Benchmarking the private sector banks in India using MCDM approach

• Published date: 01 May 2021
• Author: Sanjay Gupta,Manoj Mathew,Swati Gupta,Vinay Dawar
• Date: 01 May 2021
• DOI: http://doi.org/10.1002/pa.2409

PRACTITIONER PAPER

Benchmarking the private sector banks in India using MCDM

approach

Sanjay Gupta

1

| Manoj Mathew

2

| Swati Gupta

1

| Vinay Dawar

3

1

Sri Aurobindo College of Commerce and

Management, Ludhiana, Panjab University,

Chandigarh, India

2

Department of Mechanical Engineering,

SSIPMT, Raipur, India

3

University School of Business, Chandigarh

University, Ghruan, Mohali, India

Correspondence

Manoj Mathew, Department of Mechanical

Engineering, SSIPMT, Raipur, India.

Email: mathewmanojraipur@gmail.com

The study aims to rank the performance of Indian private sector banks on the basis

of their financial capability. The study is focussed on those banks which are listed in

the Bombay Stock Exchange (BSE), for the period from 2014–15 to 2018–19. The

financial performance of selected Indian private banks is ranked using a hybrid Multi-

Criteria Decision Making (MCDM) technique, that is, AHP-TOPSIS. The Analytical

Hierarchy Process (AHP) is used to determine the weights of 10 financial perfor-

mance pointers, and further Technique for Order of Preference by Similarity to Ideal

Solution (TOPSIS) is used to provide rankings and benchmarking of the private sector

banks. Thereafter, overall ranking is given to the selected banks using interval-valued

TOPSIS (IV-TOPSIS) for a combined period of 5 years. Sensitivity analysis has been

performed to check the robustness of the method and its impact on the final ranking

of the banks. Results showed that HDFC bank is the top performer and is ranked first

for all the years consecutively during the period 2014–2019 and has set a financial

indicator benchmark for other competitor banks. South Indian Bank showed the

worst results in each year and stood last in the overall ranking. The IndusInd bank is

followed after HDFC bank by improving its performance from 2014–19. With a slight

margin, Kotak Mahindra Bank ranked after IndusInd. Through the AHP-TOPSIS technique,

each year the private sector banks ranking differs among themselves depending upon the

financial performance pointers. Based on interval-valued TOPSIS (IV-TOPSIS), it was found

that the overall HDFC was the top-performing bank and South Indian Bank was the worst-

performing bank among all other banks. The results obtained from sensitivity analysis were

found to be consistent with IV-TOPSIS. The paper used the AHP technique, which is sub-

jective in nature, and the results depend on the opinion of the experts. This study will assist

the investors who want to channelize their funds in private banks having shares enlisted in

BSE. It will accommodate banks to compare and judge their financial performance along

with improving their performance and planning their future strategy. AHP-TOPSIS utilized

by past researchers is unable to bring out the cumulative performance for banks, but in this

paper, IV-TOPSIS is utilized, which can be effectively used to evaluate the cumulative per-

formance of banks. The study tries to fill the gap in the literature by providing the overall

ranking to private sector banks in India on the basis of financial indicators.

JEL CLASSIFICATION

E 58; G 19; G 24

Received: 22 May 2020 Revised: 20 July 2020 Accepted: 15 August 2020

DOI: 10.1002/pa.2409

J Public Affairs. 2021;21:e2409. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of15

https://doi.org/10.1002/pa.2409