Thesis

PERFORMACE EVALUATION OF SELECTED BANKING
COMPANIES IN INDIA: A STUDY
A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN

ARTS (COMMERCE) TO THE UNIVERSITY OF BURDWAN
BY
JAYANTA KUMAR NANDI
Under the Supervision of

Dr. Chitta Ranjan Sarkar
Associate Professor, Department of Commerce
The University of Burdwan
West Bengal. India
2012
PREFACE
The noble mission of Indian Planning Commission has long been concentrated on the
attainment of overall growth with social justice and equity. Finance which acts as a catalytic
agent, has been given top priority. Financial intermediaries are going through significant
changes all over the world under the impact of deregulation, technological up gradation and
financial innovations. The traditional and conservative face of Indian banking has undergone
a metamorphosis due to the effect of liberalization, reorganization and consolidation. In the
deregulated environment, a series of reformative measures were undertaken to improve the
working of Indian banks in line with the international banking practices. The emergence of
new private sector banks as well as the entry of new foreign banks in this era has thrown
tremendous challenges in the form of tough competition among Indian banks. Only banks
with high level of financial performance will survive and grow on long term perspectives. In
this backdrop an attempt has been undertaken in this study to examine the comparative
performance of selected public and private sector banks in India during the period 2001-02 to
2010-11 under the different parameters. For this purpose ten leading Indian banks from each
of the public and private sector banks have been taken into consideration. The study is
divided into eight chapters.
Chapter 1 has described the significance or relevance of the study, objectives of the
study, data source, research methodology, limitations and assumptions of the study, plan or
structure of the research study.
Chapter 2 represents the survey of existing literatures on the comparative financial
performance of the banking companies. Existing literatures survey is subdivided into foreign
study and Indian study according to the years of study.
Chapter 3 highlights the history of banking in India and brief profiles of selected
public and private sector banks. In this chapter brief history of banking in India prior to 1969,
nationalization of Indian banks and their progress after nationalization, reasons for
nationalization of banks, criticism against nationalization of banks, banking sector reforms in
India and growth of new private sector banks, brief history and background of selected PSBs
and Pvt.SBs in India have been discussed.
Chapter 4 has examined the financial performance of the selected public sector banks
and the performance of the selected PSBs has been judged on the basis of mobilization of
deposits, supplying loans and advances, investment of funds, efficiency of NPA management,
social responsibility performance, cost control efficiency, productivity efficiency, earnings

and profitability efficiency.
Chapter 5 has examined the financial performance of the selected private sector
banks and the performance of the selected PSBs has been judged on the basis of mobilization
of deposits, granting loans and advances, investment of funds, efficiency of NPA
management, social responsibility performance, cost control efficiency, productivity
efficiency, earnings and profitability efficiency.
Chapter 6 examines the comparative performance of selected public sector and private
sector banks using different relevant statistical tools.
Chapter 7 examines the comparative performance of selected PSBs and Pvt.SBs using
CAMEL Model.
Chapter 8 contains the summary of findings of the study, conclusion and suggestion.
In spite of some limitations, the present study is expected to be useful for both
academicians and bankers to get some idea about the financial performance of Indian banks
in the twenty first century and for conducting further study relating to this matter.
I take this opportunity to acknowledge some of the persons, who over a long time
have influenced me to carry out my research work.
I am extremely happy to express my deep sense of gratitude to my respected Sir Dr.
Chitta Ranjan Sarkar, Associate Professor in the Department of Commerce, The University of
Burdwan, Burdwan without his guidance, help and supervision this work would have been
incomplete. I am thankful and convey my sincere gratitude to him for spending his valuable
time to guide me throughout this research work.
I express my deep sense of gratitude to my respected teacher Prof. Debasish Sur who
first advised me to do my research work under the supervision of my respected Sir Dr. Chitta
Ranjan Sarkar. I am also thankful and convey my sincere gratitude to my respected teachers
Prof. Jaydeb Sarkhel, Prof. Debdas Rakshit and Prof. Santanu Kumar Ghosh who have
guided me and encouraged me to my research work. Thanks are also due to all the nonteaching staff of the commerce department and my friends and relatives for inspiring me to
complete the study.
Department of Commerce
----------------------------
The University of Burdwan
Jayanta Kumar Nandi
Burdwan, Pin 713104

West Bengal, India
ii
LIST OF CHARTS
Chart No.
4.1
Title of the Chart

Final Ranks of Selected PSBs based on total of ultimate ranks
5.1Final Ranks of Selected Pvt.SBs based on total of Ultimate Ranks
Page No.
129
213
LIST OF TABLES
Table No.
Title of Table
Page No.
4.1
Statement showing Total Deposits, Loans & Advances and

Investments and their Annual Growth Rates of SBI during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of PNB during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of BOB during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of BOI during the
period 2001-02 to 2010-11
Statement showing Total Deposits, Loans and Advances &
Investments and their Annual Growth Rates of CB during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of UBI during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of CBI during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of SB during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of OBC during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of UCO Bank during
50
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
iii
51
52
53
54
55
56
57
58
59
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
the period 2001-02 to 2010-11

Investments and their Annual Growth Rates of all selected PSBs
taken together
Statement showing the Analysis of Mean Growth of Total
Deposits, Loans & Advances and Investments of the selected
PSBs in India individually and as a whole
Showing Return on Advances (RA) of all selected PSBs in India
for the period 2001-02 to 2010-11
Statement showing Rank, Mean Rank and Ultimate Rank of
Return on Advances (RA) of Selected PSBs in India
Showing Investment-Deposit Ratio (IDR) of all selected PSBs in
India for the period 2001-02 to 2010-11
Investment-Deposit Ratio (IDR) of Selected PSBs in India
Showing Gross NPAs of all selected PSBs in India for the period
2001-02 to 2010-11
Showing Gross NPAs to Total Assets (%) of all selected PSBs in
Showing Gross NPAs to Total Advances (%) of all selected
PSBs in India for the period 2001-02 to 2010-11
Showing Net NPAs of all selected PSBs in India for the period
2001-02 to 2010-11
Showing Net NPAs to Total Assets (%) of all selected PSBs in
Showing Net NPAs Ratio (Net NPAs to Net Advances) of all
selected PSBs in India for the period 2001-02 to 2010-11
Statement showing Average NPA Indices of selected PSBs in
India taken together based on Selected NPA Ratios during the
period 2001-02 to 2010-11
Statement showing Rank, Composite Rank and Ultimate Rank of
NPAs of Selected PSBs in India based on bank-wise mean values
of Gross NPA to TA, Gross NPA to Total Advances, Net NPA to
TA and Net NPA to Net Advances
Statement showing Advances to Priority Sector of selected PSBs
in India during the period 2001-02 to 2010-11
Statement showing Priority Sector Advances to Total Advances
(%) of selected PSBs in India during the period 2001-02 to 201011
Statement showing wage bills to total income (%) of selected
PSBs in India during the period 2001-02 to 2010-11
Statement showing Average Social Responsibility Indices of
selected PSBs in India taken together based on Social
iv
60
61
63
64
65
66
68
69
70
72
73
74
75
77
84
86
88
89
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
4.43
4.44
4.45
4.46
4.47
Responsibility Indicators during the period 2001-02 to 2010-11

Social Responsibility Indicator Ratios of Selected PSBs in India
Statement showing Ratio of Cost of Deposits (%) of Selected
PSBs in India
Cost of Deposits (%) of Selected PSBs in India
Statement showing Ratio of Cost of Borrowings (%) of Selected
PSBs in India
Cost of Borrowings (%) of Selected PSBs in India
Statement showing Ratio of Intermediation Cost to Total Assets
(%) of Selected PSBs in India
Intermediation Cost to Total Assets of Selected PSBs in India
Statement showing Ratio of Burden to Total Assets (%) of
Selected PSBs in India
Burden to Total Assets (%) of Selected PSBs in India
Statement showing Average Cost Efficiency Indices of selected
PSBs in India taken together based on Selected Cost Minimizing
Efficiency Ratios during the period 2001-02 to 2010-11
Statement showing Average Indices of Output-Input (O/I) Ratios
of Selected Public Sector Banks in India for the period 2001-02
to 2010-11
O/I ratio of Selected PSBs in India
Statement showing Business per Employee (in ` Lakh) of the
Selected PSBs in India for the period 2001-02 to 2010-11
Business per Employee (in ` Lakh) of Selected PSBs in India
Statement showing Profit per Employee (in ` Lakh) of the
Selected PSBs in India for the period 2001-02 to 2010-11
Profit per Employee (in ` Lakh) of Selected PSBs in India
Statement showing Average Productivity Indices of selected
PSBs in India as a whole based on Selected Productivity Ratios
during the period 2001-02 to 2010-11
Statement showing Ratio of Net Interest Income to Total Assets
(NIM) of the Selected PSBs in India for the period 2001-02 to
2010-11
Net Interest Income to Total Assets (NIM) of Selected PSBs in
90
94
95
96
97
99
100
101
102
103
106
107
108
109
112
113
114
117
118
4.48
4.49
4.50
4.51
4.52
4.53
4.54
4.55
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
India
Statement showing Yield on Investment and Bank balances (%)
of the Selected PSBs in India for the period 2001-02 to 2010-11
Interest Yield on Investment and Bank balances (%) of Selected
PSBs in India
Statement showing Interest yield on Loans and Advances (%) of
the Selected PSBs in India for the period 2001-02 to 2010-11
Interest yield on Loans and Advances (%) of Selected PSBs in
India
Statement showing Return on Assets (ROA) of the Selected
PSBs in India for the period 2001-02 to 2010-11
Return on Assets (ROA) of Selected PSBs in India
Statement showing Average Earnings and Profitability Indices of
selected PSBs in India as a whole based on Selected Earnings
and Profitability Ratios during the period 2001-02 to 2010-11
Statement showing Final Rank (based on the aggregate of the
Ultimate Ranks) of Selected PSBs in India during the study
period from 2001-02 to 2010-11
Investments and their Annual Growth Rates of ICICI Bank
Investments and their Annual Growth Rates of HDFC Bank
Investments and their Annual Growth Rates of AXIS Bank
Investments and their Annual Growth Rates of Federal Bank
Investments and their Annual Growth Rates of J&K Bank during
the period 2001-02 to 2010-11
Investments and their Annual Growth Rates of Indusind Bank
Investments and their Annual Growth Rates of ING Vys Bank
vi
119
120
122
123
125
126
127
130
133
134
136
137
138
139
140
141
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
5.19
5.20
5.21
5.22
5.23
5.24
5.25
Investments and their Annual Growth Rates of K.Bnk during the

period 2001-02 to 2010-11
Investments and their Annual Growth Rates of SIB during the
period 2001-02 to 2010-11
Investments and their Annual Growth Rates of K.Vys Bank
Investments and their Annual Growth Rates of all selected
Pvt.SBs taken together
Statement showing the Analysis of Mean Growth of Total
Deposits, Loans & Advances and Investments of the selected
Pvt.SBs in India individually and as a whole
Showing Return on Advances (RA) of all selected Pvt.SBs in
Return on Advances (RA) of Selected Pvt.SBs in India
Showing Investment-Deposit Ratio (IDR) of all selected Pvt.SBs
in India for the period 2001-02 to 2010-11
Investment-Deposit Ratio (IDR) of Selected Pvt.SBs in India
Showing Gross NPAs of all the selected Pvt.SBs in India for the
period 2001-02 to 2010-11
Showing Gross NPAs to Total Assets (%) of all selected Pvt.SBs
Showing Gross NPAs to Total Advances (%) of all selected
Pvt.SBs in India for the period 2001-02 to 2010-11
Showing Net NPAs of all selected Pvt.SBs in India for the period
2001-02 to 2010-11
Showing Net NPAs to Total Assets (%) of all selected Pvt.SBs in
Showing Net NPAs Ratio (Net NPAs to Net Advances) of all
selected Pvt.SBs in India for the period 2001-02 to 2010-11
Statement showing Average NPA Indices of selected Pvt.SBs in
India taken together based on Selected NPA Ratios during the
period 2001-02 to 2010-11
NPAs of Selected Pvt.SBs in India based on bank-wise mean
values of Gross NPA to TA, Gross NPA to Total Advances, Net
NPA to TA and Net NPA to Net Advances
Statement showing Advances to Priority Sector of selected
Pvt.SBs in India during the period 2001-02 to 2010-11
vii
142
143
144
145
147
148
149
150
152
153
154
156
157
158
160
161
166
5.26
5.27
5.28
5.29
5.30
5.31
5.32
5.33
5.34
5.35
5.36
5.37
5.38
5.39
5.40
5.41
5.42
5.43
5.44
Statement showing Priority Sector Advances to Total Advances

(%) of selected Pvt.SBs in India during the period 2001-02 to
2010-11
Statement showing wage bills to total income (%) of selected
Pvt.SBs in India during the period 2001-02 to 2010-11
Statement showing Average Social Responsibility Indices of
selected Pvt.SBs in India taken together based on Social
Responsibility Indicators during the period 2001-02 to 2010-1
Social Responsibility Indicator Ratios of Selected Pvt.SBs in
India
Statement showing Ratio of Cost of Deposits (%) of Selected
Pvt.SBs in India
Cost of Deposits (%) of Selected Pvt.SBs in India
Statement showing Ratio of Cost of Borrowings (%) of Selected
Pvt.SBs in India
Cost of Borrowings (%) of Selected Pvt.SBs in India
Statement showing Ratio of Intermediation Cost to Total Assets
(%) of Selected Pvt.SBs in India
Intermediation Cost to Total Assets of Selected Pvt.SBs in India
Statement showing Ratio of Burden to Total Assets (%) of
Selected Pvt.SBs in India
Burden to Total Assets (%) of Selected Pvt.SBs in India
Statement showing Average Cost Efficiency Indices of selected
Pvt.SBs in India taken together based on Selected Cost
Minimizing Efficiency Ratios during the period 2001-02 to
2010-11
Statement showing Average Indices of Output-Input (O/I) Ratios
of Selected Private Sector Banks in India for the period 2001-02
to 2010-11
O/I ratio of Selected Pvt.SBs in India
Statement showing Business per Employee (in ` Lakh) of the
Selected Pvt.SBs in India for the period 2001-02 to 2010-11
Business per Employee (in ` Lakh) of Selected Pvt.SBs in India
Statement showing Profit per Employee (in ` Lakh) of the
Selected Pvt.SBs in India for the period 2001-02 to 2010-11
viii
168
170
171
172
176
177
178
179
181
182
184
185
186
189
190
191
192
194
195
5.45
5.46
5.47
5.48
5.49
5.50
5.51
5.52
5.53
5.54
5.55
6.1(A)
6.1(B)
6.2(A)
6.2(B)
6.3(A)
Profit per Employee (in ` Lakh) of Selected Pvt.SBs in India

Statement showing Average Productivity Indices of selected
Pvt.SBs in India as a whole based on Selected Productivity
Ratios during the period 2001-02 to 2010-11
Statement showing Ratio of Net Interest Income to Total Assets
(NIM) of the Selected Pvt.SBs in India for the period 2001-02 to
2010-11
Net Interest Income to Total Assets (NIM) of Selected Pvt.SBs in
India
Statement showing Yield on Investment and Bank balances (%)
of the Selected Pvt.SBs in India for the period 2001-02 to 201011
Interest Yield on Investment and Bank balances (%) of Selected
Pvt.SBs in India
Statement showing Interest yield on Loans and Advances (%) of
the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
Interest yield on Loans and Advances (%) of Selected Pvt.SBs in
India
Statement showing Return on Assets (ROA) of the Selected
Pvt.SBs in India for the period 2001-02 to 2010-11
Return on Assets (ROA) of Selected Pvt.SBs in India
Statement showing Average Earnings and Profitability Indices of
selected Pvt.SBs in India as a whole based on Selected Earnings
and Profitability Ratios during the period 2001-02 to 2010-11
Statement showing Final Rank (based on the aggregate of the
Ultimate Ranks) of Selected Pvt.SBs in India during the study
period from 2001-02 to 2010-11
Analysis of Earnings and Profitability Indices (EPI) of the
selected PSBs in India for the study period from 2001-02 to
2010-11
Analysis of Earnings and Profitability Indices (EPI) of the
selected Pvt.SBs in India for the study period from 2001-02 to
2010-11
Analysis of Cost Efficiency Indices (CEI) of the selected PSBs in
India for the study period from 2001-02 to 2010-11
Analysis of Cost Efficiency Indices (CEI) of the selected Pvt.SBs
in India for the study period from 2001-02 to 2010-11
Analysis of Productivity Indices (PI) of the selected PSBs in
ix
196
199
200
201
202
204
205
207
208
210
212
215
216
217
218
219
6.3(B)
6.4(A)
6.4(B)
6.5(A)
6.5(B)
6.6(A)
6.6(B)
6.7(A)
6.7(B)
6.8(A)
6.8(B)
6.9
6.10
6.11
Analysis of Productivity Indices (PI) of the selected Pvt.SBs in

Analysis of NPA Indices (NPAI) of the selected PSBs in India
for the study period from 2001-02 to 2010-11
Analysis of NPA Indices (NPAI) of the selected Pvt.SBs in India
Analysis of Social Responsibility Indices (SRI) of the selected
PSBs in India for the study period from 2001-02 to 2010-11
Analysis of Social Responsibility Indices (SRI) of the selected
PSBs in India for the study period from 2001-02 to 2010-11
Analysis of Correlation Coefficient between Earnings and
Profitability Indices and other efficiency parameter indices (i.e.
EPI & PI and EPI & CEI) of the selected PSBs and Pvt.SBs in
India during 2001-02 to 2010-11
Analysis of Correlation Coefficient between Earnings and
Profitability Indices and other efficiency parameter indices (i.e.
EPI & NPAI and EPI & SRI) of the selected PSBs and Pvt.SBs
in India during 2001-02 to 2010-11
Analysis of Average Earnings and Profitability Indices,
Productivity Indices, Cost Indices, NPA Indices and Social
Responsibility Indices of the Selected PSBs in India as a whole
Analysis of Average Earnings and Profitability Indices,
Productivity Indices, Cost Indices, NPA Indices and Social
Responsibility Indices of the Selected Pvt.SBs in India as a
whole for the study period from 2001-02 to 2010-11
Analysis of Correlation between EPI & PI, EPI & CEI, EPI &
NPAI and EPI & SRI of the selected PSBs as a whole in India
during the study period from 2001-02 to 2010-11
Analysis of Correlation between EPI & PI, EPI & CEI, EPI &
NPAI and EPI & SRI of the selected Pvt.SBs as a whole in India
during the period from 2001-02 to 2010-11
Analysis of Multiple Correlations between EPI & other selected
parameter indices of all the selected PSBs and Pvt.SBs in India
as a whole during the study period from 2001-02 to 2010-11
Analysis of Multiple Correlation between EPI & other selected
efficiency measures of selected PSBs and Pvt.SBs in India
during the study period from 2001-02 to 2010-11(Multiple
Correlation Coefficient of EPI on PI, CEI, NPAI and SRI)
Analysis of Multiple Regression of EPI on PI, CEI, NPAI and
SRI of the selected PSBs and Pvt.SBs as a whole in India during
2001-02 to 2010-11 (Regression Equation: EPI = b0 + b1.PI +
b2.CEI + b3.NPAI + b4.SRI)
220
221
222
223
224
229
230
233
235
237
238
240
242
244
6.12
6.13
6.14
6.15
6.16
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
Analysis of Multiple Regression of EPI on PI, CEI, NPAI and

SRI of the selected PSBs and Pvt.SBs in India during 2001-02 to
2010-11 (Regression Equation: EPI = b0 + b1.PI + b2.CEI +
b3.NPAI + b4.SRI)
Analysis of Correlation coefficient between SRI & NPAI of the
selected PSBs and Pvt.SBs as a whole in India during the period
from 2001-02 to 2010-11
Analysis of Correlation coefficient between SRI & NPAI of the
selected PSBs and Pvt.SBs in India during the period from 200102 to 2010-11
Analysis of performance efficiency indices and their grand
average values of the selected PSBs and Pvt.SBs in India during
the period 2001-02 to 2010-11
Analysis of U-rank sum test of selected samples based on the
ascending values of grand average of selected efficiency
parameter indices of the selected PSBs and Pvt.SBs in India for
the period 20010-02 to 2010-11
Statement showing Capital Risk Weighted Assets Ratio (%) of
selected public and private sector banks
Statement showing Debt-Equity Ratio of selected public and
private sector banks
Statement showing Advances to Assets Ratio (%) of selected
public and private sector banks
Statement showing G-Securities to Total Investment Ratio (%) of
Statement showing Rank of the selected public and private sector
banks under different measures of Capital Adequacy
Statement showing Composite Rank and Final Rank of the
selected public and private sector banks based on different
measures of Capital Adequacy
Statement showing Net NPAs to Total Assets (%) of selected
Statement showing Net NPAs Ratio (Net NPAs to Net
Advances) of selected public and private sector banks
Statement showing Total Investments to Total Assets (%) of
banks under different measures of Asset Quality
measures of Asset Quality
Statement showing Business per Employee (` in lakh) of the
xi
249
251
253
254
255
259
261
262
264
265
267
270
272
274
275
277
279
7.13
7.14
7.15
7.16
7.17
7.18
7.19
7.20
7.21
7.22
7.23
7.24
7.25
7.26
7.27
7.28
Statement showing Profit per employee (` in lakh) of the

Statement showing Credit-Deposit Ratio (%) of the selected
banks under different measures of Management Efficiency
measures of Management Efficiency
Statement showing Spread as a percentage of Total Assets of
Statement showing Percentage growth in Net Profit of selected
Statement showing Interest Income to Total Income (%) of
Statement showing Non-Interest Income to Total Income (%) of
banks under different measures of Earning Capacity
selected public and private sector banks under different measures
of Earning Capacity
Statement showing Liquid Assets to Demand Deposits (%) of
Statement showing Liquid Assets to Total Deposits (%) of the
Statement showing Liquid Assets to Total Assets (%) of the
banks under different measures of Liquidity
measures of Liquidity
Statement showing analysis of Mean Rank and Overall Rank of
selected public and private sector banks in CAMEL Model
xii
282
284
286
287
289
291
293
295
297
298
301
303
305
307
309
310
CONTENTS
Page No.
Preface
List of Charts
iii
List of Tables
iii
CHAPTER-1: GENERAL INTRODUCTION
1-11
1.1 Introduction
1.2 Significance or relevance of this study
1.3 Objectives of the study
1.4 Hypothesis of the study
1.5 Data source
1.6 Research Methodology
10
1.7 Limitations and Assumptions of the study
10
1.8 Plan or structure of the Study
11
CHAPTER- 2: REVIEW OF LITERATURE
12-23
2.1 Foreign Studies
12
2.2 Indian Studies
14
CHAPTER-3: HISTORY OF BANKING IN INDIA AND BRIEF

