Journal Press India^®

Author Details ( * ) denotes Corresponding author

Indian banking stocks have rebounded post the COVID-19 crisis. This rebound has been seen despite the concerns raised by declining asset quality over the past five years following a sluggish economy and a weakening Rupee. Public sector banks which are at the forefront of the Indian economy have seen their asset quality and profitability erode when compared to their private sector counterparts. It is useful to understand the key drivers of profitability of this sector. This paper studied the influence of key micro and macro determinants on profitability of select banks in India’s public sector over the 13-year period from 2008-2020. The return on assets was the profitability measure considered. The micro factors studied included measures of bank size, lending, income, productivity, asset quality, and capital adequacy. The macro factors studied were changes in interest and exchange rates. Asset quality proved to be the most important driver of public sector bank profitability in India.

Keywords

Bank profitability; Public sector banks; Indian banking; NPA; Panel regression.

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