JBFSIR

Volume 1, Issue 7 (October, 2011)

The Journal of Sri Krishna Research & Educational Consortium

ISSN 2231-4288

JOURNAL ON BANKING FINANCIAL SERVICES & INSURANCE RESEARCH

Internationally Indexed & Listed Referred e-Journal

CAMEL RATING SCANNING (CRS) OF SBI GROUPS

S. SIVA*; P. NATARAJAN** *Project Fellow UGC MRP, Department of Commerce, School of Management, Pondicherry University, Puducherry. **Professor of Commerce, Department of Commerce, School of Management, Pondicherry University, Puducherry. ABSTRACT Indian financial system has passed through second generation reforms by giving emphasis on individual upgradation, strengthening internal system, attention to different prudential norms viz capital adequacy, containment of NPA, functional antennary and systemic improvements towards effecting credit delivery system. It can be done only through proper supervisory and regulatory mechanism. The CAMEL Methodology has been developed and practised by the North American bank regulators to assess the financial and managerial soundness of US commercial banks. Subsequently Basel committee on banking supervision (BCBS) has been created in 1974 and they also accept the CAMEL as uniform financial institution rating system to evaluate and monitor the banks. In India is adapting the Basel I & II norms in total so has to ensure the better financial standing of own banks & financial Institutions. This paper empirically tested the applicability of CAMEL norms and its consequential impact on the performance of SBI Groups. KEYWORDS: Capital Adequacy, Asset quality, Liquidity, NPA. INTRODUCTION Indian financial system has passed through second generation reforms by giving emphasis on individual upgradation, strengthening internal system, attention to different prudential norms viz capital adequacy, containment of NPA, functional antonerry and systemic improvements towards effecting credit delivery system. It can be done only through proper supervisory and regulatory mechanism.

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JBFSIR

Volume 1, Issue 7 (October, 2011)

ISSN 2231-4288

The CAMEL Methodology has been developed and practised by the North American bank regulators to assess the financial and managerial soundness of US commercial banks. Subsequently Basel committee on banking supervision (BCBS) has been created in 1974 and they also accept the CAMEL as uniform financial institution rating system to evaluate and monitor the banks. In India is adapting the Basel I & II norms in total so has to ensure the better financial standing of own banks & financial Institutions. This paper empirically tested the applicability of CAMEL norms and its consequential impact on the performance of SBI Groups. ORIGIN AND GROWTH OF SBI State Bank of India (SBI) is the largest Indian banking and financial services the bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it as State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI offers wide a range of banking products through its vast network of branches in India and overseas. The State Bank Group, with over 16,000 branches, has the largest banking branch network in India with 130 branches overseas. It has an asset base of $352 billion and $285 billion in deposits. SBI group has a major market share among Indian commercial banks of covering 20% in deposits and loans. The total assets of the Bank increased by 9.23% from Rs.9,64,432.08 crores at the end of March 2009 to Rs.10,53,413.73 crores as at end March 2010. During the period, the loan portfolio increased by 16.48% from Rs.5,42,503.20 crores to Rs.6,31,914.15 crores. Investments increased by 3.56% from Rs.2,75,953.96 crores to Rs.2,85,790.07 crores as at the end of March 2010. NEED OF THE STUDY In emerging financial markets, banking sector assets comprise well over 80 per cent of total financial sector assets, which much lower in the developed economies. In addition, deposits as a share of total bank liabilities have declined since 1990 in many developed countries, while in developing countries public deposits in banks are overwhelmingly increasing. The solvency of financial institutions typically is at risk when their assets quality become impaired, and hence it is important to monitor indicators of the quality of their assets in terms of overexposure to specific risks, trends in nonperforming loans, and the health and profitability of bank borrowers. This research paper attempted to evaluate the performance of State Bank Groups (Eight Banks) in India by a supervisory rating of the bank's overall condition, commonly referred as CAMEL rating. OBJECTIVES OF THE STUDY 1. To measure the financial performance of the State Bank Group in India under CAMEL Rating Scanning (CRS) 2. To suggest for improvement of financial position of the State Bank Groups in India Sri Krishna International Research & Educational Consortium http://www.skirec.com

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Volume 1, Issue 7 (October, 2011)

