A STUDY OF FACTORS AFFECTING EFFICIENCY OF TOP FIVE PUBLIC SECTOR BANKS
Banking industry in India is all poised for a major leap in coming years. The year
2004 witnessed some major positive changes in this industry. A pickup in demand for loans, chiefly in retail sector and good spreads in treasury transactions caused a substantial face lift to all players in the banking sector. All top rated banks have succeeded in reducing their NPA’s by around 65% to 100%. The growth in business is also an impressive 24-41%. But, one thing that is sending alarm signals is that stronger banks are becoming stronger and weaker ones are in the process of being wiped off. We have done a study of efficiency in the public sector banks, the factors responsible for success and failure of top 5 banks. The present study aims at finding answers to similar questions and reveals efficiency determinants amongst public sector banks in India. We have evaluated the factors affecting the efficiency of public sector banks using various profitability factors.
Since the process of liberalization and reform of the financial sector were set in motion in 1991, banking has undergone significant changes. The underlying objectives of these were to make the
system more competitive, efficient and profitable. A decade of economic and financial sector reforms has strengthened the fundamentals of the Indian economy and transformed the operating environment for banks and financial institutions in the country. The sustained and gradual pace of reforms has helped avoid any crisis and has actually fuelled growth. As pointed out in the RBI Annual Report
2007-08, GDP growth in the 13 years after reforms i.e. 1992-93 to
2007-08 averaged 6.9% against 5.8% recorded during 1980-81 to 1989-
90 in the pre-reform period. The most significant achievement of the financial sector reforms has been the marked improvement in the financial health of commercial banks in terms of capital...