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FINANCIAL STRENGTH AS AN INDICATOR FOR MEASURING BANK COMPETITIVENESS: AN EMPIRICAL EVIDENCE FROM INDIAN BANKING INDUSTRY

Priya Ponraj and Gurusamy Rajendran

Journal of Applied Economic Sciences, 2012, vol. 7, issue 2(20)/ Summer 2012, 179-188

Abstract: Liberalization and globalization has led Indian banking companies to focus on quality of service, speed and cost to face severe competition. The paper measures the bank competitiveness among the select Indian commercial banks in terms of financial strength. A bank is said to be competitive if it is financially strong. Financial strength of the bank is measured in terms of financial ratios viz. efficiency ratio, profitability ratio, capital adequacy ratio, income-expenditure ratio, deposits and return ratios. Factor analysis is used to structure and detect the components of financial strength. The competitive position mapping of the public sector, private sector and foreign banks is obtained by applying discriminant analysis. It is found that foreign banks are the most competitive compared to the private and public sector banks in terms of the profitability ratio, returns ratio and capital adequacy ratio.

Keywords: competitiveness; Indian commercial banks; financial ratios; financial performance; factor analysis; discriminant analysis. (search for similar items in EconPapers)
Date: 2012
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