Competitiveness In Banking Sector Essay

Introduction:

The banking sector in economy plays vital role as an intermediary between lender and borrower. Banks accept deposits from customers and transform these same deposits into productive multiple financial instruments. The benefits banks offer these services of intermediary are dual; on one hand investors in need of money for their investment are facilitated by banks by providing credit to them at a rate that is different from the rate that depositors earn on their deposit, and on another hand investors with surplus money are offered multiple choices to deposit their surplus money in different financial instruments banks offer at competitive prices. These benefits are reaped by both borrower and lender in an environment of enormous competition among banks in banking sector of the financial sector of an economy.

Besides known as engine of economic growth banking sector over decades of its operation in a competitive environment has given birth to ‘Boom’ and ‘Bust’ cycle which, apart from economic expansion, have washed-up and ruined world economies, each crisis with its own style and contagion effects on overall economy. Each crisis followed another crisis with its widespread impact on population directly and

First one is mostly used approach known as structure-conduct-performance (based on market concentration) or market structure. The banks’ pricing behavior can be calculated from market structure which on the basis of pricing behavior can identify individual banks and banking sector profitability. Therefore from these facts it can be said that any change in profitability can determine competitiveness of the bank or that where a bank stands in competition line in contrast to its competitors. The highly efficient bank in highly competitive environment will grab maximum market shares and will show the door to non-performing