A Performance Evaluation of Indian Public Sector Banks: Panel Regression Analysis

Abstract

The study aims to evaluate the factors determining the financial performance of public sector banks in India. To facilitate the analysis, we used a panel of 14 public sector banks from 2000 to 2020. The results show that debt equity ratio and return on assets affect the net profit margin and return on equity positively. Further, the results imply that public sector banks in India are trailing money due to the cost of interest paid to return on capital and overall debt relative to owners’ funds. However, the profitability of these banks is rising due to total debt equity ratio and SIZE. Public sector banks were found to be better in terms of credit to corporates and size compared with past performance. These banks could benefit from diversifying their income generation efforts by providing customer-based financial services, enhancing the financial system’s overall performance. Decreasing non-performing assets (NPAs), this study suggests that public sector banks should investigate other strategies to increase profitability by providing additional choices to customers, lenders, and borrowers.