Changing Income Structure, Ownership and Performance: An Empirical Analysis of Indian Banking Sector

Umakrishnan, K U and Bandyopadhyay, Arindam (2005): Changing Income Structure, Ownership and Performance: An Empirical Analysis of Indian Banking Sector. Unpublished.

Abstract

This paper investigates the relationship between the changing patterns of bank’s source of income and risk adjusted performance. A database of 77 banks over the period of 1999 to 2004 is constructed for the 27 public sector banks, 22 private banks, 25 foreign banks and 3 cooperative banks to compare their change in income composition. Bank’s performance is measured by risk adjusted return on BIS risk allocated capital (RARORAC). To examine the relationship between ownership pattern and performance, we compare the difference between new generation private sector banks and foreign banks with their public sector and cooperative banks counterparts. We argue that in a competitive financial market in order to change the profitability drivers in banking, Indian banks need to improve their non-interest income and also augment risk adjusted interest income through better risk based pricing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Banking, Value creation and performance
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; D - Microeconomics > D6 - Welfare Economics > D60 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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