Banking Revival: CAMELS Insights into India's Public Sector Banks Post 2019 Reforms

The Indian banking sector has undergone significant transformations through the 2019 banking reforms, including the implementation of Prompt Corrective Action (PCA) frameworks and large-scale mergers of Public Sector Banks (PSBs), aimed at enhancing stability, efficiency, and resilience amid rising non-performing assets and economic challenges. This study conducts a comparative analysis of the financial performance of major PSBs in India, focusing on the pre-reform (2015–2019) and post-reform (2020–2024) periods, utilizing the CAMELS framework, which encompasses capital adequacy, asset quality, management efficiency, earning efficiency, liquidity, and sensitivity. Data were sourced from the CMIE-RBI database for 12 PSBs. CAMELS parameters were used to compute composite scores and rank the banks. Bank of Maharashtra and Indian Bank showed significant improvements, and the Bank of Baroda remained stable in rankings post-merger. To assess the statistical significance of reform impacts, an independent t-test was applied to compare the mean values of each CAMELS parameter across the two periods, yielding significant differences in Capital Adequacy, Asset quality, and Earnings, indicating enhanced post-reform stability, though Management efficiency and Liquidity metrics show insignificant results. The findings underscore the reforms' positive influence on PSB performance, offering policy implications for future banking consolidation in emerging economies. JEL Classification: E44, E42, E58, G21, G28, G34