Factors Affecting Profitability of Commercial Banks: A Rural Perspective

This paper has examined the profitability of commercial banks in relation to selected rural banking parameters, viz. the share of rural branches in total bank branches, the share of agricultural credit in total bank credit, and the rural credit-deposit ratio. The study is based on the time series data for the period 1971–72 to 2011–12. The study has revealed that the share of rural branches in total bank branches increased during the period 1971–72 to 1990–91 but declined later on due to the shift in rural banking policy from expansion to consolidation. In terms of credit-deposit ratio, the paper has observed that of every hundred rupees mobilized as deposits, sixty rupees were given as agricultural credit. The study has suggested that credit delivery should be customized and non-performing assets should be minimized. The deposit mobilization should be rationalized and made more popular by making them compatible with preference and cash flow patterns.