A Study on Determinants of Performance in the Banking Sector: Panel Data Analysis

Abstract

The banking sector faced a lot of challenges due to monetary regulation changes, BASEL III implementation, and the credit crunch during the pandemic. The decade of 2014-2024 was a period of shock to the banking industry globally. Hence, this study determines the various determinants of the performance of banks for the period of 2014-2024. The panel data comprises public and private-sector banks in India, with a sample size of 306. The various bank-specific and macroeconomic determinants have been considered in the study. The various tools employed are the unit root test, the multicollinearity test, and the panel regression. From the results, it is found that all determinants considered for the study are stationary in nature. The multicollinearity test of the variance inflation factor revealed that the determinants had a p-value less than five and indicated no serious multicollinearity among the determinants, thereby establishing a foundation for panel regression. The results of panel regression revealed that leverage ratio, capital adequacy ratio, and non-performing loans influenced the performance of the banks in India during the period of the study.