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special featureGodse (1996) also studied CAMEL for evaluatingperformance of banks.Rao and Dutta (1998, cited by Bodla, Ibid) attempted toderive rating based on CAMEL. In their study, based onthese five groups (C-A-M-E-L-S), 21 parameters in allwere developed. After deriving separate rating foreach parameter, a combined rating was derived forall nationalized banks (19) for the year 1998.It wasfound that the worst rating was that of Indian Bankpreceded by UCO Bank, United Bank of India, SyndicateBank and Vijaya Bank.On making review of previous studies, we conclude thatthey used CAMEL model for ranking / rating of the banks.In this light we propose to make a comparative studyof performance of public sector and private sector banksin India.DATA & METHODOLOGYThe period of study in this paper is financial yearending March 31, 2010. The data has been collectedfrom Annual Reports of the Banks and CMIE PROWESSdatabase.There are total 55 scheduled commercial banks inIndia (www.rbi.org.in). Out of this 28 are in publicsector and 27 are in private sector. The populationis too small to permit sampling. Therefore, entirepopulation has been considered. However, sincesome of these banks are not yet a public limitedcompany, their financial data is not available inpublic domain. Therefore, 26 public sector banksand 22 private sector banks, whose data wasavailable in CMIE PROWESS database, constituteour population.The CAMEL model has been used as a measuringinstrument to capture the performance of variousbanks. The difference of means test and t-statistichas been used on the significance of difference ofresults of these banks on various parameters ofperformance as obtained by CAMEL model.The CAMEL model is described as under :CAMEL is a ratio-based model for evaluating theperformance for banks. Various ratios forming thismodel are as follows :C A M E LCapitalAdequacyAdvancesto AssetsCapitalAdequacyRatioDebtEquityRatioG-Secto totalInvestmentsAssetQualityGrossNPA toNetAdvancesNet NPAto NetAdvancesNet NPAto TotalAssetsTotalInvestmentto TotalAssetsCapital Adequacy:ManagementEfficiencyBusinessPerEmployeeProfit PerEmployeeTotalAdvancesto TotalDepositsEarningsQualityInterestIncometo TotalIncomeNet Profitto AverageAssetsNon-interestIncometo TotalIncomeOperatingProfits toAverageWorkingFundsSpreadto TotalAssetsLiquidityG-Secto TotalAssetsLiquidAssets toDemandDepositsLiquidAssetsto TotalAssetsLiquidAssetsto TotalDepositsBanks must maintain depositor's confidence andprevent bankruptcy. Capital serves as a cushionto absorb unexpected performance shocks andinspires depositors' confidence while denotingstability and efficiency of financial system. Capitaladequacy represents the overall financial conditionand ability of the management to raise additionalcapital. Capital Adequacy Ratio indicates degree ofbank leverage. It's measurement is done by :1. Capital Adequacy Ratio :The banks are required to maintain the minimumCAR as specified by RBI from time to time, whichcurrently stands at 9%. It is arrived at by dividing thesum of Tier-1 and Tier-2 capital by aggregate ofRisk Weighted Assets (RWA).CAR= (Tier-1 + Tier-2)/ RWATier-1 capital includes equity capital and freereserves.Tier-2 capital includes subordinate debts of5-7 years tenure, revaluation reserves, generalprovisions and loss reserves, hybrid debt capitalThe Journal of Indian Institute of Banking & Finance October - December 2011 45