An Application and Comparison of Bankruptcy Models in the Indian Banking Sector

Abstract

In today’s era, banks are more serious about their success and survival due to increased Non-Performing Asset (NPA) over a period of time. An increased number of NPA’s shows that banks are facing huge credit risk. This calls for a proper assessment of credit risk. There are many techniques available for credit risk assessment and one of the most popular approaches is using a scoring model. In the current paper, Altman Z-score, Springate and Grover and Zmweskis model are applied to assess credit risk of public, private and merged banks. The aim of this paper is to apply and compare these scoring models for credit risk assessment of public, private banks and merged banks in India. The data collected during the period 2005–2017 were tested 44 Indian banks. The result shows a similarity in Springate and Grover scoring model and has implications in assessment of banks credit risk in India. As per the ranks given by these models, Dena bank and Catholic Syrian bank in case of public and private banks, respectively, achieved the first rank, depicting a highly secured financial position of these banks.

Keywords: Bankruptcy Model, Altman Z-score Model, Springate, Grover, Zmweskis, India, Banking Sector

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