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The present study was undertaken to examine and understand how financial management plays a crucial role in the growth of banking. It is concerned with examining the profitability position of the selected sixteen banks (BANKEX-based) for a period of five years (2000-01 to 2006-2007). The study reveals that the profitability position was reasonable during the period of study when compared with the previous years. Return on Investment proved that the overall profitability, and the position of selected banks was sustained at a moderate rate. With respect to debt equity position, it was evident that the companies were maintaining 1:1 ratio, though at one point of time it was very high. Interest coverage ratio was continuously increasing, which indicated the company's ability to meet the interest obligations. Capital adequacy ratio was constant over a period of time. During the study period, it was observed that the return on net worth had a negative correlation with the debt equity ratio. Interest income to working funds also had a negative association with interest coverage ratio and the Non-Performing Assets (NPA) to net advances was negatively correlated with interest coverage ratio.
The banking sector picked up momentum during 2005-06. Bank credits witnessed a strong expansion for the second year in succession. A steady growth in deposits was also observed. It was the first time, since the nationalization of banks in 1969, that investment by the commercial banks in the government securities declined in absolute terms (by Rs. 19,514 cr.) in any single year.
Currently banking in India is considered as fairly mature in terms of supply, product range and reach. In terms of quality of assets and capital adequacy, Indian banks are considered to have a strong and transparent position. As the growth in the Indian economy is expected to be strong for quite some time, especially in its services sector, the demand for banking services is also expected to be stronger. |