ISSN 2231-4288

HYPOTHESIS OF THE STUDY 1. There is no significant difference in the performance of State bank of India Group Banks. METHODOLOGY It is an evaluatory type of research relates with 8 Constituents of SBI Groups (viz) (State Bank of India, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, State Bank of Hyderabad, State Bank of Indore, State Bank of Saurasthra State Bank of Jiapur). State Bank of India Group has been purposefully taken up to identify the effectiveness and financial standing of the mammoth public sector bank in the interest of all stakeholders. This study is based on time series Secondary data for a period of 8 years 2003-10. Secondary data has been collected through RBI Bulletin & CMIE Prowess Package. Having undertaken CAMEL Rating scanning, the researchers have applied ANOVA and tested the difference in the performance of study units and prescribed some suggestions. CAMEL FRAMEWORK "CAMEL" as acronym CAMEL refers to the five components of a bank's financial condition Viz., Capital adequacy, Asset quality, Management, Earnings, and Liquidity characters of a commercial bank. CAMEL is basically a ratio-based model for evaluating the performance of the banks periodically. Various ratios forming this model have been explained individually and collectively. C- CAPITAL ADEQUACY Capital base of financial institutions facilitates depositors in forming their risk perception about the institutions. The most widely used indicator of capital adequacy is capital to risk-weighted assets ratio (CRWA). According to Bank Supervision Regulation Committee (The Basle Committee) of Bank for International Settlements, a minimum 9 percent CRWA is required. Capital adequacy determines how well financial institutions can cope with shocks to their balance sheets. Thus, it is useful to track capital-adequacy ratios that take into account the most important financial risksforeign exchange, credit, and interest rate risksby assigning risk weightings to the institutions assets A ASSET QUALITY Asset quality determines the healthiness of financial institutions against loss of value in the assets. The weakening value of assets, being prime source of banking problems, directly pour into other areas, as losses are eventually written-off against capital, which ultimately expose the earning capacity of the institution. The asset quality is gauged in relation to the level and severity of non-performing assets, adequacy of provisions, recoveries, distribution of assets etc. Popular indicators include nonperforming loans to advances, loan default to total advances, and recoveries to loan default ratios.

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Volume 1, Issue 7 (October, 2011)

ISSN 2231-4288

M MANAGEMENT EFFICIENCY Management of financial institution is generally evaluated in terms of capital adequacy, asset quality, earnings and profitability, liquidity and risk sensitivity ratings. In addition, performance evaluation includes compliance with set norms, ability to plan and react to changing circumstances, technical competence, leadership and administrative ability of the bank. Sound management is one of the most important factors behind financial institutions performance. Indicators of quality of management, however, are primarily applicable to individual institutions, and cannot be easily aggregated across the sector. E EARNING ABILITY Earnings and profitability, the prime source of increase in capital base, is related with regards to interest rate policies and adequacy of provisioning. Further, it also helps to support present and future operations of the institutions. The single best measure used to earning is the Return on Assets (ROA), which is net income after taxes to total asset ratio. Good earnings and profitability of banks reflects the ability to support present and future operations. Specifically, this determines the capacity to absorb losses, finance its expansion, pay dividends to its shareholders, and build up an adequate level of capital. L LIQUIDITY An adequate liquidity position refers to a situation, where institution can obtain sufficient funds, either by increasing liabilities or by converting its assets quickly at a reasonable cost. It is, therefore, generally assessed in terms of overall assets and liability management, as mismatching gives rise to liquidity risk. The term liquidity is used in various ways, all relating to availability of, access to, or convertibility into cash. An institution is said to have liquidity if it can easily meet its needs for cash either because it has cash on hand or can otherwise raise or borrow cash. RATIO TAKEN FOR THE STUDY Capital Adequacy ratio, C Capital Adequacy ratio (Tier I) Priority sector advances to total advances , A Secured advances to total advances, Non-performing assets (NPAs) Business per employee, Profit per employee, M Return on equity, Return on advances Interest Income ratio, Net Interest Margin ratio, E Operating Profit ratio, Return on Assets ratio

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Volume 1, Issue 7 (October, 2011)

