This study examines the impact of intellectual capital (IC) on the financial performance (FP) of Indian public sector banks (IPSBs) between 2010 and 2021. This paper utilizes the modified value-added intellectual coefficient (MVAIC) approach to measure IC. It employs a panel data estimation approach, specifically the generalized method of moments (GMM), to investigate the connection between IC and the FP of public sector banks in India. The findings indicate that IC, along with its sub-elements of human capital (HC), capital employed (CE), structural capital (SC), and Relational capital (RC) have a notable positive or negative influence on various FP indicators, including return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), earnings per share (EPS), and market performance (Tobin’s Q). Furthermore, the combined IC, as evaluated through the modified value-added intellectual coefficient (MVAIC), has a notable and favorable impact on ROA and ROE. The leverage variable exhibits a negative and significant impact on the financial indicators, indicating that an increase in debt leads to a decrease in the bank’s value. This study aims to assist stakeholders and policymakers in identifying the key elements of IC and determining an appropriate distribution among them to achieve sustainable FP and value generation in Indian IPSBs.

The study aims to investigate the impact of intellectual capital (I.C) on the sustainable financial performance (F.P) of private sector banks (PSBs) in India. Data were gathered from 17 banks between 2010 and 2021 using Prowessiq (CMIE) and their annual financial reports. To evaluate the ways in which intellectual capital (I.C) affects sustainable financial performance (F.P), the modified value-added intellectual coefficient (MVAIC) methodology was applied. The human capital (HC), capital employed (CE), structural capital (SC), and relational capital (RC) were utilized as independent factors together with three control variables (leverage, size, and GDP), the return on capital employed (ROCE), and return on equity (ROE), which were used as dependent variables. The results show that RC and SC have a clear, statistically significant relationship with ROCE. Additionally, HC and CE have a direct positive and statistically significant effect on ROE. Overall, all of the I.C. components have significant impacts in increasing the efficiency and profitability of Indian private sector banks. Furthermore, the total intellectual capital (MVAIC) exhibits a statistically significant negative association with ROE but a substantial positive association with ROCE. It is advised that policymakers and managers focus more on the various I.C components because they are the key engines generating value for the banks in order to preserve a more sustainable F.P.