In view of the importance of improving the profitability performance of the banking sector in recent years, a census study has been adopted by covering all the Indian scheduled commercial banks, which have been divided into three groups viz., the SBI group, the Nationalized Banks group and the Private Banks group with two sessions, i.e., Period I and Period II by dividing the 10 year-study period into the first five years and the last five years. The step-wise multiple regression analysis was adopted for the study. An analysis of the SBI group reveals that in both the periods of study, the variable provisions and contingencies to total expenses occupied a prominent place. The nationalized banks group showed a position of provisions and contingencies to total expenses in the first half of the study period and Capital Adequacy Ratio (CAR) during the second half of the study period. In relation to the private banks group, it has changed from other interest expenses ratio to capital adequacy ratio.

In recent years, the profitability performance of the Indian scheduled commercial banks has become a novel topic for discussion. There is ample evidence to show the declining profitability of the banking industry.

In India, 73% of the bank branches are located in rural and semi-urban areas. A significant proportion of fund is contributed through deposits, which accounts for more than 80% of the liabilities of the scheduled commercial banks. Loans and advances form around 50% of aggregate deposits. More than 75% of the investments of the scheduled commercial banks are channeled into safe and risk-free assets consisting of both government and other approved securities.

The introduction of virtual banking has fetched massive developments in the banking industry. Such virtual banking services include Automated Teller Machines (ATMs), shared ATM networks, Electronic Fund Transfer at Point of Sale (EFTPOS), smart cards, stored-value cards, phone-banking, Internet and Intranet banking. With the change in the social and economic objectives of the commercial banks, particularly of the scheduled commercial banks in India, it becomes extremely essential to assess their profitability performance. However, in most of the studies covering the recent period, `profit' has been used as one of the many indicators of their performance appraisal. This dilutes the importance of profits to a large extent. Despite the change in thrust, banks remain commercial organizations and profit factor cannot be ignored without endangering viability of banks and continuity of their operations. In fact, the approach of policymakers towards profitability too has changed, with the result that low profits have become a fact of life. Therefore, it is high time to concentrate efforts on analyzing the profits and profitability of the scheduled commercial banks, so that the confidence of the public in the soundness of the banking system remains unimpaired and the social objectives of banks do not necessarily dilute.

Bank Management Journal, Scheduled Commercial Banks, Banking Industry, Intranet Banking, Internet Banking, ATM Networks, Automated Teller Machines, ATMs, Commercial Organizations, Multiple Regression Analysis, Capital Adequacy Ratio, Manpower Resources, Voluntary Retirement Scheme, VRS, Banking Services.