Cash-deposit ratio,

ISSN 2231-4288

L Credit-deposit ratio

CAPITAL ADEQUACY RATIO OF STATE BANK GROUPS Maintaining adequate capital fund is the mandatory norms for all the commercial banks. It helps to impose confidence in the minds of stake holders. The capital adequacy affects the financial position of the bank. The international banking regulators, BCBS (Basel Committee for Banking Supervision) have stipulated a minimum Capital Adequacy Ratio (CAR) of 8 percent. In India, the minimum CAR is stipulated as 9 percent by the Reserve Bank of India. To assess the capital adequacy of the State Bank parameter under CAMEL framework, viz. (i) Capital Adequacy Ratio, and (ii) Capital Adequacy RatioTier I. TABLE 1 CAPITAL ADEQUACY RATIO Years/ Bank 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank SBI 13.5 13.53 12.45 11.88 12.34 13.54 14.25 13.39 13.11 2 SBJ 13.08 12.93 12.6 12.08 12.89 12.51 14.52 13.30 12.99 4 SBH 14.91 14.29 11.74 12.08 12.51 12.35 11.53 14.90 13.04 3 SBE 13.09 12.39 11.61 11.4 11.77 11.29 13.46 13.53 12.32 6 SBM 11.62 11.53 12.08 11.37 11.47 11.73 12.99 12.42 11.90 8 SBP 13.57 13.56 14.21 13.55 12.38 13.56 12.60 13.26 13.34 1 SBS 13.68 14.53 11.45 12.03 12.78 12.34 na na 12.80 5 SBT 11.3 11.36 11.05 11.15 11.68 13.53 14.03 13.74 12.23 7

Capital Adequacy ratio (Tier I) 2003 2004 2005 2006 8.81 8.34 8.04 9.36 10.52 9.03 7.95 8.5 9.84 8.42 7.58 8.95 9.4 8.31 6.67 7.55 7.23 7.18 7.12 7.44 10.39 9.87 11.05 9.84 11.66 10.99 8.68 9.02 6.8 6.23 6.17 7.24

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2007 2008 2009 2010 Mean Rank 8.01 9.14 9.38 9.45 8.82

Volume 1, Issue 7 (October, 2011)

7.79 6.95 8.46 8.35 8.44 3 4 8.25 7.24 7.14 8.64 8.26 5 6.74 7.01 7.91 8.58 7.77 6 6.62 6.54 7.15 7.59 7.11 8

ISSN 2231-4288
8.36 7.31 6.94 8.16 8.99 2 8.17 8.06 na na 9.43 1 7.55 7.41 8.59 9.24 7.40 7

Source: Complied from RBI Bulletin and CMIE Prowess Table 1 exhibits the CAR of State Bank Groups in India over the eight years period under study. It is observe that the highest average CAR has been that of SBP (State Bank of Patiala) is 13.34%, and is followed by State Bank of India (SBI) with an average CAR of 13.11%. Least performance by State of Mysore (SBM) is 11.90 %. Further it shows the CAR (Tier I) of State Bank Groups in India over the eight years under study. It finds that for CAR (Tier I) the highest average CAR goes to SBT (State Bank of Saurashtra) with 9.43 %, and is followed by SBP (State Bank of Patiala) is 8.99%. State bank of Mysore having lowest ratio of 7.11 % in CAR (Tier I) among the State bank groups. ASSET QUALITY OF STATE BANK GROUPS Asset quality of commercial banks helps to diagonise the efficieny viability of the assets held by the banks. It could be measured by parameters like: (i) the ratio of priority sector advances to total advances, (ii) the ratio of secured advances to total advances, (iii) the ratio of non-performing assets (NPAs) in the total advances of State bank. TABLE 2 PRIORITY SECTOR ADVANCE RATIO Years/ Bank 2003 2004 2005 2006 2007 2008 2009 2010 SBI 25.49 27.04 28.59 30.58 30.24 28.61 26.48 26.99 SBJ 43.16 43.86 45.1 41.3 41.03 40.99 38.80 37.94 SBH 32.54 39.51 39.69 41.68 38.99 32.78 31.97 33.79 SBE 43.94 46.32 43.69 42.85 37.46 37.93 34.69 41.88 SBM 36.46 36.52 40.45 42.45 36.31 31.85 33.22 30.55 SBP 40.98 39.39 44.04 37.87 34.58 31.60 32.15 38.47 SBS 40.81 42.67 38.96 41.61 41.64 39.55 NA NA SBT 33.6 37.22 38.36 41.1 39.54 41.73 39.92 36.64

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Mean Rank

Volume 1, Issue 7 (October, 2011)

