| The aim of this paper is to discover the relationship between net NPAs and financial profitability, by estimating the determinants of profitability, for 12 public sector banks in India, for the period 2011–2023. The author employed three panel regression models: fixed, random, and PLS regression models. The author used bank-specific variables (deposit, CDR, DER) and economic indicators like GDP growth rate, inflation, and interest rate as explanatory variables, along with net NPAs. The results revealed that the RE model was a valid and efficient model, that is best suited for public sector banks in India. The result also found that NPAs exerted detrimental effect on the rate of profitability of public sector banks, by using a set of bank-specific and macroeconomic predictors of profitability. The result recomends that public-sector banks must lower their NPAs and debt-to-equity ratios, in order to become more profitable. Total bank deposits demonstrated neither positive nor negative effects. Only the credit deposit ratio was found to be positively significant, under the study.
|