PROFITABILITY AND PRODUCTIVITY IN SRI LANKAN BANKS: A COMPARATIVE STUDY

Abstract

Productivity and profitability are the keys to economic domination. This paper compares two categories of banks on their productivity and profitability. It examines an important area of productivity and profitability in the public sector banks against private sector banks operating in Sri Lanka. This study comprehensively covers the entire private and public sector licensed registered commercial banks under Central Bank of Sri Lanka. The study is primarily based on secondary data collected from relevant Annual Reports and Websites. A five year period (2005-2009) has been determined for evaluation of their performance. However it is significant to note that there is a remarkable difference in the spread ratio, while there is no significant difference in burden ratio among these banks. Productivity and profitability are interrelated and even though productivity is not the sole factor; it is an important factor that influenced the profitability to a greater extent. The key to increased profitability is increased productivity. Public sector banks have not been as profitable as the Private Banks primarily because of low interest earned ratio. To overcome this drawback, public banks should introduce some progammes with a view to increasing the profitability. The private sector banks need to foster the deposit base of the bank to expand the deposits to increase productivity.

Key Words: Profitability, Productivity, Spread Ratio, Burden Ratio

For full paper: fmscresearch@sjp.ac.lk