Drivers of Performance in the Indian Banking Sector: A Discriminant Analysis Approach

Commercial banks play an important intermediation role by investing in financial assets. The paper first analyses the banks on the basis of the computed Hannan Henweck G score. Further, discriminant analysis is used to find significant drivers of performance in banks including the G score. Although, being rigorous in computation, discriminant analysis technique helps us in capturing all the crucial information in one composite score. Division of banks into high and low-performing zone helps us identify significant drivers of performance in Indian banks. Use of multivariate statistical measure signals towards higher solvency score and greater credit risk to become a high performer. Classification precision of 86% is achieved thereby signalling towards the relevance of the study.