PROFILES OF SELECTED PUBLIC AND PRIVATE
SECTOR BANKS
24-46
3.1 Brief history of banking in India prior to 1969
24
3.2 Nationalization of Indian banks and their progress after nationalization
26
3.3 Reasons for Nationalization of Banks
29
3.4 Criticisms against nationalization of banks
31
3.5 Banking sector reforms in India and growth of new private sector banks
31
3.6 Brief Profiles of Selected Public Sector Banks (PSBs) in India
37
3.6.1 History and Background of State Bank of India (SBI)
37
3.6.2 History and Background of Punjab National Bank (PNB)
37
3.6.3 History and Background of Bank of Baroda (BOB)
38
3.6.4 History and Background of Bank of India (BOI)
38
3.6.5 History and Background of Canara Bank (CB)
39
3.6.6 History and Background of Union Bank of India (UBI)
39
3.6.7 History and Background of Central Bank of India (CBI)
40
3.6.8 History and Background of Syndicate Bank (SB)
40
3.6.9 History and Background of Oriental Bank of Commerce (OBC)
41
3.6.10 History and Background of UCO Bank (UCO)
41
3.7 Brief Profiles of Selected Private Sector Banks (Pvt.SBs) in India
42
3.7.1 History and Background of ICICI bank (ICICI)
42
3.7.2 History and Background of HDFC bank (HDFC)
42
3.7.3 History and Background of Axis Bank (AXIS)
43
3.7.4 History and Background of Federal Bank (Federal)
43
3.7.5 History and Background of Jammu and Kashmir Bank (J&K)
44
3.7.6 History and Background of Indusind Bank (Indusind)
44
3.7.7 History and Background of ING vysya bank (ING Vys)
45
3.7.8 History and Background of Karnataka Bank (K.Bnk)
45
3.7.9 History and Background of South India Bank (SIB)
46
3.7.10 History and Background of Karur Vysya Bank (K.Vys)
46
CHAPTER-4: PERFORMANCE EVALUATION OF SELECTED PUBLIC

SECTOR BANKS IN INDIA
47-130
4.1 Introduction
47
4.2 Analysis of Total Deposits, Loans & Advances and Investments of Selected
Public Sector Banks
48
4.2.1 Analysis of Total Deposits, Loans & Advances and Investments of State
Bank of India (SBI)
49
4.2.2 Analysis of Total Deposits, Loans & Advances and Investments of

Punjab National Bank (PNB)
51
4.2.3 Analysis of Total Deposits, Loans & Advances and Investments of Bank
of Baroda (BOB)
52
4.2.4 Analysis of Total Deposits, Loans & Advances and Investments of Bank
of India (BOI)
53

Canara Bank (CB)
54

Union Bank of India (UBI)
55

Central Bank of India (CBI)
56

Syndicate Bank (SB)
57

Oriental Bank of Commerce (OBC)
58

UCO Bank (UCO)
59
4.2.11 Analysis of Total Deposits, Loans & Advances and Investments of the
selected PSBs as a whole
60
4.2.12 Analysis of Mean Growth of Total Deposits, Loans & Advances and
Investments of the selected PSBs in India individually and as a whole
61
4.3 Analysis of important ratios associated with Deposits, Loans & Advances and
Investments
62
4.3.1 Analysis of Return on Advances (RA) of selected PSBs in India
62
4.3.2 Analysis of Investment-Deposit Ratio (IDR) of selected PSBs in India
64
4.4 Analysis of Non-Performing Assets (NPAs) of Selected PSBs in India
66
4.4.1 Analysis of Gross NPAs of Selected Public Sector Banks
67
4.4.2 Analysis of Gross NPAs to Total Assets (%) of Selected PSBs in India
69
4.4.3 Analysis of Gross NPAs to Total Advances (%) of Selected PSBs in

India
70
4.4.4 Analysis of Net NPAs of the Selected Public Sector Banks in India
70
4.4.5 Analysis of Net NPAs to Total Assets (%) of Selected PSBs in India
73
4.4.6 Analysis of Net NPAs to Net Advances (%) of the Selected PSBs in
India
73
4.4.7 Average NPA Indices of the Selected PSBs in India
74
4.5 Analysis of Social Responsibility Performance of Selected PSBs in India

based on Priority Sector Advances and Wage Bill Payment
4.5.1 Analysis of Advances to Priority Sectors of selected PSBs in India
78
79
4.5.1-1 Introduction
79
4.5.1-2 Categories of priority sector
80
4.5.1-3 Analysis of Social Responsibility Performance based on Priority

Sector Advances of the Selected PSBs in India
4.5.2 Analysis of Social Responsibility Performance based on wage bill
payment to the employees of selected PSBs in India
4.5.2-1 Analysis of Wage bills to Total Income (%) of selected PSBs in
India
4.6 Analysis of Cost Minimizing Efficiency, Productivity Efficiency and Earnings
and Profitability Efficiency of the selected Public Sector Banks (PSBs) in
India
4.6.1 Efficiency Analysis of Cost Management of the Selected PSBs in India
81
87
87
91
92
4.6.1-1 Analysis of Cost of Deposits Ratio (CDR) and Ultimate Rank of

the selected PSBs in India
92
4.6.1-2 Analysis of Ratio of Cost of Borrowings (CoB) and Ultimate

Rank of the selected PSBs in India
95
4.6.1-3 Analysis of Ratio of Intermediation cost to Total Assets (%) and

Ultimate Rank of the selected PSBs in India
97
4.6.1-4 Analysis of Ratio of Burden to Total Assets (%) and Ultimate

100
4.6.2 Analysis of Productivity Efficiency of the Selected PSBs in India
104
4.6.2-1 Performance Analysis using Input-Output quantities i.e. OutputInput (O/I) Ratio and Ultimate Rank of selected PSBs in India
104
4.6.2-2 Analysis of Business per Employee (in ` Lakh) and Ultimate

Rank of selected PSBs in India
107
4.6.2-3 Analysis of Profit per Employee (in ` Lakh) and the Ultimate
rank of selected PSBs in India
110
4.6.3 Analysis of Earnings and Profitability Efficiency of the Selected PSBs

in India
115
4.6.3-1 Analysis of Spread as a percentage of Total Assets and Ultimate

Rank of the Selected PSBs in India
115
4.6.3-2 Analysis of Interest Yield on Investments and Bank balances

(IYIB) and Ultimate Rank of the Selected PSBs in India
118
4.6.3-3 Analysis of Interest Yield on Loans and Advances (IYLA) and

Ultimate Rank of the Selected PSBs in India
121
4.6.3-4 Analysis of Return on Assets (ROA) and Ultimate Rank of the

124
4.7 Comprehensive Ranking for the Performance of the selected PSBs in India
128
CHAPTER- 5: PERFORMANCE EVALUATION OF SELECTED

PRIVATE SECTOR BANKS IN INDIA
131-213
5.1 Introduction
131
5.2 Analysis of Total Deposits, Loans and Advances & Investments of Selected
Private Sector Banks
131
5.2.1 Analysis of Total Deposits, Loans & Advances and Investments ICICI
Bank (ICICI)
133

HDFC Bank (HDFC)
134
5.2.3 Analysis of Total Deposits, Loans & Advances and Investments Axis
Bank (AXIS)
135

Federal Bank (Federal)
136

Jammu & Kashmir Bank (J&K)
137

Indusind Bank (Indusind)
138
5.2.7 Analysis of Total Deposits, Loans & Advances and Investments of ING
Vysya Bank (ING Vys)
139

Karnataka Bank (K.Bnk)
140

South Indian Bank (SIB)
141

Karur Vysya Bank (K.Vys)
142
selected Pvt.SBs as a whole
143
Investments of the selected Pvt.SBs in India individually and as a
whole
144
Investments
145
5.3.1 Analysis of Return on Advances (RA) of selected Pvt.SBs in India
145
5.3.2 Analysis of Investment-Deposit Ratio (IDR) of selected Pvt.SBs in India
148
5.4 Analysis of Non-Performing Assets (NPAs) of Selected Pvt.SBs in India

5.4.1 Analysis of Gross NPAs of Selected Private Sector Banks
150
151
5.4.2 Analysis of Gross NPAs to Total Assets (%) of Selected Pvt.SBs in

India
151
5.4.3 Analysis of Gross NPAs to Total Advances (%) of Selected Pvt.SBs in

India
153
5.4.4 Analysis of Net NPAs of the Selected Private Sector Banks in India
155
5.4.5 Analysis of Net NPAs to Total Assets (%) of Selected Pvt.SBs in India
157
5.4.6 Analysis of Net NPAs to Net Advances (%) of the Selected Pvt.SBs in
India
158
5.4.7 Average NPA Indices of the Selected Pvt.SBs in India
159
5.5 Analysis of Social Responsibility Performance of Selected Pvt.SBs in India

162
5.5.1 Analysis of Social Responsibility Performance based on Priority Sector

Advances of the Selected Pvt.SBs in India
162
5.5.2 Analysis of Social Responsibility Performance based on wage bill

payment to the employees of selected Pvt.SBs in India
169
5.5.2-1 Analysis of Wage bills to Total Income (%) of selected Pvt.SBs

in India
169

and Profitability Efficiency of the selected Private Sector Banks (Pvt.SBs) in
India:
173
5.6.1 Efficiency Analysis of Cost Management of the Selected Pvt.SBs in

India
174
5.6.1-1 Analysis of Cost of Deposits Ratio (CDR) and Ultimate Rank of

the selected Pvt.SBs in India
174
5.6.1-2 Analysis of Ratio of Cost of Borrowings (CoB) and Ultimate

Rank of the selected Pvt.SBs in India
177
5.6.1-3 Analysis of Ratio of Intermediation cost to Total Assets (%) and

Ultimate Rank of the selected Pvt.SBs in India
179
5.6.1-4 Analysis of Ratio of Burden to Total Assets (%) and Ultimate

182
5.6.2 Analysis of Productivity Efficiency of the Selected Pvt.SBs in India
187
5.6.2-1 Performance Analysis using Input-Output quantities i.e. OutputInput (O/I) Ratio and Ultimate Rank of selected Pvt.SBs in India
187
5.6.2-2 Analysis of Business per Employee (in ` Lakh) and Ultimate

Rank of selected Pvt.SBs in India
192
5.6.2-3 Analysis of Profit per Employee (in ` Lakh) and the Ultimate
rank of selected Pvt.SBs in India
5.6.3 Analysis of Earnings and Profitability Efficiency of the Selected
Pvt.SBs in India
193
197
5.6.3-1 Analysis of Spread as a percentage of Total Assets and Ultimate

Rank of the Selected Pvt.SBs in India
197
5.6.3-2 Analysis of Interest Yield on Investments and Bank balances

(IYIB) and Ultimate Rank of the Selected Pvt.SBs in India
200
5.6.3-3 Analysis of Interest Yield on Loans and Advances (IYLA) and

Ultimate Rank of the Selected Pvt.SBs in India
203
5.6.3-4 Analysis of Return on Assets (ROA) and Ultimate Rank of the

Selected Pvt.SBs in India
206
5.7 Comprehensive Ranking for the Performance of the selected Pvt.SBs in India
211
CHAPTER- 6: COMPARATIVE PERFORMANCE OF SELECTED

PUBLIC SECTOR AND PRIVATE SECTOR BANKS
USING STATISTICAL TOOLS
214-256
6.1 Correlation Analysis
214
6.2 Analysis of Performance Efficiency Indices of the selected PSBs in India as a

whole during the study period 2001-02 to 2010-11
231
6.3 Analysis of Performance Efficiency Indices of the selected Pvt.SBs in India as

a whole during the study period 2001-02 to 2010-11
233
6.4 Analysis of Correlation Coefficient between Earnings and Profitability (EPI) and
other efficiency parameters of the selected PSBs as a whole in India
236
6.5 Analysis of Correlation Coefficient between Earnings and Profitability (EPI)

and other efficiency parameters of the selected Pvt.SBs as a whole in India
237
6.6 Analysis of Multiple Correlation between Earnings and Profitability (EPI) and
other efficiency measures of the selected PSBs and Pvt.SBs as a whole in
India
239
6.7 Analysis of Multiple Correlation between Earnings and Profitability (EPI) and
other efficiency measures of the selected PSBs and Pvt.SBs in India
240
6.7.1 Analysis of Multiple Correlation between Earnings and Profitability

(EPI) and other efficiency measures of the selected PSBs in India
240
6.7.2 Analysis of Multiple Correlation between Earnings and Profitability

(EPI) and other efficiency measures of the selected Pvt.SBs in India
241
6.8 Analysis of Multiple Regression of Earnings and Profitability on Overall

Efficiency Measures
242
6.8.1 Analysis of Multiple Regression of Earnings and Profitability on Overall

Efficiency Measures of the selected PSBs as a whole in India
243

Efficiency Measures of the selected Pvt.SBs as a whole in India
243
6.9 Analysis of Multiple Regression of Earnings and Profitability on Overall

Efficiency Measures of the selected PSBs and Pvt.SBs in India
244

Efficiency Measures of the selected PSBs in India
244

Efficiency Measures of the selected Pvt.SBs in India
246
6.10 Analysis of Correlation coefficient between Non-performing Asset Index

(NPAI) and Social Responsibility Index (SRI) of the selected PSBs and
selected Pvt.SBs in India
250
6.11 Analysis of Performance Efficiency Indices and their Grand Average values
of the selected PSBs and Pvt.SBs in India
253
6.12 Analysis of Rank Sum Tests using Wilcoxon-Mann-Whitney or U-test
254
CHAPTER- 7: COMPARATIVE PERFORMANCE OF SELECTED

PUBLIC SECTOR AND PRIVATE SECTOR BANKS
257-310
7.1 Capital Adequacy Analysis of Selected PSBs and Pvt.SBs
258
7.1.1 Analysis of Capital Risk Weighted Assets Ratio (CRAR)
258
7.1.2 Analysis of Debt-Equity Ratio
260
7.1.3 Analysis of Advances to Assets Ratio
261
7.1.4 Analysis of Government Securities (G-Sec) to Total Investment Ratio
263
7.2 Analysis of Asset Quality of Selected PSBs and Pvt.SBs
268
7.2.1 Analysis of Net NPAs to Total Assets (%)
268
7.2.2 Analysis of Net NPAs to Net Advances (%)
270
7.2.3 Analysis of Total Investments to Total Assets (%)
273
7.3 Analysis of Management Efficiency
278
7.3.1 Analysis of Business per Employee
278
7.3.2 Analysis of Profit per Employee
280
7.3.3 Analysis of Credit-Deposit Ratio
283
7.4 Analysis of Earning Capacity
288
7.4.1 Analysis of Spread as a percentage of Total Assets
288
7.4.2 Analysis of Percentage growth in Net Profit
289
7.4.3 Analysis of Interest income to Total Income (%)
291
7.4.4 Analysis of Non-Interest Income to Total Income (%)
293
7.5 Analysis of Liquidity
299
7.5.1 Analysis of Liquid Assets to Demand Deposits (percentage)
299
7.5.2 Analysis of Liquid Assets to Total Deposits (percentage)
301
7.5.3 Analysis of Liquid Assets to Total Assets (percentage)
304
7.6 Analysis of Mean Rank and Overall Rank in CAMEL Model
309
CHAPTER- 8: SUMMARY OF FINDINGS OF THE STUDY,

CONCLUSION AND SUGGESTION
311-330
8.1 Introduction
311
8.2 Performance of the Selected Public Sector Banks (PSBs)
312
8.2.1 Analysis of Deposits
312
8.2.2 Analysis of Loans and Advances
312
8.2.3 Analysis of Investments
313
8.2.4 Analysis of NPAs
313
8.2.5 Analysis of Cost Minimizing Efficiency, Productivity Efficiency and

Earnings and Profitability Efficiency
314
8.2.6 Analysis of Social Responsibility Performance
315
8.3 Performance of the Selected Private Sector Banks (Pvt.SBs)
315
315
316
316
316

317
318
8.4 Comparative Analysis using Statistical Tools
319
8.5 Comparative analysis using CAMEL model
326
8.6 Conclusion
329
Bibliography
331-336
CHAPTER- 1
GENERAL INTRODUCTION
1.1 Introduction
The banking sector plays a magnificent role in an economy for the smooth as well as efficient
functioning of the different activities of the society. Finance is like blood to every form of
activities. Finance is at the core of socio-economic growth trajectory of a society. The
principal objective of Indian planning had been the attainment of growth with social justice
and equity. Finance which acts as a catalytic agent, is a great necessity. To meet this growing
need of finance, the demand for strengthening the banking system on sound footing gathered
momentum during the early period of independence in India. Banking system occupies an
important place in a nations economy and is indispensable in a modern society. The
overwhelming role of finance in the economic development of a country is well recognized
and forms the core of the money market in economy.
Generally, banks collect money from those who have spare money or who are saving
it out of their income and lend this money out to those who require it. This mechanism of
providing finance is highly valuable and a bare necessary in any community. But the role of
commercial banks is not only confined to savings and its transmission to those who are in a
position to invest it in a profitable enterprise; but also an instrument of credit creation. The
role of bank has been transformed as prime mover of economic change, particularly in
developing countries. It is necessarily more complex in view of dynamic contribution
expected from time to time in the challenging task of optimum economic growth. A
distinguishing feature of Indian banking industry comprises a wide range of functions. The
financial sector plays a major role in mobilization and allocation of financial savings from the
net savers to the borrowers. The banks are the most important segment of the financial sector.
The structure of the banking industry affects its performance and efficiency which in turn
affects the banks ability to collect savings and channelize them into productive investment.
The effective role of intermediation performed by banks adds gain to the real sector of the
economy.
There are different opinions with regard to the origin of the word bank in the
modern sense. According to some authors, the word bank is derived from the French word
bancus or banque which means a bench. Initially, the bankers, the Jews in Italy,
1
transacted their business on benches in the market place. If a banker failed, his banque,
(bench) was broken into pieces by the people, which indicated the bankruptcy of the
individual banker. Some authors say that the word bank is originally derived from the
German word Banck meaning a joint stock fund which was Italianised into banco when
the Germans were masters of a great part of Italy. Banco means heap of money. The word
bank is used in modern times, means an institution accepting money as deposits which are
used for lending.
In India, the Banking Regulation Act, 1949 defines bank as a banking company and a
banking company is a company which transact the business of banking in India [Section
5(c)]. Section 5(b) defines banking as accepting, for the purpose of lending or investment, of
deposits of money from the public, repayable on demand or otherwise and withdrawable by
cheque, draft, and order or otherwise. The present day banker has three ancestors: goldsmiths,
money lenders and merchants. The goldsmiths used to accept money and other important
valuable items of their customers for safe custody and issued receipts of them. These receipts
were used as medium of exchange. The money lenders lent their surplus funds to the needy
and earned income by way of taking high interest. The merchants were primarily traders and
they had to oblige their customers by accepting their money for safe custody. Banking
business was their side occupation. Today, we can see all the characteristics of these three
types of functions in modern banks.
During period of Queen Elizabeth, goldsmiths of England possessed a position for
modern banking in England. They used to receive valuables and funds of their customers for
safe custody and issued receipts acknowledging the same. But their business was affected by
severe restrictions imposed on them by King Charles II and ruined. Ruin of goldsmiths
marked a turning point in the history of English banking which led to the growth of private
banking and the establishment of the Bank of England in 1694. This bank started its
business with a view to finance the governments war with France. The Bank received
subscriptions from the people and it provided loans to the government.
After the enactment of Banking Act of 1833 the growth of joint-stock commercial
banking was accelerated in England. During the 19th Century, the growth of modern
commercial banking was found in England.
In India, Banking is indeed as old as Himalayas. During the Vedic period, banking
system was found in India in an unorganized manner. The books of Manu contained
references regarding deposits, pledges, policy of loans and rates of interest etc. In those days
banking meant money lending and characteristics of modern banking were not found.
2
The first joint stock bank was set up in 1770 at Calcutta under European management
by the name of Bank of Hindustan. Thereafter, East India Company established three
Presidency Bank in India Bank of Bengal (1806), Bank of Bombay (1840) and Bank
of Madras (1843). The first purly Indian joint-stock bank was the Oudh Commercial Bank
which came into existence in 1889. These three Presidency Banks were merged in 1921 as
per the Imperial Bank of India Act 1920 and renamed as Imperial Bank of India. On the
basis of recommendations of the Hilton Young Commission in 1926, Government passed the
Reserve Bank of India Act, 1934 to establish a central bank in the country as a share-holders
bank. Reserve Bank of India was established in 1935. Initially, it was established as a private
shareholders bank with a fully paid-up capital of `5 crore. In 1949 the Banking Regulation
Act was passed and the Reserve Bank of India was nationalized on 1.1.1949. This Act gave
extensive controlling powers to the Reserve Bank of India and the Government over the
commercial banks. Enactment of the Banking Regulation act and nationalization of RBI were
the precursor of the structural reforms in the Indian banking system during post-independence
period. These two events proved to be the turning points in the development of Indias
commercial banks.
On the recommendation of the Rural Credit Survey Committee, the Imperial Bank of
India was renamed as the State Bank of India on July1, 1955 as per SBI Act 1954 and the
State Bank Group was established in 1960 as per State Bank of India (Associate Banks) Act
1959. SBI and its associate banks opened new offices especially in the rural and semi-urban
areas and even in those areas where people were never still served by the banks. This attempt
proved to be fruitful in increasing quantum of deposits of commercial banks.
But almost all the commercial banks except the SBI and its associate banks were
mainly controlled by big business houses. They were mainly concerned with the
maximization of their private gains and not concerned with serving social interests.
Concentration of wealth and economic power was in the hands of a few industrialists and
monopolistic business in banking system was created. The lending policy of the commercial
banks was highly discriminatory. They did not grant credit to priority sectors like agriculture,
small-scale industries and big and established business firms. Even, they were not interested
in opening offices in semi-urban and rural areas due to lack of profitability. Credit policy of
banks also encouraged some antisocial and illegal activities such as hoarding, black
marketing etc. against the general public interest. To overcome these unfair affairs of the
banks the Government nationalized 14 commercial banks with deposits of `50 crore or more
on 19th July, 1969. On 15th April, 1980, the Government again nationalized another 6
commercial banks.
After nationalization, there had been a rapid progress in branch expansion of public
sector banks. New branches were opened in the rural and semi-urban areas without any
banking facilities. There had been massive rise in the deposits of the commercial banks. On
the one hand, massive deposit mobilization and on the other hand rapid expansion of money
supply caused phenomenal growth in credit supply. After nationalization, there was a
remarkable change in the credit policy of the banks. Credit to the priority sectors especially
agriculture, small industry and business and small transport operators were given more
importance by the policy makers. In addition to, other priority sectors, such as retail trade,
professional and self-employed persons, education, housing loans for weaker sections and
consumption loans were also included. Various innovative schemes such as village adoption,
agricultural development branches and equity funds for small units etc. were introduced for
the potential disbursement of bank credit. For making the banking sector an integral part of
the planning process in the country, credit planning was introduced. Banks prepared quarterly
credit budgets to bring about more correlation between the demand for and supply of credit.
Despite a massive rise in deposit mobilization and in credit granting, public sector banks
suffered from low profitability over the years. Several public sector banks and financial
institutions became weak financially and some public sector banks incurred losses year after
year.
Low profitability of public sector banks in India was caused due to two factors- (i)
declining interest income and (ii) increasing cost of operation for banks. Public sector banks
had to keep high proportion of their deposits with RBI in CRR (Cash Reserve Ratio) and SLR
(Statutory Liquidity Requirements) and earned relatively low rate of interest. Further, they
had to allocate a major portion of their deposits to priority sectors under social banking at a
lower rate of interest. Even, at least 1% of the total deposits had to be lent to the weaker
sections of the community at a low concessional rate of interest of 4% only. As a result,
quantum of income earned by them was lower. Above all, the public sector banks were
forced by the government to lend in agriculture and other priority sectors to dubious parties
who were not in a position to repay their dues. Consequently, their loans became had and
doubtful debts commonly known as non-performing assets.
Uneconomic branch expansion, heavy recruitment of employees, growing indiscipline
and inefficiency of the staff due to trade union activity, low productivity, heavy salary bill
etc. caused rise in cost of production of public sector banks (PSBs). For these reasons, on one
4
side PSBs low interest income and on another side, their mounting expenditures reduced
their profitability.
Besides these, they were not customer-friendly at all and their work technology was
outmoded. As a result, they were not in a position to meet challenges in a competitive
environment. So, there is an urgent need of certain reforms so that PSBs can get out of their
weaknesses.
In modern era, the process of globalization has imparted its huge influence on the
Indian banking industry. In the post liberalization period, there was an ardent need to bring
about structural changes in the Indian banking system so as to make it economically viable
and competitively strong.
Therefore, the Government of India set up a High Level Committee with Mr. M.
Narasimham, a former Governor of RBI, as chairman to examine all respects relating to the
structure, organization, functions and procedures of the financial system. Based on the
recommendations of the Narasimham Committee, the first phase of Financial Sector Reforms
was initiated in 1991. The second phase of Banking Sector Reforms was initiated in 1998.
The major reform measures are given below:
(i)
Progressive reduction in Cash Reserve Ratio and Statutory Liquidity Ratio.
(ii)
Phasing out concessional rate of interest to priority sectors.
(iii) Deregulation of interest rates.

