Assessing the financial soundness of the Indian banks: a study with reference to selected public sector and private sector banks

Abstract

One of the most significant sectors that lead to economic growth is the banking sector. This is because financing is important to all firms and is primarily provided by banking institutions. The Indian banking industry has historically served as a more important pillar of support for the growth of the entire economy, but recent changes in macroeconomic factors like COVID-19, rising inflation, political factors, and economic changes have had a greater impact on the banking industry’s performance. Using Altman’s Z-score model, the current study aims to comprehend the financial stability of the chosen financial institutions. In terms of their insolvency status, banks’ financial stability is being attempted to be understood. The study uncovers that the majority of the selected banks have been impacted drastically due to macroeconomic and structural changes like recent mergers in the public sector banks. The result indicates that the banks are in a distress zone and need to strategize their future operations in order to yield better results. The study also highlights the prominent technological trends impacting the banking sector.