The Study of Financial Performance of Banking Sector of India

Banking sector reforms in India, strive to increase efficiency and profitability of the banking institutions, the existing banking institutions has to face the global competition. As a consequence, there has not only been rapid expansion in the number of banking institutions in the country, but the banking horizon of the country has also changed significantly with the entry of new private sector and foreign banks. As of now, the country has public sector, old private sector, new private sector and foreign banks operating side-by-side and giving cut-throat competition to each other. Apparently, these different types of banks differ significantly from each other in terms of financial performance including operational efficiency, profitability, productivity and credit efficiency. There is a general perception that new private sector banks and foreign banks are more efficient in financial performance than that of nationalized and old private sector banks. This study emphases on the financial performance of all the commercial banks of the country for the period of five years from the year 1997-1998 to 2001-2002. The aim of this study is to understand and to find out different types of efficiency level of all the commercial banks in India. The operational efficiency reveals the performance of banks regarding operational aspects. The profitability tells about banks financial strength with the same and other banking groups in the industry. The productivity parameter indicates the labour productivity of the employees of a bank. The credit efficiency parameter shows how the given credits are efficient and what will be the effect on solvency of the bank. All these parameters have been taken with different ratios for the period of five years. All the scheduled commercial banks in India have been selected by the researcher.