(iv) Introduction of prudential norms relating to capital adequacy, asset qualification,
provisioning and income recognition.
(v)
Setting up of new private sector banks with a view to inducing greater

competition and for improving operational efficiency of the banking system.
(vi) Entry of foreign banks to open offices in India either as branches or as

subsidiaries.
(vii) Setting up of Lok Adalats, Debt Recovery Tribunals, Asset Reconstruction
Companies, Settlement Advisory Committee, Corporate Debt Reconstructuring
Mechanism etc. for quicker recovery / restructuring. Promulgation of
Securitization and Reconstruction of Financial Assets and Enforcement of
Securities Interest (SARFAESI) Act and its subsequent amendment to ensure
creditor rights.
(viii) Establishment of the Board for Financial Supervision as the apex supervising
authority for commercial banks, financial institutions and non-banking financial
companies.
5
(ix) Introduction of CAMELS supervisory rating system, move towards risk-based

supervision, consolidated supervision of financial conglomerates, strengthening
of off-site surveillance through control returns.
(x)
Recasting of the role of statutory auditors, increased internal control through

strengthening of internal audit.
(xi) Setting up of INFINET as the communication backbone for the financial sector,
introduction of Negotiated Dealing System (NDS) for screen-based trading in
government securities and Real Time Gross Settlement (RTGS) System etc.
1.2 Significance or relevance of this study

Government regulation, in most of the countries shielded the banks from the forces of
competition. India is no exception for this. With the nationalization of the most of the major
commercial banks in 1969, restrictions on entry and expansion of private and foreign banks
were gradually increased. The Reserve Bank of India also began enforcing uniform interest
rates, spreads and service changes among nationalized banks.
This cause of lack competition either among public banks or between the public and private
banks and gradually eroded the spirit of competition from the banking sector. In addition, the
labour policies of the public sector where employees salaries and promotions are not linked to
their job performance has also led to a steady decline in the efficiency, quality of customer
services and work culture in the banks.
In added some areas of concern in the form of increasing non-performing assets,
declining profitability and efficiency, which were threatening the viability of commercial
banks. In the light of this facets of banking, the Ghosh committee in 1985, Vaghul group in
1987 and Narasimham Committee in 1991 were appointed to improve the productivity,
profitability and efficiency of the financial sector in general and baking sector in particular.
Commercial banks have played a vital role in giving direction to economic
development by catering the financial requirement of trade and industry in the country. By
encouraging thrift among the people, commercial banks have fastened the process of capital
formation. Banks draw the community savings into the organized sector which can then be
allotted among the different economic activities according to the priorities laid down by
planning authorities in the country. The banks are not only the safe deposit vaults for these
savings, but taking the banking system as a whole, they also create deposits in the process of
their lending operations. However, the important function of a banker is the provision of
convenient machinery by which people can make payments to each other without having to
walk round each others house with bags of coins.
Banks also exercise influence on the level of economic activities through the creation
of manufacturing of money. Through their lending policies, they divert the economic activity
to the needs of the country. In view of this, the role of commercial banks in underdeveloped
countries and planned economies like India becomes particularly important. Though levels of
income in India are very low, yet these are pocket, where savings could accrue. But they do
not find appropriate avenues for its employment, of which the commercial banks are a
significant organ, help in capital formation a necessary condition for growth. As admitted by
the lending bankers, banking is the kingpin of the chariot of economic process. As such its
role in expending economy of a country like ours can neither be under estimated nor
overlooked. The success of our giant five year plan is dependent, among other things on the
smooth and satisfactory performance of the role by banking industry of our country.
Innovation is the most essential tool for economic progress of an economy.
Innovation is the function of the entrepreneur and it requires fund for implementation. The
entrepreneur often cannot bring about these innovations for lack of available finance. In such
a situation, banks may come forward and pay special attention in financing business of
innovation by providing cheap and adequate credit.
Since 1992-93, the structure of the Indian banking system has undergone several
changes in terms of scope, opportunities and operational buoyancy etc. The commercial
banks have been facing much competition in the intermediation process from term lending
institutions, non-banking intermediaries, chit funds and the capital market. To compete with
them efficiently, the commercial banks have been permitted to undertake new activities like
investment banking, securities trading, insurance business etc, on a selective basis at par with
the competitors. Besides, new banking services like ATM and internet banking have been
emerged due to the advancement of computers and information technology.
The success of economic growth of a country mainly depends on the effective
performance of banks. Indian capital market is highly dependent on the growth and prosperity
of banking sectors. Therefore, it is high time to evaluate the financial performance of Indian
banking companies. In this backdrop, the present study seeks to examine the trends in the
financial performances of 20 top banking companies, major players in the Indian money
market, during the period 2001-02 to 2010-11. All the banking companies have been selected
on the basis of their total income and balance sheet size.
The selected banking companies are:

A. Public Sector Bank (PSBs)
B. Private Sector Banks (Pvt.SBs)
1. State Bank of India (SBI)
1. ICICI Bank Ltd. (ICICI)
2. Punjab National Bank (PNB)
2. HDFC Bank (HDFC)
3. Bank of Baroda (BOB)
3. Axis Bank Ltd. (AXIS)
4. Bank of India (BOI)
4. Federal Bank Ltd. (Federal)
5. Canara Bank (CB)
5. Jammu and Kashmir Bank (J&K)
6. Union Bank of India (UBI)
6. Indusind Bank Ltd. (Indusind)
7. Central Bank of India (CBI)
7. ING Vysya Bank (ING Vys)
8. Syndicate Bank (SB)
8. Karnataka Bank (K.Bnk)
9. Oriental Bank of Commerce (OBC) 9.South Indian Bank (SIB)

10. UCO Bank (UCO)
10. Karur Vysya Bank (K.Vys)
1.3 Objectives of the study

This study is to give a focus on the evaluation of comparative financial performance
of the banking institutions in the selected public and private sector banks in India during the
period 2001-02 to 2010-11. The role of banks in promoting the economic and social welfare
for the betterment and advancement of the life of the community is well recognized. This
study has the following specific objectives:1.
To make a comparative analysis of the financial performance of selected public

and private sector banks in India during the period covered in the study based on
mobilization of deposits from the public which is an important function of every
commercial bank. Performance of a bank to a greater extent depends on the
quantum of deposits as it is the important source of funds. Performance of the
selected banks in respect of deposit mobilization both in absolute and in relative
terms will be examined in the study.
2.
To evaluate the financial performance based on the deployment of funds in the

form of granting loans and advances or investment which is another important
function of any banking business. So, the study will also examine the
performance of the selected banks in the field of loans and advances and
investment position during the period under study.
3.
Credit management has become the major challenge for the banking system.
Mounting NPAs are adversely affecting the profitability, liquidity and solvency
position of a bank. Present study will examine the comparative efficiency of the
selected public sector and private sector banks relating to management of NPAs
and also relating to recovery of loans and advances during the study period.
4.
To make an estimate of the selected public and private sector banks in regard to
their contribution into the society based on the advances to the priority sectors
and wage bills payment to the employees.
5.
Based on few selected relevant ratios another objective of the study is to

examine the performance of the banks in respect of productive efficiency,
efficiency in managing cost items and earnings and profitability efficiency,
though in the old ideology of Indian banking, profitability was not considered
here as a prime objective. Due to tough competition between private sector and
public sector banks along with the counterparts of foreign banks, profitability
has got utmost importance for the survival and growth of any banking business.
The study will examine this issue.
6.
To find out the overall strengths and weaknesses of the selected private and
public sector banks in terms of their financial performance through the
technique of ratio analysis and other statistical tools.
7.
Capital adequacy, asset quality, management, earning capacity and liquidity are
the important parameters of performance of any banking sector. CAMEL
evaluates five key components (Capital, Asset, Management, Earning and
Liquidity) to judge the overall efficiency of operations. The present study seeks
to evaluate the overall performance through CAMEL ratings of the banks under
study.
8.
To suggest measures to improve the performance of public and private sector

banks.
1.4 Hypothesis of the study

The hypothesis of the study rests on the premises that the performance of the private
sector banks is better as compared to that of the public sector banks during the period of
study from the bankers viewpoints but from the social viewpoints, the selected public sector
banks are better performer.
1.5 Data source

The data of the selected banking companies for the period 2001-02 to 2010-11 used
in this study have been collected from the secondary sources, i.e. Reserve Bank of India
Publication, Annual Reports of RBI, various issues of Economic Review of RBI, Statistical
Tables Relating to Banks in India and websites of Reserve Bank of India, websites of selected
public and private sector banks, Indian Bankers Association Bulletins, Capitaline corporate
database, Reserve Bank of Indias Report on Trend and Progress in Banking (RBI, 2010).
For collecting relevant data for the purpose of conducting the research work internet surfing
has also been made for obtaining the requisite and latest information.
1.6 Research Methodology

Ten leading Indian banks from the public sector and ten banks from the private sector
have been selected for this study. All these banks have been selected on the basis of quantum
of total income and balance sheet size.
The selected relevant parameters like mobilization of deposits, loans and advances,
investment, return on assets, earnings and expenses, responsiveness of earnings to expenses,
capital asset risk weighted assets ratio, interest cost of deposits, interest cost of borrowings,
ratio of intermediation cost to total assets, ratio of burden to total assets, output-input
analysis, business per employee, profit per employee, spread as a percentage of total assets,
interest yield on loans, interest yield on investment and bank balances, intermediation costs
to total assets, debt-equity ratio, advances to assets ratio, total investments to total assets,
cash-deposit ratio, credit-deposits ratio, percentage growth in net profit, interest income to
total income, non-interest income to total income, wage bill to total income, priority sector
advances and non-performing assets of the selected public sector and private sector banks
will be considered to study the operational performance whereas average, percentage, rank,
ultimate rank, tables, charts, graphs have been used for their analysis for the study period
2001-02 to 2010-11. The technique of ratio analysis, simple mathematical and statistical
techniques like measure of central tendency, correlation analysis, regression analysis, trend
analysis,t-test, F-test will be used at appropriate places.
1.7 Limitations and Assumptions of the study

The study has the following limitations and is based on certain assumptions:
a. The study is limited to only ten years period (i.e. 2001-02 to 2010-11).
b. The study is limited to the published secondary data of annual reports of RBI, Reserve
Bank of India Publications, various issues of Economic Review of RBI, Statistical
Tables Relating to Banks in India and Indian Bankers Association Bulletins, Reserve
Bank of Indias Report on Trend and Progress in Banking (RBI, 2010).
c. It is assumed that the selected banks under study have given much emphasis on
creation of money and profits by lending loans and receiving deposits and by other
10
activities keeping in mind their obligations to the society for using public money and
for enjoying social and economic franchise for utilizing and holding of money
resource.
d. While selecting the public and private sector banks for research purposes, focus has
been given on the basis of the availability of requisite information needed for
conducting the research.
1.8 Plan or structure of the Study

The study is divided into eight chapters as follows:
CHAPTER- 1 is the introductory part containing the objectives, hypothesis, data

source, research methodology, significance or relevance or importance of the
study, limitations and assumptions and plan or structure of the study.
CHAPTER- 2 contains review of literature survey.
CHAPTER- 3 deals with history and background of Indian banking system and
brief profiles of selected public and private sector banks.
CHAPTER- 4 examines the performance of selected public sector banks from

different criteria.
CHAPTER- 5 shows the performance of selected private sector banks from

various angles.
CHAPTER- 6 shows the comparative analysis of financial performance of

selected public and private sector banks using relevant statistical tools.
CHAPTER- 7 highlights comparative analysis of performance between selected

public sector banks and private sector banks using CAMEL model.
CHAPTER- 8 gives summary of findings, suggestion and conclusion.
11
CHAPTER- 2
REVIEW OF LITERATURE
2.1 Foreign Studies
The issue of efficiency in financial institutions has been the subject of considerable
examination. Berger and others provide a survey of the research on scale and scope
economies, X-inefficiency in banking (which describes all allocative and technical
efficiencies) and the impact on efficiency of bank mergers. (Berger, Hunter and Timme,
1993).
The authors note the research finding that X-inefficiencies account for around 20
percent or more of costs in banking, while scale and product-mix inefficiencies are found to
account for less than 5 percent of costs. They also observe that the measured inefficiency
varies considerably depending on the choice of measurement method. One interesting finding
they highlight is that output inefficiencies are on average larger than input inefficiencies,
which suggests that most of the inefficiencies are in the form of deficient revenues rather than
excessive costs. This suggests that focusing on the cost function could understate bank
inefficiency.
As regards the sources of X-inefficiency, the authors highlight research findings that
suggest this could be the result of agency problems between owners and managers,
regulations and organizational and legal structures and scale and scope of operations.
The literature on bank privatization itself is rather scanty. In one of the few studies of
its kind, Verbrugge, Owens and Megginson(1999) investigated bank privatization that used
public security offerings as the divestment mechanism. Their study covered 65 banks from 12
high information and 13 emerging economies, although pre- and post privatization data was
available for only 36 banks, of which 31 were located in high-information economies and
five in emerging economies.
The authors found limited improvement in bank profitability, operating efficiency,
leverage, and non-interest revenue after privatization. There were significant returns to IPOs
(although there was no information to compare these with market returns), which were
consistent with those found in other non-financial privatization studies and in the IPO
literature in general. This conclusion was limited to high-information economies, as pricing
data for emerging economies was very limited. Seasonal issues were not significantly under
priced.
12
The authors found that the government retained substantial ownership even after the
IPO; only in seven cases was government ownership totally eliminated at the IPO stage and
there were eight cases where such ownership was eliminated with a secondary offering. The
authors are inclined to ascribe the limited improvement in performance post-privatization to
the fact of continued government control over bank decision.
Another study involves a comprehensive survey of government ownership of banks
and an examination of its implications for financial development and economic growth (La
Porta, Lopez de-Silanes and Shleifer(2000). Surveying 92 countries around the world, the
authors find that government ownership of banks is still common. In 1995, 42 percent of the
equity of the top ten banks was owned by government in an average country. The authors
also found that higher government ownership is associated with slower subsequent
development of the financial system, lower efficiency in the financial sector and lower
economic growth. Further, they find that government ownership of banks tends to be more
prevalent in less- developed countries.
Whatever the authors results for developing countries in general, it would be hard to
argue that government ownership of banks has not contributed to financial development in
India. Indeed, as highlighted earlier, the fact of financial deepening is, perhaps, among the
least-contested propositions about government ownership of banks in India. This would hold
even if we went by some of the measures that the authors employ: growth of private
credit/GDP, growth of liquid liabilities/GDP, growth of commercial bank assets/total bank
assets, and growth of stock market capitalization/GDP.
Moreover, this study also finds that state ownership need not always be bad for
growth. The World Bank (2001) notes that the above study does show that at higher per
capita income levels, the negative effect diminishes to become insignificant. Barth, Caprio
and Levine (2001) showed that greater state ownership is associated with higher interest rate
spreads, lower levels of private credit, lower stock market activity and less non bank credit.
They also find that state ownership tends to heighten the probability of crises, although this
finding was not statistically significant. Reviewing further evidence on the subject of
government ownership, the World Bank concludes there is a strong case for moving to sell
government banks, but, for reasons that are clear, it qualifies its recommendation with the
comment that the findings do not demand elimination of all state ownership.
13
The World Bank study also examines the experience of bank privatization in several
countries and documents the gains from ownership, it underlines, are for other things equal,
such as the quality of financial infrastructure and the regulatory environment. It cites the
examples of Chile and Mexico, where there were major banking crises (including costs of 42
percent and 20 percent of GDP respectively) following privatization. This happened because
of an underdeveloped supervisory and regulatory framework. The bank concludes that there
must be a deliberate and credible phasing out of state ownership, going hand-in-hand with a
strengthening of the environment.
2.2 Indian Studies

