Comparative Performance Evaluation of Selected Commercial Banks in India using CAMELS Rating Model

Abstract

Sound financial health of a bank is the guarantee not only to its depositors but is equally significant for the shareholders, employees and whole economy as well. As sequel to this maxim, efforts have been made from time to time to measure the financial position of each bank and manage it efficiently and effectively.Indian banking sector widely includes commercial, nationalized, co-operative, private and international banks in its fold. In the present study an attempt is made to evaluate the financial performance of three major commercial banks (IOB, Canara Bank and Syndicate Bank) using CAMELS Rating Model. CAMELS rating model is basically an approach widely used to measure the performance of banking unit inside and outside India. This model measures the performance of banks from all important parameters like Capital adequacy, Asset quality, Management efficiency, Earning quality, Liquidity and sensitivity to market. The study is based on secondary data drawn from the annual reports. For the purpose of evaluation the data's of five years (2011-2016) before demonetization are analyzed by calculating the 17 ratios related to CAMELS rating model. It is found out that according to Basel Norm the overall state of capital adequacy of all the three banks are satisfactory. As far as loan portfolio is concern, the overall state of asset quality and management efficiency are satisfactory, whereas the earning capacity of the banks is not and the liquidity is also not satisfactory. The high level of NPAs and sluggishness in the domestic growth, slow recovery in the global economy and the continuing uncertainty in the global market leading to lower International Journal of Global Sustainability ISSN 1937-7924 2018 exports and imports are one of the main reasons for the low earning capacity of banks along with these reasons RBI's new rules to make higher provisioning for substandard assets also affected the earning capacity of all the three banks. Based on the evaluations all the three commercial banks should improve its earning capacity and the liquidity position to perform efficiently and effectively.

Comparative Study on the Overall Performance of Merged Public Sector Banks and Private Sector Banks using CAMEL Model

“…[4]. Second component of this model is the quality of banking assets where it measures how far the non-performing asset can impact the financial health of bank [7]. A third component deal with the quality of management, measuring this ratio is complex as this is qualitative assessment.…”

“…2, December 2021 SRINIVAS PUBLICATION ability of a bank and to enhance the effectiveness of a bank. In India, RBI utilizes this tool to judge the performance of banks which includes (C) Capital adequacy, (A) Assets quality, (M) Management soundness, (E) Earnings, (L) Liquidity [2]. The present research is conducted to analyze the overall performance of Private banks and merged public sector banks with special reference to four public sector banks (Punjab National Bank, Canara Bank, Indian Bank and Union Bank of India) and four private sector banks (ICICI Bank, Axis Bank, Karnataka Bank and HDFC Bank).…”

CAMELS-Based Supervision and Risk Management: What Works and What Does Not

“…The findings are mixed in the Indian context. Samuel (2018) concludes that even though Indian private sector has maintained good asset quality with efficient management, the level of earnings capacity and the liquidity are not satisfactory. Khatri (2019) examines the performance of both private and public sectors financial institutions of India by using CAMELS.…”

“…Inability of available research to establish the impact of supervision on risk management using Capital, Assets, Management, Earning, Liquidity and Sensitivity (CAMELS) framework, coverage of only partial components like CAMEL or, CAL or those which have covered all CAMELS variables, lack of methodological validation, improper focus on supervision with banks’ risk management have played crucial roles in demanding a solid research in the area. Recent studies offering some evidences of CAMEL rating are also limited to banks’ performance, for example, Samuel (2018) for Indian banks, Alemu and Aweke (2017) for Ethiopian banks, and Zafar, Haida, Afiridi, and Urooge (2017) for Pakistani banks.…”

An Evaluation of Financial Health of Nigerian Deposit Money Banks using CAMELS Rating Model

“…Their intermediation function serves as the backbone and catalyst for the growth of an economy (Funso, Kolade & Ojo, 2012;Jain and Jaiswal, 2016). As the financial health of an economy is intertwined with that of its banking system (Chaudhuri, 2018;Samuel, 2018), it is unimaginable to visualise a modern economy bereft of the services of a bank (Rahman& Islam, 2018).…”