Volume 18, No. 6, 2021
A Study On Financial Risk Analysis And Bank Profitability Performance Of Regional Rural And Cooperative Urban Banks In India
Dr. Kishore Krishna Das , Dr. Arabinda Debnath
Abstract
The majority of firms rely heavily on financing from the banking industry. In India, rural residents who were formerly unserved by commercial banks can now access financial services through cooperative and regional rural banks. These banks encourage thrift and entrepreneurship among the rural populace while supporting the growth of small-scale industry and agriculture in rural regions. The degree to which banks have met their financial goals is gauged by their financial performance. A strong banking system depends critically on accurate and trustworthy assessment of banks' financial performance as well as practical evaluation of their financial risks. The objective of the present research is to identify any trends in the performance of the chosen Regional Rural Banks and Cooperative Banks in India over an eight-year period. Using a Multi-Criteria Decision Making (MCDM) approach, the ranking performance of the chosen banks is first evaluated. The decision-making method used in this article is the Technique of Order Preference by Similarity to the Ideal Solution (TOPSIS). The study's factors include capitalization, financing costs, operational efficiency, asset quality, bank size, deposits, net interest margin, profit margin on capital used, profit margin on net worth, liquidity to asset ratio, and risk associated with liquidity. To analyse the financial risk, a pooled regression model with random and fixed effects is used. Lastly, the Chi-squared automated interaction detector with Vector Error Correction Model (VECM) approach has been used to improve the examination of bank profitability.The SPSS programme is used to execute the results.The Indian agricultural sector receives financial support from regional rural and urban banks, which also aid individuals in resolving their financial difficulties. Two urban banks (Bombay Mercantile Cooperative Bank and Goa Urban Co-operative Bank) and four rural banks (Assam Gramin Vilash Bank, Baroda Gujarat Gramin bank, Himachal Pradesh Garmin Bank, and Karnataka Villas Gramin bank) were the focus of the study. Based on a balanced panel data set with multiple observations of leading Indian banks from 2015 to 2022, a regression analysis is constructed. Additionally, the results showed that, among the bank-specific factors, ROE is significantly positively impacted by bank size, assets management ratio, assets quality ratio, and liquidity ratio, in that order.
Pages: 9495-9524
Keywords: Banking, Financial risks, Bank profitability, financial performance, Multi-Criteria Decision Making, Liquidity Risk, Proxy Measurement.