Factors Influencing the Performance of Commercial Banks: A Dynamic Panel Study on India

Sreemanta Sarkar and Debdas Rakshit

FIIB Business Review, 2023, vol. 12, issue 1, 85-99

Abstract: The article investigates the determinants of commercial banks’ performance in India over the period from 2000 to 2017 with special reference to the macroeconomic factors. Considering return on assets (ROA), return on equity (ROE) and net interest margin (NIM) as the measure of performance, we have chosen a panel of public and private sector commercial banks of our country. Taking some macro variables such as GDP, inflation and lending interest rate as the prime explanatory variables along with some bank-specific and macroeconomic control variables, first difference generalized method of moments (GMM) method has been applied to observe the impact of these macroeconomic factors on the performance of commercial banks. Results indicate that external variables significantly affect commercial banks’ performance and these findings remain unaltered with the sequential inclusion of all control variables. This work has immense importance to the bankers, planners and policymakers in shaping appropriate policy decisions for the commercial banks.

Keywords: Return on assets; return on equity; net interest margin; GDP; GMM (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:fbbsrw:v:12:y:2023:i:1:p:85-99

DOI: 10.1177/23197145211021564

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