Performance measurement of banks an application of economic value added & balanced scorecard

Abstract

The new millennium has brought with it a sea phase change in the areas of economic activities with the banking sector gearing up for survival, productivity and enlarging the customer base. Performance of Financial institutions is a generally measured by applying quantitative techniques of financial measurement. It is a post-mortem examination technique of achievement of a bank. Differences in measured efficiency of banking institutions broadly arise on account of [I] different efficiency concepts used; [2] different measurement methods used to estimate efficiency; and [3] a host of other exogenous and endogenous factors. Nevertheless, to know about the existence of performance drivers in an institution, both quantitative and qualitative aspects of performance measurement are to be considered. CAMEL rating system, basically a quantitative technique, is widely used for measuring performance of banks. Concepts of Balanced Scorecard [BSC], which covers both quantitative and qualitative aspects of performance measurement, may be used to measure the long term prospect of performance was recommended. This paper also examines the extent of awareness and adaptability of Economic Value Added [EVAJConcept of the Indian Banks and suitable suggestions were drawn.