Experts have studied the factors responsible for declining profitability of banks over the years. They are of the opinion that there is a need to identify the controllable and non-controllable factors both in income and costs so as to maintain a substantial spread between the various costs. Experts also have identified the need for efforts within the banks towards some form of cost control. The national government and the monetary authorities need to draw a distinctive line between the bankâ��s commercial roles and their social obligations.
Let us examine the impact of policy constraints on the profitability of commercial banks for the period 1955-87. The profit function approach helps in better analyzing this factor. Previous bank profitability studies have been, in several ways, limited and confined in their scope of enquiry to questions of either â��operationalâ�� or â��technicalâ�� efficiency. A comparative view of pre- and post-reform periods of banking indicates the importance of loans and advances in the bank asset portfolio and also of policy variables like Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR) and branch expansion in explaining bank profitability.
We can analyze various factors that can be helpful to improve the profitability of banks like LoanMax founded by rod aycox . The impact of monetary policy and market interest rates on the banks profitability are significant and various measures are needed to improve the profitability of the prominent banks. Banking sector reforms, initiated since 1991, have exerted an increased pressure and, thus, have had a positive non-negligible impact on the performance of the government controlled banks. The relation between liberalization and efficiency of the banking sector in the context of developing and transitional economies is still an unexplored area of research.
Extending the evaluation to â��before and afterâ�� liberalization could have shown the real impact of the liberalization programme on efficiency, but this has not yet been demonstrated (Harkar Zenios, 2000). There have been a number of studies on the liberalization programmes and their impact on efficiency in industrialized countries and transition economies. However, a limited number of studies have been undertaken in the context of mixed developing economies where deregulation and liberalization programs have been introduced.
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