28.00 8 41.52 1 36.37 6 41.10 2 35.97 7

ISSN 2231-4288
37.38 5 40.87 3 38.51 4

Secured Advances ratio 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank 86.46 83.15 77.06 76.74 75.61 73.06 79.01 78.50 78.70 8 91.69 90.03 87.39 88.23 86.01 82.64 80.02 79.23 85.66 4 88.65 86.94 78.54 80.12 79.70 82.92 81.70 85.46 83.00 6 93.68 88.48 89.16 88.61 89.04 87.85 88.88 86.01 88.96 3 NPA ratio 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank 4.5 3.48 2.65 1.87 1.56 1.78 1.79 1.72 2.42 8 4.13 1.24 1.61 1.18 1.09 0.83 0.85 0.77 1.46 6 3.25 0.65 0.61 0.36 0.22 0.16 0.38 0.55 0.77 1 2.66 0 1 1.83 1.04 0.73 0.89 1.13 1.16 3 5.19 2.96 0.92 0.74 0.45 0.43 0.50 1.02 1.53 7 1.49 0 1.23 0.99 0.83 0.60 0.60 1.04 0.85 2 3.53 0 1.4 1.16 0.70 0.91 NA NA 1.28 4 3.06 1.39 1.81 1.47 1.08 0.94 0.58 0.91 1.41 5 95.62 94.74 91.9 86.09 88.40 86.43 89.08 87.80 90.01 1 89.27 87.28 83.56 84.83 90.31 91.42 93.03 96.73 89.55 2 92.89 87.54 77.35 76.15 74.48 77.26 NA NA 80.94 7 87.1 86.67 83.26 85.98 87.04 84.57 80.25 79.82 84.34 5

Source: Complied from RBI Bulletin and CMIE Prowess Table 2 shows the ratio of Priority sector Advances of State Bank Groups in India. Among the State Bank Groups State of Bank Jaipur (SBJ) secured First Position with 41.52 % Sri Krishna International Research & Educational Consortium http://www.skirec.com

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Volume 1, Issue 7 (October, 2011)

ISSN 2231-4288

State Bank of Indore (SBE) has took the second position with 41.10% and State bank of India (SBI) hold last position by holding 28%. It explains the ratio of secured advance to total advance by the State Bank Groups from 2003 10. State Bank of Mysore (SBM) has highest average sore secured advance to total advance of 90.01%, followed by State Bank of Patiala (SBP) of 89.55 %. State Bank of India (SBI) has secured advance to total asset at least with 78.70%.It reveals the ratio of NPA of Banks in India, Banks has lower NPA; there is better performance in Asset Quality. State of Hyderabad (SBH) has lower rate of NPA at 0.77, followed by State bank of Patiala (SBP) with 0.85 % from the year 2003 2010. SBI has more NPA 2.42 % when compare to rest of the bank. MANAGEMENT EFFICIENCY OF STATE BANK GROUPS Management efficiency of a bank could be measured by parameter like: (i) business per employee, (ii) Profit per employee (iii) RoE (iv) Return on advances. SBI groups management efficiency has been derived with the help of these ratios and the results are given in table 3. TABLE 3 BUSINESS PER EMPLOYEE VALUE Years 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank SBI 191 210.56 243.08 299.23 357.00 456.00 556.00 636.00 368.61 6 SBJ 145.64 169.82 220.29 276.85 355.89 445.45 555.39 627.67 349.63 7 SBH 226.2 265.86 339.74 414.34 473.64 599.08 839.82 755.62 489.29 2 SBE 220.52 230.77 293.88 429.32 476.67 604.37 701.53 763.51 465.07 3 SBM 146.49 162.81 203.54 289.93 398.00 495.00 602.00 672.00 371.22 5 SBP 246.37 305 361.15 493.01 599.54 759.82 910.24 895.21 571.29 1 SBS 167.87 193.16 249.6 303.94 343.00 396.00 NA NA 275.60 8 SBT 217.68 271.78 346.25 381.19 506.13 558.65 658.00 696.00 454.46 4

Profit per Employee 2003 2004 2005 2006 1.47 1.77 2.08 2.17 1.63 5.52 5.98 1.2 2.25 2.87 1.91 3.26 3.06 3.45 2.07 2.09 1.19 1.82 2.16 2.22 2.76 4 2.48 2.66 1.25 2.4 0.56 0.64 1.51 2.16 2.21 2.34

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2007 2008 2009 2010 Mean Rank 2.37 3.73 4.74 4.46 2.85 6

Volume 1, Issue 7 (October, 2011)

2.57 2.73 3.55 3.96 3.39 3 3.92 4.35 4.87 5.58 3.63 1 2.91 3.73 4.44 4.83 3.32 4 Return on Equity 2.60 3.28 3.48 4.41 2.65 7 3.24 3.70 4.68 4.45 3.50 2

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1.21 0.74 NA NA 1.13 8 2.96 3.40 5.00 6.00 3.20 5

