Profitability determinants of Indian banks – an empirical study

The development of any nation is the result of the financial soundness of different sectors such as banking, insurance, healthcare and hygiene. The Banking system and the Financial Institutions play very significant role in the economy. An efficient banking system must cater to the needs of high end investors by making available high amounts of capital for big projects in the industrial, infrastructure and service sectors and also supply credit to the medium and small ventures for new investment and expansion of the existing units. However, there are certain factors that govern the functioning of a bank and its operations like Stage of business cycle in the economy, Political stability, Competition due to domestic and foreign players, Regulations by the regulator, The Reserve Bank of India, Interest rate fluctuations, etc. This study focuses on few internal factors and the regulations of the RBI. The most important factor that is studied in this paper is Profit. Hence in this study, we have taken the base of a few ratios that help in determining how more profits can be generated for a bank. It thus gives the means by which a bank can generate profits and thus excel in comparison to its competitors.