Impact of Macro-Economic and Bank-Specific Variables on Banks Performance: A Comparison between Private and Public Sector Commercial Banks

Abstract

Present study is conducted to know the influence of bank-specific and macro-economic variables on bank performance in Indian context. A comparison has been made between public and private sector banks. For the purpose of the study, we have selected 32 commercial banks. Secondary data has been collected from the annual reports of the respective banks for the period 2010–11 to 2020–21. Panel regression model have been employed for the study. Empirical findings show that high operating expenses are not appropriately used to manage financial performance in sample banks especially for public sector banks. Study results also show that credit risk has an inverse association with financial performance. Leverage is negatively related to financial performance for public sector banks only. Deposit ratio, size and Annual GDP growth rate positively related to financial performance in all sample banks. While exchange rate has negative impact on the financial performances. The results show that different bank-specific and macro-economic variables influence differently with bank performance in public and private sector banks. The findings of the study will help policymakers and other stakeholders especially in the financial sector to understand various macro-economic and bank-specific variables impact on bank performances.

DOI: https://doi.org/10.21863/jcar/2024.13.3.009

Keywords: Commercial Banks, Macro-Economic Variables, Bank Performance, Credit Risk, India

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