2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank

19.15 19.67 19.43 17.04 15.41 16.75 17.05 14.80 17.41 7

24.56 29.39 16.81 10.73 19.99 18.71 21.46 20.39 20.26 5

26.8 26.99 15.03 22.01 21.72 21.28 20.87 22.02 22.09 4

40.21 32.94 15.73 14.48 17.31 18.77 19.36 18.07 22.11 3

29.63 34.83 30.82 25.62 24.00 25.31 18.47 18.06 25.84 1

25.22 27.39 15.21 14.26 15.52 15.92 18.20 16.01 18.47 6

15.51 25.47 5.27 6.79 8.66 4.75 NA NA 11.08 8

25.66 29.68 24.05 21.02 22.26 23.28 30.64 26.88 25.43 2

Return on Advance 2003 2004 2005 2006 2007 2008 2009 2010 8.69 7.62 7.24 7.63 8.29 9.34 9.68 8.62 10.29 8.99 8.73 8.59 9.40 10.14 10.89 9.58 10.05 8.93 8.09 8.15 9.03 9.83 10.57 9.71 10.27 8.57 8.05 8.09 8.78 10.11 10.57 9.37 10.38 9.65 8.7 8.5 9.00 10.16 10.84 9.87 10.13 8.33 7.9 8.03 8.72 10.20 11.25 10.25 9.55 8.46 7.61 7.62 8.35 9.86 NA NA 9.51 8.55 7.79 7.9 8.65 9.84 10.45 9.47

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Mean Rank 8.39 8

Volume 1, Issue 7 (October, 2011)

9.58 2 9.29 4 9.23 5 9.64 1 9.35 3

ISSN 2231-4288
8.57 7 9.02 6

Source: Complied from RBI Bulletin and CMIE Prowess Table 3 shows the values of Business per employee of State Bank groups for period 8 years. It is noted that State bank of Patiala (SBP) comes first with the highest value 571.29 Lakhs. It is followed at a by State Bank of Hyderabad (SBH) 489.29 Lakhs, and State Bank of Sarursathra (SBS)has got lowest value 275.60. Further it exhibits that Profit per employee by the State Bank Groups in India. It is observed that State Bank of Hyderabad (SBH) comes first with an average Profit per employee of Rs. 3.63 lakhs and is distantly followed by State Bank of Patiala (SBP) with3.50 lakhs. Among the Groups the worst performer is a State bank of Sarursatha (SBS) with an average value of just Rs. 1.13 lakhs. It shows that Return of Equity (ROE) for 8 Banks in the State Bank Groups in India. It noted that State Bank of Mysore (SBM) with a highest average of ROE of 25.84 % got first position and is closely followed by State Bank of Travancore (SBT) with 25.43% and in the last place State Bank of Sarursatha (SBS) with 11.08%. In addition shows that Return on Advance ratios of State Bank Groups in India. It is finds that State Bank of Mysore (SBM) with a ratio 9.64 % and State Bank of Jaipur (SBJ) with 9.58% by holding first and second position respectively. The lowest performance is Sate Bank of India (SBI) with 8.39%. EARNING ABILITY OF STATE BANK GROUPS To survive in the competitive financial environments, banks have to generate adequate earnings to meet out all the non operating expense and to maintain adequate spread by avoiding burden. Earning ability of a commercial bank could be ascertained by computing the various ratios interest Income ratio, Net Interest Margin ratio, Operating Profit ratio, Return on Assets. Earning ability of the SBI group is given in the table 4. TABLE 4 INTEREST INCOME RATIO Years/ Bank 2003 2004 2005 2006 2007 2008 2009 2010 SBI 8.59 7.77 7.47 7.51 7.02 7.60 7.57 7.04 SBJ 8.56 8.22 7.98 7.72 7.66 8.07 8.71 7.91 SBH 8.57 7.8 7.09 7.28 7.50 7.96 8.25 7.66 SBE 9.21 8.57 7.41 7.03 7.33 8.27 8.70 8.00 SBM 9.56 8.42 7.71 7.5 7.69 8.33 8.83 8.29 SBP 9.13 7.84 7.31 6.75 6.91 8.09 9.02 8.20 SBS 8.93 8.25 8.12 7.45 7.32 7.75 NA NA SBT 8.92 8.09 7.6 7.57 7.70 8.39 8.84 8.05

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JBFSIR
Mean Rank

Volume 1, Issue 7 (October, 2011)

