Assessing The Financial Distress Of Indian Banks: A Comparative Study Using Emerging Market Z Score Model
Abstract
The Indian banking industry plays a significant role in advancing the economic growth of the nation. As a result, the stability and financial health of this industry are important concerns. The present study aims to assess the financial stability of Indian banks using the Emerging Market Z Score Model. In addition, it aims to analyse the variations in Altman's Z-score values among these banks and compare the Z-scores between scheduled public sector banks and scheduled private sector banks. The analysis is derived from secondary data obtained from a sample of ten banks collected from Prowess IQ. The sample comprises ten banks, consisting of five scheduled public sector banks and five scheduled private sector banks. The selection criteria were based on market capitalisation from 2013–14 to 2019–20. The findings indicate a strong financial outlook, with all banks consistently showing Z-scores above the safe threshold of 2.60, indicating a safe zone classification. The findings of a one-way ANOVA (F-test) demonstrate significant disparities in the averages of Z-scores among the ten banks, signifying differences in their financial performance. The t-test results also reveal a significant disparity in Z-scores between scheduled public sector banks and scheduled private sector banks, highlighting the distinctive financial attributes of these two groups. Scheduled private sector banks demonstrate slightly higher financial stability than scheduled public sector banks, but they also show greater variability compared to scheduled public sector banks. This suggests that the financial stability of private sector banks may exhibit greater variation. Overall, this study enhances the comprehension of the financial soundness and stability of banks in India, offering valuable observations for individuals involved in the banking sector and making a valuable contribution to ongoing studies on the analysis of financial performance.
