IJCRT2211463

www.ijcrt.
org © 2022 IJCRT | Volume 10, Issue 11 November 2022 | ISSN: 2320-2882
A CAMEL MODEL ANALYSIS OF PUBLIC

BANKS IN INDIA
ABSTRACT
A reliable indicator and metric for determining whether an economy's economic operations are sound is
performance review of the banking sector. The performance and financial soundness of a few Indian public
banks have been assessed in the current study for the years 2018 through 2022. The financial health of the
chosen banks has been examined using the CAMEL technique. To arrive at the result through the comparison
and significant examination of several CAMEL factors, Composite Rankings, mean (µ), median (Med.) and
standard deviation (σ) have been utilised. According to the CAMEL analysis, State Bank of India is placed
first, followed by Union Bank of India, while Bank of Baroda took the third spot. Punjab National Bank is in
the fourth spot, and the last spot was acquired by Bank of India.
Keywords: Public Sector Banks, CAMEL, Capital Adequacy
INTRODUCTION
The banking sector is a crucial part of the financial system and aids in the facilitation of monetary policy as
well as stimulating capital formation, innovation, and monetization. It also plays a significant role in the
economic development of nations. During the liberalisation process, the Indian banking industry has seen a
number of changes. Since 1969, when the Indian government nationalised all major banks, public sector banks
have dominated the Indian banking sector.
The ability of a bank to compete in the market and play a crucial part in the development of the sector are
determined by its financial stability and performance evaluation, which has implications for shareholders,
employees, stakeholders, and the entire economy of a nation. In response to this remark, efforts are made
periodically to assess each bank's financial standing and manage it effectively. (Mohiuddin, 2014)
A regulatory framework for banking supervision must be put in place in order to assess the overall
performance of banks. The CAMEL rating system, one of several measures of supervisory information, was
first implemented in the United States in 1979 and has since been proven to be a helpful and effective
instrument in the U.S. Government's reaction to the financial crisis in 2008. (Dang)
IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e25

www.ijcrt.org © 2022 IJCRT | Volume 10, Issue 11 November 2022 | ISSN: 2320-2882
This study is structured as follows: after the introduction, the following section discusses the pertinent
literature. The goals and methodology of the study are described in the third part. The fourth portion describes
the findings and analyses, while the final section contains the key conclusions and recommendations.
LITERATURE REVIEW
For the years 1998 to 2007, Mathuva (2009) looked studied the correlations between profitability, capital
adequacy ratio, and cost income ratio (CIR). According to the study, capital adequacy has a variety of effects
on the bank's profitability.
Using the CAMEL technique, Mishra et al. (2012) and Misra (2013) examined the performance of 12 public
and private sector banks from 2000 to 2011. It was determined that private sector banks were expanding more
quickly than public sector banks. Low economic soundness was demonstrated by Union Bank and SBI. Using
the CAMEL technique, it evaluated the State Bank Group's operations and financial stability. According to
the study's findings, the company has to strengthen its position in terms of asset quality and capital sufficiency.
In Turkey between 2001 and 2009, Erol (2013) compared the performance of Islamic banks to that of regular
banks. The findings demonstrated that Islamic banks outperformed conventional banks in terms of
profitability and asset management ratios, but lagged behind in terms of sensitivity to market risk criteria.
Rostami (2015) examined how the CAMELS model's various parameters affected the efficiency of Iranian
banks. In this study, the Q-ratio Tobin's served as a performance measure. It was discovered that there was a
meaningful relationship between each CAMEL model category and the Q-ratio, Tobin's which serves as a
measure of bank performance.
For the years 2009 to 2013, Majumdar (2016) evaluated the financial performance of 15 Bangladeshi banks.
The CAMEL model was used to assess the financial stability of a few banks. The data had undergone an
ANOVA test, average, and composite ranking. The investigation found that the performance of a few selected
institutions had varied significantly. The research recommended that banks take the necessary action to fix
these flaws.
Through the use of the CAMEL technique, Ramya (2017) analyses the financial performance of the State
Bank of India during the research period of 2012–2016. It was determined that action must be taken to
strengthen SBI's position in relation to a few factors, including the debt-to-equity ratio, operating profit, and
the ratio of non-interest income to total income.
For the years 2006 to 2015, Singh (2017) looked at the capital adequacy performance of India's commercial
and public sector banks. Except for the Central Bank of India, all the banks were determined to have strong
capital adequacy positions.

