Determinants of Bank Performance: Evidence from the Indian Commercial Banks

Abstract

Banking performance significantly impacts on economic growth. However, bank’s performance can be affected by remarkable factors. The present study aims to identify the bank-specific factors that determine the performance of the Indian commercial banks. Return on Assets and Return on Equity are considering the indicators of bank performance. A fixed effect and random effect panel regression models have been applied to a dataset of 39 commercial banks for the post-crisis period 2009 to 2017. Based on panel data analysis, results reveal that Capital adequacy ratio has a significant effect on return on assets while the insignificant impact on return on equity. Intermediation cost to total assets and Nonperforming assets were negatively influencing the performance of the banks. Non-interest income and Net interest margin showed a positive effect on banks performance. Credit deposit ratio, Investment deposit ratio, Cost of funds were not significant determinants of Indian commercial banks performance.

Keywords: Bank Performance, Return on Assets, Return on Equity, Non-Interest Income, Net Interest Margin, Intermediation Cost, NPA

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