Examining the Financial Sustainability of Public Sector Banks & Private Sector Banks in the Indian Banking Sector Post the Economic Slowdown in the Indian Economy: A Comparative Analysis Using CAMELS Model

Abstract

Introduction: The major objective of the study is to make a comparative analysis of the public sector and private sector banks operating in India to know their financial position and to examine financial sustainability after the events of economic slowdown in India using the CAMELS approach.

Method: The study would be based on a secondary data analysis which would use the data collected from the financial statements of banks for the period of 2016-2021. For the said study, a total sample of 5 public sector and 5 private sector banks was taken into consideration and stratified sampling was used for sample selection. For data analysis, selective ratios forming part of the CAMELS model were used to draw a comparison among the banks for their financial performance and to point out their financial sustainability.

Results: The study found out that in terms of Capital Adequacy, Asset Quality, Management Efficiency & Sensitivity to Risk private sector banks were more sustainable and better performers whereas the public sector banks were outperformers in terms of Earnings & Liquidity.

Conclusion: This analysis of financial sustainability in Indian public and private sector banks post-economic downturn highlights their resilience and adaptability. Using the CAMELS model, the study reveals varying strengths and weaknesses across sectors. Public sector banks, while resilient in some areas, may struggle with quick decision-making due to government regulations. Private sector banks are more agile and innovative but require careful oversight due to higher risks. The study underscores the need for a balanced regulatory framework to ensure both stability and competition. Addressing identified vulnerabilities through innovation, improved risk management, and strategic initiatives is crucial for enhancing the resilience and sustainability of Indian banks. This research provides a foundation for future policy decisions to strengthen the banking sector and support financial stability in India.