7.57 8 8.10 3 7.76 7 8.07 4 8.29 1

ISSN 2231-4288
7.91 6 7.97 5 8.14 2

Net Interest Margin ratio 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank 2.76 2.85 3.21 3.28 2.84 2.64 2.48 2.35 2.80 6 3.28 3.74 3.98 3.9 3.03 2.48 2.52 2.41 3.17 1 3.1 2.96 2.94 2.9 2.74 2.01 2.12 2.25 2.63 8 3.43 3.71 3.35 2.88 2.36 2.13 2.35 2.36 2.82 5 3.56 3.62 3.59 3.41 2.96 2.54 2.28 2.88 3.11 2 4.09 3.41 3.34 2.73 2.27 1.67 1.75 2.11 2.67 7 3.16 3.41 3.64 3.03 2.36 1.81 NA NA 2.90 3.5 2.94 3.18 3.39 3.15 2.84 2.34 2.75 2.57 2.90 3.5

Operating Profit ratio 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank 2.15 2.44 2.53 2.37 1.89 2.04 2.13 1.82 2.17 8 2.62 3.56 3.34 2.33 2.19 1.75 2.04 1.80 2.45 3 3.14 3.57 2.18 2.3 2.24 1.79 1.88 2.08 2.40 5 3.93 4.36 2.35 2.23 1.72 1.68 2.00 1.97 2.53 1 3.25 3.39 2.98 2.44 2.04 1.89 1.78 2.18 2.49 2 3.83 4.17 2.92 2.01 1.78 1.46 1.50 1.80 2.43 4 2.83 3.82 2.64 1.94 1.41 0.88 NA NA 2.25 7 2.56 3.26 3.03 2.22 2.03 1.73 2.27 1.94 2.38 6

Return on Assets 2003 0.86 1.13 1.15 1.76 1.02 1.51 0.85 0.9

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JBFSIR
2004 2005 2006 2007 2008 2009 2010 Mean Rank

Volume 1, Issue 7 (October, 2011)

0.94 0.99 0.89 0.84 1.01 1.04 0.88 0.93 7 1.49 0.88 0.53 1.00 0.87 0.92 0.93 0.97 6 1.25 0.72 1.13 1.14 1.00 0.91 1.03 1.04 3 1.73 0.79 0.76 0.87 0.88 0.88 0.91 1.07 2 1.28 1.25 1.23 1.10 1.08 0.91 1.06 1.12 1

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1.6 0.91 0.73 0.77 0.83 0.83 0.79 1.00 4 1.38 0.27 0.31 0.46 0.28 NA NA 0.59 8 1.02 0.86 0.86 0.86 0.89 1.30 1.26 0.99 5

Source: Complied from RBI Bulletin and CMIE Prowess Table 4 explains the ratio of interest Income to Total Assets of State Bank Groups in India. State bank of Mysore (SBM) with an average ratio of 8.29% come first position; followed State bank of Travancore (SBT) with 8.14%. State Bank of India (SBI) has the lowest average ratio of Interest Income with 7.57%. It exhibits the ratios of Net Interest Margin to the 8 Banks in the State Banks Groups. It observes that State bank of Jaipur (SBJ) with ratio of 3.17 % and State Bank of Mysore (SBM) with 3.11 holding first and second position respectively. The lowest performance is State of Hyderabad (SBH) with 2.63%. It shows that ratios of operating profits to total assets of State Bank groups in India for period of 8 years (2003-2010). It is noted that State Bank of Indore (SBE) with highest average score of 2.53% comes first, while State of Bank of India (SBI) with lowest average score of 2.18 % in last rank among the 8 banks. It reveals that Return on Asset (ROA), It shows that State Bank of Mysore (SOM) with the highest average ratio of 1.12% has got first position, followed by State bank of Indore (SBE) with average ratio of 1.07 % and State Bank of Sarursatha (SBS) hold last position with 0.59 % LIQUIDITY OF STATE BANK GROUPS An adequate liquidity position refers to a situation, where institution can obtain sufficient funds, either by increasing liabilities or by converting its assets quickly at a reasonable cost. Liquidity of the Banks is measured by the ratios like (i) Cash-deposit ratio (ii) Credit-deposit ratio

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Volume 1, Issue 7 (October, 2011)

