Page 36 - Banking Finance October 2015
P. 36
ARTICLE
the operational and financial position of SBI through CAMEL Corporation, Unit Trust of India and Industrial Development
model. Bank of India - had been taken as a sample.
RBI has introduced a rating methodology technique to Gupta and Kaur (2008) conducted the study with the main
judge the financial viability of banks which is known as objective to assess the performance of Indian Private Sector
CAMEL (Capital adequacy, Asset Quality, Management Banks on the basis of CAMEL Model and gave rating to top
Performance, Earning performance, Liquidity) Model. five and bottom five banks. They ranked 20 old and 10 new
CAMEL model can also be used by making use of the publicly private sector banks on the basis of CAMEL model. They
available accounting data. In short, CAMEL model is considered the financial data for the period of five years
designed to reflect a bank's financial performance. In the i.e., from 2003-07.
process of continuous evaluation of the bank's financial
performance both in public sector and private sector, the In short, CAMEL model is designed to reflect a bank's
academicians, scholars and administrators have made financial performance. CAMEL is basically ratio based model
several studies on the CAMEL model but in different for evaluating the performance of banks. It is a
perspectives and in different periods. management tool that measures capital adequacy, assets
quality, and efficiency of management, quality of earnings
Cole et al. (1995) conducted a study on "A CAMEL Rating's and liquidity of financial institutions.
Shelf Life" and their findings suggest that, if a bank has not
been examined for more than two quarters, off-site Objectives of the Study
monitoring systems usually provide a more accurate
indication of survivability than its CAMEL rating. The study has been conducted with a view:-
D To analyze the operational performance and to
Godlewski (2003) tested the validity of the CAMEL rating
typology for bank's default modelisation in emerging examine the financial viability through liquidity and
markets. He focused explicitly on using a logical model profitability performance with the CAMEL MODEL.
applied to a database of defaulted banks in emerging
markets. Scope and Significance of the Study
Said and Saucier (2003) examined the liquidity, solvency and The banking industry in India has a huge canvas of history,
efficiency of Japanese Banks using CAMEL rating which covers the traditional banking practices from the
methodology, for a representative sample of Japanese time of Britishers to the reforms period, nationalization to
banks for the period 1993-1999. They evaluated capital privatization of banks and now increasing numbers of
adequacy, assets and management quality, earnings ability foreign banks in India.
and liquidity position.
Therefore, banking in India has been through a long journey.
Prasuna (2003) analyzed the performance of Indian banks Banking industry in India has also achieved a new height
by adopting the CAMEL Model. The performance of 65 with the changing times. The use of technology has brought
banks were studied for the period of 2003-04. The author a revolution in the working style of the banks.
concluded that the competition was tough and consumers
benefited from better services quality, innovative products There is an urgent need to introduce new products. Existing
and better bargains. products need to be delivered in an innovative and cost
effective way by taking full advantage of emerging
Bhayani (2006) analyzed the performance of new private technologies. The new rules of competition require
sector banks through the help of the CAMEL model. Four recognition of the importance of consumers and the
leading private sector banks - Industrial Credit & Investment necessity to address the needs through innovative products
Corporation of India, Housing Development Finance supported by new technology. Therefore, the present study
analyses the operational and financial strength of SBI
through the CAMEL model.
36 | 2015 | OCTOBER | BANKING FINANCE
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