OBJECTIVE AND RESEARCH METHODOLOGY
This paper's major goal is to evaluate the financial performance of a few public banks in India and to look
into the main elements that influence those banks' financial performance. In order to learn more about the
current state of the phenomenon and to characterise "what existing" in terms of variables, the current study is
both descriptive and exploratory in nature. Out of the banks listed on the NSE, the top five public sector banks
are State Bank of India, Punjab National Bank, Union Bank of India, Bank of India, and Bank of Baroda.
This study is solely based on secondary data that was gathered from the Reserve Bank of India, Capitoline
data base, and annual reports of a few selected banks throughout a five-year period, from the years 2018 to
2022. The financial stability of the chosen banks has been examined using the CAMEL technique. Under each
CAMEL acronym and the overall rankings, specific Ratios have been computed. Mean (µ), Median (Med.)
and Standard Deviation (σ) are used in this case to draw a conclusion via a substantial comparison of the
various CAMEL parameters.
RESULTS AND ANALYSIS
Based on the CAMEL framework, the financial soundness of the chosen banks will be examined in this
section. The selection of indicators is based on their analytical value, the availability of data for compilation,
calculation, and their relevance for the investigation. Only those indicators are chosen that are appropriate for
the study. The study's chosen indicators are listed in the following table under each CAMEL acronym.
Table 1: Calculated Ratio under CAMEL Model

Capital Managerial Earning
Assets Quality Liquidity
Adequacy Efficiency Capability
Net NPA/ Net Return on Capital Net Interest
Capital Advances Employed Margin Cash Deposit
Adequacy Ratio Return on Return on Net Net Profit Ratio
Assets Worth / Equity Margin
CAPITAL ADEQUACY
The bank's capital adequacy status shows if it has enough capital to cover unforeseen losses. It is necessary
to preserve depositor confidence and keep the bank from failing. (Reddy, 2012) “According to "The United
States Uniform Financial Institutions Rating System 1997," "Meeting statutory minimum capital requirements
is the key factor in deciding the capital adequacy and maintaining an adequate level of capital is a critical
element." This demonstrates the firm's capacity for liability protection. It will be very risky for banks to be
able to meet the demand of their depositors if there are any loan losses. Therefore, it is essential to maintain
a high level of capital adequacy in order to avoid the bank from failing. (Chen , 2003) According to regulatory
standards, Indian public sector banks are urged to maintain a CAR of 12 percent whereas Indian scheduled
commercial banks are expected to maintain a CAR of 9 percent.

Table 2: Capital Adequacy of Selected Banks
Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda 12.00% 13.00% 13.00% 14.00% 15.00%
Punjab National Bank 9.00% 10.00% 14.00% 14.00% 14.00%
Union Bank of India 11.00% 12.00% 13.00% 12.00% 14.00%
Bank of India 13.00% 14.00% 13.00% 14.00% 17.00%
State Bank of India 13.00% 13.00% 13.00% 13.00% 13.00%
Table 3: Metrics for Capital Adequacy

Name of the Banks Mean (µ) Median (Med.) Standard Deviation (σ)
Bank of Baroda 13.40% 13.00% 1.02%
Punjab National Bank 12.20% 14.00% 2.23%
Union Bank of India 12.40% 12.00% 1.02%
Bank of India 14.20% 14.00% 1.47%
State Bank of India 13.00% 13.00% 0.00%
Table 4: Overall Rank of Capital Adequacy based on Mean (µ) Values

Rank Allotted I II III IV V
Name of the Bank of Bank of State Bank of Union Bank of Punjab National
Bank India Baroda India India Bank
In terms of total Capital Adequacy, Bank of India ranks first, followed by Bank of Baroda, State Bank of
India, and Union Bank, according to Tables 2, 3, and 4. The bank is in a favourable position if its composite
rank is the lowest. When compared to the other banks included in the survey, Punjab National Bank is in last
place. Bank of India has the greatest capital adequacy at 14.20 percent, followed by Bank of Baroda at 13.40
percent. In comparison to other banks, Punjab National Bank has the largest Standard Deviation (σ), which
indicates greater volatility.
ASSET QUALITY
An important factor to consider when determining the level of financial strength is the quality of the assets.
Determining the composition of non-performing assets (NPAs) as a percentage of all assets is the main goal
when evaluating the quality of the assets.
This study is limited to two metrics, namely Net NPA/Net Advances and Return on Assets, in order to identify
the Asset Quality for the five selected banks.

