Key factors influencing profitability of Indian commercial banks
Dr. Anita Makkar, Dr. Hardeep
The present study is an attempt to measure the profitability of the banks and also to identify the key factors influencing the profitability of 46 Indian commercial banks (26 public sector banks and 20 private sector banks) using the data of 15 financial years (2001-02 to 2015-16). Profitability is measured through return on assets ratio and some of the internal factors namely; liquid assets to total assets, current ratio, capital adequacy ratio, non-performing assets to total assets, profit per employee, business per employee and size of the bank are used to identify the key factors influencing the profitability of Indian banking industry. The study found that liquidity, solvency, efficiency and size are the key factors significantly influencing the profitability of Indian commercial banks. The study concluded that there is consistency in the profitability of public sector banks while lack of steadiness in the profitability of private sector banks. The study suggested that the banks having low return on assets as compared to benchmark given by RBI must improve their efficiency and boost their level of profitability to comply with Basel norms.