Camels Rating Model For Evaluating Financial Performance of Banking Sector: A Theoretical Perspective
The function and significance of banking sector cannot
be under-estimated in the development of an economy. The
strength of economy of any country basically hinges on the
strength and efficiency of financial system, which, in turn, depends
upon a sound banking system. Reserve Bank of India
recommended two supervisory rating models named as CAMELS
(Capital Adequacy, Assets Quality, Management, Earning,
Liquidity, Systems and Controls) and CACS (Capital Adequacy,
Assets Quality, Compliance, Systems and Controls) for rating of
Indian commercial, private and foreign banks operating in India.
The present study describes the various financial ratios used in the
above mentioned models to measure the financial performance of
banking sector. The study examined each parameter of CAMELS
system by review of literature and empirical studies.