Analyzing Financial Stability and Performance of Indian Banks through Capital Adequacy and Debt-equity Ratios: A Comprehensive Statistical Analysis
Ashwath R *
Department of Commerce, Rani Channamma University, Belagavi, India.
Sachindra G R
Department of Commerce, Rani Channamma University, Belagavi, India.
*Author to whom correspondence should be addressed.
Abstract
Aims: This study analyzes the financial stability of selected Indian banks using Capital Adequacy Ratio (CAR) and Debt-Equity Ratio (DER) over five financial years (2019-2024).
Study Design: This study applied statistical techniques, including descriptive statistics for measures of central tendency (mean, median, mode) and dispersion (standard deviation, variance) for the Capital Adequacy Ratio (CAR) and Debt-Equity Ratio (DER). Line charts were created to visualize trends. For hypothesis testing, ANOVA was conducted to compare the mean CAR and DER across different banks, with Bonferroni tests used for specific pairwise comparisons.
Duration of Study: 2019-2020 to 2023- 2024.
Methodology: This study used secondary data from bank annual reports, regulatory filings from the Reserve Bank of India (RBI), and MoneyControl.com.This study applied statistical techniques, including descriptive statistics for measures of central tendency (mean, median, mode) and dispersion (standard deviation, variance) for the Capital Adequacy Ratio (CAR) and Debt-Equity Ratio (DER). For hypothesis testing, ANOVA was conducted to compare the mean CAR and DER across different banks, with Bonferroni tests used for specific pairwise comparisons
Results: The findings indicate that Kotak Mahindra Bank and HDFC Bank maintain strong CAR with low variability, ensuring stability. In contrast, Union Bank and SBI exhibit lower CAR and higher variability, indicating potential risks. SBI and Axis Bank manage leverage effectively, while Union Bank and Kotak Mahindra Bank show significant DER fluctuations. ANOVA results suggest no significant differences in CAR and DER across banks, highlighting overall stability
Conclusion: This study emphasizes the significance of financial stability and performance evaluation in the banking sector, focusing on key ratios like the Capital Adequacy Ratio (CAR) and Debt-Equity Ratio (DER). It finds that private sector banks, such as Kotak Mahindra Bank and HDFC Bank, outperform public sector banks, which exhibit higher variability in performance. While ANOVA tests show no significant difference in capital adequacy levels across banks, the notable variability in DER highlights the need for improved debt management.
Keywords: Bank performance, Capital Adequacy Ratio (CAR), Debt-Equity Ratio (DER), financial stability, profitability analysis