The conclusion for Asset Quality will be drawn using the Mean (µ) for both of these indicators.
Table 5: Net NPA/Net Advances of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda 5.49% 3.33% 3.13% 3.09% 1.72%
Bank of India 8.26% 5.62% 3.89% 3.35% 2.28%
Table 6: Return on Assets of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda -0.25% 0.13% 0.07% 0.12% 0.58%
Punjab National Bank -1.55% -1.21% 0.05% 0.20% 0.28%
Union Bank of India -1.06% -0.58% -0.56% 0.26% 0.44%
Bank of India -0.96% -0.86% -0.46% 0.28% 0.46%
Table 7: Metrics for Asset Quality

Bank of Baroda 1.74% 1.62% 0.74%
Bank of India 2.19% 1.71% 1.34%
Table 8: Overall Rank of Asset Quality based on Mean (µ) Values

Name of the State Bank of Punjab National Union Bank of Bank of Bank of
Bank India Bank India India Baroda
Together, Tables No. 5, No. 6, No. 7, and No. 8 show that State Bank of India's asset quality is significantly
higher than that of other banks. In terms of assets quality, Punjab National Bank came in second place,
followed by Union Bank of India, Bank of India, and Bank of Baroda, in that order. Additionally, State Bank
of India displayed the greatest Standard Deviation (σ) of 5.71 percent, making it the most variable bank in
terms of Asset Quality.

MANGEMENT EFFICIENCY
Another crucial element of the CAMEL model that assures a bank's survival and expansion is management
effectiveness. The other components of the CAMEL model can be easily evaluated using the most recent
financial records, but management quality is a more elusive and subjective metric that is nonetheless essential
for institutional success. The banking sector changes underline the necessity of enhancing bank productivity
through suitable actions that decrease operating expenses and increase profitability.
This study is limited to two factors to identify the Asset Quality for the five selected institutions. i.e., Return
on Capital Employed (ROCE) and Return on Net Worth/Equity.
The Mean (µ) on both these metrics will be considered in order to reach to the conclusion for the Management
Efficiency.
Table 9: Return on Capital Employed (ROCE) of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda 1.88% 1.96% 1.78% 1.97% 1.88%
Bank of India 1.19% 1.33% 1.80% 1.53% 1.40%
Table 10: Return on Net Worth/Equity of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda -4.05% 2.20% 1.21% 1.87% 8.54%
Bank of India -16.21% -14.79% -7.88% 5.12% 7.04%
State Bank of India -2.21% 0.98% 8.69% 8.89% 12.53%
Table 11: Metrics for Managerial Efficiency

Bank of Baroda 1.92% 1.88% 2.03%
Punjab National Bank -3.74% 1.22% 7.48%
Union Bank of India -2.35% -4.23% 5.74%
Bank of India -1.18% -2.46% 5.06%

Table 12: Overall Rank of Managerial Efficiency based on Mean (µ) Values
Name of the State Bank of Bank of Bank of Union Bank of Punjab National
This managerial effectiveness is illustrated by Tables Nos. 9, 10, 11, and 12. In terms of results compared to
other banks, State Bank of India performed better, followed by Bank of Baroda, Bank of India, and Union
Bank of India, with Punjab National Bank receiving the lowest ranking. When it comes to volatility, the
Punjab National Bank has the largest Standard Deviation (σ) of 7.48 percent, which makes it more susceptible
in terms of Management Efficiency when compared to other chosen banks.
EARNING CAPABILITIES
A key factor in determining a bank's capacity to generate continuous profits is the quality of its earnings. In
essence, it establishes a bank's profitability and shows how it can sustain and increase its earnings in the long
run. For tasks like paying dividends, maintaining proper capital levels, offering investment options for bank
expansion, developing strategies for starting new businesses, and keeping a competitive edge, banks rely on
their robust earning capacity. This study is limited to two metrics, namely, Net Interest Margin and Net Profit
Margin, in order to identify the Earning Capabilities for the five selected banks. The Mean (µ) on both these
metrics will be considered in order to reach to the conclusion for the Earning Capabilities.
Table 13: Net Interest Margin of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda 2.57% 2.48% 2.40% 2.58% 2.57%
Bank of India 1.72% 2.18% 2.32% 1.96% 1.91%
Table 14: Net Profit Margin of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda -4.15% 2.05% 1.19% 1.95% 10.49%
Bank of India -15.85% -13.40% -6.87% 5.38% 8.89%
State Bank of India -1.82% 1.21% 6.73% 8.73% 12.53%

