Financial Analysis of Indian Banking Industry: Bank Meter Model

Abstract

Capital in banking system is the foundation of economic development of country. If a specific country had been stimulated due to various risk, inflation of money, financial crisis, imbalance of economy development, unavoidable pandemic like COVID-19 and meagre supply of money circulation etc., these are all roots which can be interconnected for the failure of the banking system. These are the motives all countries are established and renowned by the BASEL’s committee norms worldwide. The liquidity and solvency position of banks structured and build up by BASEL committee norms which evaluate each and every bank’s financial health. To analyze the capital positions there are assorted authors suggested universally and accepted various techniques like ZMIJEWSKI Model, CAMEL, ALTAMAN’s, SPRINGATE’s Model, OHLSON’s Model, BANKOMETER Model, etc. To appraise the performance based on various ratios of Public & Private sector banks, we have selected the Bankometer Model (S-score) developed and suggested by International Monetary Fund (IMF) recommendations global prudential indicators of financial system in January 2000, to evaluate the financial performance in respect of capital ratios of the Public and Private sector banks in India, for the present study we have considered a period of ten years (FY 2010 to FY2019). Secondary data have been collected from the reports of Indian Bankers Association (IBA), Statistical Tables, Annual Reports of Banks, Reserve Bank of India (RBI) Monthly Bulletin, NSE & SEBI, Money control, economic times etc. The results of the study showed that as per Bankometer model, banks were extremely liquid, had more than required adequate capital base, were able to manage debt, have excellent profitability and asset quality but they were deficient in the economic, operational & political risk. These findings suggest that this model can be used as EWS-early warning system & alert tool for measuring financial performance of a bank.