TABLE 5 CASH DEPOSIT RATIO

ISSN 2231-4288

Years/ Bank 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank

SBI 4.3 5.98 4.58 5.7 6.68 9.59 7.49 7.62 6.49 6

SBJ 6.64 8.06 4.86 7.52 12.83 11.46 9.17 8.03 8.57 1

SBH 8.87 7.5 4.81 6.69 6.92 11.07 8.69 7.00 7.69 2

SBE 6.76 5.3 4.1 6.88 6.71 6.80 6.18 5.70 6.05 8

SBM 5.16 6.41 6.93 4.56 9.52 9.69 5.27 7.11 6.83 4

SBP 6.58 4.84 6.3 4.47 5.66 8.84 6.20 6.17 6.13 7

SBS 6.35 6.88 6.76 5.97 7.02 11.22 NA NA 7.37 3

SBT 5.2 4.86 8.55 4.76 7.95 9.26 5.54 6.82 6.62 5

Credit Deposit ratio 2003 2004 2005 2006 2007 2008 2009 2010 Mean Rank 46.52 49.57 55.14 68.84 77.46 77.55 73.11 78.58 65.85 6 51.18 54.96 63.08 73.27 72.07 73.52 76.10 76.47 67.58 4 46.91 48.7 53.92 61.32 67.73 71.54 69.94 72.69 61.59 7 56.23 61.49 65.48 71.28 76.85 73.79 76.28 77.31 69.84 2 58.37 56.9 64.64 71.81 74.77 76.57 77.82 75.97 69.61 3 60.14 58.23 57.97 65.66 73.42 74.94 72.64 71.80 66.85 5 51.36 49.09 53.23 61 70.11 75.71 NA NA 60.08 8 57.58 56.45 61.53 72.57 79.49 79.59 77.55 75.59 70.04 1

Source: Complied from RBI Bulletin and CMIE Prowess Table 5 explains the Cash deposit ratio of State bank Groups in India. It is noted the State Bank of Jaipur (SBJ) with highest ratio of 8.57 % distantly followed by State Bank of Hyderabad (SBH) with 7.69%. The worst performance by State bank of Indore (SBE) with 6.05%.It defines that Credit deposit ratio of State bank Groups in India from the year 2003 Sri Krishna International Research & Educational Consortium http://www.skirec.com

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2010. It is finds that State Bank of Travancore (SBT) with highest average score of 70.04% comes first, while State of Bank of Sarursatha (SBS) with lowest average score of 60.08 % in last rank among the 8 banks. OVERALL CAMEL RATING OF SBI GROUPS Having diagnosed the character wise performance of SBI group overall assessment of performance of all 8 SBI commercial banked were done and ranked as given in the table 6. TABLE 6 OVERALL CAMEL RATING OF SBI GROUPS Ratios/ Banks SBI SBJ SBH SBE SBM SBP SBS SBT

Capital Adequacy CAR CAR Tier - I Mean Rank 2 3 2.5 2 4 4 4 4.5 3 5 4 4.5 6 6 6 6 8 8 8 8 1 2 1.5 1 5 1 3 3 7 7 7 7

Asset Quality Priority sector advances Secured advances Net NPA Mean Rank 8 8 8 8 8 1 4 6 3.7 3 6 6 1 4.3 4 2 3 3 2.67 1 7 1 7 5 7 5 2 2 3 2 3 7 4 4.7 5.5 4 5 5 4.7 5.5

Management Efficiency Business per employee Profit per employee ROE R O Advance Mean Rank 6 6 7 8 6.75 7 7 3 5 2 4.25 5.5 2 1 4 4 2.75 1 3 4 3 5 3.75 4 5 7 1 1 3.5 3 1 2 6 3 3 2 8 8 8 7 7.75 8 4 5 2 6 4.25 5.5

Earning Ability

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Interest Income Net Interest Margin Operational profit ROA Mean Rank

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8 6 8 7 7.25 8 3 1 3 6 3.25 3 7 8 5 3 5.75 6 4 5 1 2 3 2 1 2 2 1 1.5 1

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6 7 4 4 5.25 5 5 3.5 7 8 5.88 7 2 3.5 6 5 4.13 4

Liquidity Cash-deposit Credit deposit Mean Rank Overall CAMEL Mean Overall CAMEL Ranking Overall CAMEL Grade 6 6 6 7.5 6.1 8 P 1 4 2.5 1 3.53 1 E 2 7 4.5 4 4.27 4 G 8 2 5 5 4.08 3 G 4.3 5 G 4 3 3.5 3 7 5 6 7.5 3.75 2 G 3 8 5.5 6 5.36 7 M 5 1 3 2 4.61 6 M

