Effectiveness of Assets Towards Earning Quality of Public Sector Banks in India

Public Sector Banks have played a key role in promoting financial inclusion. But at the same time, the NPA crisis in India built up over time impacted the financial parameters of PSBs, restricting their ability to lend and support productive sectors of the economy. To explore the trend and pattern of assets and earning quality figures, the data related to all the 12 public sector banks (PSBs) for past 3 years viz. 2021-22 to 2023-24 have been considered. Additionally, the study evaluates the relationship between the assets quality and earning quality of PSBs during the study period. This study is mainly based on secondary data for which the researcher collected the secondary data from the annual reports of PSBs and statistical tables published by Reserve Bank of India. The findings of the investigation reveal that majority of the PSBs are found to be effective in terms of asset and earning quality. Whether it is a matter of quality of assets or earning, in both the cases Bank of Maharashtra has performed the best among the total 12 PSBs. Further, One-way ANOVA and Correlation Coefficient is also used to test hypothesis. Except NIM, there is no significant difference between the trends of Gross NPAs, Net NPAs and ROA in PSBs over the last three years. Along with this, the study also found a positive impact on earnings due to decline in bad loans.