Determinants of profitability of state-owned banks in India: a dynamic panel data approach

Padmasai Arora, A. Jiran Meitei and Hitesh Arora

International Journal of Business Performance Management, 2024, vol. 25, issue 6, 761-785

Abstract: Indian state-owned banks (SOBs) stand out distinctly in terms of volume and branch network. Once regarded as harbingers of economic change, they have started losing market share to their private counterparts. The profitability of SOBs has witnessed a steady decline post global crisis and turned into losses in 2016. Addressing the problem of low profitability at the policy level requires identification of its major determinants. This paper takes a close empirical look at bank specific and macro-economic determinants of profitability of Indian SOBs during 2004-2005 to 2018-2019 using dynamic panel model. This study provides a new perspective needed for understanding the impact of previous year's profitability on current bank profitability. The results are also indicative of counter cyclical measures adopted for SOBs by the authorities. This study gains immense importance in the light of the ongoing efforts by Indian government to restructure and consolidate Indian banking sector.

Keywords: profitability; performance; state owned banks; SOBs; India; ROA; ROE; GMM. (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbpma:v:25:y:2024:i:6:p:761-785

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