A Comparative Study on Analyzing the Solvency of The Indian Public, Private and Foreign Sector Commercial Banks Using Modified Altman Z-Score

The financial solvency of the banks is the backbone of the economic stability of a country. Evaluating and predicting the vulnerability of banks is crucial not only for the banks' management but also considered important by the creditors, investors, depositors, government, and policymakers. This study is trying to accomplish the objective of evaluating the financial solvency of Indian commercial banks. Modified Altman Z-score developed by Edward I. Altman in 1995 calculated for the Indian commercial banks for a period from F. Y. 2016-2020. The Study comprised 77 banks covering 21 public sector, 19 private sector and 37 foreign sector banks. This study further examined the statistical independence of all the three groups taken. The findings claim that private sector banks are more solvent than public sector banks. While comparing with the foreign sector banks, both public and private sector banks having less Z-Score. However, the results supporting the previous shreds of evidence that Indian commercial banks are in the safe zone. This independent test shows that there are significant differences among all the three groups taken in the study. Further, the regression analysis outcome claims the statistically significance of each component of Altman Z-score. The originality of the study is that it covers all the Indian commercial banks. Previous studies do not find any evidence of the foreign sector banks in the Indian commercial banking system. The findings have a larger application for the managers and policymakers to prevent the adversity of bankruptcy in Indian commercial banks. Researcher can further extend this study by including the impact of the Covid-19 period, which may be compared with the prior period to check and predict the solvency of the Indian banks.