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Financial Strength As An Indicator For Measuring Bank Competitiveness: An Empirical Evidence From Indian Banking Industry

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  • Priya PONRAJ
  • Gurusamy RAJENDRAN

Abstract

Liberalization and globalization has led Indian banking companies to focus on quality of service, speed and cost to face severe competition. The paper measures the bank competitiveness among the select Indian commercial banks in terms of financial strength. A bank is said to be competitive if it is financially strong. Financial strength of the bank is measured in terms of financial ratios viz. efficiency ratio, profitability ratio, capital adequacy ratio, income-expenditure ratio, deposits and return ratios. Factor analysis is used to structure and detect the components of financial strength. The competitive position mapping of the public sector, private sector and foreign banks is obtained by applying discriminant analysis. It is found that foreign banks are the most competitive compared to the private and public sector banks in terms of the profitability ratio, returns ratio and capital adequacy ratio.

Suggested Citation

  • Priya PONRAJ & Gurusamy RAJENDRAN, 2012. "Financial Strength As An Indicator For Measuring Bank Competitiveness: An Empirical Evidence From Indian Banking Industry," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(2(20)/ Su), pages 179-188.
  • Handle: RePEc:ush:jaessh:v:7:y:2012:i:2(20)_summer2012:p:179
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    References listed on IDEAS

    as
    1. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
    2. Barajas, Adolfo & Steiner, Roberto & Salazar, Natalia, 2000. "The impact of liberalization and foreign investment in Colombia's financial sector," Journal of Development Economics, Elsevier, vol. 63(1), pages 157-196, October.
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