Analysis of Impact of Micro Economic Factors on Liquidity Position of Selected Private Sector Banks in India

This paper examines microeconomic factors that are specific to banks these factors help in finding the liquid assets of the banks. To discover the relationship, Multiple Linear regression on a sample of 10 private sector banks from 2008 to 2017 is performed. The paper concentrates on factors that are connected with micro-level functions of banks such as the profit earned, the size of the selected banks funding the cost of banks, deposits and capital adequacy. The analysis shows that all bank-specific micro-level factors expect profitability affect banks liquidity. Further cost of funds have a negative impact on liquidity; all other factors showed a favourable impact on banks liquidity, only profitability factor have an insignificant effect on the liquid asset position of selected banks. This paper highlights the liqujdity position of Private Banks in India and gives a better understanding of liquidity analysis.