A Multi-Criteria Decision Making Model-Based Approach for Evaluation of the Performance of Commercial Banks in India

Abstract

This paper applies multi-criteria decision making algorithms to arrive at the financial health of commercial banks in India, both in the public sector and the private sector. The various performance parameters considered arise out of the Basel guidelines, and we feel that our study will facilitate the regulator in monitoring the performance of banks over time. We also investigate whether the stock market has taken cognizance of these regulatory variables and valued banks accordingly. Our results indicate that while relative performance of private sector banks has not undergone much change, some public sector banks have improved over time. The results also reveal that the stock market does not attach much importance to these regulatory variables in the valuation of banks.