Studies on bank efficiency and profitability in the Indian context had not been the
sufficient enough of research work since later, profitability was not the objective of Indian
banks there have been many attempts to compare profitability in the various categories of
banks. Many of the studies (Swami and Subrahmanyam, 1993 for instance) have attempted to
focus on profitability within public sector banks in attempt to set benchmarks for laggards.
A field study was conducted by Reddy (1998) after selecting 150 borrower farmers
from small, medium and large group and reported that almost all sample farmers (93%)
from small, medium as well as large size group told that their low income was the main
reason for non-repayment of loan.
Siddiqi, Rao & Thakkar (1999) conducted a study on about 800 top NPA in 17
commercial banks and reported that the diversion of funds like expansion, diversification,
modernization or promoting sister concerns, etc. was the single most prominent reason for the
growth of NPAs in public sector banks and concluded that the higher NPAs in priority
sector advances have pushed up the overall proportion of NPAs of these banks by about 3%
to 4%.
Kumar (2000) analysed the trends of NPAs in RRB at all-India level through the
classification of loan assets and size of NPAs and pointed out that the percentage of gross
NPAs at all-India level, though declined over the periods, remained at a very high level
(28%) at the end of March 1999.
An empirical study on determinants of Off-Balance Sheet Activities of Public Sector
Banks in India was conducted by Nachane and Ghosh (2002). The main objective of this
study is to identify the factors influencing off-balance sheet (OBS) activities of public sector
banks in India. For the purpose of the analysis, pooled data models are used for the period
1995-96 to 1999-2000. The results indicate that (i) size plays an important role in influencing
14
OBS activities and (ii) higher the levels of capital and liquid assets, lower the incentive of the
banks to engage in OBS activities.
Saha (2002) conducted a study on credit card in India at the growth stage in plc. The
objective of this study is a comparative study on customer benefits provided by banks to its
credit card customers vis--vis profit maximization of banks through best possible credit
management in Credit Card Business in India. This study concludes that credit card is in the
growth stage in the context of PLC, so far as India is concerned and that is the reason why a
lot of foreign banks like ABN-AMRO and private sector banks like IDBI, HDFC etc. are
planning to introduce credit card as their latest product. It is estimated that by another 5 years
number of credit card holder would be tripled if not quadrupled as compared to today, in
India.
Bhattacharya and Das (2003) conducted a study which examines the nature and the
extent of changes in the market concentration in the Indian banking sector and their possible
implications on prices and output of banking services. The first part of this study attempts to
measure market concentration in banking in India in alternative ways from 1989-90 to 200001. It focuses on both static and dynamic measures of market concentration. The paper finds
a strong evidence of change in the market structure occurred during the early 1990s. Despite
a spate of mergers during the late 1990s, market concentration was not significantly affected.
It is also observed that the different concentration ratios rank the changes similarly over time.
The second part of the paper analyses the possible impact of changes in banking market
structure on prices and output of this sector during the same period. It is demonstrated that
measurement problem of real output pertaining to banking sector in the national income data
could be severe. The implied inflation as obtained through the GDP deflator for the banking
sector in India led to unbelievable measures of inflation for banking services, casting some
doubt on the methodology adopted. Alternatively, proxy price measures based on the spread
appear to be more consistent with the changes in market structure in India during the late
1990s. The paper argues that the favorable market structure in India could be one important
factor that led to a reduction in the prices of banking services after the administered interest
regime was lifted.
Ranjan and Dhal (2003) conducted an empirical study on non-performing loans
(NPLs) and terms of credit of Indian Public Sector Banks. This study attempted an empirical
analysis of the NPLs of public sector banks in India and investigated the response of NPLs to
terms of credit, bank size and macroeconomic conditions. The empirical results from panel
regression models suggested that the terms of credit variables have significant effect on the
15
banks NPLs in the presence of bank size and macroeconomic shocks. Moreover, alternative
measures of bank size could give rise to differential impact on banks non-performing loans.
In regard to terms of credit variables, changes in the cost of credit in terms of expectation of
higher interest rate induced increase in NPLs. On the other hand, factors like horizon of
maturity of credit, better credit culture, favourable macroeconomic and business conditions
lead to lowering of NPLs.
Maji and Dey (2003) concluded a case study of the Khatra Peoples Co-operative
Bank Ltd (KPCB), an Urban Co-operative Bank (UCB) in the district of Bankura in west
Bengal regarding management of NPAs. This study makes an attempt to analyse amountwise, age-wise, loan head-wise and sector-wise classification of NPAs and identify the
factors responsible for the growth of NPAs of KPCB. This study reveals that the gross NPAs
(both in absolute and relative terms) of KPCB, though lower than other UCBs operating in
this district, has not improved significantly during the study period. Higher proportion of
NPAs in unsecured loans, increasing NPAs in service security loans and high level of NPAs
in hypothecation loans are important factors for the growth of NPAs. Another alarming factor
is that the quantum of doubtful asset is very high. It is clear from this study is that the KPCB
has already taken certain steps to reduce NPAs in service security and hypothecation banks.
Lastly, this study concludes that KPCB should adopt certain further steps to reduce substandard and mounting doubtful assets.
Misra (2003) conducted a field study in which he examined whether allocative
efficiency of the Indian Banking System has improved after the introduction of financial
sector reforms in the early 1990s. For this study, allocative efficiency has been studied for 23
states of India and also estimated for two periods (1993-2001) to get a comparative
perspective. This study concludes that improvement has been observed in the overall
allocative efficiency in the post-reform period for the majority of the states and the improved
allocative efficiency is more marked for the services sector than for industry across the states.
Gani and Bhat (2003) conducted a comparative study on service quality in five
commercial banks (including private sector, public sector and foreign banks) of selected
states of Northern India. For this study, 800 customers of banks were chosen by using the
method of simple random sampling based on all important demographic characteristics like
age, education, income, profession and geographic location of bank. For examining service
quality and its five dimensions (Tangibility, Reliability, Responsiveness, Assurance and
Empathy) in banks, SERVQUAL Model was used. This study concluded that service quality
of foreign banks was comparatively much better than that of Indian banks and suggested
16
heavy investment by Indian banks in tangibility dimensions to improve the quality of service
to the customers.
A case study of Jammu and Kashmir Bank Ltd. in regard to Transformative Role of
Information Technology in Promoting HRD was conducted by Rohmetra (2004). This study
highlights the need for taking a transformative view for Information Technology Systems
with due appreciation of HRD-IT interface. The aim of this study is to ascertain the current
status of IT in the Jammu and Kashmir Bank Ltd., besides commending on its transformative
efficacy in terms of how people feel about the technological change in the bank. This study
reports that employees in J&K bank have been able to deliver good services with efficiency
un spite of certain inadequacies in the system and there has been a need for supportive
development culture with a sharp focus on adequate and appropriate training interventions
considered cardinal for maneuvering fundamental transitions in banking business.
A comparative study on performance evaluation of Indian commercial banks was
conducted by Ram Mohan and Ray (2004). This study attempts a comparison of performance
among three categories of Indian banks-public, private and foreign, using physical quantities
of inputs and outputs, and comparing the revenue maximization efficiency of banks during
1992-2000. This study concludes that public sector banks performed significantly better than
private sector banks but no differently from foreign banks. The conclusive points to a
convergence in performance between public and private sector banks in the post-reform era,
using financial measures of performance.
A study of mergers and acquisitions in the banking industry in India was conducted
by Selvam, Vanith and Babu (2005). The main objective of the study was to analyze and
compare the financial performance of merged banks in terms of their growth of total assets,
profits, revenue, investment and deposits before and after merger. The performance of
merged banks is compared taking four years of pre-merger and four years of post-merger as
the time frame and the year of merger uniformly included in the post-merger period of all
sample banks. In this study, seven banking units (SBI, Oriental Bank of Commerce,
Centurion Bank, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank) were
randomly Drawn from the 20 banking units which had undergone mergers and acquisitions.
In order to evaluate the performance, statistical tools like mean, standard deviation and t-test
were used. The growth rates of sample banks for all variables (mean values of variables
before and after mergers) have been analyzed. This study concludes that the performance of
ICICI Bank is high in the growth of all respects (except deposit) than that of other sample
banks taken for this study. This study also suggests that if the banks want to proceed through
17
merger & acquisition, they have to proceed more carefully so that they can avoid the common
mistakes associated with merger & acquisition activities.
Ghosh and Das (2005) conducted an empirical study on depositor discipline in the
banking sector in India. This study traces the determinants of depositor discipline in Indian
banking. Using annual data on commercial banks covering the period 1996 to 2003, the
findings reveal that, while bank-specific factors are dominant in case of state-owned banks,
systematic variables tend to overwhelm bank-specific factors in explaining behavior of
depositors of private banks. In case of private and foreign banks, policy announcements have
an important bearing on the dependent variable. For state-owned banks, larger asset translates
into higher deposit growth, suggesting that depositors are sensitive to the to-big-to-fall
effect. Finally, insured depositors tend to exercise discipline by compelling banks to pay a
higher price on deposits.
A study was conducted by Chakraborty (2005) on Management of NPAs- Trends and
Challenges. Need for managing NPAs, present situation in Indian banks, strategies adopted
by banks to reduce NPAs are discussed in this study.
A study regarding growth of retail banking was conducted by Sudhir (2005) in which
it was found that the existing potential of retail banking was untapped in rural and semi-rural
areas and that hitherto untapped clientele provided a good and vast opportunity for growth in
this segment.
Mahakud and Bhole (2005) conducted an empirical study on Bank as Source of
Finance- Evidence from Indian Corporate Sector. This study analyses the trends in
commercial bank financing of Public Limited Companies (PULCos), Private Limited
Companies (PRLCos) and Foreign Companies (FRCos) in India during the period of 1966-67
to 2001-02 and estimates panel data models by using data for 500 companies listed in
S&PCNX 500 Index of NSE India for the period 1996-97 to 2003-04, for empirically
identifying the determinants of corporate bank borrowings. From this study, it has been found
that the dependence on bank borrowings is high in the case of PRLCos than PULCos and
FRCos in India. An industry wise analysis also has been carried out to know the dependence
on bank borrowings of the various industries in India. From the econometric analysis it has
been found that the variables like size of the company, debt to equity ratio, return on assets,
Tobins Q-ratio, Altmans Z-score and tangibility are the major determinants of bank debt in
the case of Indian Corporate Sector.
Krishnaveni and Prabha (2005) conducted a study to analyse the internal service
quality perceptions of bank employees. According to them developing long-term relations
18
with the external customers depends primarily on the superior quality of service delivered to
the customer which, in turn, depends on the quality and capability of the internal; customers
(employees) of the bank, as they play a major role in the service delivery process.
A field study was conducted by Bodla (2005) after selecting 226 customers from four
selected private sector banks and four selected public sector banks of only urban areas of
Northern India for the period during September03 to January04. This study was designed to
determine expectations and perceptions of the quality of services offered by selected
commercial banks by using SERVQUAL Model. This study finds that the performance of
selected banks falls short of the expectations of customers on a large majority of the elements
of service quality and concluded that service quality of private sector banks was better than
that of public sector banks on all dimensions except assurance where the later had an edge
over the former.
A study regarding Service Tax on Banking Services was conducted by Dehaleesan
(2005). This study gives us a broad view of the operation of Service Tax on Banking. In this
study, various relevant matters regarding service tax such as applicability of the Act, specific
exclusions, registration to be followed for proper compliance, method of valuation and also
the Cenvat Credit utilization are discussed. Findings of this study is that except interest
income all other income (particularly fee-based) attracts Service Tax. It is indeed imperative
that the banks avail the Cenvat Credit available via various input services/input (including
Capital Goods), lest it dents into the bottom line.
Bagchi (2005) conducted a study on Basel II Accord on Operational Risk
Management in Indian banking sector. In this study, the author says that in view of Basel II
Accord, operational risk management in banking will need new skill sets aided and supported
by an articulated Operational Risk Policy of each bank. He concludes that Basel II Accord on
Operational Risk Management is a welcome move. This will surely strengthen the business
orientation and focus of Indian Banking. Furthermore, since each bank is likely to have a
specific Operational Risk Policy, it will provide a clear direction to operating staff and
simultaneously enable Top Management to monitor and control the risk on an ongoing basis.
Basic Indicator Approach is a simple and viable method of capital computation it would set
apart necessary amount to take case of Operational Risk in tune with integral best practices.
Chakrabarti and Chawla (2005) conducted a study on bank efficiency in India since
the Reforms. They apply the increasingly popular methodology of Data Envelopment
Analysis (DEA) to evaluate the relative efficiency in Indian banks during the period 19902002 after selecting 70 banks out of over 100 commercial banks operating in India. This
19
study suggests that on a value basis, the foreign banks, as a group, have been considerably
more efficient than all other bank groups, followed by the Indian private banks. From a
quality perspective, the Indian private banks dominate with foreign banks coming up last.
Bhayani (2005) conducted an empirical study on retail banking awareness among 200
customers having their current accounts with private banks, nationalized and co-operative
banks in the Rajkot city of Gujarat. The objective of this study was to compare the services
provided by different private sector banks in the Rajkot city and also to know the customers
awareness about the services provided and how often they utilized these services. This study
concluded that in India, due to various factors like illiteracy etc, the IT awareness of the
customers was still very low. So, the banks needed to put major efforts towards educating the
customers for building up an IT savvy customer base.
Roy (2006) conducted a study on bank lending to priority and retail sectors during the
period from 1996-97 to 2004-05. For this study, 47 Indian scheduled commercial banks,
which accounts for about 90-95 percent of bank credit of all scheduled commercial banks
were selected. From this study, it is clear that there has been a structural shift in credit
delivery of scheduled commercial banks from priority sectors i.e. agriculture, small-scale
industries, to services and retail sectors during the last few years.
A study, Chidambaram and Rama (2006), examines how an employer can influence
the job satisfaction of an employee at the work place so that his job performance can be
enhanced. For this study, 200 bank employees (50 officers and 150 clerks) of 114 bank
branches consisting of 97 public and 17 private sector bank branches operating in Kamarajar
district were selected randomly. Several statistical tools i.e. Chi-square test, Multiple Linear
Regression Analysis, Inter-correlation Analysis, Factor Analysis were adopted for various
purposes. This study gives us some findings that the efficiency and performance of an
employee are often hampered by his socio-economic conditions. As these are out of the
periphery of formal organizational jurisdiction and could hardly be changed, it is always
better for the management to concentrate on the job variables, such as pay and benefit
satisfaction, promotional opportunities, equipment and resources, to aiming, workload and
supervisory relationships, which determine job satisfaction and are considered deficient areas.
Neetu Prakash (2006) conducted a comprehensive study on the growth of retail
banking in India. The findings of this study indicate that the growth of retail banking is an
important milestone in Indian banking sector developments, through the growth of retail
banking in India is very small as compared to work standards. The study also finds that the
20
performance of private sector banks in respect of retail banking is much better than that of
their public sector counter parts.
Srivastava, Halani and Bajpai (2006) conducted a study on the impact of banking
reforms on role clarity of Indian public sector bank employees. Role clarity is one of the
important factors at work culture. This study is based on about 120 respondents selected
randomly from middle and top-level management of five different branches of one of the
topmost public sector bank in the Chhattisgarh region. A questionnaire developed by
Sinha(1990) was used for ascertaining the degree of role clarity. The items reliability of
questionnaire was found to be 0.785 (Cron batch alpha value). The outcome of this indicates
that role clarity of public sector bank employees has increased in the post-reform era.
A study conducted by Bhasin (2006) shows that leading banks are using Data Mining
(DT) tools for customer segmentation and profitability, credit scoring and approval,
predicting payment default, marketing, detecting fraudulent transaction etc.
Maji and Dey (2006) conducted an empirical study on productivity and profitability of
select public sector and private sector banks in India. The specific objectives of the study are
(i) to examine the productive efficiency of selected banks during the study period; (ii) to test
how fast the sample banks have been able to improve their respective levels of profitability
with respect to a larger level; and (iii) to examine the factors influencing the profitability of
the selected banks. In this study, five large Indian banks from the public sector and private
sector each have been selected on the basis of highest quantum of deposit mobilization during
the period 1996-97 to 2003-04. a composite productivity index is used to analyze the
productivity efficiency of selected banks. In order to measure the banks efficiency in
achieving the larger level of profitability during the study period, OLS model has been used
and to examining the factors influencing profitability, multiple regression Model has been
used. The study finds that except for a few cases, the productivity index of greater than 1 is
found for all the selected banks, though definite pattern is not noticed. In the matter of
achieving the larger level of profitability by the banks, SBI and PNB are the most successful
banks followed by HDFC Bank and ICICI Bank. Regarding the factors influencing the
profitability, a strong and significant impact of interest spread on profitability is found in case
of SBI, PNB, HDFC Bank and ICICI Bank.
Balasubramanium (2006) conducted a study on Securitisation reforms and Asset
Reconstruction Companies (ARCs). The main objective of this study is to analyse and
explain the reasons for heavy burden of NPAs and role of ARCs in NPA management.
Findings of this study suggest that ARCs have to be set-up on the best professional standards,
21
employing staff with high-level legal and financial expertise on concerning creditors and
borrowers. Further more, ARC is not a panacea for all problems related to NPA management
in the banking sector. Introduction of corporate governance guidelines in banks would be
working as an inspiration towards maintaining financial discipline and upholding the value to
the shareholders/ stakeholders. The ultimate benefit to the economy would arise when these
distresses assets are sold to successful promoters and thus turned into healthier companies
and industrial resurgence is made resulting into better economy.
Shri A.S. Shiralashetu and Dr. Akash S.B (2006) conducted a study on the
Management of NPAs in Indian Commercial Banks. The main objectives of this study are to
(i) analyse bank-wise NPAs (ii) analyse gross and net NPAs to total assets and advances (iii)
analyse sector-wise NPAs and (iv) offer useful suggestions to reduce the NPA in banks. This
study covers the NPAs in public sector, private sector and foreign banks in India. This study
concludes that the problems of NPA are more in public sector banks compared to private and
foreign banks in India. Similarly, the problems of NPA are more in non-priority sector than
priority sector. Further, SSI sector has largest share in the total NPA of priority sector which
affects adversely financial health of banks. Hence, banks in India must apply the principles of
financial management to solve the problems of mounting NPAs.
Prakash (2006) conducted a study on implementation of Basel Norms in Indian
banking sector. The main objective of this study is to observe whether Indian banks,
particularly the public sector banks are ready to implement Basel Norms within the outer
limit of year 2006. This study concludes that banks in India particularly public sector banks
are ready to migrate to Basel Accord II only at a conceptual and academic level. They have to
travel a long distance when it comes to organizational and technological readiness to go
ahead, only then they can compete with international competition smoothly.
A study was conducted by Dey and Maji (2006) on Need to Improve Customer
Service in Banks: An Indian Perspective. An attempt has been made in this study to show
the reasons behind Indian banks increase in their business levels under retail banking in
tough competition and the factors that determine better customer service. This study
concludes that banks should try to retain their existing customers because the cost of retaining
a customer is much lower than the cost of acquiring a new customer and to retain customers
banks should focus on customer needs and wants and increase continuously their service
standards levels.
A study was conducted by Negi and Thakur (2006) on Online Banking. This study
attempts to examine whether banks can meet their clients expectation through online and
22
internet in the competitive environment. Concept of on-line banking, evaluation of on-line

banking, types of on-line banking, how on-line banking helps, current on-line banking
products, advantages of on-line banking, on-line banking on Indian perspective, future of online banking are discussed in details in this study. Lastly, this study concludes that on-line
banking has become a necessary weapon and is fundamentally changing the banking industry
world wide.
Rao, Das and Singh (2006) concluded an empirical study on Commercial Bank
Lending to Small-Scale Industry. This study examines the trends in sectoral allocation of
bank credit to the Small-Scale Industry (SSI) vis--vis non-SSI Sector in the post-reform
period (1992-2003). This study also attempts to understand the variations in bank credit to the
SSI Sector across bank groups and also the influence of the size and performance of banks on
credit to the SSI Sectors. For this study, 97 scheduled commercial banks excluding RRBs are
taken. These banks are classified into four groups, viz, SBI and its associates, nationalized
banks, foreign banks and other scheduled commercial banks. These banks are also classified
broadly into three size classes- small, medium and large, high incidence of bad loans arising
out of SSI advances could be one of the reasons for the declining share of SSI loans of the
commercial banks.
However, a comparative as well as exhaustive study about the financial performances
of public sector banks and private sector banks in India, especially after Banking Sector
Reforms have not been undertaken to highlight their roles in the areas of priority and nonpriority sector lending, management of NPA, interest rate reforms, overall profitability, social
responsibility performance in the form of extending employment opportunities to the huge
number of unemployed youths, in the form of providing adequate wage payment and also
providing soft-term loans to employees to build up employee morale.
23
CHAPTER- 3
HISTORY OF BANKING IN INDIA AND BRIEF PROFILES OF SELECTED
PUBLIC AND PRIVATE SECTOR BANKS
3.1 Brief history of banking in India prior to 1969
The Indian banking system has undergone major changes in the past fifty years.
Structural, financial and geographical changes have taken place in Indian banking system.
The banking activity has now reached the common people. Looking back the history of
Indian banking system, it is observed that Indigenous Bank was an old form of Indian
banking system.
Money lending operation in India was found in the Vedic period i.e. 2000 to 1400
B.C. In the Buddhist period, ample evidence of the existence of sresthis or bankers has been
obtained. They were mainly engaged in lending money to traders, to merchant adventures for
going to foreign countries, to explorers to extract valuable materials from forests and to kings
for meeting financial difficulties due to war or other reasons against the pledge of movable or
immovable property or personal surety.
From the writings of few Muslim historians, European travelers, State records and the
Ain-i-Akbari it is reported that under the early Muslim and Mughal rulers in India indigenous
bankers played a major part in lending money, financing internal and foreign trade and giving
financial assistance to rulers during periods of stress.
The indigenous bankers were usually known as kothiwals, sarafs, shroffs, seths,
chettis or mahajans. They varied in their size from petty money-lenders to substantial shroffs
who carried on large and specialized business. They used to grant loans against all kinds of
securities such as gold, jewellery, land, promissory notes, hundies etc. they also lent against
personal credit of the borrowers.
The East India Company established banks on Western lines in India. As a result,
banks and Government treasuries were established. Indigenous bankers with reduced
resources with a smaller scale of business could not compete with the commercial banks.
In spite of the progress of the join-stock banks, indigenous bankers still carried on a
large amount of banking business throughout India. Because, area of work of join-stock
banks was restricted to metropolitan areas and important commercial centers. But work of
indigenous bankers was still concentrated in rural areas.
24
The first join-stock bank under European management in Calcutta known as the
Bank of Hindustan was established in 1770 by Alexander & Co., one of the leading Agency
Houses. This was the first bank to issue notes. This bank went into liquidation in 1832 with
the fall of the Agency House of Alexander & Co.
Thereafter, East India Company established three Presidency Banks in India. The
Bank of Bengal, the first of the Presidency Banks was established in 1806 as The Bank of
Calcutta and received its charter as The Bank of Bengal in 1809. Other two Presidency
Banks The Bank of Bombay and The Bank of Madras were established in 1840 and 1843,
with a share capital of `50 lakh and `30 lakh respectively. East India Company contributed
`3 lakh in each case and obtained the right to appoint some of their directors.
The Imperial Bank of India Act, 1920 was implemented by amalgamating three
Presidency Banks into the Imperial Bank of India in 1921. It had right to hold government
funds and manage the public debt and not to issue currency. The branches of this bank were
performing their functions as clearing houses.
It was anticipated that the Imperial Bank should gradually be developed into a fullfledged Central Bank. In fact, it performed certain central banking functions such as banker
to Government. But after the establishment of Reserve Bank it ceased to function as a central
bank. It functioned purely as a commercial bank.
On the basis of the recommendation of the Hilton Young Commission of 1926, the
Reserve Bank of India Act was passed in 1934 to establish a Central Bank in the country as a
share-holders bank. Reserve Bank of India commenced its operation on 1st April 1935. It
was originally constituted as a private shareholders bank with a fully paid-up share capital of
`5 crore. In order to bring integration between its policies and those of Government it was
nationalized on 1.1.1949.
Revolutionary changes were found in the Indian banking structure after Second World
War. Many banks began to open branches in different places. The banks started investing
funds on government securities. But till the time of independence, Indian banking system was
not sound even if there were hundreds of small banks under unscrupulous management. In
1949 Banking Regulation Act was passed with a view to restructure commercial banks in
India. For the first time, the Act introduced the licensing system for banking business. This
Act gave extensive controlling powers to the Reserve Bank of India and the Government over
the commercial banks. It had laid down rules and regulations for the opening of banks, their
branches and minimum capital required for opening a bank etc.
25
In 1955, the State Bank of India Act was passed. Rural Credit Survey Committee
recommended that the Government should establish a strong state-owned commercial bank
which would undertake rapid expansion of banking facilities in rural areas. The State Bank of
India (Subsidiary Banks) Act was passed in September 1959, enabling the State Bank of
India to take over eight state-owned or state-associated banks as its subsidiaries. The eight
subsidiaries of State Bank of India were as follows: (i) The State Bank of Bikaner (ii) The
State Bank of Jaipur (iii) The State Bank of Indore (iv) The Sate Bank of Mysore (v) The
State Bank of Patiala (vi) The Sate Bank of Hyderabad (vii) The State Bank of Saurashtra and
(viii) The State Bank of Travancore.
3.2 Nationalization of Indian banks and their progress after nationalization

