Associate Professor, Anjuman Arts, Science & Commerce College, Dharwad, Karnataka, India
Online published on 29 October, 2013.
The health of the economy is closely related to the soundness of its banking system. Rural sector is an important segment of the Indian economy. Assessment of the bank's performance in terms of earnings level may reveal more about government policy than about the bank's own efficiency. The banks, acting as financial intermediaries, mobilize savings of the society and supplement their resources through borrowings for providing credit to the needy sectors. In the light of the amalgamation of RRBs in India the main purpose of this study is to investigate the performance by comparing between pre and post amalgamation period.
From analyzing all the ratios of both the RRBs. we find that the activities and its associated requirements and results are significant compared to certain standard levels that the bank is required to maintain as a good bank. Amalgamation of banks helped to reduce the cost of borrowings and cost of deposits. The performance of RRBs has marginally improved during the post amalgamation period. The RRBs have performed better than that in pre amalgamation period as revealed by most of the profitability indicators like return of funds, cost of Funds, cost of deposits, financial margin, operating cost, risk cost, net margin etc. Therefore To obtain higher yields, a bank must either take on increased risk or lower its operating costs. Greater risk manifests itself in greater volatility of both net income and the market value of a bank's shareholders’ equity.
