial Performance, Capital Adequacy, CAMEL Model

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