An examination of the relationship between spread and burden in determining the financial efficiency: A study of new generation private banks in India

The aim of this paper is to find out the financial efficiency of new generation private banks operating in India during the period 2007-08 to 2016 -17. A Regression analysis is used to find out how the independent variables are supporting dependent variables.
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An examination of the relationship between spread and burden in determining the financial efficiency: A study of new generation private banks in IndiaInternational Journal of Mechanical Engineering and Technology (IJMET)Volume 10, Issue 03, March 2019, pp. 1713–1724, Article ID: IJMET_10_03_173Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=3ISSN Print: 0976-6340 and ISSN Online: 0976-6359© IAEME Publication Scopus Indexed AN EXAMINATION OF THE RELATIONSHIP BETWEEN SPREAD AND BURDEN INDETERMINING THE FINANCIAL EFFICIENCY: A STUDY OF NEW GENERATION PRIVATE BANKS IN INDIA S. Sathyakala Assistant Professor, Sona College of Technology, Salem Umaya Salma Shajahan Assistant Professor, Sona College of Technology, Salem P. Kamalakannan Assistant Professor, Sona College of Technology, Salem ABSTRACT The aim of this paper is to find out the financial efficiency of new generation private banks operating in India during the period 2007-08 to 2016 -17. A Regression analysis is used to find out how the independent variables are supporting dependent variables. The study also aims in predicting how spread and burden of banks are influencing its financial decisions. It is observed that The variables like Spread to working fund, Spread to total income, Burden to total income, burden to working fund, Non-interest income to working fund, Interest expended to total income are positively correlated with net interest margin. Key words: financial efficiency, india, spread, burden, regression, net interest income Cite this Article: S. Sathyakala, Umaya Salma Shajahan and P. Kamalakannan, An Examination of the Relationship Between Spread and Burden in Determining the Financial Efficiency: A Study of New Generation Private Banks in India, International Journal of Mechanical Engineering and Technology 10(3), 2019, pp. 1713–1724. http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&IType=31. INTRODUCTIONThe banks play a major role in economic growth of any country (Richa Verma Bajaj 2016).Banks were considered to be the backbone for any developing economy (Thangasamy 2014).Today no country in the world can progress without a well-organized system of banking.Stronger financial performance indicates that the banks were more stable and ascertain the safe http://www.iaeme.com/IJMET/index.asp 1713 editor@iaeme.com An Examination of the Relationship Between Spread and Burden in Determining the Financial Efficiency: A Study of New Generation Private Banks in Indiaposition that forms a base for long term survival, better utilization of resources and earningsand ensure optimum capital for absorbing risk and financial crisis (Krishna and Kavitha 2017).Banks need to be efficient in all its activities. Efficiency describes the distance exists betweenthe inputs and outputs used by the concerned bank and the quantity of inputs and outputs usedby the efficient bank. (Aparana Bhatia and Megha Mahendru 2017). There are three mainefficiency concepts for analyzing the bank’s financial performance i.e. Revenue efficiency, costefficiency and profit efficiency.(Aparana Bhatia and Megha Mahendru 2017).Finally thesethree efficiencies are determining the financial efficiency of the banks. This research paper isdivided into six sections. The first section is introduction and banking in India. The secondsection deals with reviews and variables used in this study. The third section describes data andmethodology employed in this work. Fourth section describes the statistical tools and thefindings from the analysis are sectioned in five. Finally the conclusion and scope for furtherresearch has been exhibited in section six.1.1. Banking in IndiaThe Indian banking industry is one of the largest in the world. Banking in India dates back tothe Vedic age. Initially in India Desi banking was much popular and the banking was done withhundies. Earlier studies reveals that various kinds of banking instruments including loansexisted during Buddhist, Mauryan and the Mughal periods. But the formal banking system inIndia can be traced to 1770 where the first bank “Bank of Hindustan” was established. Then inthe year 1786 “The General Bank of India” commenced its banking operations, but regrettablythese two banks are now redundant. Till the end of 17th century there were no formal system ofbanking operations in India. Modern banking has its foundation during the British period.During the early nineteenth century there were three main presidencies – Bombay, Calcutta andMadras. Each of these presidencies had their own banks with respect to their presid ...