Do Determinants of Bank Profitability Change Over Time? Evidence from India

Great Lakes Herald, September 2017, Vol 11, Issue 2

Posted: 13 Jun 2017 Last revised: 12 Dec 2017

See all articles by Rajveer Rawlin

Rajveer Rawlin

M S Ramaiah Institute of Management; Independent; M S Ramaiah Institute of Management

Date Written: June 12, 2017

Abstract

Banking stocks have been surging off late. However asset quality issues that have plagued the banking sector over the past five years remain in the back ground. This paper seeks to study the influence of key internal determinants on the profitability of listed banks in India and to see if these determinants change or remain the same over time. The profitability measures chosen were the Return on Assets (ROA) and the Return on Equity (ROE). The internal determinants chosen for the study comprised of key bank metrics such as the deposit/credit ratio and bank size, income measures that include interest income/average working funds and non interest income/average working funds, a measure of fee based income, a key productivity measure in business per employee and risk factors that include the capital adequacy ratio and % Net NPA. The influence exerted by the determinants on ROA and ROE was different across years and varied for both ROA and ROE. The risk factors and income measures studied proved to be key determinants of ROA and ROE. Key stake holders of banks should keep these determinants in mind as they seek to evaluate and understand the rapidly growing Indian banking landscape.

Keywords: Profitability, Determinants, Indian Banking Sector, ROA, ROE, NPA, Capital Adequacy

JEL Classification: G00, G20, G21, P34

Suggested Citation

Rawlin, Rajveer and Rawlin, Rajveer, Do Determinants of Bank Profitability Change Over Time? Evidence from India (June 12, 2017). Great Lakes Herald, September 2017, Vol 11, Issue 2, Available at SSRN: https://ssrn.com/abstract=2984885

Rajveer Rawlin (Contact Author)

M S Ramaiah Institute of Management ( email )

Gate No-8, General Sciences Building 
'C' Block, M S Ramaiah Nagar 
Bengaluru, 560054
India

HOME PAGE: http://https://rajveersmarketviews.blogspot.com/

Independent ( email )

M S Ramaiah Institute of Management ( email )

Gate No-8, General Sciences Building 
'C' Block, M S Ramaiah Nagar 
Bengaluru, 560054
India

HOME PAGE: http://https://rajveersmarketviews.blogspot.com/

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