Article ID: | iaor2017244 |
Volume: | 26 |
Issue: | 3 |
Start Page Number: | 347 |
End Page Number: | 364 |
Publication Date: | Jan 2017 |
Journal: | International Journal of Services and Operations Management |
Authors: | Arora Hitesh, Arora Padmasai |
Keywords: | finance & banking, economics, developing countries, performance |
Despite its importance, research on Indian bank profitability is sparse and there is little conclusive evidence on what internal factors lead to higher profitability. This paper aims at identifying significant bank‐specific determinants of commercial bank profitability in India. Using balanced panel data of 73 banks (26 public sector banks, 20 private banks and 27 foreign banks) comprising of 584 observations during 2004‐05 to 2012‐13, regression results reveal that net NPA has a significant negative impact on profitability for the three bank types. The impact of CRAR, though positive, on bank profitability is insignificant in all the three bank types. The remaining variables vary in their impact, relation to profitability and significance. Analysis also shows that Indian banks are witnessing lower and declining profitability than foreign banks. Internal factors are under the control of management and thus, the results of the present study are expected to be useful to various stakeholders of banks in India through useful implications.