This study examines the interrelationship between capital adequacy ratio (CAR), profitability and other bank-specific and macroeconomic variables in Indian banks using a simultaneous equations framework. By disaggregating the sample into public, private and foreign banks, the analysis uncovers both commonalities and key differences in how these variables interact across ownership types. The findings challenge previous results observed at the aggregate level—for instance, the previously reported positive association between non-performing assets (NPAs) and CAR is not observed in any bank group. Our results challenge prior aggregate-level findings, as the purported positive association between NPAs and CAR does not hold for any bank group. These insights contribute to a more nuanced understanding of capital–profitability dynamics in a diverse banking system.
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