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Determinants of Profitability in Indian Banks in the Changing Scenario

Author

Listed:
  • Biraj Kumar Mohanty

    (Professor, Alliance University, Chandapura, Anekal Road, Bangalore, India)

  • Raveesh Krishnankutty

    (Assistant Professor, Department of Economics and Finance, Rajagiri Business School Kochi, Kerala, India)

Abstract

Banking Sector in India plays a crucial role in the development of the country. Being a major constituent of the economy, banks have their own promises and challenges. While banks have the onus of providing funds to the growing economy, they face a daunting task of maintaining profitability in a competitive environment. This study aims at identifying the performance variables responsible in driving the Return on Asset (ROA) of the banks. We have analyzed bank specific, industry specific and economy specific elements guiding the profitability of 46 Indian banks over a period of 17 Years (1999-2015) through panel Generalized Method of movements (GMM) estimation. It was found out that Return on Asset (ROA) has a significant positive association with last year ROA, solvency ratio, capital adequacy ratio whereas two and three year lag ROA, size, GDP growth, Loan to Deposit Ratio, expense ratio and productivity have significant negative effect.

Suggested Citation

  • Biraj Kumar Mohanty & Raveesh Krishnankutty, 2018. "Determinants of Profitability in Indian Banks in the Changing Scenario," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 8(3), pages 235-240.
    • Handle: RePEc:eco:journ1:2018-03-29
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    References listed on IDEAS

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    Cited by:

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    2. Suzan Dsouza & Mustafa Raza Rabbani & Iqbal Thonse Hawaldar & Ajay Kumar Jain, 2022. "Impact of Bank Efficiency on the Profitability of the Banks in India: An Empirical Analysis Using Panel Data Approach," IJFS, MDPI, vol. 10(4), pages 1-18, October.
    3. Satyaban Sahoo & Sanjay Kumar, 2021. "Existence of Cointegration between the Public and Private Bank Index: Evidence from Indian Capital Market," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 152-172, December.
    4. Raad Mozib Lalon & Anika Afroz & Tasneema Khan, 2023. "Impact of Bank Liquidity and Macroeconomic Determinants on Profitability of Commercial Banks in Bangladesh," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 13(6), pages 177-186, November.

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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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