Role of Financial Soundness of Banking Industry in India by Using Altman Z-Score Model-with Special Reference Union Bank of India-Empirical Evidence
Author : Dr. Vanumu Chittabbai and Dr. Ch. Vishnu Murthy
Abstract :
In this country, more than 75% of all banking transactions occur in nationalised banks. The government owns the lion's share of the stock in these financial institutions. After merging with its five partner banks (as of April 1, 2017), SBI has become one of the world's top 50 banks in terms of transaction volume. Every economy relies on a banking system that is as stable financially as possible. The failure of large banks might have severe consequences for the global economy. The recent demise of Lehman Brothers is an example of this domino effect in action. Examining the health of domestic financial institutions is critical here. A bank's financial health may be evaluated using a variety of measures, including capital adequacy ratios, profitability, liquidity, and hybrid models like the CAMEL rating.
A financial institution that offers banking and related services to the general public is known as a bank. Financial institutions, of which banks are a subset, are crucial to economies everywhere. They are crucial to the growth of the economy. Banking is a urgent movement. Because they make it easier for money to move around, financial institutions are very important to the growth of the economy. Banks serve as go-betweens between the lenders and the borrowers of money, allowing businesses and governments to function. An essential instrument for assessing the financial stability of a corporation is the Altman Z score model. Unfortunately, this aspect was least investigated by scholars examining banks' financial health. The Altman model is being used in the present study to assess the Indian banking industry. With just a few of notable outliers, the survey concluded that Indian banks are in a decent financial situation. Canara Bank, a public sector bank, and Kotak Mahindra Bank, a private sector bank, were the two institutions discovered to be in a troubled financial state. Both of these banks, however, have adequate capital adequacy ratios in comparison to their competitors. The study advises utilizing a hybrid model before making any definitive judgments about a company's financial stability.
Keywords :
Altman model, financial position, hybrid model, union Bank of India