The banks are viewed as the custodians of savings and considered the powerful
institutions to provide credit. They mobilize the resources from all the sections of community
by way of deposits and provide them to industries and others by way of granting loans.
Soon after independence, the demand for nationalization of banks in India was raised
by some leading members of the Congress party, the socialist and communist parties. The
nationalization of the Reserve Bank in 1949 was the first step in this movement. Another
important event was the passing of the Banking Regulation Act in 1949. This Act gave
extensive controlling powers to the Reserve Bank and the Government over the joint stock
banks.
It was observed that the growth of Indian commercial banking was too slow and
deficient in many respects. Commercial banks were mainly managed by big business houses.
So concentration of wealth and economic powers were in the hands of a few industrialists and
monopoly business in banking system was followed. Banks directors were related to big
business houses. They utilized banks resources by granting of loans to the companies in
which they had interests. Thus, the resources of banks were misused.
The lending policy of the commercial banks was highly discriminatory. They did not
grant credit for the interest of the nation or for the development of the priority sectors. Their
major advances were distributed among large and medium-scale industries and big and
established business firms. They did not give attention to the requirements of priority sectors
like agriculture, small-scale industries, exports etc. Bank finance was also supplied to some
antisocial or undesirable activities like hoarding, black-marketing, speculation etc.
To overcome these deficiencies radical changes were needed in the structure and
functioning of commercial banks. In this respect, a new banking policy was initiated by the
26
Congress Government in 1967, described as the social control of banks. The concept of
social control was in fact, introduced by the AICC Resolution on the eve of the Fourth
General Elections. Social Control of banks was deemed to be a midway between complete
social ownership, i.e. nationalization and maintenance of the status quo. According to the
AICC Resolution, social control means greater participation of banks under the effective
guidance of the State in the mobilization of deposits and allocation of credits to the socially
desirable sectors of the economy, which would ensure enlarged material benefits to the nation
at large.
Government took several steps to exercise control over banks to make banking more
purposeful, more dynamic and more helpful to the common man. These steps are discussed as
follows:
A) A National Credit Council (N.C.C) at an all-India level was established in
December 1967. It was basically designed as an instrument of credit planning. The National
Credit Council consisted of representatives from large, medium and small-scale industries,
agriculture, cooperative sector, trade and bankers and professional accountants. The Finance
Minister was its Chairman and the Governor of the Reserve Bank was vice-chairman. It
started its function from February 1968. The main functions of the N.C.C were:
(i)
to assess the demand for bank credit from different sectors of the economy.
(ii) to determine priorities for granting loans and advances for investment,
considering the availability of resources and the requirement of the priority
sectors, particularly, agriculture, small-scale industry and exports.
(iii) to co-ordinate lending and investment policies as between commercial banks
and the specialized agencies with a view to ensuring an optimum and efficient
utilization of resources and
(iv) to tackle other related issues as may be referred to it by the chairman or the vicechairman of the Council.
B) The Banking Laws (Amendment) Act was passed in December 1968 as legislative
measure for social control over banks and came into effect from 1.2.1969. Main provisions of
this new Act are discussed below:
(i)
The majority of directors of a Bank had to consist of persons having special

knowledge or practical experience in any of the areas such as accountancy,
agriculture and rural economy, banking, co-operative, economics, finance, law,
small-scale industries etc.
27
(ii) Bigger banks had to be managed by whole time chairman possessing special
knowledge and practical experience of working in a banking company or in
finance, economics or business administration.
(iii) At least two directors had to possess special knowledge and practical experience
in respect of agriculture, rural economy and co-operation.
(iv) The banks were also prohibited from making any loans or advances, secured or
unsecured to their directors or to any companies in which they had substantial
interest.
(v) The Reserve Bank was, however, empowered to appoint, remove or terminate
the services of the chairman, any director, the chief executive officer or any
other officer or employee of a bank, under specific circumstances.
(vi) All foreign banks were to set up an advisory board consisting of Indians and
conduct their lending policies and activities under the guidance of such an
advisory board.
(vii) The Government had power to take over any bank in the country, without
resorting to legislation, in the interest of depositors and better provision of
credit.
C) In order to enlarge the commercial banks role in agricultural finance, the
Agricultural Finance Corporation Ltd. was set up in 1968.
D) The RBI also introduced changes in the branch expansion policy, as guided by the
N.C.C for extending banking facilities to wider areas including rural areas of India.
However, the social control measures were not able to achieve the desired social and
economic objectives. Therefore, the Government of India nationalized fourteen major Indian
banks each having deposits of ` 50 crore and above on 19th July 1969. No foreign banks were
taken over. The names of 14 banks taken over by the Government under the Banking
Companies (Acquisition & Transfer of Undertakings) Act of 1969 are:
1.
The Central Bank of India Ltd.
2. The Bank of India Ltd.

3. The Punjab National Bank Ltd.
4. The Bank of Baroda Ltd.
5. United Commercial Bank Ltd.
6. The Canara Bank Ltd.
7. The Dena Bank Ltd.
8. The United Bank of India Ltd.
28
9. The Syndicate Bank Ltd.

10. The Union bank of India Ltd.
11. The Allahabad Bank Ltd.
12. The Bank of Maharashtra Ltd.
13. The Indian Bank Ltd.
14. The Indian Oversease Bank Ltd.
On April 15, 1980, Government took over another six private sector banks whose
reserves were more than `200 crore each. The six banks taken over by the Government under
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 are:
1.
The Andhra Bank Ltd.
2. Corporation Bank Ltd.

3. The New Bank of India Ltd.
4. The Oriental bank of Commerce Ltd.
5. The Punjab and Sindh Bank Ltd.
6. The Vijaya Bank Ltd.
In 1993, New Bank of India merged with Punjab National Bank. As a result, the total
number of public sector banks including SBI and its associates are 27.
3.3 Reasons for Nationalization of Banks:

Bank nationalization in India had to face many criticisms. However, many persons and
authorities have given many reasons for the nationalization of major commercial banks.
A) The then Prime Minister, Smt. Indira Gandhi:
According to the opinion of the then P.M, Smt. Indira Gandhi, private sector banks
were nationalized (i) to remove control of few; (ii) to provide adequate credit facilities to
agriculture, small industry and exports; (iii) to give professional bent to bank management;
(iv) to encourage new classes of entrepreneurs and (v) to provide adequate training as well as
reasonable terms of service to bank staff
B) Other opinions of protagonists of nationalization:
(i)
The Revenue Issue: Nationalization of banks would enable the Government to

obtain all the large profits of the banks as its revenue.
(ii)
The Safety Issue: Nationalization of banks would safeguard and promote the
interests of depositors. As a result, public would deposit their surplus money for
investment in banks.
29
(iii) The Monopoly Issue: All major private banks in India were controlled by one
big business house or the other or jointly by a few of them. Consequently,
concentration of wealth and economic power was in the hands of a few
industrialists. The director of banks had close connections with numerous
companies of big business houses and they used to finance the companies in
which they had interests. Nationalization of banks was desirable to prevent all
such malpractices for the greater highly interest of the society.
(iv) The Use Issue: The huge unlisted money would get the necessary channelization
for use effectively for developing the country.
(v)
The Credit Issue: Private commercial banks adopted traditional approach in their
credit policy which was not conducive to a rapid, balanced development of all
the sectors of our economy. Most of the bank credits were granted to industry
for financing inventory holdings rather than for tits expansion. Nationalization
of banks was considered as important matter to allocate bank finance for the
needs of Indian economic development or a rational perspective.
(vi) The Priority Issue: Private Banks did not grant bank credit for the purpose of
national interest and development of priority sector. Bank credit was not granted
to needy farmers or small-scale industrialists or to new entrepreneurs. Thus,
nationalization of banks was desirable for the benefit of the priority sector under
the schemes of planned economic development of the country.
(vii) Rural Issue: Private sector banks were not interested in opening their branches
in semi-urban and rural areas. Their activities were largely confined to urban
areas and mostly in metropolitan cities. After nationalization, disparity in the
spread of banking facilities would be removed and rural banking would receive
a big push through public sector banking.
(viii) The Service Motive Issue: By nationalization commercial banks would change
their function from profit motive to service motive in order to achieving the goal
of socialism.
(ix) The Equality Issue: After nationalization, wide disparities in the salaries in
different commercial banks would be removed. Before nationalization top
executives of some private banks received unduly high salaries than their
counterparts in the public sector.
(x)
The Tax Issue: The All India Bank Employees Association contended that
nationalized banks would check the incidence of tax evasion and black money.
30
3.4 Criticisms against nationalization of banks

Various criticisms against nationalization of banks were also raised by various experts,
political leaders and authorities. These were much of confusions about the nationalization of
banks as regards effectiveness of fund management, political interference in disbursement of
loans, low profitability etc. Some others severely criticized that nationalization of bank would
destroy the overall banking business in the country. Because of laxity in government control,
banks would not function properly, credit creation and deposit mobilization would be
hampered and common people would be unhappy with the nationalized banks for their
inefficient work and lack of future growth.
3.5 Banking sector reforms in India and growth of new private sector banks
After nationalization, Indian banking system made considerable progress both
functionally and in terms of geographical coverage. Despite a massive rise in deposit
mobilization and in extending the credit facilities, public sector banks suffered from low
profitability over the years. Several public sector banks (PSBs) and financial institutions
became financially weak and some PSBs incurred losses year after year. Low profitability of
PSBs in India was generally caused due to two factors- (i) declining interest income and (ii)
increasing cost of operation for banks. PSBs had to keep high proportion of their deposits
with RBI in Cash Reserve Requirement (CRR) and Statutory Liquidity Requirements (SLR)
and earn relatively low rate of interest. Further, they had to allocate a major portion of their
deposits to priority sectors under social banking at a lower rate of interest. Even, at least 1%
of the total deposits had to be lent to the weaker sections of the community at a low
concessional rate of interest of 4% only. As a result, quantum of income earned by them was
lower. Above all, the public sector banks were forced by the Government to lend in
agriculture and other priority sectors to insolvent parties who were not in a position to repay
their dues. Consequently, their loans became doubtful debts commonly known as nonperforming assets (NPAs).
Uneconomic branch expansion, heavy recruitment of employees, growing indiscipline
and inefficiency of the staff due to trade union activity, low productivity, heavy salary bill
etc. caused rise in costs of operation of PSBs. For these reasons, on the one side PSBs low
interest income and on another side, their mounting expenditures, profitability was reduced.
Besides these, the major causes for poor profitability were political and administrative
interference and control of their working by the Government, poor work culture and general
31
indifference to customer services and vicious trade union activity which periodically
paralyzed the banking system.
In the post-liberalization period, there was an ardent need to bring about structural
changes in the Indian banking system so as to make it economically viable and competitively
strong. Therefore, Government of India set up a High Level Committee with Mr. M.
Narasimham, a former Governor of RBI as chairman to examine all aspects relating to the
structures, organizations, functions and procedures of the financial system. Based on the
recommendations of the Narasimham Committee, the first phase of Financial Sector Reforms
was initiated in 1991. The second phase of Banking Sector Reforms was initiated in 1998.
The main objective of banking sector reforms was to promote a diversified, efficient
and competitive financial system with the ultimate goal of improving the allocative efficiency
of resources through operational flexibility, improved financial viability and institutional
strengthening. As the Indian banking system had become predominantly Government owned
by the early 1990s, banking sector reforms essentially took a two-pronged approach. First, the
level of competition was gradually increased within the banking system while simultaneously
introducing international best practices in prudential regulation and supervision tailored to
Indian requirements. In particular, special emphasis was placed on building up the risk
management capabilities of Indian banks while measures were initiated to ensure flexibility,
operational autonomy and competition in the banking sector. Second, active steps were taken
to improve the institutional arrangements including the legal framework and technological
system. The supervisory system was revamped in view of the crucial role of supervision in
the creation of an efficient banking system.
The Narasimham Committee recommended that the Government should reduce the
SLR from the present 38.5% of the net demand and time liabilities of banks to 25% over the
next five years. As a result, banks could utilize their funds for allocation to agriculture,
industry, trade etc. It also recommended that RBI should rely on open market operations
increasingly and reduce its dependence on CRR. The Committee proposed that:
(i) CRR should be progressively reduced from the present high level of 15% to 3 to 5%.
(ii) RBI should pay interest on impounded deposits of banks above the basic minimum at a
rate of interest equal to the level of banks one year deposits.
The Narasimham Committee recommended that the system of directed credit
programmes should be gradually phased out. It also recommended that priority sector should
be redefined to include only the weakest sections of the rural community such as small and
marginal farmers, the tiny sector of industry, small business and transport operators, village
32
and cottage industries and rural artisans and other weaker sections. The directed credit
programme for this redefined priority sector should be fixed at 10% of the aggregate bank
credit, subject to taking a review after three years.
Another major element of the Banking Sector Reforms has been the introduction of
prudential norms. Reserve Bank of India advised all commercial banks (excluding foreign
banks) on November 7, 1985 to introduce the Health Code classification indicating the
quality (or health) of individual advances in the following eight categories, with a health code
assigned to each borrowal account: 1.Satisfactory 2.Irregular 3.Sick viable 4.Sick-nonviable
5.Advances recalled 6.Suit filed accounts 7.Decreed debts and 8.Bad and Doubtful debts.
Based on the risk-weighted assets of the banks, the prudential norms also prescribe the
minimum capital to be maintained. The BIS (Bank for International Settlements) appointed a
Committee in 1988 to suggest Capital Adequacy and Risk Management measures for
international banks. This Committee is also known as Basel Committee. Narasimham
Committee recommended the adoption of BIS norms on Capital Adequacy for the Indian
banks. This Committee observed that the capital adequacy ratios of Indian banks were
generally low and some banks were seriously under capitalized. The banks in India should
conform to the international standards. These regulations would enhance transparency and
accountability in the operations of the banks thereby compelling them to pay greater attention
to the quality of lending.
One of the major objectives of banking sector reforms had been to enhance efficiency
and productivity through competition. So this Committee recommended that RBI should
permit the setting-up capital and other requirements as may be prescribed by the RBI and the
maintenance of prudential norms with regard to accounting, provisioning and other aspects of
operations. These guidelines are aimed at to ensure that new banks made themselves
financially viable and technologically up-to-date from the start. They should start their
functions in a professional manner, so as to improve the image of commercial banking
system and to win the confidence of the depositing public. New private sector banks such as
UTI Bank Ltd. (now Axis Bank Ltd.), HDFC Bank Ltd., IDBI Bank Ltd., ICICI Bank Ltd.
etc. started their functions and performed efficiently with public sector banks. There should
be no difference in the treatment between public sector banks and private sector banks.
The Committee recommended that the Government should allow foreign banks to open
offices in India either as branches or, where the Reserve Bank considered it appropriate, as
subsidiaries. They should conform to or fulfill the same or similar social obligations as the
Indian banks. Foreign banks and Indian banks should be permitted to set up joint ventures
33
particularly in regard to merchant and investment banking, leasing and other newer forms of
financial services. But for setting up of new private sector banks and new offices of foreign
banks in India, existing public sector banks would have to face competition within their
industry. Therefore, this would improve profitability and also efficiency of banks.
The most disheartening problem facing commercial banks all over the world recently is
the mounting pressure of non-performing assets (NPAs) which are adversely affecting the
profitability, liquidity and solvency position of banks and thus posing challenge to their
ultimate survival. Since the banking sector reforms, NPAs have become the most critical
factor governing the performance of banks. The Committee suggested the Government to
take different actions for quick recovery of NPAs.
A Corporate Debt Structuring (CDR) mechanism had been implemented in 2001 to
provide a timely and transparent system for restructuring of large corporate debts with the
banks and financial institutions.
Indian banking system had been over-regulated and over administered. It was thus
recommended that a strong system of supervision was essential for a sound banking system.
The supervision should be based on an alert mechanism for monitoring compliance with
prudential regulations and directives of the Reserve Bank and other regulatory agencies. RBI
set up a Board for Financial Supervision (BFS) in November 1994, as the apex supervisory
authority with an Advisory Council under the chairmanship of the Governor to strengthen the
supervisory and surveillance system of banks, financial institutions and non-banking financial
companies. The CAMEL model is introduced which evaluated banks Capital Adequacy,
Asset Quality, Management, Earnings and Liquidity. This system covered the mandated
aspects of solvency, liquidity and financial/operational health of banks. With the passage of
time, financial sector supervision was expected to be based on risk-oriented. So, it was
expected that the risk-based supervision (RBS) approach would be more efficient than the
traditional approach. By adopting these powers of RBI, the operations and the operating
environment of the banking sector would be regulated and supervised.
To facilitate the banking business and to foster the growth of banking habit, two other
institutions have been set up. The deposit insurance and credit guarantee corporation of India
undertakes the twin functions of extending the insurance cover to the depositors in the banks
and protect the interest of banks by providing guarantees in respect of advances granted by
them to small scale industries and the priority and neglected sectors of the economy. The
Export Credit Guarantee Corporation (ECGC) provides protection to the banks in respect of
risks inherent in financing the export trade.
34
With the setting up and growth of all these institutions, Indian banking and financial system
may be claimed to have the first set up comparable to any advanced as shown in the
following chart:--
CHART SHOWING INDIAN BANKING SYSTEM

CENTRAL BANK & MONETARY AUTHORITY
RESERVE BANK OF INDIA
APEX BANKING INSTITUTIONS
INDUSTRIAL
DEVELOPMENT
BANK OF INDIA
SMALL INDUSTRIES
DEVELOPMENT
BANK OF INDIA
NABARD
EXIM BANK
NATIONAL
HOUSING
BANK
BANKING INSTITUTIONS
COMMERCIAL
BANKS
REGIONAL RURAL BANKS
PUBLIC
SECTOR
BANKS
PRIVATE
SECTOR
BANKS
CO-OPERATIVE
BANKS
STATE CO-OPERATIVE
BANKS
*DEVELOPMENT BANK
INDIAN
OLD
BANKS
STATE BANK
GROUP
NEW
BANKS
FOREIGN
LOCAL AREA
BANKS
CENTRAL/DISTRICT
CO-OPERATIVE
BANKS
NATIONALISED
BANKS
SUBSIDIARY COMPANIES
STATE BANK
OF INDIA
SUBSIDIARY BANKS
PRIMARY CREDIT
SOCIETIES
SUBSIDIARY COMPANIES
35
* DEVELOPMENT
INDUSTRIAL DEVELOPMENT BANKS
BANKS
LAND DEVELOPMENT
BANKS
ALL INDIA
STATE LEVEL
SFCs
IFCI
LTD.
ICICI LTD.
STATE LEVEL LAND

DEVELOPMENT
BANK
SIDCs
IIBI
PRIMARY LAND
DEVELOPMENT
BANKS
SUBSIDIARY
COMPANIES
SUBSIDIARY
COMPANIES
INVESTMENT INSTITUTIONS
LIC
GIC
UTI
CREDIT GUARANTEE INSTITUTIONS
ECGC
MONEY MARKET INSTITUTIONS
Discount and Finance House of India Ltd.
36
DICGCI
3.6 Brief Profiles of Selected Public Sector Banks (PSBs) in India:

