These are the nationalized banks and account for more than 75 per cent of the total banking business in the country. Majority of stakes in these banks are held by the government. In terms of volume, SBI is the largest public sector bank in India and after its merger with its 5 associate banks (as on 1st April 2017) it has got a position among the top 50 banks of the world. Financial soundness of banking sector is undoubtedly a backbone of every economy. Failure of giant banks may traumatize not only the domestic economy but can also put the globe at stake. Collapse of Lehman brothers is recent evidence to this contagious effect. In this context, it is very crucial to analyze the financial soundness of domestic banks. At present there are various methods which may be helpful to analyse financial position of banks like capital adequacy ratio, profitability, liquidity or hybrid model like CAMEL rating. A bank is a financial institution that provides banking and other financial services to their customers. Banks are a subset of the financial services industry and play an important role in the global economies. They are a key player in stimulating economic growth. Banking is an important undertaking. The movement of capital handled by banks allows economies to grow and prosper. Businesses and governments need money to operate, and banks act as intermediaries between the suppliers of funds and users of funds. An important model to analyse financial soundness / distress of any corporate house is Altman Z score model. But unfortunately, it was least explored by researchers while studying financial soundness of banks. In this reference the present study attempts to apply Altman model to Indian banking industry. The study found that with only two exceptions the financial position of Indian banks found satisfactory. The two banks found somehow in distress position are Canara bank among public sector banks and Kotak Mahindra bank among private sector banks. However, capital adequacy ratio of both of these banks was sound enough as compared to its peer banks. The study suggests the use of hybrid model to make any conclusive remark to the soundness of any company.