A Study on Determinants of Profitability in Indian Banks

Abstract

Profitability is a crucial indicator of banks financial performance. By understanding, evaluating and analysis of factors that affect profitability, banks can improve their financial performance and maintain their long-term viability. Although, there are number of variables that affects the profitability of a bank but this paper examines the determinants of profitability (measured by Returns of Assets ROA) of selected banks by using correlation and multiple regression on dependent variable ROA with independent variable ROCE, CASA, NMP, OPM, ROE or Net-worth, NIM, OP/Total Assets, the study shows that NPM, ROCE, CASA, OPM and OP/ Total Assets are more significant and crucial for determining ROA. Although, ROE and NIM are not significant in determining ROA using multiple regressions, individually they are significant in determining ROA.