In this section an attempt has been made to highlight in brief the history and background of
selected PSBs in India under the study.
3.6.1 History and Background of State Bank of India (SBI)
State Bank of India is the largest state-owned banking and financial services company
in India. In addition to the banking services, the Bank through its subsidiaries, provides a
wide range of financial services, which include life insurance, merchant banking, mutual
funds, credit card, factoring, security trading, pension fund management and primary
dealership in the money market.
The Bank operates in four business segments, namely Treasury, Corporate/ Wholesale
Banking, Retail Banking and Other Banking Business. The Treasury segment includes the
investment portfolio and trading in foreign exchange contracts and derivative contracts. The
Corporate/ Wholesale Banking segment comprises the lending activities of Corporate
Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group.
The Retail Banking segment consists of branches in National Banking Group, which
primarily includes personal banking activities, including lending activities to corporate
customers having banking relations with branches in the National Banking Group.
SBI provides a range of banking products through their vast network of branches
in India and overseas, with over 16,000 branches. The bank has 156 overseas offices
spread over 32 countries. State Bank of India was incorporated in the year 1955. The
Government of India nationalized the Imperial Bank of India in the year 1955, with the
Reserve Bank of India taking a 60% stake, and name was changed to State Bank of India.
In the year 2001, the SBI Life Insurance Company was started by the Bank. They
are the only Bank that have been permitted 74% stake in the insurance business.
During the year 2005-06, the bank introduced 'SBI e-tax' an online tax payments facility for
direct and indirect tax payment. It also launched the centralized pension processing. As of
March 2010, the Bank had 12,496 branches and 21,485 Group ATMs.
3.6.2 History and Background of Punjab National Bank (PNB)
Punjab National Bank is a state-owned commercial bank located in New Delhi. The
Bank is one of the Big Four Banks of India. They offer banking products, and also operate
credit card and debit card business, bullion business, life and non-life insurance business, and
gold coins and asset management business. They are recognized as the Bank offering highest
levels of customer satisfaction in Delhi and Chennai.
37
The Bank has the largest domestic network of 4997 offices, including 46 extension
counters among Nationalized Banks. All their branches offer Core/ Centralized Banking
Solution (CBS) along with a variety of financial products catering to different market
segments. They has international presence in 9 countries, with a branch at Kabul, 2 branches
in Hong Kong, representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned
subsidiary in UK (with 5 branches), and a joint venture with Everest Bank Ltd,Nepal.
Punjab National Bank was nationalized in July 1969 along with 13 other banks. In the
year 1986, they acquired Hindustan Commercial, which added Hindustan's 142 branches to
the Bank's network.
3.6.3 History and Background of Bank of Baroda (BOB)
Bank of Baroda is one of the leading commercial banks in India. The Bank's solutions
includes personal banking, which includes deposits, gen-next services, retail loans, credit
cards, debit cards, services and lockers; business banking, which includes deposits, loans and
advances, services and lockers; corporate banking, which includes wholesale banking,
deposits, loans and advances and services, and international business, which includes nonresident Indian (NRI) services, foreign currency credits, ECB, offshore banking, export
finance, import finance, correspondent banking, trade finance and international treasury.
The Bank offers services, such as domestic operations and Forex operations. They also offer
rural banking services, which include deposits, priority sector advances, remittance,
collection services, pension and lockers. They also offer fee based services such as cash
management and remittance services. The Bank is having their head office located at Baroda
and their corporate office is located at Mumbai.
Bank of Baroda was incorporated on July 20, 1908 as a as a private bank with the name
The Bank of Baroda Ltd. The Bank was established with a paid up capital of Rs 1 million and
was founded by Maharaja Sayajirao III of Baroda. In the year 1910, the Bank opened their
first branch in the city of Ahmedabad. In the year 1919, they opened their first branch in
Mumbai City. In the year 1953, the Bank opened first international branch at Mombasa,
Kenya.
3.6.4 History and Background of Bank of India (BOI)
Bank of India is a state-owned commercial bank with headquarters in Mumbai. The
Bank provides a wide range of banking products and financial services to corporate and retail
customers. The bank provides specialized services for businesses (dealing in foreign
exchange), NRIs, merchant banking, etc. They also have specialized branches that deal in
asset recovery, hi-tech agricultural finance, lease finance and treasury, and small scale
38
industries. The Bank offers products such as mutual funds, venture capital, depository
services, bullion trading and credit cards.
The Bank operates in three business segments, namely Treasury Operations, Wholesale
Banking Operations and Retail Banking Operations. The Bank is having their presence at 29
locations in 18 countries across four continents. They are having 3101 branches in India
spread over all states/ union territories including 141 specialized branches. These branches
are controlled through 48 zonal offices. Bank of India was incorporated on September 7,
1906 by a group of eminent businessmen from Mumbai. The Bank was stared with one office
in Mumbai, with a paid-up capital of ` 50 lakh. The Bank was the first in India promoted by
Indian interests to serve all the communities of India.
3.6.5 History and Background of Canara Bank (CB)
Canara Bank (Canbank) founded as 'Canara Bank Hindu Permanent Fund' in July of
the year 1906 at a small port in Mangalore, Karnataka, by late Sri. Ammembal Subba Rao
Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.'
in 1910 and became Canara Bank in 1969 after nationalisation. The Bank has undergone
various phases in its growth path over hundred years of its existence. The growth of Canara
Bank was phenomenal, especially after nationalization in the year 1969, attaining the status
of a national level player in terms of geographical reach and clientele segments. Eighties was
characterized by business diversification for the Bank. The Bank has expanded its domestic
presence, with 2678 branches spread across all geographical segments. Apart from 111
specialized service branches, the Bank has 195 Extension Counters.
3.6.6 History and Background of Union Bank of India (UBI)
Union Bank of India is one of largest state-owned banks in India and is listed on the
Forbes 2000. The Bank's business segments include Treasury Operations, Retail Banking
Operations, Corporate Wholesale Banking and Other Banking Operations. They offer various
types of deposits such as savings bank deposits, current deposits, current and savings accoun
(CASA) deposits, and term deposits.
The Bank's advances portfolio includes large corporate advances; micro, small and
medium enterprises advances; agriculture advances, and retail advances. Their retail advances
include home loan, vehicle loan, education and other retail loans. Union Bank of India was
originally incorporated on November 11, 1919 in Mumbai with the name The Union Bank of
India Ltd. In July 19, 1969, the Bank was nationalized and the name of the Bank was changed
to 'Union Bank of India'. Pursuant to nationalization, the Bank sponsored four regional rural
39
banks in 1972. In the year 1975, Belgaum Bank Ltd, a private sector bank was amalgamated
withthe Bank.
3.6.7 History and Background of Central Bank of India (CBI)
Central Bank of India, a public sector banking institution is one of the oldest and
largest commercial banks in India. The bank has their branches in 27 States and four Union
Territories in India. The Bank's main business is taking deposits, lending money and making
investments. They also offer a wide range of general banking services to our customers,
including credit cards, debit cards, cash management and remittance services and collection
services. Central Bank of India was incorporated on December 21, 1911 as The Central Bank
of India Ltd and was founded by Sir Sorabji Pochkhanawala. In May 1, 1929, the Bank
incorporated The Central Bank Executor and Trustee Company Ltd (now known as Centbank
Financial and Custodial Services Ltd) as a subsidiary of the Bank to undertake the trustee and
executor business and act as executors, administrators and trustees and executes private and
public trusts, including, religious and charitable trusts.
In the year 1969, the Bank was nationalized along with 13 other major commercial
banks and the Bank is currently owned by the Government of India. The Bank was renamed
as Central Bank of India. The Bank introduced the credit card in the name 'Centralcard' in the
year 1980. In the year 1984, Indo-Zambia Bank Ltd, a joint venture Bank was incorporated
under the laws of the Republic of Zambia, which carries out banking activities in Zambia.
Central Bank of India was conferred with the 1st Award under National Awards for
Excellence in MSE Lending based on their outstanding performance in lending to Micro and
Small Enterprises during the year 2007-08. As on March 31, 2010, the Bank has 3577
branches, 34 Satellite offices and 192 Extension Counters. Out of the 3577 branches, there
were 1388 rural branches, 898 Semi-urban branches, 683 urban branches and 608
metropolitan branches.
3.6.8 History and Background of Syndicate Bank (SB)
Syndicate Bank is one of the major public sector banks in India. The Bank provides a
range of financial products and services to the retail customers, including housing loans,
retail trade loans, vehicle loans, consumer loans, education loans, mortgage loans and
investment loans. They also offer other services, such as TeleBanking, short messaging
service banking and data warehousing.
The Bank delivers their products and services through their extensive branch network,
extension counters, ATMs, phone banking and the Internet. As of March 2008, the total
branch network of the Bank was 2,169, comprising of 644 rural, 492 semi urban, 508 urban
40
and 52 metro branches. The Bank has 21 specialised SME branches, 11 extension counters, 9
satellite offices and 1 SB sub office. The Bank also has an overseas bank in London.
Syndicate Bank was established in the year 1925 in Udupi, Karnataka by Upendra Ananth
Pai, T M A Pai and Varman Kuduva. The business of the Bank was commenced on
November 10, 1925 with the name Canara Industrial and Banking Syndicate Ltd. In the year
1928, the Bank opened their first branch at Brahmavar in Dakshina Kannada. In the year
1946, they opened 29 branches in a single day in rural areas.
In the year 1953, the Bank took over the assets and liabilities of two Local Banks,
namely Maharashtra Apex Bank Ltd and Southern India Apex Bank Ltd. In the year 1957,
they opened their 100th branch at Ilkal in Karnataka. In the year 1962, the Bank entered into
foreign exchange business by opening Foreign Exchange Department at Mumbai.
3.6.9 History and Background of Oriental Bank of Commerce (OBC)
Oriental Bank of Commerce (OBC) was started in Lahore, Pakistan in 19th February
of the year 1943, made a modest beginning under its Founding Father, Late Rai Bahadur Lala
Sohan Lal. OBC is a public sector bank engaging in monetary intermediation of commercial
banks, saving banks and discount houses.
In 1947, the Bank had to face the holocaust of partition. Branches in the newly formed
Pakistan had closed down and the Registered Office had shifted from Lahore to Amritsar. In
the year 1951, the registered office was relocated to Delhi. It was nationalized in April of the
year 1980. In the year 1998, the bank had joined hands with Citibank to launch OBC cobranded credit card. OBC had set up special branch and asset recovery branch, one each at
Delhi and Mumbai in the year 1999. The Bank had opened specialised branch for women
entrepreneurs in the year 2002 and also in the same year OBC made tie up with Corporation
Bank to share each other's ATM network. For the purpose of Centralised Banking Solution
(CBS, OBC had joined hands with Infosys Technologies Ltd and Wipro Ltd in the year 2003.
during the same year 203, the Bank and Small Industries Development Bank of India (SIDBI)
had agreed to work on projects in the field of small-scale, infrastructure and service areas.
3.6.10 History and Background of UCO Bank (UCO)
UCO Bank is a commercial bank and a Government of India Undertaking. The Bank
offers a host of value added banking solutions to their customers, which includes
international banking services, services for NRIs, loan schemes, deposit schemes and value
added e-banking solutions. They also possess a host of branches authorized for direct tax
collection in India. The Bank has 34 regional offices spread all over India.
41
UCO Bank head office is located in Kolkata. The Bank has 34 Regional Offices spread
all over India. The bank has international presence with four overseas branches in two
important financial centers in Singapore and Hong Kong and representative offices at Kuala
Lumpur, Malaysia and Guangzhou in China. The bank also has a NRI corner to offer
specialized services to its international customers.
UCO Bank was incorporated in the year 1943 as The United Commercial Bank
Limited. In July 1969, the Bank was nationalized and 100 per cent ownership was taken over
by the Government of India. Thereafter the Bank expanded rapidly. In December 30, 1985
the name of the Bank was changed to UCO Bank. During the year 2001-02, the Bank opened
1 new branch in Pune, and 5 new extension counters.
3.7 Brief Profiles of Selected Private Sector Banks (Pvt.SBs) in India:

In this section an attempt has been made to discuss the history and background of the selected
Pvt.SBs in India for the study period.
3.7.1 History and Background of ICICI bank (ICICI)
ICICI Bank Ltd is a major banking and financial services organization in India. The
Bank is the second largest bank in India and the largest private sector bank in India by market
capitalization. They are a publicly held banking company engaged in providing a wide range
of banking and financial services including commercial banking and treasury operations.
The Bank and their subsidiaries offers a wide range of banking and financial services
including commercial banking, retail banking, project and corporate finance, working capital
finance, insurance, venture capital and private equity, investment banking, broking and
treasury products and services. They offer through a variety of delivery channels and through
their specialised subsidiaries in the areas of investment banking, life and non-life insurance,
venture capital and asset management.
ICICI Bank Ltd was incorporated in the year 1994 as a part of the ICICI group with the
name ICICI Banking Corporation Ltd. The initial equity capital was 75.0% by ICICI and
25.0% by SCICI Ltd, a diversified finance and shipping finance lender of which ICICI owned
19.9% at December 1996. Pursuant to the merger of SCICI into ICICI, ICICI Bank became a
wholly-owned subsidiary of ICICI. In September 10, 1999, the name of the Bank was
changed from ICICI Banking Corporation Ltd to ICICI Bank Ltd.
3.7.2 History and Background of HDFC bank (HDFC)
HDFC Bank Ltd is a major Indian financial services company based in Mumbai. The
Bank is a publicly held banking company engaged in providing a wide range of banking and
42
financial services including commercial banking and treasury operations. The Bank at present
has an enviable network of 1,725 branches spread in 780 cities across India. They also have
one overseas branch in Bahrain and two representative offices in UAE and Kenya. The Bank
has two subsidiary companies, namely HDFC Securities Ltd and HDB Financial Services
Ltd.
The Bank has three primary business segments, namely banking, wholesale banking
and treasury. HDFC Bank Ltd was incorporated on August 30, 1994 by Housing
Development Finance Corporation Ltd. In the year 1994, Housing Development Finance
Corporation Ltd was amongst the first to receive an 'in principle' approval from the Reserve
Bank of India to set up a bank in the private sector, as part of the RBI's liberalization of the
Indian Banking Industry. HDFC Bank commenced operations as a Scheduled Commercial
Bank in January 1995.
3.7.3 History and Background of Axis Bank (AXIS)
AXIS Bank is one of the fastest growing banks in private sector. The Bank operates in
four segments, namely treasury, retail banking, corporate/ wholesale banking and other
banking business. The treasury operations include investments in sovereign and corporate
debt, equity and mutual funds, trading operations, derivative trading and foreign exchange
operations on the account, and for customers and central funding.
The Bank's registered office is located at Ahmedabad and their Central Office is located
at Mumbai. The Bank has a very wide network of more than 1042 branches (including 56
Service Branches/ CPCs as on June 30, 2010). The Bank has five wholly-owned subsidiaries
namely Axis Securities and Sales Ltd, Axis Private Equity Ltd, Axis Trustee Services Ltd,
Axis Asset Management Company Ltd and Axis Mutual Fund Trustee Ltd.
Axis Bank was incorporated in the year 1993 with the name UTI Bank Ltd. The Bank
was the first private banks to have begun operations after the Government of India allowed
new private banks to be established. The Bank was promoted jointly by the Administrator of
the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of
India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance
companies, i.e. National Insurance Company Ltd, The New India Assurance Company Ltd,
The Oriental Insurance Company Ltd and United India Insurance Company Ltd.
3.7.4 History and Background of Federal Bank (Federal)
The Federal Bank Limited (FBL) (the erstwhile Travancore Federal Bank Limited)
was incorporated with an authorised capital of rupees five thousand at Nedumpuram, a place
near Tiruvalla in Central Travancore in 28th April of the year 1931 under the Travancore
43
Company's Act. Shri K.P.Hormis founded the Bank. It started business of auction -chitty and
other banking transactions connected with agriculture and industry. The bank though
successful in the earlier periods, suffered set backs and was on the verge of liquidation. As a
largest traditional private sector bank in the country, FBL nurtured for more than seven
decades, gaining the reputation of being an agile, technology savvy and customer friendly
bank and mostly built wide network of branches, reaching out to cover all the major cities of
the country.
The Bank was licensed under Sec.22 of the Banking Companies Act, 1949 in 11th of
July of the year 1959. FBL had floated several kuries one after another. It also introduced
several new deposit schemes during the same period. The Bank embarked for a massive take
over bids during the year 1964, which accelerated its growth horizontally and vertically. In
that process it took over the assets and liabilities of the Chalakudy Public Bank Ltd, The
Cochin Union Bank Ltd and The Alleppey Bank Ltd. The St.George Union Bank Ltd was
merged with the Bank in the year 1965 and in the year 1968, The Marthandom Commercial
Bank Ltd was amalgamated with the FBL.
3.7.5 History and Background of Jammu and Kashmir Bank (J&K)
Jammu And Kashmir Bank Limited (J & K) was incorporated in 1st October of the
year 1938 and commenced its business from 4th July of the year 1939 at in Kashmir (India).
The Bank was the first in the country as a state owned bank. It offers banking services under
the three major divisions as Support services, Depository services and Third party services.
Presently, the bank has more than 560 branches under its control to serve the customers
across the country. According to the extended Central laws of the state, Jammu & Kashmir
Bank was defined as a government of company as per the provision of Indian companies act
1956. In the year 1971, the Bank received the status of scheduled bank. RBI declared it as 'A'
Class Bank in the year of 1976.
3.7.6 History and Background of Indusind Bank (Indusind)
Indusind Bank Ltd is one of the new generation private sector banks in India. The
Bank's business lines include corporate banking, retail banking, treasury and foreign
exchange, investment banking, capital markets, non-resident Indian/high-net-worth individual
banking, and information technology. The Bank business divisions include Retail/ Consumer
Banking, Consumer Finance, Global Markets Group, Corporate & Commercial Banking,
Transaction Banking Group and Investment Banking.
IndusInd Bank Ltd was incorporated in the year 1994 and was promoted by Mr
Srichand P Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja
44
Group. The Bank started their operations with a capital amount of ` 1,000 million among
which ` 600 million was donated by the Indian Residents and ` 400 million was raised by the
Non-Resident Indians. The company is a pioneer in launching internet Banking. They are
rated as one of the Top Performing Banks in various survey reports.
3.7.7 History and Background of ING vysya bank (ING Vys)
ING Vysya Bank Ltd is the prominent Bank in India, formed with the Vysya Bank
Ltd, a premier bank in the Indian Private Sector and ING Group, a global financial
powerhouse of Dutch origin, in the year 2002. With their core Banking Solution, IT oriented
products and focused Retail Banking and Wholesale Banking Services, the Bank aims for
sustainable growth to benefit all the stakeholders, clients, employees and society at large.
The Bank was originally incorporated on March 29, 1930 as The Vysya Bank Ltd. In the
year 1948, the Bank acquired the status of Scheduled Bank. Since then the Bank has grown in
size and stature and has reached the coveted position of number one private sector bank in
India. Since then the Bank has grown in size and stature and has carved a distinct identity of
being India's Premier Private Sector Bank. Subsequent to acquisition of stake in the Bank by
ING Group NV in August 2002, the name of the Bank was changed from Vysya Bank Ltd to
ING Vysya Bank Ltd. In the year 1987, the Bank incorporated the Vysya Bank Leasing Ltd
for leasing and merchant banking activities along with Karur Vysya Bank Ltd. In the year
1990, they incorporated Vysya Bank Housing Finance Ltd for housing finance activities.
3.7.8 History and Background of Karnataka Bank (K.Bnk)
Karnataka Bank Ltd, a premier private sector bank, is a leading 'A' Class Scheduled
Commercial Bank in India. The Bank offers a total value package, a one-stop shop for all the
banking needs. They provide Working Capital Finance, Term Loans and Infrastructure
Finance to help the Business grow. The Bank operates in four business segments, namely
treasury, corporate and wholesale banking, retail banking and other banking operations.
Karnataka Bank Ltd was incorporated on February 18, 1924 as The Karnataka Bank
Ltd at Mangalore in Karnataka. The Bank was established to cater to the banking needs of the
South Kanara Region. In May 23, 1924, the Bank obtained the certificate to commence
business. In April 4, 1966, they received their license to carry on the banking business in
India. In September 2010, the Bank launched a new product exclusively for women, i.e. the
new saving bank account for women named KBL Vanitah to encourage saving habit among
the womenfolk and also to allay the fear of managing their wealth.
45
3.7.9 History and Background of South India Bank (SIB)

One of the earliest banks in South India, South Indian Bank (SIB) came into being
during the Swadeshi movement. It was incorporated on 1st March 1928 by the fulfillment of
the dreams of a group of enterprising men who joined together at Thrissur to provide the
people a safe, efficient and service oriented repository of savings of the community on one
hand and to free the business community from the clutches of greedy money lenders on the
other by providing need based credit at reasonable rates of interest. Now the bank accounts
about the network of 520 branches, 17 extension counters and 260 ATMs.
3.7.10 History and Background of Karur Vysya Bank (K.Vys)
Karur Vysya Bank is a privately held Indian bank, headquartered in Karur in Tamil
Nadu. The company operates in four business segments: treasury operations, corporate/
wholesale banking operations, retail banking operations and other banking operations. The
company's investments are categorized into three categories, held to maturity, held for trading
and available for sale.
Karur Vysya Bank was incorporated on June 22, 1916. The Bank commenced their
operations on July 1, 1916 in the aftermath of the First World War, with a view to revive
agriculture, trade and industry in and around Karur. In January 17, 1927, they opened their
first branch at Dindigul.
In the year 1952, the Bank became a scheduled bank. In the year 1963, Selvavridhi
Bank Ltd was amalgamated with the Bank. Also, in the year 1964, Salem Shri Kannika
Parameswari Bank Ltd and Pathinengrama Arya Vysya Bank Ltd, Kombai were
amalgamated with the Bank. In the year 1965, Coimbatore Bhagyalakshmi Bank Ltd merged
with the Bank. In the year 1980, the Bank got the license to deal in foreign currencies and to
transact foreign exchange business. They established International Division for forex
operations.
The Bank has set up a Disaster Recovery Site (DRS) at Cyber Pearl, Hi-Tech City,
Hyderabad. The Bank is ensuring less than 30 minutes old data backup of the Primary Data
Centre Databases at this DRS using a Disaster Recovery Automation Solution.
46
CHAPTER- 4
PERFORMANCE EVALUATION OF SELECTED PUBLIC SECTOR BANKS IN
INDIA
4.1 Introduction
At the time of achieving its independence, the Indian economy was ruined and
devastated. The economy was suffering from the lack of requisite financial help to grow and
survive. Means of production were concentrated to a few heads and the banks were in the
private sector those days. The private sector banks did not show their guts to provide finance
for developing the Indian economy. As a move to change the scenario, the government of
India with the noble mission took a dramatic measure to nationalize the banks to bring them
under the direct control of the government and also to make necessary changes in the banking
industry to save the country. With all fervor and zeal, nationalization of the commercial
banks took place in the country as a means of socio-economic development of the country
through providing loans and advances to different sectors as also to the priority sectors to
control and check private monopolies, to curb regional imbalances prevailing in the society
and also to develop banking habits of the common people to get respite from future financial
stringencies. The first phase of bank nationalization was done in 1969 and the second phase
in 1980 and this movement of bank nationalization has opened up the scope free and fair
banking operations in the country.
As per the Banking Regulation Act, 1949 and report of several committees for
strengthening the health of banking sector, main functions of banks revolve round the
activities towards mobilization of deposits, efficient utilization of resources to ensure
investors safety and enhancing financial health of the society as a whole. Apart from this,
providing more and more services to the customers in different forms for retaining existing
customers and attracting new ones are important mottos of every bank. So, the financial
performance of banks should be judged from the viewpoints of mobilization of deposits,
granting loans and advances, investment of funds, recovery of loans and advances, priority
sector advances, productivity, profitability and overall efficiency.
In this chapter, an attempt has been undertaken to analyze the financial performance
of selected ten public sector banks [State Bank of India (SBI), Punjab National Bank (PNB),
Bank of Baroda (BOB), Bank of India (BOI), Canara Bank (CB), Union Bank of India (UBI),
Central Bank of India (CBI), Syndicate Bank (SB), Oriental Bank of Commerce (OBC) and
47
UCO Bank (UCO)] on the above mentioned aspects. For analyzing, this chapter is subdivided into different heads.
4.2 Analysis of Total Deposits, Loans & Advances and Investments of Selected
Public Sector Banks
Mobilization of deposits is one of the prime functions of banks. Banks take deposits
from the public in different forms, viz. demand deposits, saving deposits, term and other
deposits etc. First total quantum of deposits of each bank has been analyzed, and then all the
ten banks have been taken together for measuring performance as a whole.
Lending of funds to the customers constitutes another main function of the banking
company. The major portion of the banks funds is employed by way of loans and advances,
which is the most profitable employments of its funds. The major part of banks income is
earned from interest charged on the funds so lent. The three cardinal principles of bank
lending, namely, safety, liquidity and profitability are firmly followed by the commercial
banks. The loans and advances are traditionally presented in the balance sheet of a bank in
three different formats. In the first format, categorization is based on the type or nature of the
assets. According to this format bank issues loans and advances in three ways- bills
purchased and discounted; cash credits, overdrafts & loans repayable on demand and term
loans. In the second format, loans and advances are categorized into secured and unsecured
advances and the third format consists of a categorization based on the sectoral credit
disbursements.
Traditionally, commercial banks lend majority of their funds by way of cash credit
system. For analyzing performance of selected public sector banks in respect of loans and
advances first growth of absolute quantum of total loans and advances along with percentage
increase/ (decrease) i.e. annual growth rate over the previous year for each bank have been
considered. After analyzing the performance of all the selected banks taking together in
respect of loans and advances has been considered.
Apart from advances and fixed assets, a major asset item in the balance sheet of a
bank is investments in various kinds of securities. Banks investments in the domestic market
are classified into six different categories depending upon the nature of security.
These include:
a) Government Securities
b) Other approved securities
c) Shares
48
d) Debentures and Bonds

