EFFICIENCY AND EFFECTIVENESS IN INDIAN BANKING: A HOLISTIC ASSESSMENT OF FINANCIAL PERFORMANCE

Abstract

Purpose: The study aims to explore how India's economic progress cruces on its banking sector. Technological advancements and evolving customer demands have prompted significant changes in banking management and systems. Recognizing the sector's pivotal role, it becomes imperative to investigate factors affecting its performance. The analysis focuses on six North Indian banks over a decade, evaluating and ranking them based on output ratios to understand their impact on the economy.

Design/ Methodology/ Approach :The study uses a descriptive and analytical approach. Ratio-based model for assessing banks' performance. It is a management tool that assesses strategy, growth, liquidity, asset quality, and earnings.

The current analysis is based on secondary data that was gathered from the annual reports, websites of the relevant banks, periodicals, journals, and other public information between 2012–2013 to  2021–2022.In the study, thirteen variables are used. Arithmetic mean, standard deviation, coefficient of variation, and t-test are employed as statistical tools for the analysis and interpretation of the results.

Findings: In a nutshell, the findings reveal that private sector banks, particularly HDFC Bank, outshine other banks across various criteria. HDFC Bank emerges as the leader in this study, followed by CITI BANK, ICICI BANK, Punjab National Bank, and Standard Chartered Bank, in that order. The research also highlights a noteworthy observation: there is a significant mean difference at the 0.05 level among the studied banks for the majority of parameters examined.

Practical Implications: The outcomes of this study typically serves as models for additional regulatory checks and initiatives to improve the financial environment.

Original Value: A significant contribution to the body of knowledge is achieved through testing and subsequent confirmation of the effects of ratios on the financial performance of banks.

India's economic development is based on the banking industry. With the development of technology and taking into account people's requirements, significant changes in the management and banking system have been observed over time. If the banking sector does not function properly, it could have a significant and wide-ranging impact on the economy. Therefore, there is a pressing need to look into the variables that affect the banking industry's performance level. The output ratios are the only criteria used to evaluate and rank the institutions. The current analysis makes use of data from six North Indian banks chosen over a period of ten years.

Keywords: Return on Assets (ROA), Return on Net Worth (RONW), Income to Overhead Ratio (IOR), Gross NPA, Net NPA, Provision Coverage Ratio, Loan Ratio, Deposit Ratio, Loan to Deposit Ratio, Capital adequacy ratio, Interest Income/Interest Cost, Non-Interest Income/Non-Interest Cost, ANOVA.