The subprime mortgage crisis and its blow on the financial performance: A case of Indian banking industry

Abstract

Globalization has brightened the future of the Indian banking industry. But there is the darker side of the coin too; if globalization brings profit, it can bring losses too. The subprime mortgage crisis 2006 in the US impacted the whole world. A number of banks in the globe have been affected by this recent global recession. Many of the banks also got bankrupt due to the effects of recession. But Indian banks, due to their conservative approach, have not been much impacted. The banks in India remained resilient from the impact of the world’s recession. The key idea of this article is to evaluate the impact of recent recession on Indian banking sector. The objective of the paper is to statistically test the impact of recession on Indian banking sector. The article hypothesized that the performance of Indian banking industry has not been much impacted due to world recession. This has been analyzed by evaluating the financial performance of Indian banking sector by using the four financial indicators- profitability, capital adequacy, management performance and liquidity. This study is based on secondary data analysis of the banks. Analysis is made at group level– state bank and its associates, nationalized banks, private banks and foreign banks will be analyzed for the time period 2006-2009.The paper has evaluated that whether there is positive, negative or no impact of recession on Indian banking sector and also which group of bank is highly impacted due to recession.