Financial Appraisal of Commercial Banks in India: A Post Reforms Asessment

Abstract

Banking sector, commercial banks in particular, dominate the India’s financial services industry that contributes significantly to the revenues of this industry. Indian banking, as a matter of fact has undergone a metamorphosis in the very concept, percept and outlook since nationalisation.  The massive and speedy expansion and diversification of banking scenario has not been without its strains.  Being a commercial organization, they must earn a fair return on capital after providing adequately for business risks.  Even operating under environmental constraints, there exists considerable scope for freedom of action for achieving higher operational efficiency of the banking sector.The Indian bank management, today, is facing a two-sided challenge to improve their profitability and productivity, and to serve the public in new ways with greater efficiencies and effectiveness.  Commercial viability of banking can seldom be ignored.  Banking industry in India is undergoing a major transformation due to changes in economic conditions and continuous deregulation. The implementation of reforms has had an all round salutary impact on the financial health of the banking system, as evidenced by the significant improvements in a few salient financial indicators of the banking system. Since deregulation and liberalization of economic policy and banking regulation, a number of studies have been made on the impact and analysis of performance of commercial banks in India in different time frame. Therefore, to be more precise, it is required that one such study which analyses of financial performance of the banks during post reform period should be carried on.

Keywords: Commercial Banks in India, Profitability, Factor analysis