ASSESSING THE PROBABILITY OF FINANCIAL DISTRESS IN COMMERCIAL BANKS OF INDIA

The present paper attempts to assess the probability of financial distress in 46 Indian commercial banks covering 26 public sector banks and 20 private sector banks for the period of 2005-06 to 2011-12. Using Z-score test for four different ratios namely, working capital to total assets, retained earnings to total assets, earnings before interest and taxes to total assets and equity to total asset, the study finds that all commercial banks in India are distress free except three banks. There is a significant difference in the value of Z-score of public and private sector banks. The study also concludes that there is consistency in the performance of public sector banks while there is much variation in the performance of private sector banks.