Analysis of financial performance of selected Banks in India: A comparative study on public sector banks and private sector banks

Abstract

Banking system is the backbone of every country. The functions of banks mainly revolve around accepting deposits and lending which has widened with ancillary functions in the present period of time. The financial performance of banks is the sum total of the activities for managing banking transactions. The performance of the banks is reflected through the Profit & loss Account and Balance sheet which is prepared annually. The study analyses the financial performance of public sector banks and private sector banks by calculating and comparing various ratios of selected banks. The objectives of the study are firstly to study the financial performance of public sector banks and private sector banks in India and to compare the performances of selected public sector banks and private sector banks. Three public sector banks (Bank of Baroda, State bank of India and Punjab National Bank) and three private sector banks (HDFC bank, ICICI bank, and Axis bank) of India have been selected for the study. This study covers the period of four years from 2016-17 to 2019-20.The findings of the study depict that Private sector banks performed better in maintaining Capital Adequacy, managing non-Performing assets and making adequate provisions for bad loans, positive returns on equity, high returns on assets, high net interest margin by managing investments efficiently and maintaining adequate debt-equity ratio while public sector banks performed better in maintaining adequate credit- deposit ratio and current ratio. The overall financial performance of private sector banks had been comparatively better than the public sector banks during the period of the study.The study excludes other banks such as foreign banks, cooperative banks, regional rural banks which also play an important role in Indian banking system. The study constraints on a limited period of four years and limited variables for analyzing the financial performance of selected public sector banks and Private sector banks.