Profitability of commercial banks in India

In the changing economic environment of competitiveness, efficiency and productivity, profits are not a taboo for the banking industry. The present paper attempts to analyse the profitability of the four sample categories of banks by employing the method of ratio for a period of 1981 to 2007. In this study, only the ratio of net profits to working funds has been used to measure profitability of the banks. Because the ratio of net profits to working funds is considered as a more comprehensive measure of bank profitability as it indicates the efficiency with which the banks deploy their sources/working funds so as to maximize their profits. The comparative analysis of profitability of banks has been carried out during the pre-reform and post-reform period. The analysis brings into light that the public sector banks as compared to the foreign and private sector banks have performed poorly in terms of profitability during the period 1981–90. However, the response of public sector banks has been delayed, but they followed up superior technology and provided better quality of services as well which enabled them to maintain high profitability levels.