Performance Affecting Factors of Indian Banking Sector : An Empirical Analysis

There are several variables which can be used to assess the performance of banking sectors and its affecting factors as well as. Therefore, this study examines the performance affecting factors of selected 18 – public sector, 13 – private sector and 16 – foreign sector banks in India using panel data during 2005–2020. Return on assets and return on equity are used as proxy variables for measurement of bank’s performance and dependent variables in this study. Accordingly, capital adequacy ratio, net profit, return on investment adjusted to cost of funds, return on advances adjusted to cost of funds, return on investment, investment - deposit ratio, credit - deposit ratio, cash - deposit ratio, total of borrowings and profit per employee are considered as independent variables. Log-linear regression model is used to assess the regression coefficients of aforementioned variables with return on assets and return on equity. The empirical results based on panel corrected standard estimation model enforce that return on assets and return on equity are significantly associated with net profit, return on advances adjusted to cost of funds, ratio of cash deposit ratio, total borrowing and profit per employee. Hence, these variables are seemed most influencing factors of bank’s performance of Indian banking sector