Banking Revival: CAMELS Insights into India's Public Sector Banks Post 2019 Reforms
DOI:
https://doi.org/10.53983/ijmds.v14n8.005Keywords:
Banking Reforms, Public sector banks, CAMELS parameters, Financial PerformanceAbstract
The Indian banking sector has undergone significant transformations through the 2019 banking reforms, including the implementation of Prompt Corrective Action (PCA) frameworks and large-scale mergers of Public Sector Banks (PSBs), aimed at enhancing stability, efficiency, and resilience amid rising non-performing assets and economic challenges. This study conducts a comparative analysis of the financial performance of major PSBs in India, focusing on the pre-reform (2015–2019) and post-reform (2020–2024) periods, utilizing the CAMELS framework, which encompasses capital adequacy, asset quality, management efficiency, earning efficiency, liquidity, and sensitivity. Data were sourced from the CMIE-RBI database for 12 PSBs. CAMELS parameters were used to compute composite scores and rank the banks. Bank of Maharashtra and Indian Bank showed significant improvements, and the Bank of Baroda remained stable in rankings post-merger. To assess the statistical significance of reform impacts, an independent t-test was applied to compare the mean values of each CAMELS parameter across the two periods, yielding significant differences in Capital Adequacy, Asset quality, and Earnings, indicating enhanced post-reform stability, though Management efficiency and Liquidity metrics show insignificant results. The findings underscore the reforms' positive influence on PSB performance, offering policy implications for future banking consolidation in emerging economies.
JEL Classification: E44, E42, E58, G21, G28, G34
Downloads
References
Ali, A., & Roy, A. V. (2008). An Analytical Study of Merger & Acquisition Trends of Public Sector Banks of India (A Case Study of Bank of Baroda & Punjab National Bank) [Synopsis]. Ch. Charan Singh University, Meerut.
Ali, A., Singh, D., & S Ali. (2020). A Systematic Analysis of Commercial Banks in India–A Study of Nonperforming Assets (Npa). International Journal of Management, 11(9), 688–710. https://doi.org/10.34218/IJM.11.9.2020.066
Bastan, M. (2016). Dynamics of banking soundness based on CAMELS rating system. https://www.researchgate.net/publication/326654535
Chawla, S., & Rani, S. (2019). Conundrum of Non-performing Assets Over Two Decades: An Analysis of Punjab National Bank. Management and Labour Studies, 44(3), 263–284. https://doi.org/10.1177/0258042X19848238
Dang, U. (2011). THE CAMEL RATING SYSTEM IN BANKING SUPERVISION A CASE STUDY.
G., K., Shubha, A., & Babu K S, N. (2024). Comparative Performance Evaluation Of Selected Public And Private Sector Banks: CAMELS Model Approach In Indian Context - A Longitudinal Study. Educational Administration: Theory And Practice, 30(5), 7232–7244. https://doi.org/https://doi.org/10.53555/kuey.v30i5.4137
Gupta, P. K., Agarwal, P., & Agarwal, M. S. (n.d.). A COMPARATIVE ANALYSISOF PROFITABILITY OF PUBLIC AND PRIVATE SECTOR BANKS IN BUNDELKHAND REGION.
Hosen, M., Wahyudi Bank NTB Syariah, I., Kenn Syahrir, D., Nadratuzzaman Hosen, M., & Wahyudi, I. (2023). BANK NTB SYARIAH’S SOUNDNESS: A MULTI-METHOD ASSESSMENT USING CAMELS, RGEC, AND ALTMAN Z-SCORE. JURNAL ILMIAH MANAJEMEN BISNIS DAN INOVASI UNIVERSITAS SAM RATULANGI, 10(3), 1759–1773. https://www.researchgate.net/publication/375588071
Jain, A. (2020a). Analysing Indian public sector bank merger CAMELS Score. Research Gate, 1–46. https://www.researchgate.net/publication/342977678
Jain, A. (2020b). Analysing Indian public sector bank merger CAMELS Score [Indian Institute of Foreign Trade]. https://www.researchgate.net/publication/342977678
Klomp, J., & Haan, J. de. (2012). Banking risk and regulation: Does one size fit all? Journal of Banking & Finance, 36(12), 3197–3212. https://doi.org/10.1016/J.JBANKFIN.2011.10.006
Koli Abhay Kant, L. N. (2020). Pre and Post Merger Performance of Commercial Banks in India (A Comparative Study among Indian Public Sector, Private Sector and Foreign Banks).
Krishnamurthy, R. (2017). Public sector bank mergers : A reality check. Economic and Political Weekly, 52(29), 12–15.
Malandrakis, I. K. (2014). Liquidity risk and credit risk: a relationship based on the interaction between liquid asset ratio, non-performing loans ratio and systemic liquidity risk. Int. J. Financial Engineering and Risk Management, 1(4), 375–400.
Mishra, S. K. (2012). A CAMEL Model Analysis of State Bank Group. SSRN Electronic Journal. https://doi.org/10.2139/SSRN.2177081
Riha Parvin, S. M., Nirmala, C., & Niyaz. (2021). Comparative Study on the Overall Performance of Merged Public Sector Banks and Private Sector Banks using CAMEL Model. International Journal of Management, Technology, and Social Science, 6(2), 244–255. https://doi.org/10.5281/zenodo.5775465
Roman, A., & Şargu, A. C. (2013). Analysing the Financial Soundness of the Commercial Banks in Romania: An Approach based on the Camels Framework. Procedia Economics and Finance, 6, 703–712. https://doi.org/10.1016/S2212-5671(13)00192-5
Roopa, P., & Uday Gowri Shankar, K. (2020). Financial Statement Analysis of Public Sector Banks Selected for Mergers using Camels Rating System. International Journal of Management (IJM), 11(10), 1383–1394. https://doi.org/10.34218/IJM.11.10.2020.124
Rose, P. S., & Hudgins, S. C. (2010). Bank Management and Financial Services (8th ed.). McGraw Hill. https://www.scirp.org/reference/referencespapers?referenceid=3789157
Rostami, M. (2015a). CAMELS’ ANALYSIS IN BANKING INDUSTRY. Global Journal of Engineering Science and Research Management, 2(11), 10–26. www.gjesrm.com
Rostami, M. (2015b). Determination of Camels model on bank’s performance. International Journal of Multidisciplinary Research and Development, 2(10). www.allsubjectjournal.com
Sandeep, P., Khanwalker, M., & Gupta, A. (2018). Merger of Public Sector Banks in India-Synergies at Work. Pragyaan: Journal of Management, 16(2), 58–63. www.rbi.org.in
Sarkar, S., & Sensarma, R. (2016). The relationship between competition and risk-taking behaviour of Indian banks. Journal of Financial Economic Policy, 8(1), 95–119. https://doi.org/10.1108/JFEP-05-2015-0030
Singh Madray, J., & Kamal, R. (2020). Merger of Public Sector Undertaking Banks in India (Vol. 8, Issue 7). www.ijcrt.org
