CAMELS rating

Background of the Study

Bank is very old institution that is contributing toward the development of any economy and its treated an important service industry in modern world. .Recently a well-judged technique named CAMELS rating is widely used for evaluating performance of financial institutions, especially to banks. Central bank, which is regulatory body has been calculating this rating till now.

Capital Adequacy

Focuses on the total position of bank capital and protects the depositors for the potential shock so flosses that a bank incur.

Asset Quality

The composition of all commercial banks shows the concentration of loan sand advances in total assets. The high concentration of loan sand advances in dicates vulnerability of assets to credit risk, especially since the portion of non-performing assets is significant

Management Soundness

Sound management is the most important pre-requisite for the strength and growth of any financial institution. Since indicators of Management quality are primarily specific to individual institution.

Earning sand Profitability

Strong earning sand profitability profile of a bank reflect its ability to support present and future operations. More specifically, this determines the capacity to absorb losses by building an adequate capital base, finance its expansion and pay adequateate dividends to its shareholders.

Liquidity

Liquidity indicators measured  as percentage of demand and time liabilities(excluding inter bank items)of the banks.

Sensitivity to Market risk

To assess the degree to which a bank might be exposed to adverse financial market conditions, the Bank added a new Characteristic name das “Sensitivity to Market risk” to what was previsiouly referred to as the CAMEL rating.