Banks play a very important role in the economic development of the country. Commercial banks have to focus on the performance, if they have to survive in the market for a longer period. . Both external and internal factors can have an impact on the performance of the banks. However due to the fact that only few studies have been done to find out the determinants of profitability of banks, also various studies have shown different views on the impact of macroeconomic variables in the profit of the bank.. The purpose of this study is to find out the impact of macroeconomic variables (Inflation rate, Interest Rate and GDP growth rate) on the profitability of Indian Commercial Banks. The study was done on the banks listed in NIFTY. Data for a period of 5 years has been extracted and analysed using Correlation and Multiple Regression Analysis along with descriptive statistics. The result of the study shows that GDP growth rate has an insignificant impact on all the banks considered for the study except Kotak Bank and Yes Bank. The Interest Rate has a negative and insignificant impact on all the public-sector banks used in the study whereas it has positive and insignificant impact on all private sector banks except Yes Bank. The Inflation rate has positive and significant impact on all the public-sector banks whereas it has insignificant impact on private sector Banks except Yes Bank and Federal Bank. This result will help the policy makers to concentrate on changes in the external factors like inflation and GDP which has an impact on the performance of the banks.
Cite this article:
Sangeetha R, Chinu Moorarka. Macroeconomic variables and Commercial banks in India. Asian Journal of Management. 2019; 10(1): 25-28. doi: 10.5958/2321-5763.2019.00005.2