Innovation in Banking Efficiency Measurement

Abstract

Every bank prepared the profit and loss account in simple methods where all income comes in credit side of the profit and loss account and all expenses in debit side of the balance sheet. Banking profit and loss account do not prepared like the manufacturing and trading company. There is no gross profit no operating profit, only they prepared net profit directly. From my method bank can calculate the gross profit, operating profit and net profit will be same in the both the methods. From these methods we can calculate active ratio, passive ratio, and non monetary ratio and even we can calculate breakeven point of the banking sector. For that purpose I categorized the expenses and income according to its importance, intensity and activity. From these methods of profit and loss account we can measures the various ratios which are used for efficiency measurement of the banking industry. No any banker used these types of methods and no any instruction from the RBI.