Page 3 of 22

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 01

January 2019

Available online: https://ejbss.org/ P a g e | 825

Banks is followed by a section on the Due to various mergers and

objectives of the Paper and the acquisitions in the Banking Industry, it

research methodology used and the is undergoing structural changes.

data source. In the next section, Industrial Development Bank of India

comparative analysis of Public Sector (IDBI) has been included in the list of

Banks is done on the basis of selected Public Sector Banks. It was a new

parameters. The last section concludes Private sector bank before 2004-05.

the findings of the analysis along with CAMEL stands for Capital Adequacy,

its implications for the Banking sector. Asset Quality, Management Quality,

Earning Quality and Liquidity (Media for

Objectives Freedom, 2007).

• To rank the Public Sector Banks on CAPITAL ADEQUACY

the basis of different parameters Capital Adequacy is concerned with

• To rank the Public Sector Banks on whether a bank has enough cushion to

the basis of the Composite Index absorb a reasonable amount of losses

calculated for each bank. before it becomes insolvent and loses

• To conduct a comparative analysis of depositors’ funds. A high Capital

overall performance of Public Sector Adequacy across all banks ensure that

Banks. a nation’s financial system is efficient

and stable as it lowers the risk of banks

Data Source becoming insolvent. It is indicative of

the overall financial condition of the

The paper has used secondary data. bank and also indicates its ability to

The data used has been collected from meet the need for additional capital

the Statistical Tables Related to Banks funds. It shows the leverage a bank

in India from the year 2010-11 to enjoys in order to be able to take

2012-13, available on the official advantage of emerging opportunities as

website of the Reserve Bank of India. well as to withstand upcoming

For the purpose of the paper, the unexpected adversity.( Ketkar et. al

Report on trend and progress of banks 2003). The paper has used two ratios

in India for related years have also to rank banks on this parameter. These

been used. are:

1. Capital Adequacy Ratio

Research Methodology 2. Debt-Equity Ratio

The paper has used the CAMEL Capital Adequacy Ratio : It is a

Approach to do a comparative analysis measure of the ability of a bank to meet

of 26 Public Sector Banks. The CAMEL its obligation by comparing its capital to

approach is a recognised international its risk weighted assets. The capital

rating system that uses 5 Parameters used for the calculation is the average

to rank banks. It was first developed in of the Tier-1 and tier-2 capital.

the 1970s by the U.S. Federal Reserve A high Capital Adequacy Ratio of a

to provide a convenient summary of bank means that it is more likely to

Bank Performance. meet its financial obligations. During