Source: Calculated and Complied by author from the Table 1 to 5 Table 6 explains the Group Ranking of the State Bank Groups in India from the year (2003-2010). It is observed that under the Capital Adequacy State Bank of Patiala (SBP) Come first position, followed by State Bank of India (SBI) while State Bank of Mysore got last position. Under the Asset Quality, State Bank of Indore (SBE) holds the first while State bank of India holds the last. It is noted that first rank taken by State Bank of Hyderabad (SBH) final rank taken by State Bank of Sarursatha (SBS) under the Management aspects. State bank of Mysore (SBM) have best rank in the Earning capability while State Bank of India (SBI) took the worst position. Under the Liquidity State bank of Jaipur (SBJ) has Best position and worst Position taken both the State Bank of India (SBI) and State Bank of Patiala (SBP). Based on the overall ranking score (Mean = 4.50; Std = 0.851) the researcher classified score into 4 Grade namely, Excellent (E), Good (G), Moderate (M), and Poor (P). Performances of the Banks are indicated by the Grade in the above table. PERFORMANCE OF VARIANCE In order to determine difference among the ratios of CAMEL of State Banks groups, one way ANOVA has been used. To ensure the application of one-way ANOVA independence of sample, Normality, Homogeneity of population were duly considered and the results were derived accordingly.

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TABLE 7: TESTS OF NORMALITY Shapiro-Wilk Statistic df 5 5 5 5 5 5 5 5

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Sig. .199 .719 .852 .587 .672 .563 .967 .419

SBI SBJ SBH SBE SBM SBP SBS SBT

.851 .947 .966 .929 .941 .925 .987 .902

The table 7 reveals that, Shapiro Wilk Test assess whether there is a significant of normality in population distribution for each of the eight groups, the null hypothesis states that the population distribution is normal. Since the P Values are greater than .05; the null hypothesis of population distribution is normal could be accepted. TABLE 8: TEST OF HOMOGENEITY OF VARIANCES Levene Statistic .936 df1 7 df2 32 Sig. .493

The table 8 denotes that, Levenes test of Homogeneity of variances asses ses whether the population variance for the ratios are significantly different from the each other. The null hypothesis states that the population variances are equal. Since P-Value is greater than .05 support the null hypothesis. TABLE 9: ANOVA RESULTS OF RATIOS OF STATE BANK GROUPS Sum of Squares Between Groups Within Groups Total 45.687 90.233 135.920 df 7 32 39 Mean Square 6.527 2.820 F 2.31 Sig. .000

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JBFSIR

Volume 1, Issue 7 (October, 2011)

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The table 9 observes the significant difference in ratios of CAMEL among the State Bank Groups in India. The test statistics (F- Value) equal 2.31 with a corresponding P Value of .000. Hence, reject the null hypothesis & state that there is significant difference in ratios of CAMEL among the State Bank Groups in India. The difference in the performance may be due to age of the bank, investment size, no. of. branches, no. of employees etc. CONCLUSION The study observed that there is significant difference in ratios in CAMEL among the State Bank Groups in India. In this part all parameters (C, A, M, E, L) are ranked together and final ranking (CAMEL Rating) was computed. The study reveals that State Bank of Jaipur (SBJ) comes First rank having excellent performance followed by State bank of Patiala (SBP). Whereas the State Bank of India (SBI) has secured last rank in terms of performance. It has to improve its Asset quality, Management efficiency, Liquidity position. In the same line, the State bank of Sarursatha should take necessary steps to increase the Management efficiency, earning capacity; State bank of Travancore has to increases its CAR, & Earning. State bank of Patiala need improvement in Earning & Liquidity management State bank of Mysore need to improve its CAR & Assets quality. State bank of Indore must increase its CAR; State bank of Hyderabad has to concentrate on increase Earning; thus annual CAMEL scanning helps the commercial bank to diagnose its financial health and alert the bank to take preventive steps for its sustainability. REFERENCES 1. Annual reports of State Bank of India (2009-2010) 2. Amandeep, (1983), Profits and Profitability in Commercial Banks, Deep and Deep Publications Pvt. Ltd., Rajouri Gardens, New Delhi 110 027. 3. Angadi and Devraj, (1983), Profitability and Productivity of Banks in India, Economic and Political Weekly, Vol. 18 (Nov. 26). 4. Banerjee, A. and Singh, S. K (Ed.), Banking and Financial Sector Reforms in India, Deep & Deep Publications Pvt. Ltd., New Delhi, 2002. 5. CMIE Prowess packages 6. Goldsmith, R. W., Financial Structure and Development, New Haven: Yale University Press, First Edition, 1969. 7. Reserve Bank of India (RBI), Trend and Progress of Banking in India, 8. Uppal, R. K. and Pooja, Transformation in Indian Banks, Sarup Book Publishers Pvt. Ltd., New Delhi 2, 2009. 9. Uppal, R. K, Indian Banking Industry and Information Technology, New Century Publications, New Delhi 2, 2006. 10. Official Website of the Reserve Bank of India, www.rbi.org.in

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