e) Subsidiaries and/ or Joint Ventures
f) Other investments
Bank can also invest in overseas market in foreign government securities, subsidiaries/or
joint ventures and other investments.
In this section performance of the selected public sector banks in respect of
investment position has been analyzed. For this, only total amount of investments has been
considered instead of segregating it into six different categories. Only total investments
considered because of lack of appropriate data on investment in different segment. This
section has been organized in the following way whereby the total quantum of investment
along with percentage of investment increase/ (decrease) over the previous year, i.e. annual
growth rate for each bank has been analyzed at first. Year-wise quantum of investment has
been plotted in the figure to see the growth of investment. After analyzing the performance of
all the selected banks taking together in respect of investment has been considered.
4.2.1 Analysis of Total Deposits, Loans & Advances and Investments of State
Bank of India (SBI)
For measuring total deposits, total loans and advances & total investments of SBI
during the study period, absolute quantum of total deposits, advances & investments over the
periods has been considered and their percentage increase/ (decrease) over the previous year
i.e. annual growth rates have also been taken into consideration.
49
Table 4.1
Statement showing Total Deposits, Loans & Advances and Investments and their
Annual Growth Rates of SBI during the period 2001-02 to 2010-11
Total
Years
Deposits
Annual
Growth
Total Loans
and Advances
Annual
Growth
Rate
Total
Investments
Annual
Growth
Rate
( ` in Crore)
Rate
( ` in Crore)
2001-02
270560.14
120806.47
145142.03
2002-03
296123.28
9.45
137758.46
14.03
172347.89
18.74
2003-04
318618.67
7.60
157933.54
14.65
185676.49
7.73
2004-05
367047.53
15.20
202374.46
28.14
197097.91
6.15
2005-06
380046.05
3.54
261641.54
29.29
162534.24
(-)17.54
2006-07
435521.09
14.60
337336.49
28.93
149148.88
(-)8.24
2007-08
537403.95
23.39
416768.20
23.55
189501.27
27.06
2008-09
742073.13
38.08
542503.20
30.17
275953.96
45.62
2009-10
804116.23
8.36
631914.15
16.48
295785.20
7.19
2010-11
933932.81
16.14
756719.45
19.75
295600.57
(-)0.06
( ` in Crore)
[Source: Collected and compiled from year wise RBI data base]
Table 4.1 highlights the absolute quantum of total deposits, total loans and advances & total
investments and their annual growth rates of SBI during the study period 2001-02 to 2010-11.
It is clear from the table that the absolute quantum of total deposits and total loans and
advances increased significantly during the period under study. But the absolute quantum of
total investments fluctuated and three negative growth rates are observed during the study
period. Highest annual growth rate of total deposits is found in the year 2008-09 (38.08%)
and lowest is observed in the year 2005-06 (3.54%). In the year 2008-09, percentage of total
loans and advances increased by 30.17% over the previous year which speaks in favour of
banks efficiency in granting total advances. Similar results are observed for the periods
2005-06 (29.29%), 2006-07 (28.93%) and 2004-05 (28.14%). On the other hand lowest
annual growth rate with negative value of total investment is observed (-) 17.54% in the year
2005-06 and highest growth (45.62%) is noticed in the year 2008-09.
50
4.2.2 Analysis of Total Deposits, Loans & Advances and Investments of Punjab
National Bank (PNB)
Table 4.2 shows the absolute quantum of total deposits, total advances & total
investments and their annual growth rates of PNB during the study period 2001-02 to 201011. It is clear from the table that the absolute quantum of total deposits and total loans and
advances increased significantly during the period of study. But the absolute quantum of total
investments fluctuated in one year of the study period. It is also clear from the table that the
annual growth rate of total deposits over the previous year is satisfactory except in the year
2003-04 a small decreased is observed (15.96% in 2003-04 as against 18.23% in 2002-03). In
the year 2010-11 highest percentage of growth over the previous year of total advances
(29.75%) is noticed and lowest percentage is observed in the year 2002-03 (17.05%). In the
year 2005-06 lowest value with a negative growth rate of total investment (-18.98%) is found.
Highest growth rate of total investments (23.79%) is noticed in the year 2003-04 though
definite trend is not observed.
Table 4.2
Annual Growth Rates of PNB during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
64123.48
34369.42
28207.17
2002-03
75813.51
18.23
40228.12
17.05
34030.04
20.64
2003-04
87916.40
15.96
47224.73
17.39
42125.47
23.79
2004-05
103166.89
17.35
60412.75
27.93
50672.83
20.29
2005-06
119684.92
16.01
74627.37
23.53
41055.32
(-)18.98
2006-07
139859.68
16.86
96596.52
29.44
45189.83
10.07
2007-08
166457.22
19.02
119501.57
23.71
53991.70
19.48
2008-09
209760.50
26.01
154702.99
29.46
63385.18
17.40
2009-10
249329.80
18.86
186601.21
20.62
77724.47
22.62
2010-11
312898.73
25.50
242106.67
29.75
95162.35
22.44
Years
and Advances
Growth
Rate
51
Investments
( ` in Crore)
Growth
Rate
4.2.3 Analysis of Total Deposits, Loans & Advances and Investments of Bank of
Baroda (BOB)
Table 4.3 highlights the absolute quantum of total deposits, total loans and advances
& total investments and their annual growth rates of BOB during the study period 2001-02 to
2010-11. It is clear from the table that the absolute quantum of total deposits and total loans
and advances increased significantly throughout the period of study. But the absolute
quantum of total investments fluctuated over the study period. While highest percentage of
total deposits increase over the previous year is found in 2006-07 (33.37%) and the lowest
one (7.38%) is observed in the year 2002-03. While highest percentages growth of total loans
and advances over the previous year is found in 2006-07 (39.57%) and the lowest one
(0.72%) in the year 2003-04. On the other hand it can be said from the table that for BOB
total quantum of investments has fluctuated throughout the study period and three negative
growths are also observed so the bank should be cautious about its unstable growths.
Table 4.3
Annual Growth Rates of BOB during the period 2001-02 to 2010-11
Total
Years
Deposits
Annual
Growth
Total Loans
and Advances
Annual
Growth
Rate
Total
Investments
Annual
Growth
Rate
( ` in Crore)
Rate
( ` in Crore)
2001-02
61804.46
33662.99
23833.13
2002-03
66366.37
7.38
35348.07
5.01
30179.39
26.63
2003-04
72967.32
9.95
35600.88
0.72
38018.79
25.98
2004-05
81333.46
11.47
43400.38
21.91
37074.45
(-)2.48
2005-06
93661.99
15.16
59911.78
38.04
35114.23
(-)5.29
2006-07
124915.98
33.37
83620.87
39.57
34943.64
(-)0.49
2007-08
152034.13
21.71
106701.32
27.60
43870.06
25.55
2008-09
192396.95
26.55
143251.41
34.25
52445.88
19.55
2009-10
241261.93
25.40
175035.29
22.19
61182.38
16.66
2010-11
305439.48
26.60
228676.36
30.65
71260.63
16.47
52
( ` in Crore)
4.2.4 Analysis of Total Deposits, Loans & Advances and Investments of Bank of
India (BOI)
Table 4.4 highlights the absolute quantum of total deposits, total loans and advances
& total investments and their annual growth rates of BOI during the study period 2001-02 to
2010-11. It is clear from the table that the absolute quantum of total deposits, total advances
and total investments increased significantly during the period of study. Percentage growth of
all selected parameters over the previous year shows an increasing trend over the years. In the
year 2010-11 highest growth rate of total deposits (30.08%) was noticed and lowest
percentage was observed in the year 2002-03 (7.94%). It is also clear from the table that the
percentage increase of total loans & advances over the previous year is satisfactory except in
the year 2003-04 though definite trend is not observed. The improvement in total investment
is quite satisfactory. Percentage growth rate as shown in the table also favour of the
improvement of total investment. Barring a few, percentage increase is seen frequently
though definite trend is not found.
Table 4.4
Annual Growth Rates of BOI during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
59710.60
38310.78
22083.53
2002-03
64453.59
7.94
42633.18
11.28
24434.85
10.65
2003-04
71003.11
10.16
45855.90
7.56
27162.86
11.16
2004-05
78821.45
11.01
55528.89
21.09
28686.32
5.61
2005-06
93932.03
19.17
65173.75
17.37
31781.74
10.79
2006-07
119881.73
27.63
85115.89
30.60
35492.75
11.68
2007-08
150011.98
25.13
113476.34
33.32
41802.88
17.78
2008-09
189708.48
26.46
142909.37
25.94
52607.18
25.85
2009-10
229761.94
21.11
168490.71
17.90
67080.18
27.51
2010-11
298885.81
30.08
213096.18
26.47
85872.42
28.01
Years
and Advances
Growth
Rate
53
Investments
( ` in Crore)
Growth
Rate
4.2.5 Analysis of Total Deposits, Loans & Advances and Investments of Canara
Bank (CB)
Table 4.5 highlights the absolute quantum of total deposits, loans & advances and
total investments and their annual growth rates of CB during the study period 2001-02 to
& advances increased significantly during the period of study. But the absolute quantum of
total investments fluctuated throughout the year. Though the quantum of total deposits
increased throughout the study period but percentage growth was not consistent during the
study period which is evident from the percentage increase over the previous year. The
percentage increases in total loans & advances over the previous year also speak in favor of
the banks efficiency in the matter of improving net worth by providing loans. There is a
fluctuating trend in the percentage change of the total loans and advances during the study
period and in the year 2005-06 highest percentage of growth over the previous year (31.45%)
is noticed and lowest percentage is observed in the year 2007-08 (8.86%). In case of CB
significant improvement in total investment is noticed for the period 2002-03 (31.17%). For
all other years percentage increases are found is not very high and no definite trend is
observed and a negative growth (-) 2.84% is found in the year 2005-06.
Table 4.5
Statement showing Total Deposits, Loans and Advances & Investments and their
Annual Growth Rates of CB during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
64030.01
33126.71
23220.10
2002-03
72094.81
12.60
40471.60
22.17
30458.24
31.17
2003-04
86344.56
19.77
47638.62
17.71
35792.98
17.51
2004-05
96795.91
12.10
60421.40
26.83
38053.88
6.32
2005-06
116803.24
20.67
79425.69
31.45
36974.17
(-)2.84
2006-07
142381.44
21.90
98505.69
24.02
45225.53
22.32
2007-08
154072.42
8.21
107238.04
8.86
49811.57
10.14
2008-09
186892.51
21.30
138219.40
28.89
57776.90
15.99
2009-10
234651.44
25.55
169334.63
22.51
69676.95
20.60
2010-11
293972.65
25.28
212467.17
25.47
83699.92
20.13
Years
and Advances
Growth
Rate
54
Investments
( ` in Crore)
Growth
Rate
4.2.6 Analysis of Total Deposits, Loans & Advances and Investments of Union
Bank of India (UBI)
total investments and their annual growth rates of UBI during the study period 2001-02 to
& advances and total investments increased significantly during the period of study. The
percentage increases in total deposits over the previous year speak in favour of the banks
efficiency in the matter of improving resource base. There is a fluctuating trend in the
percentage change of the total deposits during the study period and in the year 2008-09
highest percentage of growth over the previous year (33.55%) was noticed and lowest
percentage was observed in the year 2002-03 (12.45%). Though the quantum of total loans
and advances has increased throughout the study period but percentage of increase is not
consistent during the study period which is evident from the percentage increase over the
previous year. The highest growth of increase in loans and advances of UBI is observed in
the year 2004-05 (36.29%). It is also revealed from the data shown in the table that the
quantum of investments fluctuated throughout the study period. Lowest growth is observed
1.56% in the year 2004-05 and highest growth (27.12%) is noticed in the year 2008-09.
Table 4.6
Annual Growth Rates of UBI during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
39793.86
21383.31
15409.69
2002-03
44748.62
12.45
25514.85
19.32
19370.79
25.71
2003-04
50558.94
12.98
29425.91
15.33
22442.03
15.86
2004-05
61830.58
22.29
40105.08
36.29
22792.80
1.56
2005-06
74094.30
19.83
53379.95
33.10
25917.66
13.71
2006-07
85180.23
14.96
62386.43
16.87
27981.78
7.96
2007-08
103858.65
21.93
74348.29
19.17
33822.65
20.87
2008-09
138702.83
33.55
96534.23
29.84
42996.96
27.12
2009-10
170039.74
22.59
119315.30
23.60
54403.53
26.53
2010-11
202461.29
19.07
150986.08
26.54
58399.14
7.34
Years
and Advances
Growth
Rate
55
Investments
( ` in Crore)
Growth
Rate
4.2.7 Analysis of Total Deposits, Loans & Advances and Investments of Central
Bank of India (CBI)
Table 4.7 shows the absolute quantum of total deposits, loans & advances and total
investments and their annual growth rates of CBI during the study period 2001-02 to 201011. It is clear from the table that the absolute quantum of total deposits increased significantly
during the period of study. The quantum of total loans & advances and total investments
fluctuated during the period under study. So the performance of the CBI in mobilizing total
deposits is found quite satisfactory. However, it is observed that a fluctuating annual growth
has been prevailed throughout the study period in case of CBI with peak annual growth rate
of 33.27% in 2007-08. Though the quantum of total loans & advances has increased
throughout the study period but percentage of increase is not consistent during the study
period which is evident from the annual growth rate. Highest growth (36.90%) of total
investments is noticed in the year 2008-09 though definite trend is not observed throughout
the year. Thus it can be said that for CBI total quantum of investments fluctuated throughout
the study period and negative growths are also observed so the bank should be cautious about
its unstable growth.
Table 4.7
Statement showing Total Deposits, Loans & Advances and Investments and their Annual
Growth Rates of CBI during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
47137.38
21287.51
21099.81
2002-03
51165.12
8.54
23159.22
8.79
26045.36
23.44
2003-04
55908.60
9.27
22804.11
(-)1.53
31405.13
20.58
2004-05
60751.68
8.66
27277.32
19.62
30834.76
(-)1.82
2005-06
66482.66
9.43
37483.48
37.42
28639.10
(-)7.12
2006-07
82776.28
24.51
51795.47
38.18
27741.90
(-)3.13
2007-08
110319.66
33.27
72997.42
40.93
31455.19
13.39
2008-09
131271.85
18.99
85483.20
17.10
43060.72
36.90
2009-10
162107.47
23.49
105383.49
23.28
50562.87
17.42
2010-11
179356.02
10.64
129725.41
23.10
54504.49
7.80
Years
and Advances
Growth
Rate
56
Investments
( ` in Crore)
Growth
Rate
4.2.8 Analysis of Total Deposits, Loans & Advances and Investments of Syndicate
Bank (SB)
Table 4.8 highlights the absolute quantum of total deposits, total loans & advances
and total investments and their annual growth rates of SB during the study period 2001-02 to
2010-11. It is clear from the table that the absolute quantum of total deposits and total
advances increased significantly during the period of study. But the quantum of total
investments fluctuated during the study period. While highest percentages of total deposits
increase over the previous year is found in 2006-07 (46.64%) and the lowest one (0.98%) in
the year 2009-10. Highest percentages growth of total loans and advances is found in 200607 (41.69%) and the lowest one (9.54%) is seen in the year 2002-03.
It is clearly depicted that in the year 2005-06 of the study period lowest growth with
a negative value of investment (-15.23%) is found. Highest growth (46.12%) is noticed in the
year 2006-07 though definite trend is not observed during the study period.
Table 4.8
Annual Growth Rates of SB during the period 2001-02 to 2010-11
Annual
Annual
Annual
Total Loans
( ` in Crore)
Growth Rate
and Advances
2001-02
28548.33
14884.66
11910.60
2002-03
30660.54
7.40
16305.35
9.54
13823.24
16.06
2003-04
42584.82
38.89
20646.93
26.63
17916.60
29.61
2004-05
46294.57
8.71
26729.21
29.46
20370.74
13.70
2005-06
53624.40
15.83
36466.24
36.43
17269.11
(-)15.23
2006-07
78633.57
46.64
51670.44
41.69
25234.02
46.12
2007-08
95170.80
21.03
64051.01
23.96
28075.93
11.26
2008-09
115885.14
21.77
81532.27
27.29
30537.23
8.77
2009-10
117025.79
0.98
90406.36
10.88
33010.93
8.10
2010-11
135596.08
15.87
106781.92
18.11
35067.62
6.23
Years
Total Deposits
( ` in Crore)
Growth
Rate
57
Total
Investments
( ` in Crore)
Growth
Rate
4.2.9 Analysis of Total Deposits, Loans & Advances and Investments of Oriental
Bank of Commerce (OBC)
Table 4.9 shows the absolute quantum of total deposits, total advances and total
investments and their annual growth rates of OBC during the study period 2001-02 to 201011. It is clear from the table that the absolute quantum of total deposits and total loans &
investments fluctuated and a negative fluctuation is observed during the period under study.
In the year 2004-05 highest percentage growth (34.13%) of total deposits was noticed and
lowest percentage was observed in the year 2002-03 (4.64%). The performance of the OBC
in providing total loans and advances was also satisfactory. Percentage growth of total loans
and advances over the previous year is satisfactory except in the year 2002-03 (10.73%)
though definite trend is not observed. Percentage growth of investment as shown in the table
supports the improvement of total investment except the year 2005-06 where a negative
growth is found i.e. (-) 8.31%. Barring a few, percentage increase is high though definite
trend is not observed.
Table 4.9
Annual Growth Rates of OBC during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
28488.39
14157.87
13724.35
2002-03
29809.10
4.64
15677.24
10.73
14780.54
7.70
2003-04
35673.50
19.67
19680.76
25.54
16794.11
13.62
2004-05
47850.33
34.13
25299.20
28.55
18342.19
9.22
2005-06
50197.46
4.91
33577.25
32.72
16817.56
(-)8.31
2006-07
63995.97
27.49
44138.47
31.45
19808.35
17.78
2007-08
77856.70
21.66
54565.83
23.62
23950.68
20.91
2008-09
98368.85
26.35
68500.37
25.54
28488.95
18.95
2009-10
120257.59
22.25
83489.30
21.88
35785.32
25.61
2010-11
139054.26
15.63
95908.22
14.87
42074.77
17.58
Years
and Advances
Growth
Rate
58
Investments
( ` in Crore)
Growth
Rate
4.2.10 Analysis of Total Deposits, Loans & Advances and Investments of UCO
Bank (UCO)
total investments and their annual growth rates of UCO Bank during the study period 200102 to 2010-11. It is clear from the table that the absolute quantum of total deposits and total
loans & advances increased significantly during the study period. But the quantum of total
investments fluctuated and two negative fluctuations are observed during the period under
study. Though the quantum of total deposits has increased throughout the study period but the
percentage of increase is inconsistent. The percentage increase in total loans and advances
over the previous year also evident the banks efficacy in the matter of providing loans and
advances, though it is seen that the rate of increase has fluctuated over the time period.
Highest growth rate is found in the year 2005-06 (35.15%) and lowest in the year 2007-08
(17.22%). The significant improvement in total investment is noticed for the period 2009-10
(48.11%). For all other years percentage increase are not very high and no definite trend is
observed and a negative growth (-) 0.57% is observed in the year 2006-07 and another lowest
value with negative growth (-) 1.37 is found in the year 2010-11.
Table 4.10
Growth Rates of UCO Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
26848.77
12805.37
12301.84
2002-03
31343.38
16.74
15923.11
24.35
14137.50
14.92
2003-04
39244.26
25.21
20626.44
29.54
17611.48
24.57
2004-05
49470.23
26.06
27655.71
34.08
19064.37
8.25
2005-06
54543.73
10.26
37377.58
35.15
19636.31
3.00
2006-07
64860.01
18.91
46988.91
25.71
19524.87
(-)0.57
2007-08
79908.95
23.20
55081.90
17.22
24249.63
24.20
2008-09
100221.57
25.42
68803.86
24.91
29384.78
21.18
2009-10
122415.55
22.14
82504.53
19.91
43521.43
48.11
2010-11
145277.60
18.68
99070.81
20.08
42927.28
(-)1.37
Years
and Advances
Growth
Rate
59
Investments
( ` in Crore)
Growth
Rate
selected PSBs as a whole

The performance of ten selected public sector banks taken together in the matter of
mobilizing total deposits, supplying loans & advances and investments during the study
period is analyzed. It is clear from the table that the absolute quantum of total deposits and
total loans & advances increased significantly during the period of study. But the quantum of
total investments fluctuated and a negative fluctuation is observed during the study period. If
it is looked at the annual growth rate as shown in the Table 4.11 then it is revealed that
barring a few cases increase in percentage of deposit is observed and is found quite
satisfactory though a fluctuating trend is noticed during the study period. If one looked at the
percentage growth of loans and advances as shown in the table then it is revealed that barring
a few cases, percentage increase is observed and is found quite satisfactory though definite
trend is not highlighted. From the percentage growth of investment as shown in the table it is
revealed that a negative growth is found (-10.21%) in the year 2005-06 and barring a few
cases percentage increase is observed which is also quite satisfactory though definite trend is
not found.
Table 4.11
Growth Rates of all selected PSBs taken together
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
691045.42
344795.09
316932.25
2002-03
762578.32
10.35
393019.20
13.99
379607.84
19.78
2003-04
860820.18
12.88
447437.82
13.85
434945.94
14.58
2004-05
993362.63
15.40
569204.40
27.21
462990.25
6.45
2005-06
1103070.78
11.04
739064.63
29.84
415739.44
(-)10.21
2006-07
1338005.98
21.30
958155.18
29.64
430291.55
3.50
2007-08
1627094.46
21.61
1184729.92
23.65
520531.56
20.97
2008-09
2105281.81
29.39
1522440.30
28.51
676637.74
29.99
2009-10
2450967.48
16.42
1812474.97
19.05
788733.26
16.57
2010-11
2946874.73
20.23
2235538.27
23.34
864569.19
9.61
Years
and Advances
Growth
Rate
60
Investments
( ` in Crore)
Growth
Rate
Investments of the selected PSBs in India individually and as a whole:

