Analyzing Performance of Indian Public Sector Banks using CAMEL Approach

Abstract

Each country’s banking system plays a crucial role in its economic development. Without a sound banking system, no economy can exist. In the current banking environment, due to the increasing complexity of the banking system financial performance evaluation is becoming increasingly important. Thus, the financial health of banks has been regularly evaluated. The present study focuses on the performance appraisal of five public sector banks i.e., SBI, Bank of Baroda, Canara Bank, PNB and Union Bank. Regression Analysis, WACC, and CAMEL Model are some of the tools used to measure bank’s performance via., CAMEL parameters this evaluation has been done. This is a well-established method of comparing the performance of financial institutions as well as banks. This way of evaluating banks' performance is widely recognized. This model evaluates a bank's performance based on several factors, including capital sufficiency, asset quality, management, earnings, and liquidity. To determine capital adequacy in the current research, we took into account: Capital Adequacy Ratio and Government Securities to Total Investments Ratio. To measure asset quality we considered: Total Investment to Total Assets and Net NPA Ratio. To measure Management efficiency we considered: Business per employee and Profit per employee. To measure earnings quality we considered: EPS (Earnings per share); Operating Profit to Average Working Funds and Dividend payout ratio. To measure liquidity we considered: Investment to total deposits and Government securities to total deposits. The study has considered a period of six years i.e., from 2017 to 2022. The primary objective of the present study is to focus on the performance appraisal of five Indian banks all the banks are public sector banks viz., SBI, Bank of Baroda, Canara Bank, PNB and Union Bank. Apart from that, this study also gives a ranking with the help of the overall performance of banks. This study has used secondary data sourced from annual reports of Banks and also taken help from few websites. Various financial ratios and averages have been used to analyze the information collected.

Keywords

• financial performance
• camel model
• banks’ overall performance
• sbi
• bank of baroda
• canara bank
• pnb and union bank