Table 15: Metrics for Earning Capabilities
Bank of Baroda 2.41% 2.26% 2.38%
Punjab National Bank -2.61% 1.43% 6.38%
Union Bank of India -1.00% -3.01% 4.43%
Bank of India -1.18% -2.46% 5.06%
Table 16: Overall Rank of Earnings Capabilities based on Mean (µ) Values
Name of the State Bank of Bank of Union Bank of Bank of Punjab National
Together, Tables Nos. 13, 14, 15, and 16 show that State Bank of India has superior managerial efficiency
than other banks, with Bank of Baroda, Bank of India, and Union Bank of India following closely behind,
with Punjab National Bank receiving the lowest ranking. Compared to other chosen banks, Punjab National
Bank has the largest Standard Deviation () of 6.38 percent, which makes it more vulnerable in terms of earning
capabilities.
LIQUIDITY
Financial soundness is significantly impacted by liquidity, which also assesses a bank's operating efficiency.
It reveals a bank's ability to cover short-term obligations and deal with unforeseen depositor withdrawals. A
company's liquidity demonstrates its capacity to transform its assets into cash without suffering any losses.
The banks' liquidity ensures that depositors can access their money whenever necessary and demonstrates the
stability and durability of the industry. While having too much money hurts profitability, having too little
liquidity increases the chance of going bankrupt.
This study is limited to one parameter, the cash deposit ratio, in order to identify the liquidity for the five
selected banks. The conclusion for the liquidity will be reached after taking into account the Mean (µ) on the
chosen metric.
Table 17: Cash Deposit Ratio of Selected Banks

Name of the Banks 2018 2019 2020 2021 2022
Bank of Baroda -9.59% 0.95% 0.04% -0.08% -2.88%
Punjab National Bank 0.07% -2.99% -0.02% -0.22% 1.04%
Union Bank of India 3.50% 0.07% 2.68% -1.49% 0.89%
Bank of India -0.24% 3.22% 3.16% 6.39% 2.54%

State Bank of India 0.15% 1.82% 3.39% -5.57% 1.26%
Table 18: Metrics for Liquidity

Bank of Baroda -1.22% 0.07% 4.40%
Bank of India -0.19% -0.22% 3.85%
Table 19: Overall Rank of Liquidity based on Mean (µ) Values

Name of the Union Bank of Punjab National State Bank of Bank of Bank of
Bank India Bank India India Baroda
The three preceding tables, numbered 17, 18, and 19, collectively show that Union Bank of India has a far
superior liquidity situation than Punjab National Bank, State Bank of India, and Bank of India, in that order.
In terms of liquidity, Bank of Baroda achieved the lowest ranking. Due to its highest Standard Deviation (σ)
of 4.40 percent among the selected banks, Bank of Baroda is considered to have the highest level of volatility.
OVERALL RANKING
The following Tables No. 1 through Table No. 19 give the banks' overall rankings after taking into account
all of the CAMEL analysis's sub-criteria rankings for the five-year period (2018–2022). The ultimate grand
rating is determined by taking the group rankings of all the banks that were taken into consideration for the
study and averaging them out. According to the CAMEL analysis, Union Bank of India comes in second
place, with State Bank of India taking the first spot. Bank of Baroda is ranked third. Punjab National Bank
holds down the fourth spot. For the period of 2018 to 2022, Bank of India, out of all the selected institutions,
holds the final position according to the CAMEL study.

