Indian Journal of Finance

Open Access Open Access  Restricted Access Subscription Access

Liquidity and Business Performance : A Study of Selected Indian Banks


Affiliations
1 Department of Business Economics, The M. S. University of Baroda, Vadodara - 390 002, Gujarat, India
2 Department of Banking & Insurance, The M. S. University of Baroda, Vadodara - 390 002, Gujarat, India

   Subscribe/Renew Journal


Banks across the globe are facing liquidity issues. Sound liquidity management can reduce the probability of serious problems. Ideally, a bank needs to maintain enough high-quality liquid assets to meet its liquidity needs to withstand all kinds of possible stress situations. During the early phase of the 2008 financial crisis, many banks did not manage their liquidity prudently. These banks experienced major difficulties despite adequate levels of capital reserves. The Indian banks responded to the crisis by adopting cautious liquidity management policies. Alternatively, higher liquidity could work unfavorably for banks and mean smaller business. In this context, the present study attempted to understand the liquidity management by Indian banks and its impact on their business. The study focused upon selected large public and private sector banks so as to analyze and compare the liquidity and business performance of banks before the financial crisis (2001-02 – 2007-08) and after the crisis (2008-09 – 2018-19). The results revealed that Indian banks preferred higher liquidity in the post-crisis phase. At the same time, they cautiously managed to grow their business, albeit at a slower pace.

Keywords

Liquidity, Business, Public Sector Banks, Private Sector Banks, Indian banks, SBI, PNB, HDFC, ICICI, Pre Crisis, Post Crisis.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Bank for International Settlements.(2013). 83rd annual report. Retrieved from https://www.bis.org/publ/arpdf/ar2013e.pdf

  • Budhedeo, S. H., & Pandya, N. P. (2018). Financial performance of public sector banks in India : A post reform analysis. Indian Journal of Finance, 12(10), 7 – 20. https://doi.org/10.17010/ijf/2018/v12i10/132491

  • Chandra, S., & Awasthi, R. (2019). Insolvency risk: Issues and challenges for public sector commercial banks of India. Indian Journal of Finance, 13(12), 19 – 33. https://doi.org/10.17010/ijf/2019/v13i12/149266

  • Devanand, H. N., & Prasad, T. R. (2015). Performance analysis of public sector banks in India. Shanlax International Journal of Economics, 3(2), 84 – 94.

  • Gujarati, D. N. (1999). Essentials of econometrics (2nd ed). Singapore: Irwin/McGraw-Hill.

  • Karri, H. K., Meghani, K., & Mishra, B. M. (2015). A comparative study on financial performance of public sector banks in India: An analysis on Camel model. Oman Chapter of Arabian Journal of Business and Management Review, 4(8), 18 – 34.

  • Koley, J. (2019). Analysis of financial position and performance of public and private sector banks in India: A comparative study on SBI and HDFC Bank. A Multidisciplinary Online Journal of Netaji Subhas Open University, 2(1). Retrieved from http://www.wbnsou.ac.in/openjournals/Issue/1stIssue/January2019/Jyotirmoy_2.pdf

  • Koundal, V. (2012). Performance of Indian banks in Indian financial system. International Journal of Social Science & Interdisciplinary Research, 1(9), 204 – 213.

  • Kumar, S., & Sharma, R. (2014). Performance analysis of top Indian banks through Camel Approach. International Journal of Advanced Research in Management and Social Sciences, 3(7), 81 – 92.

  • Misra, S. K., & Aspal, P. K. (2012). A CAMEL model analysis of State Bank Group. Proceedings of 19th International Business Research Conference. Retrieved from https://ssrn.com/abstract=2177099

  • Nageshwaran, P., & Krishnan, J. (2016). Performance analysis of select public sector banks in India. Paripex Indian Journal of Research, 5(12), 373 – 375.

  • Nair, D., Mallawat, H., & Konreddy, N. (2018). Performance analysis of banks in India – Discriminant analysis with CAMELS framework. RESEARCH REVIEW International Journal of Multidisciplinary, 3(10), 39 – 45.

  • Sahota, S., & Dhiman, B. (2017). Relative performance analysis of scheduled commercial banks in India : A CAMEL model approach. Indian Journal of Finance,11(5),40–57. https://doi.org/10.17010/ijf/2017/v11i5/114251

  • The Institute of Company Secretaries of India. (2014). Banking law and practice : Module 3, Elective paper 91. Retrieved from https://www.icsi.edu/media/webmodules/publications/9.1%20Banking%20Law%20-Professional.pdf


Abstract Views: 256

PDF Views: 0




  • Liquidity and Business Performance : A Study of Selected Indian Banks

Abstract Views: 256  |  PDF Views: 0

Authors

Shradha H. Budhedeo
Department of Business Economics, The M. S. University of Baroda, Vadodara - 390 002, Gujarat, India
Neha Pandya
Department of Banking & Insurance, The M. S. University of Baroda, Vadodara - 390 002, Gujarat, India
Neha Pandya
Department of Banking & Insurance, The M. S. University of Baroda, Vadodara - 390 002, Gujarat, India

Abstract


Banks across the globe are facing liquidity issues. Sound liquidity management can reduce the probability of serious problems. Ideally, a bank needs to maintain enough high-quality liquid assets to meet its liquidity needs to withstand all kinds of possible stress situations. During the early phase of the 2008 financial crisis, many banks did not manage their liquidity prudently. These banks experienced major difficulties despite adequate levels of capital reserves. The Indian banks responded to the crisis by adopting cautious liquidity management policies. Alternatively, higher liquidity could work unfavorably for banks and mean smaller business. In this context, the present study attempted to understand the liquidity management by Indian banks and its impact on their business. The study focused upon selected large public and private sector banks so as to analyze and compare the liquidity and business performance of banks before the financial crisis (2001-02 – 2007-08) and after the crisis (2008-09 – 2018-19). The results revealed that Indian banks preferred higher liquidity in the post-crisis phase. At the same time, they cautiously managed to grow their business, albeit at a slower pace.

Keywords


Liquidity, Business, Public Sector Banks, Private Sector Banks, Indian banks, SBI, PNB, HDFC, ICICI, Pre Crisis, Post Crisis.

References





DOI: https://doi.org/10.17010/ijf%2F2020%2Fv14i5-7%2F153321