IDEAS home Printed from https://ideas.repec.org/a/sae/globus/v16y2015i5_supplp82s-92s.html
   My bibliography  Save this article

Determinants of Bank Profitability in the Post-reform Period: Evidence from India

Author

Listed:
  • Seenaiah K
  • Badri Narayan Rath
  • Amaresh Samantaraya

Abstract

The present article explores the factors that influence the profitability of Indian banking sector in the post-reform period using the data from 1995 to 2012. The results indicate that operating profits, wage bills, non-performing assets and net interest margin affect the profitability of Indian banks, while the priority sector lending does not have any impact on bank profitability in India. Further, the net interest margin is found to be significantly reducing profitability. Hence, it is suggested that banking sector in India should focus on reducing its operational expenses.

Suggested Citation

  • Seenaiah K & Badri Narayan Rath & Amaresh Samantaraya, 2015. "Determinants of Bank Profitability in the Post-reform Period: Evidence from India," Global Business Review, International Management Institute, vol. 16(5_suppl), pages 82-92, October.
    • Handle: RePEc:sae:globus:v:16:y:2015:i:5_suppl:p:82s-92s
    DOI: 10.1177/0972150915601241
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0972150915601241
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0972150915601241?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sunil Kumar & Rachita Gulati, 2009. "Did efficiency of Indian public sector banks converge with banking reforms?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(1), pages 47-84, March.
    2. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    3. Fujii, Hidemichi & Managi, Shunsuke & Matousek, Roman, 2014. "Indian bank efficiency and productivity changes with undesirable outputs: A disaggregated approach," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 41-50.
    4. Sathye, Milind, 2003. "Efficiency of banks in a developing economy: The case of India," European Journal of Operational Research, Elsevier, vol. 148(3), pages 662-671, August.
    5. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    6. K. R. Shanmugam & A. Das, 2004. "Efficiency of Indian commercial banks during the reform period," Applied Financial Economics, Taylor & Francis Journals, vol. 14(9), pages 681-686.
    7. Bhattacharyya, Arunava & Lovell, C. A. K. & Sahay, Pankaj, 1997. "The impact of liberalization on the productive efficiency of Indian commercial banks," European Journal of Operational Research, Elsevier, vol. 98(2), pages 332-345, April.
    8. Keshari, Pradeep K & Paul, Thomas M, 1994. "Relative efficiency of foreign and domestic Banks," MPRA Paper 47072, University Library of Munich, Germany.
    9. Montek S. Ahluwalia, 2002. "Economic Reforms in India Since 1991: Has Gradualism Worked?," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 67-88, Summer.
    10. Sanyal, Paroma & Shankar, Rashmi, 2011. "Ownership, competition, and bank productivity: An analysis of Indian banking in the post-reform period," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 225-247, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nikam, Supriya, 2024. "Assessing the Relationship between Non-Performing Assets (NPAs) and Profitability of Banks in India," MPRA Paper 121624, University Library of Munich, Germany.
    2. Nupur Moni Das & Bhabani Sankar Rout, 2020. "Banks’ capital adequacy ratio: a panacea or placebo," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(3), pages 303-318, September.
    3. Onkar Shivraj Swami & B. Nethaji & Jyoti Prakash Sharma, 2022. "Determining Risk Factors that Diminish Asset Quality of Indian Commercial Banks," Global Business Review, International Management Institute, vol. 23(2), pages 372-384, April.
    4. Dolly Gaur & Dipti Ranjan Mohapatra, 2021. "Non-performing Assets and Profitability: Case of Indian Banking Sector," Vision, , vol. 25(2), pages 180-191, June.
    5. Rakshit, Bijoy & Bardhan, Samaresh, 2022. "An empirical investigation of the effects of competition, efficiency and risk-taking on profitability: An application in Indian banking," Journal of Economics and Business, Elsevier, vol. 118(C).
    6. Faozi A. Almaqtari & Abdulwahid Hashid & Najib H. S. Farhan & Mosab I. Tabash & Waleed M. Al‐ahdal, 2022. "An empirical examination of the impact of country‐level corporate governance on profitability of Indian banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1912-1932, April.
