The performance of banks has been in the limelight ever since the onset of liberalization, privatization and globalization of the economy which brought in the forces of competition and deregulation, making the bank environment even more competitive. And, with the process of granting more licenses by the regulators gaining momentum, the performance of banks has become more focused. Two entities have already been given the go-ahead to open new banks and many more are likely to come. Niche banks and area-specific banks are also likely to come into existence with the RBI releasing draft guidelines, inviting comments, in this regard. In tune with this development, the academic world, especially researchers in the banking domain, are paying more attention to performance measurement studies.

In this context, the first paper, “The Performance of Indian Commercial Banks Based on Multiple Criteria of Efficiency”, by Sanjeev C Panandikar, elaborates on the multi-criteria method, TOPSIS, which is used with weights obtained through entropy function of information theory, to measure the metric efficiency ratings for Indian commercial banks on a (0, 1) scale. The bank-wise data comprising seven financial ratios is used from the financial year 2001-02 to 2012-13 to rate and rank the banks. The hypotheses of equal and stable performance are tested. The findings reveal that the public sector, private sector and foreign banks do not differ in terms of average efficiency ratings, but they differ from year to year. The non-performing assets and the business per employee are found to carry the highest weights.

In the next paper, “A Multi-Criteria Decision Making Model-Based Approach for Evaluation of the Performance of Commercial Banks in India”, the authors, Tamal Datta Chaudhuri and Indranil Ghosh, apply multi-criteria decision making algorithms to arrive at the financial health of commercial banks in India, both in the public sector and the private sector. The various performance parameters considered arise out of the Basel guidelines, and the authors feel that their study will facilitate the regulator in monitoring the performance of banks over time. They also investigate whether the stock market has taken cognizance of these regulatory variables and valued banks accordingly. The results indicate that while the relative performance of private sector banks has not undergone much change, some public sector banks have improved over time. The results also reveal that the stock market does not attach much importance to these regulatory variables in the valuation of banks.

In the paper, “An Exploratory Study of Factors Influencing the e-Loyalty of Online Banking Consumers”, the authors, Sonika Raitani and Vishal Vyas, opine that Banking and Information Technology (IT) can hardly be separated today. Banks are in the forefront of using cutting-edge technology. The fundamentals of banking have remained the same, but the perceived value from banking services has been changing due to the pace at which technology is changing in terms of the means and tools it provides us with. On the one side, it is helping banks in meeting customer service expectations, and on the other side, they are presented with the challenge posed by hackers and cyber criminals.

Moving in a different direction, another paper, “Determinants of Remittances to Bangladesh: A Regression Analysis”, by Bimal Sarkar and Kanchan Datta, dwells on the determinants of remittances in the economy of Bangladesh. According to the paper, in any developing country, shortage of foreign exchange reserve, which is very essential to pay the import bills, is a common problem. Bangladesh, which depends more on remittances to pay its import bills, is not an exception. Over the last decade, the workers’remittances played a crucial role in the economic development of the country. Using econometric techniques, this study finds that factors like GDP, crude petroleum price and exchange rate have a significant positive impact on the remittance inflow to Bangladesh.

In the paper, “ Evaluating the Credit Risk Management Framework of Public and Private Sector Banks in India: A Comparative Study”, the authors, Anju Arora and Muneesh Kumar, are of the view that professional management and sincere efforts towards upgrading Credit Risk Management (CRM) framework have gained reasonable pace in both the public and private sector banks. The study, first of its kind, attempts to find the difference in the strength of overall CRM framework of private and public sector banks in India in quantitative terms and also identifies the specific CRM elements leading to such differences in their respective frameworks, if any. A mathematical evaluation tool, namely, CRM Index Score, comprising quantitative assessment of the current set of CRM practices relating to organization, policy and strategy, operations and systems at transaction level and operations and systems at portfolio level, and the four basic elements of CRM framework, were deployed for making a comparative evaluation. The findings revealed that the strength of the overall CRM framework did not vary significantly between public and private sector banks as on the whole there existed very little difference in the scores of the public and private sector banks.

This issue also contains a research note, “The Role of Private Sector Banks in MSME Financing in Kerala”, by Parvathy Menon. The paper discusses the role of private sector banks in Micro, Small and Medium Enterprises (MSME) financing in Kerala. MSMEs, which are credited with generating the highest rate of employment, account for the increased industrial output and constitute a major portion of India’s exports. In a small state like Kerala—the state which positions itself as the headquarters of four leading private sector banks and home to a significant percentage of educated and well-accomplished class of people—the role played by MSME units in nurturing an entrepreneurial climate and developing the economy is well appreciated.

-- S C Bihari
Consulting Editor