Need and Significance of Shareholder Value Creation in Indian Banks

Abstract

Indian banking sector has witnessed a great transformation due to introduction o f prudential norms, liberalization and deregulation. With an advent o f foreign players and increased participation o f dom estic private banks, banking sector has becom e more competitive than ever before. Banks are under pressure to maintain and im prove their operational efficiency as m easured in terms o f KOI, ROE and EPS. In this paper an attem pt has been made to explore the need and significance o f these value based measures in the context o f Indian banking sector. The study reflects that in the w ake o f globalization and changed global scenario shareholder wealth maximization is a very potent criterion to review the perform ance o f banks. This paper discusses the need and significance o f shareholder value creation in Indian banks in the backdrop o f existing perform ance o f the banks and inability o f the traditional methods to measure theeconom icprofitabilityof the banks.