Risk profiling of Indian commercial banks - a clustering approach

Shailja Vashisht and Mahesh Sarva

Afro-Asian Journal of Finance and Accounting, 2024, vol. 14, issue 6, 854-872

Abstract: It is important to understand the risk profile of banks to prevent systemic risk in the economy. The present study tracks the risk profile of Indian commercial banks using the k-means clustering approach based on selected financial variables indicative of prominent banking risks. Thirty Indian banks were studied from 2009-2020 and classified into high and low risk clusters. Analysis of variance was performed to identify variables crucial for their risk profiles. The findings indicate that profitability and credit risk variables are crucial for the risk profile of Indian banks. The overall performance of the Indian banking scenario has improved during the study period. The main contribution of the current study is to identify the characteristics of high and low risk banks based on the data mining clustering approach. This approach will be very useful for the government and regulators in achieving better results in banking consolidation.

Keywords: risk profiling; cluster analysis; banking; k-means clustering; banking risk. (search for similar items in EconPapers)
Date: 2024
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