A Study on Financial Performance of Selected Commercial Banks in India Using Camel Approach

Abstract

Commercial banks plays a vital role in financial system of an economy of the country, the financial health of a nation is directly related to the financial soundness of its banking system. The Indian banking system is dominated by nationalized bank. As the banks are vital channels of sustainable development in developing nation like India, it is important to measure the soundness of various banks and identify the weakness of the banks to devise appropriate strategies to overcome these. This paper makes an attempt to analyse the financial soundness of major commercial banks in India by using CAMEL approach for the period 2013-14 to 2017-18. The CAMEL rating system is recognised as an international rating system that is used in order to rate financial institutions accordingly to six factors represented by acronym CAMEL. The aim is to apply CAMEL rating system to evaluate the (C) capital adequacy,(A) asset quality,(M) management efficiency,(E) earnings and (L) Liquidity. We used capital adequacy ratio for the analysis of capital adequacy ratio, return on asset for analysing the asset quality, interest income to total asset for analysing the asset quality, interest income to total asset for analysing management quality, interest income to total asset for analysing management quality, interest spread ratio to analyse earnings and quick ratio to analyse liquidity of banks