Performance Evaluation of Banks

 Performance Evaluation of Financial institutions Essay










Doing a efficiency appraisal of banks, especially Indian types, is no easy activity. What are the factors that must be considered to identify the good, unhealthy and the unpleasant. If we just compare the major ratios for any financial evaluation of financial institutions, we may reach at conclusions, which will be quite far from truth. Because these types of ratios perform give a picture, but not the full one. This is very easily presented in the global recession recently, where a wide range of reputed banking institutions went beneath. Global behemoths collapsed within the weight of their own inadequacies, which may not become properly mirrored in their financial analysis. However , there has to be several mechanism and parameters where banks could possibly be compared and their performance measured. The traditional analysis method employed the NPA (Non Carrying out Assets) level, the COMPACT DISC (credit deposit) ratio, the CAR (Capital Adequacy Ratio) and also other earnings ratios. In the fresh paradigm of banking, these figures tend not to reflect all the reality. The business enterprise of financial and the bank of business has undergone a sea change. This conventional paper tries to supply some other requirements on which banks can be evaluated and their relevance to the fresh economic reality.


CASA (Current Accounts Savings Account)

NIM (Net Interest Margin)

CAR (Capital Adequacy Ratio)


The last few years have been completely a trying time for the global banking industry. India, and the Indian Banking Sector, weathered this surprise much better than their counterparts in the more produced countries. It has also shaken up the financial industry, which now realizes that it has to align by itself to a fresh market truth, where the approach which manufactured them big in the first place, will not be able to catapult them even more, and in simple fact may add a lot to their particular downturn. India is certainly not immune to changes. The " Open Sky” insurance plan which was released by RBI, and that was widely anticipated to be applied by 2009, in which overseas banks would be given a free of charge run over the Indian country. However , a global recession place paid to the such plans, and the MNCs' were remaining deciding how many people to rightsize and which will business units to seal down and discontinue. The Indian financial sector will see a lot of structural changes in the coming years. Public sector banks know they have to restructure to survive, non-public banks are looking at newer strategies for expansion and MNC banks are trying to grow post-recession. There is no doubt that will increase the degree of competition and efficiency through the industry range. Before looking to do a economical analysis of the bank, one needs to keep in mind this analysis is going to differ a lot from the one for a organization or firm. This is due to the framework and operation structure of banks. There is not any tangible product or considerable service which they provide. For example , they do not invoice by the hour or we are unable to say that they have sold these many products of a product in this yr. However , there are particular parameters, which will actually aid in evaluating the true performance of any bank.


In the past, various research with regard to the financial functionality of banks have been carried out. Swami studied the comparative efficiency of different bank groups. Das has researched the correlation between the capital, non carrying out assets and the productivity. Qamar has analyzed the profitability and efficiency of resource use. Uppal offers studied the efficiency, soundness and productivity. Mukherjee examined the benchmark performance and technical efficiency.


Let us look at some crucial ratios that determine the performance of a bank:

1 ) CASA Rate – (Current Account Debris + Family savings Deposits)/Total Build up This is important because this is a great indicator...

Recommendations: Das (2002), " Risk and productivity change of public sector banks”, EPW, Vol. thirty seven, No . 5, pp. 437-438

Qamar (2003), " Success and Reference use performance in timetabled commercial banking companies in India”, Synthesis, Volume. 1, Number 1, pp. 1-16

Swamy (2001), " New competition, deregulation, and emerging changes in Indian bank: An evaluation of different financial institution groups”, Journal of the Indian Institute of Bankers, Vol. 72, No . 3, July – September, pp. 3-22

Uppal (2004), " A comparative analyze of organization, efficiency, soundness, and productivity of new non-public sector banks”, Journal of Indian Managing Studies, Volume. 8, Number 1, pp. 99-115

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