Table 20: Overall Ranking of the Selected Banks based on CAMEL Parameters
Weights
[1] [2] [3] [4] [5] [15]
Given
Final
Weighted
Capital Asset Managerial Earning Liquidity Rank
Banks Average
Adequacy Quality Efficiency Capabilities Metrics
Ranks
State
Bank of 3 1 1 1 3 1.8 I
India
Union
Bank of 4 3 4 3 1 2.6 II
India
Bank of
2 5 2 2 5 3.4 III
Baroda
Punjab
National 5 2 5 5 2 3.6 IV
Bank
Bank of
1 4 3 4 4 3.6 V
India
CONCLUSION AND SUGGESTION
The State Bank of India is ranked first among the other banks included in the study when all of CAMEL's
criteria are taken into account, according to the model. While State Bank of India lags behind in terms of
capital adequacy and liquidity, it performs well in terms of asset quality, management effectiveness, and
earning capacity. In contrast, due to its poor performance in terms of capital adequacy, earning capacity, and
liquidity, while doing better in terms of capital adequacy, Bank of India is at the lowest place when compared
to other banks under the research. Therefore, Bank of India should strengthen those sectors where it is
particularly weak. Consequently, the related policy makers

References
1. Chen , J. (2003). Capital adequacy of Chinese banks: Evaluation and Enhancement. Journal of Banking
Regulation, 4(4), 320.
2. Dang, U. (n.d.). The CAMEL rating system in banking. University of Applied Sciences.
3. Erol, C., Baklaci, F., Aydo Aum, H., & Tunc, G. (2014). Performance comparison of Islamic (participation)
banks and commercial banks in Turkish Banking Sector. EuroMed Journal of Business, 9(2), 114 - 128.
4. Kumar, M. A., Harsha, G. S., Anand, S., & Dhruva, N. R. (n.d.). Analyzing soundness in Indian banking: A
CAMEL approach. Research Journal of Management Science, ISSN, 2319, 1171.
5. Majumdar, M., & Rahman, M. M. (2016). A CAMEL Model Analysis of Selected Banks in Bangladesh.
International Journal of Business and Technpreneurship, 6(2), 233 - 266.
6. Mathuva, D. M. (2009). Capital Adequacy, Cost Income Ration and the Performance of Commercial banks:
The Kenyan Scenario. The International Journal of Applied Economics and Finance, 3(2), 35 - 47.
7. Mishra, S. K., & Aspal, P. K. (2012). A CAMEL Model Analysis of State Bank Group.
8. Mohiuddin, G. (2014). Use of CAMEL Model: A Study on Financial Performance of Selected Commercial
Banks in Bangladesh. Universal Journal of Accounting and Finance , 2(5), 151 - 160.
9. Reddy, K. S. (2012). Relative Performance of Commercial Banks in India using CAMEL Approach.
International Journal of Multidisciplinary Research, 2(3), 38 - 58.
10. Rostami, M. (2015). Determination of CAMELS Model on Bank's Performance. International Journal of
Multidisciplinary Research and Development, e-ISSN, 2339-4182.
11. Said, R. M., & Tumin, M. H. (2011). Performance and Financial Ratios of Commercial Banks in Malaysia and
China. International Review of Business Research Papers, 7(2), 157 - 169.
12. Singh, J. P., & Seth, M. (2017). An Inclusive Study on Capital Adequacy Performance of Selected Public Sector
and Private Sector Banks in India. International Journal of Multifaceted and Multilingual Studies, 3(10).

IJCRT2211463

Uploaded by

Copyright:

Available Formats

IJCRT2211463

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IJCRT2211463

Uploaded by

Copyright:

Available Formats

www.ijcrt.

A CAMEL MODEL ANALYSIS OF PUBLIC

Keywords: Public Sector Banks, CAMEL, Capital Adequacy

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e25

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e26

RESULTS AND ANALYSIS

Table 1: Calculated Ratio under CAMEL Model

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e27

Table 3: Metrics for Capital Adequacy

Table 4: Overall Rank of Capital Adequacy based on Mean (µ) Values

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e28

Table 5: Net NPA/Net Advances of Selected Banks

Table 6: Return on Assets of Selected Banks

Table 7: Metrics for Asset Quality

Table 8: Overall Rank of Asset Quality based on Mean (µ) Values

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e29

Table 9: Return on Capital Employed (ROCE) of Selected Banks

Table 10: Return on Net Worth/Equity of Selected Banks

Table 11: Metrics for Managerial Efficiency

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e30

Table 13: Net Interest Margin of Selected Banks

Table 14: Net Profit Margin of Selected Banks

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e31

Table 17: Cash Deposit Ratio of Selected Banks

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e32

Table 18: Metrics for Liquidity

Table 19: Overall Rank of Liquidity based on Mean (µ) Values

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e33

CONCLUSION AND SUGGESTION

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e34

IJCRT2211463 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org e35

You might also like