Employee productivity and financial performance of Indian public sector banks: Evidence from 2021 to 2025

Abstract

This study examines how selected financial and employee related indicators are associated with the profitability of Indian public sector banks. The sample covers all 12 public sector banks observed annually from 2021 to 2025, which gives 60 bank year observations drawn from the Reserve Bank of India Database on Indian Economy and bank annual reports. Return on assets is the dependent variable. The explanatory variables are the capital adequacy ratio, net nonperforming assets in ₹ crore, business per employee, profit per employee, the cash deposit ratio, the credit deposit ratio, the spread ratio and the burden to assets ratio. The analysis combines descriptive statistics, Pearson correlation, diagnostic tests and a pooled multiple regression with heteroskedasticity robust standard errors. The model explains about 97 per cent of the variation in return on assets. Profit per employee has a positive and statistically significant coefficient, while business per employee has a negative and statistically significant conditional coefficient, a pattern that reflects the correlation of 0.848 between the two productivity measures. The other six indicators are not significant at the 5 per cent level. Collinearity diagnostics show heavy overlap among several predictors, and profit per employee shares its numerator with return on assets. The results are therefore read as sample specific associations and not as causal effects. The study adds recent bank level evidence on employee productivity and profitability in Indian public sector banking.