    7. Bijoy Rakshit, 2021. "Evaluating Profitability and Marketability Efficiency: A Case of Indian Commercial Banks," Global Business Review, International Management Institute, vol. 22(4), pages 977-995, August.
    8. Rubi Ahmad & Mohamed Albaity, 2019. "The Determinants of Bank Capital for East Asian Countries," Global Business Review, International Management Institute, vol. 20(6), pages 1311-1323, December.
    9. Santanu Kumar Ghosh & Santi Gopal Maji, 2019. "Profitability of Banks in India: Impacts of Market Structure and Risk," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-10.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bhattacharyya, Aditi & Pal, Sudeshna, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, Elsevier, vol. 22(3), pages 109-117.
    2. Aditi Bhattacharyya & Sudeshna Pal, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, John Wiley & Sons, vol. 22(3), pages 109-117, September.
    3. Tzeremes, Nickolaos G., 2015. "Efficiency dynamics in Indian banking: A conditional directional distance approach," European Journal of Operational Research, Elsevier, vol. 240(3), pages 807-818.
    4. K. Hafsal & Anandarao Suvvari & S. Raja Sethu Durai, 2020. "Efficiency of Indian banks with non-performing assets: evidence from two-stage network DEA," Future Business Journal, Springer, vol. 6(1), pages 1-9, December.
    5. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.
    6. Bijoy Rakshit, 2021. "Evaluating Profitability and Marketability Efficiency: A Case of Indian Commercial Banks," Global Business Review, International Management Institute, vol. 22(4), pages 977-995, August.
    7. Mostak Ahamed, M., 2017. "Asset quality, non-interest income, and bank profitability: Evidence from Indian banks," Economic Modelling, Elsevier, vol. 63(C), pages 1-14.
    8. Fadzlan Sufian & Mohamad Akbar Noor Mohamad Noor, 2012. "Determinants of Bank Performance in a Developing Economy," Global Business Review, International Management Institute, vol. 13(1), pages 1-23, February.
    9. Dipasha Sharma & Anil K. Sharma, 2015. "Influence of Turbulent Macroeconomic Environment on Productivity Change of Banking Sector: Empirical Evidence from India," Global Business Review, International Management Institute, vol. 16(3), pages 439-462, June.
    10. Rajeswari Sengupta & Harsh Vardhan, 2020. "Are more productive banks always better?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-027, Indira Gandhi Institute of Development Research, Mumbai, India.
    11. Jaffry, Shabbar & Ghulam, Yaseen & Cox, Joe, 2008. "Labour use efficiency in the Indian and Pakistani commercial banks," Journal of Asian Economics, Elsevier, vol. 19(3), pages 259-293, June.
    12. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.
    13. Gulati, Rachita, 2022. "Global and local banking crises and risk-adjusted efficiency of Indian banks: Are the impacts really perspective-dependent?," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 23-39.
    14. Megginson, William L., 2005. "The economics of bank privatization," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 1931-1980, August.
    15. Fujii, Hidemichi & Managi, Shunsuke & Matousek, Roman, 2014. "Indian bank efficiency and productivity changes with undesirable outputs: A disaggregated approach," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 41-50.
    16. H.P. Mahesh & Shashanka Bhide, 2008. "Do Financial Sector Reforms Make Commercial Banks More Efficient? A Parametric Exploration of the Indian Case," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 2(4), pages 415-441, November.
    17. Zhang, Jianhua & Jiang, Chunxia & Qu, Baozhi & Wang, Peng, 2013. "Market concentration, risk-taking, and bank performance: Evidence from emerging economies," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 149-157.
    18. Ghosh, Chinmoy & Hilliard, James & Petrova, Milena & Phani, B.V., 2016. "Economic consequences of deregulation: Evidence from the removal of voting cap in Indian banks," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 19-38.
    19. Dipasha Sharma, 2018. "Stock Market Performance and Efficiency of Banks in a Developing Economy: Evidence from the Indian Banking Sector," IIM Kozhikode Society & Management Review, , vol. 7(2), pages 178-193, July.
    20. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:globus:v:16:y:2015:i:5_suppl:p:82s-92s. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.imi.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.