A CAMEL model analysis of private sector banks

Abstract

Banking is an institution that deals in money and credit, safeguards the public's savings, and grants borrowers’ loans and advances. Banks are the lifeline of any economy and are responsible for maintaining its financial stability. The sound financial health of the banking system is of significant importance to all its stakeholders, viz., its depositors, shareholders, employees and the general public. However, after the financial frauds observed in some banks lately, Indian depositors are concerned about their deposits' safety. Depositors are now concerned with evaluating banks' strength, security, and stability. The current study looks at the top six Indian private banks from 2015-16 to 2017-18 (according to the value of their total assets). The data is analysed using the CAMEL Model to measure the performance of the banks based on the five parameters: Capital adequacy, Asset quality, Management, Earnings, and Liquidity. The model illustrates the bank's total financial health and makes comparative research through bank rankings easier. The CAMEL model revealed IndusInd Bank, HDFC Bank, and Kotak Mahindra Bank as the top-performing banks.