Volume : V, Issue : II, February - 2015

Relationship of Credit Quality and Profitability in Banks: An Empirical Investigation

Bashir Ahmad Joo

Abstract :

Maintenance of sound credit quality is treated as a key for developing and maintaining viant banking and financial system.Given the growing significance of financial stability,banks should formulate strategies for managing the quality of their advance portfolio. This is pre–requisite for sound banking system because in recent times banks have become oad based financial institutions engaging in full spectrum of financial services but this paradigm has made their credit risk exposure more complex and interdependent. The increase in risk sensitivity has reduced the quality of assets in banks. The bank failures due to poor credit quality have multiplier effect and have potential to generate negative externalities for whole financial system. The present study therefore is focused to analyze the impact of poor credit quality of Indian banks on their profitability. Multiple linear regression analysis is used to explain the impact of predictor variables Burden (BUR), Credit Quality (CQ), Liquidity (LQ), Deposit Structure (DE), Operating Efficiency (OPE) on response variable Profitability (PT).Results of regression analysis have shown that BUR, CQ and DE have positive and significant impact on PT.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Bashir Ahmad Joo Relationship of Credit Quality and Profitability in Banks: An Empirical Investigation Indian Journal of Applied Research, Vol.5, Issue : 2 February 2015

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