Banking Sector in Post-Recession Era: A Study of Comparative Performance of Different Bank Groups in India

Abstract

Global financial crisis and economic downturn that began in December 2007, increased uncertainty and negatively affected the world wide economy and developed serious difficulties in terms of lapse of banking & financial institutions and plunging demand. However, amidst all this chaos, India's banking sector has been amongst the few to maintain resilience. Indian banking sector has not only been able to weather the storm of global recession, but its public sector segment has been able to moderate its impact on the Indian economy as well, compared to its peers among the foreign and private banks. A progressively growing balance sheet, higher pace of credit expansion, expanding profitability and productivity akin to banks in developed markets and lower incidence of Non Performing Assets have contributed to making Indian banking vibrant and strong. This study apprises the performance of Indian banking sector and compares different banking groups in terms of their performance through their Credit Deposit Ratio (CDR), Return on advances adjusted to cost of funds and NPAs during the period 2006 to 2013, which covers pre-recession era, the recession era and post recession era. The paper concludes that before the global recession foreign bank group was performing much better than other banking sectors. Private, Nationalized and SBI bank groups were keep on performing almost same, but certainly better than RRBs for all the period of study. But, Indian banks have to innovate to take advantage of the new business opportunities and at the same time ensure continuous assessment of risks.