Evaluation of riskiness of Indian Banks and probability of book value insolvency

Pankaj Sinha, Varundeep Singh Taneja and Vineet Gothi

MPRA Paper from University Library of Munich, Germany

Abstract: Recently, a lot of questions were raised about the financial health of commercial banks in India. This paper analyzes the Indian banks' riskiness and the probability of book-value insolvency under the framework developed by Hannan and Hanweck (1988). A risk index, known as Z score, for Global Trust Bank that became insolvent in 2004 suggests that the framework developed by Hannan and Hanweck (1988) is also relevant in the Indian context. For a random sample of 15 Indian Banks (public & private sector), we determine the riskiness/probability of book value insolvency over the years and also carry out a relative comparison between public and private sector banks in India. Results obtained in the study show that the probability of book value insolvency of Indian Banks has reduced over years and the probability of book value insolvency is lower in case of public sector banks in comparison to private sector banks.

Keywords: Riskiness; insolvency; Z-statistic (search for similar items in EconPapers)
JEL-codes: E58 O16 (search for similar items in EconPapers)
Date: 2009-05-15
New Economics Papers: this item is included in nep-ban, nep-cwa and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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