Table 4.12 highlights the analysis of mean growth of total deposits, loans &
advances and investments and their total values of the selected PSBs individually and the
mean score of the average growth rates of total deposits, loans & advances and investments
of the selected PSBs in India as a whole. From the table it is clearly observed that highest
mean growth of total deposits (20.74%) and loans & advances (25.66%) are found in case of
UCO Bank and highest mean growth of total investments (16.56%) is observed in case of
BOI. Here total value is the combination of mean growth of total deposits, loans & advances
and investments and highest total value (62.21%) is occupied by UCO Bank. It clearly
indicates from the table that highest percentage of growth taking together the mean growth of
total deposits, loans & advance and investments is found in case of UCO Bank. Mean score is
the mean value of mean growth rates of the selected parameters of the selected PSBs as a
whole and ultimate mean score is calculated at 55.94%.
Table 4.12
Statement showing the Analysis of Mean Growth of Total Deposits, Loans & Advances
and Investments of the selected PSBs in India individually and as a whole
Mean Growth
Mean Growth
Total
of Loans and
of Investments
Advances
SBI
15.15
22.78
9.63
47.56
PNB
19.31
24.32
15.31
58.94
BOB
19.73
24.44
13.62
57.79
BOI
19.85
21.28
16.56
57.70
CB
18.60
23.10
15.70
57.40
UBI
19.96
24.45
16.30
60.71
CBI
10.64
23.10
7.80
41.54
SB
19.68
24.89
13.85
58.41
OBC
19.64
23.88
13.67
57.19
UCO
20.74
25.66
15.81
62.21
18.33
23.79
13.82
55.94
Mean score
[Source: Collected and compiled from Table 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10]
Banks
Mean Growth
of Deposits
61
Investments
For measuring the performance of the selected PSBs in India, two independent ratios
based on their activities like Return on Advances (RA) and Investment Deposit Ratio (IDR)
have been computed.
The Return on Advances (RA) ratio highlights the relationship between interest
earned on advances & bill and total advances. This ratio indicates the earning capacity on
advances. The IDR represents the efficiency of banks in converting deposits from customers
into loans and advances as investments made by bank.
4.3.1 Analysis of Return on Advances (RA) of selected PSBs in India

This ratio is highly significant to judge the interest earning capacity of an entity. The
higher the value of the ratio better is the interest earning capacity of the bank. This ratio is
calculated as follows:
Return on Advances = IEA / Advances
IEA = Interest earned on advances and bills
Table 4.13 gives an outline of the interest earning capacity of the selected PSBs in
India during the study period 2001-02 to 2010-11. The table also highlights the mean, SD,
CV values of the banks under study. From the table it is observed that out of ten selected
PSBs, 6 banks have average performance above the mean average of the banks under study as
a whole. For Table 4.13 it is also observed that the majority of the selected banks have
maintained consistent performance in interest earning capacity during the study period.
62
Table 4.13 showing Return on Advances (RA) of all selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
SBI
9.44
8.69
7.62
7.24
7.63
8.29
9.34
9.68
8.62
8.64
8.519
0.830
9.743
PNB
9.44
8.69
7.62
7.24
7.63
8.29
9.34
9.68
8.62
9.85
8.640
0.932
10.783
BOB
10.02
8.89
7.90
7.35
7.31
8.27
8.84
8.96
7.88
8.03
8.345
0.837
10.030
BOI
9.39
8.80
7.48
7.13
7.58
8.51
9.34
9.78
8.42
8.12
8.455
0.890
10.524
CB
10.27
9.76
8.67
7.85
7.85
8.44
9.60
10.44
9.07
8.93
9.088
0.920
10.128
UBI
11.15
10.01
8.79
8.31
8.04
8.76
9.85
10.41
8.98
8.90
9.321
0.991
10.635
CBI
10.81
10.36
9.52
8.95
8.00
8.20
8.49
9.78
9.06
9.57
9.275
0.912
9.835
SB
11.43
9.83
8.61
8.62
8.65
9.49
9.88
10.13
8.95
9.33
9.493
0.882
9.287
OBC
11.22
10.29
9.00
8.06
8.03
8.49
9.80
10.60
9.96
9.98
9.542
1.095
11.479
UCO
10.23
9.71
8.84
7.96
8.09
8.39
9.32
10.00
9.39
9.37
9.131
0.786
8.605
10.340
9.503
8.405
7.871
7.881
8.513
9.380
9.946
8.896
9.072
8.981
0.907
10.105
PSBs
Mean
Scores
63
Table 4.14 gives an outlook about the ranks and ultimate ranks of the selected PSBs
in India based on RA. From Table 4.14, it is observed that the highest rank (based on mean
performance of interest earnings) goes to OBC and the rank based on CV, highest rank goes
to UCO Bank. The ultimate rank has been computed based on mean rank of rank based on
mean and on CV and ranking methodology have been applied in ultimate ranking by putting
highest rank on the value of least mean rank and on that ideology highest rank goes to SB and
least rank is occupied jointly by PNB and BOI.
Table 4.14
Statement showing Rank, Mean Rank and Ultimate Rank of Return on Advances (RA) of
PSBs
Mean
SBI
8.519
Rank
based
on Mean
8
9.743
Rank
based
on CV%
3
PNB
8.640
10.783
9.5
BOB
8.345
10
10.030
7.5
BOI
8.455
10.524
9.5
CB
9.088
10.128
UBI
9.321
10.635
5.5
CBI
9.275
9.835
SB
9.493
9.287
OBC
9.542
11.479
10
5.5
UCO
9.131
8.605
CV%
Mean
Rank
Ultimate
Rank
5.5
[Source: Table 4.13]
4.3.2 Analysis of Investment-Deposit Ratio (IDR) of selected PSBs in India

This ratio is calculated as follows: IDR = (total investments / total deposits) 100.
Here Investments in investment-deposit ratio represent total investments including
investments in non-approved securities.
Table 4.15 gives an outline of the investment capacity out of the deposits available
with the selected PSBs in India during the study period 2001-02 to 2010-11. The table also
highlights the mean, SD, CV values of the banks under study. From the table it is observed
that out of ten selected PSBs, only 3 banks have average performance above the ultimate
mean average value of IDR as a whole under study. For Table 4.15 it is also observed that the
majority of the selected banks have maintained consistent performance in converting total
deposits into investment during the study period.
64
Table 4.15 showing Investment-Deposit Ratio (IDR) of all selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
SBI
53.65
58.20
58.28
53.70
42.77
34.25
35.26
37.19
35.54
32.65
44.149
10.606
24.022
PNB
43.99
44.89
47.92
49.12
34.30
32.31
32.44
30.22
31.17
30.41
37.677
7.790
20.675
BOB
38.56
45.47
52.10
45.58
37.49
27.97
28.86
27.26
25.38
23.33
35.200
10.045
28.538
BOI
36.98
37.91
38.26
36.39
33.83
29.61
27.87
27.73
29.20
28.73
32.651
4.433
13.577
CB
36.26
42.25
41.45
39.31
31.66
31.76
32.33
30.91
29.69
28.47
34.410
5.023
14.599
UBI
38.72
43.29
44.39
36.86
34.98
32.85
32.57
31.00
31.99
28.84
35.549
5.214
14.667
CBI
44.76
50.90
56.17
50.76
43.08
33.51
28.51
32.80
31.19
30.39
40.207
10.131
25.196
SB
41.72
45.08
42.07
44.00
32.20
32.09
29.50
26.35
28.21
25.86
34.708
7.659
22.067
OBC
48.18
49.58
47.08
38.33
33.50
30.95
30.76
28.96
29.76
30.26
36.736
8.408
22.887
UCO
45.82
45.11
44.88
38.54
36.00
30.10
30.35
29.32
35.55
29.55
36.522
6.792
18.597
42.864
46.268
47.260
43.259
35.981
31.540
30.845
30.174
30.769
28.849
36.781
7.610
20.482
PSBs
Mean
Scores
65
Table 4.16 gives an outlook about the ranks and ultimate ranks of the selected PSBs
in India based on IDR. From Table 4.16, it is observed that the highest rank (based on mean
performance) goes to SBI and the rank based on CV, highest rank goes to BOI. The ultimate
rank has been computed based on mean rank of rank based on mean and on CV and ranking
methodology have been applied in ultimate ranking by putting highest rank on the value of
least mean rank and on that ideology highest rank goes to PNB and least rank is occupied by
BOB.
Table 4.16
Statement showing Rank, Mean Rank and Ultimate Rank of Investment-Deposit Ratio
(IDR) of Selected PSBs in India
PSBs
Mean
SBI
44.149
Rank
based
on Mean
1
24.022
Rank
based
on CV%
8
PNB
37.677
20.675
BOB
35.200
BOI
32.651
CB
Mean
Rank
Ultimate
Rank
4.5
28.538
10
8.5
10
10
13.577
5.5
34.410
14.599
5.5
UBI
35.549
14.667
4.5
CBI
40.207
25.196
5.5
SB
34.708
22.067
OBC
36.736
22.887
5.5
UCO
36.522
18.597
4.5
CV%
4.4 Analysis of Non-Performing Assets (NPAs) of Selected PSBs in India

A non-performing asset in the banking sector may be termed as an asset not
contributing to the income of the bank. The high level of NPAs in banks has been a matter of
concern and a barrier to accelerate bank financing as bank credit is a catalyst to the economic
growth of a country and any bottleneck in the smooth flow of credit creates adverse
repercussions in the economy. NPAs are not therefore the concerns of only lenders. We know
that lower the percentage of NPAs indicates that the better is efficiency of asset management
and credit recovery management of the organization and higher the degree of percentage of
NPAs indicates the inefficiency of the asset management of the institution.
66
In this section, an attempt has been made to analyze the NPAs of the selected public sector
banks during the study period. For analyzing the assets quality of the selected banks both
gross NPAs and net NPAs (both in absolute and in relative term) have been considered.
4.4.1 Analysis of Gross NPAs of Selected Public Sector Banks

Table 4.17 shows the amount of gross NPAs of the selected public sector banks for
the period 2001-02 to 2010-11. A look into the table reveals that for SBI the amount of gross
NPAs decreased up to 2006-07 and increased thereafter. In case of BOB the amount shows a
decreasing trend up to 2008-09 and increased thereafter. No definite trend of gross NPAs is
observed for other banks i.e. PNB, BOI, CB, UBI, CBI, SB, OBC and UCO Bank during the
study period. From the absolute amount of gross NPAs as shown in the table, it can be argued
that no bank is efficient in managing its loan assets. But to get a clear idea about its asset
quality, it requires analyzing NPAs in relative terms.
67
Table 4.17 showing Gross NPAs of all selected PSBs in India for the period 2001-02 to 2010-11
End March (` in crore)
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
SBI
15485.85
13506.07
12667.21
12455.73
10375.76
9998.22
12837.34
15588.60
19534.89
25326.29
PNB
4139.86
4980.06
4670.13
3741.34
3138.29
3390.72
3319.30
2767.47
3214.41
4379.39
BOB
4489.30
4167.90
3979.86
3321.81
2390.14
2092.14
1981.38
1842.92
2400.69
3152.50
BOI
3722.00
3803.93
3734.02
3155.91
2479.18
2100.49
1930.92
2470.88
4882.65
4811.55
CB
2112.44
2474.78
3126.84
2370.55
1792.61
1493.43
1415.55
2167.97
2590.31
3089.21
UBI
2420.48
2387.61
2346.84
2058.15
2098.05
1872.62
1656.60
1923.35
2670.89
3622.82
CBI
3376.00
3244.00
3092.00
2621.00
2684.00
2572.00
2350.00
2316.00
2458.00
2394.00
SB
1299.13
1420.17
1589.92
1432.78
1506.36
1559.81
1768.65
1594.54
2006.82
2598.97
OBC
951.79
1146.25
1210.91
2512.82
2116.31
1454.05
1280.10
1058.12
1468.75
1920.54
UCO
1332.65
1366.49
1479.12
1399.34
1234.74
1506.23
1651.95
1539.51
1666.43
3150.36
PSBs
68
4.4.2 Analysis of Gross NPAs to Total Assets (%) of Selected PSBs in India
Table 4.18 shows Gross NPAs as a percentage of Total Assets for the period 200102 to 2010-2011. Table 4.18 shows that gross NPAs as a percentage of total assets for CBI
have decreased continuously throughout the study period. There is a fluctuating trend in this
ratio is found in case of SBI during the study period. In case of BOB and UCO Bank, a
decreasing trend is noticed up to the year 2008-09 and 2009-10 respectively. In the year
2001-02, CB has the lower ratio (2.93%). However, in 2010-11 the ratio of SBI is found to
have the highest ratio (2.07%), though such ratio of BOB remained at lowest among all the
banks. This indicates that BOB is well aware of its assets and is utilizing them effectively.
Apart from BOB, the performance of CB, CBI, PNB, OBC and BOI are found to be
satisfactory as compared to other banks in the year 2010-11, though average ratio of Gross
NPAs to Total Assets for all the banks during the study period remained very high except
CB. Thus, there is ample scope for all the selected banks to manage their asset quality more
efficiently. In this competitive environment this is ardently needed.
Table 4.18 showing Gross NPAs to Total Assets (%) of all selected PSBs in India for the
period 2001-02 to 2010-11
End March
Years
2002 2003 2004 2005 2006 2007 2008 2009
2010
2011
Mean
SBI
4.45
3.59
3.11
2.71
2.10
1.76
1.78
1.62
1.85
2.07
2.50
PNB
5.68
5.78
4.56
2.96
2.16
2.09
1.67
1.12
1.08
1.16
2.83
BOB
6.33
5.45
4.68
3.51
2.11
1.46
1.10
0.81
0.86
0.88
2.72
BOI
5.33
4.96
4.40
3.32
2.21
1.48
1.08
1.10
1.78
1.37
2.70
CB
2.93
3.02
3.14
2.15
1.35
0.90
0.78
0.99
0.98
0.92
1.72
UBI
5.45
4.68
4.02
2.84
2.35
1.82
1.34
1.19
1.37
1.54
2.66
CBI
6.42
5.68
4.88
3.82
3.59
2.77
1.90
1.57
1.35
1.14
3.31
SB
4.09
4.12
3.37
2.75
2.47
1.75
1.65
1.22
1.44
1.66
2.45
OBC
2.95
3.37
2.95
4.65
3.59
1.97
1.41
0.94
1.07
1.19
2.41
UCO
4.25
3.91
3.38
2.56
2.00
2.01
1.84
1.38
1.21
1.93
2.45
Mean
4.79 4.46 3.85 3.13 2.39 1.80 1.45 1.19
Score
1.30
1.39
2.57
PSBs
69
4.4.3 Analysis of Gross NPAs to Total Advances (%) of Selected PSBs in India
Table 4.19 shows Gross NPAs as a percentage of Total Advances of the selected
public sector banks for the period 2001-02 to 2010-11. A look into the table reveals that gross
NPAs as a percentage of total advances remained very high for all the selected banks,
particularly up to 2005-06. Thereafter, the ratio started to significantly decline as compared to
2004-05 and the previous periods of the study, but the percentages even at the end of 2010-11
undoubtedly speak to take cautious effort to minimize their NPA level. Among the banks, the
performance of CB is satisfactory, followed by SB. On the other hand CBI shows a poor
performance in this regard.
Table 4.19 showing Gross NPAs to Total Advances (%) of all selected PSBs in India for
the period 2001-02 to 2010-11
End March
Years
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Mean
PSBs
SBI
12.82
9.80
8.02
6.15
3.97
2.96
3.08
2.87
3.09
3.35
5.61
PNB
12.05
12.38
9.89
6.19
4.21
3.51
2.78
1.79
1.72
1.81
5.63
BOB
13.34
11.79
11.18
7.65
3.99
2.50
1.86
1.29
1.37
1.38
5.63
BOI
9.72
8.92
8.14
5.68
3.80
2.47
1.70
1.73
2.90
2.26
4.73
CB
6.38
6.11
6.56
3.92
2.26
1.52
1.32
1.57
1.53
1.45
3.26
UBI
11.32
9.36
7.98
5.13
3.93
3.00
2.23
1.99
2.24
2.40
4.96
CBI
15.86
14.01
13.56
9.61
7.16
4.97
3.22
2.71
2.33
1.85
7.53
SB
8.73
8.71
7.70
5.36
4.13
3.02
2.76
1.96
2.22
2.43
4.70
OBC
6.72
7.31
6.15
9.93
6.30
3.29
2.35
1.54
1.76
2.00
4.74
UCO
10.41
8.58
7.17
5.06
3.30
3.21
3.00
2.24
2.02
3.18
4.82
Mean
10.73 9.70
8.64 6.47 4.30 3.04 2.43
Score
1.97
2.12
2.21
5.16
4.4.4 Analysis of Net NPAs of the Selected Public Sector Banks in India
For analyzing Net NPAs of the selected public sector banks, it is important to look at
the movement of Net NPAs in absolute term during the period 2001-02 to 2010-11. Net
NPAs are Gross NPAs minus Provisions on NPAs and Interest in Suspense Account. Quality
of Assets can be judged better from the level of Net NPAs.
Table 4.20 shows amount of Net NPAs of the selected public sector banks over the
period under study. It is revealed from the table that amount of net NPAs increased at the end
70
of March, 2011 as compared to the end of March, 2002 for all the banks except BOB, BOI
and CBI though due to the unavailability of data of 2002, SB does not reflect the starting
amount of net NPAs. In case of BOB the amount has declined by about 58.66% during the
study period (as compared to ` 1913.19 crore in 2002 to ` 790.88 crore in 2011), followed by
CBI (50.14%) and BOI (15.58%). In the contrary, during this period highest growth of net
NPAs is found in case of UCO (143.22%), followed by OBC (106.73%), CB (82.19%), SBI
(81.29%), UBI (34.74%) and PNB (12.63%). Though the absolute amount of net NPAs
cannot be a sole indicator for determining efficiency or otherwise, but it cannot be denied that
the banks should take special effort to improve their asset quality by reducing the amount of
NPAs.
71
Table 4.20 showing Net NPAs of all selected PSBs in India for the period 2001-02 to 2010-11
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
SBI
6810.28
6183.00
5441.73
5348.89
4906.42
5257.72
7424.33
9552.02
10870.17
12346.9
PNB
1810.01
1526.91
448.96
119.44
210.17
725.62
753.78
263.85
981.69
2038.63
BOB
1913.19
1700.28
1761.02
619.64
518.04
501.67
493.55
451.15
602.32
790.88
BOI
2304.00
2286.14
2061.57
1554.28
969.5
812.03
591.98
628.21
2207.45
1944.99
CB
1288.39
1453.88
1378.31
1125.28
879.18
926.97
899.03
1507.25
1799.7
2347.33
UBI
1338.36
1253.43
845.15
1060.38
833.95
601.22
127.57
325.94
965.33
1803.44
CBI
1699.00
1562.00
1271.00
814.00
972.00
878.00
1060.00
1063.00
727.00
847.00
SB
NA
709.51
1007.14
425.89
312.53
391.01
622.73
631.77
963.20
1030.84
OBC
453.80
225.28
NA
327.14
162.98
215.66
538.4
442.43
723.82
938.15
UCO
750.16
697.14
752.93
810.74
784.94
1006.06
1092.30
812.67
966.28
1824.55
PSBs
72
4.4.5 Analysis of Net NPAs to Total Assets (%) of Selected PSBs in India
Now an attempt is made to examine the Net NPAs of the selected public sector
banks in relative terms. Table 4.21 shows that net NPAs as a percentage of total assets for all
the selected public sector banks have fluctuated over the years during the study period 200102 to 2010-11. It is revealed from the table that in the year 2001-02, BOI had the highest
NPA percentage (3.30), but in 2010-11 the ratio reached to 0.55 percent. Similarly, for BOB,
the ratio came down from 2.70 percent in 2001-02 to a very low of 0.22 percent in 2010-11.
Thus, it reveals that the banks have utilized their assets effectively and also took necessary
steps to reduce the level of NPAs. Among the other banks, performance of CBI, PNB and
OBC at the end of the period 2010-11 is also satisfactory. If one looks at the average level of
net NPAs as percentage of total assets, then it can be said that for most of the banks (except
OBC and PNB) the ratio is not so negligible and as such it needs ardent steps to reduce it.
Table 4.21 showing Net NPAs to Total Assets (%) of all selected PSBs in India for the
period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SBI
1.96
1.64
1.33
1.16
0.99
0.93
1.03
0.99
1.03
1.01
1.21
PNB
2.48
1.77
0.44
0.09
0.14
0.45
0.38
0.11
0.33
0.54
0.67
BOB
2.70
2.22
2.07
0.65
0.46
0.35
0.27
0.20
0.22
0.22
0.94
BOI
3.30
2.98
2.43
1.64
0.86
0.57
0.33
0.28
0.80
0.55
1.38
CB
1.78
1.77
1.38
1.02
0.66
0.56
0.50
0.69
0.68
0.70
0.97
UBI
3.02
2.45
1.45
1.46
0.94
0.59
0.10
0.20
0.49
0.76
1.15
CBI
3.23
2.74
2.01
1.19
1.30
0.94
0.86
0.72
0.40
0.40
1.38
SB
NA
2.06
2.13
0.82
0.51
0.44
0.58
0.49
0.69
0.66
0.93
OBC
1.41
0.66
NA
0.61
0.28
0.29
0.59
0.39
0.53
0.58
0.53
UCO
2.39
2.00
1.72
1.49
1.27
1.34
1.22
0.73
0.70
1.12
1.40
Mean
2.47 2.03 1.50 1.01 0.74 0.65 0.59 0.48
Score
0.59
0.65
1.07
PSBs
4.4.6 Analysis of Net NPAs to Net Advances (%) of the Selected PSBs in India
Table 4.22 shows net NPAs as a percentage of net advances of all the selected banks
during the period 2001-02 to 2010-11. Net NPAs as a percentage of advances is the most
standard measure of asset quality. As per international norms, a ratio of 1% is considered to
73
be tolerable and desirable. From Table 4.22 it is observed that PNB, BOB, BOI, CBI, SB and
OBC in the year 2010-11 have net NPAs as a percentage of advances below 1%. But for the
preceding years the banks have significantly high ratio. Similarly, for all other banks the ratio
is very high as compared to international standard. The average ratio for the period 2001-02
to 2010-11 strongly supports this. Viewed from this angle it can be argued that the banks
should reduce their NPA levels immediately and improve their asset quality so that they can
compete with the tough competitive environment.
Table 4.22 showing Net NPAs Ratio (Net NPAs to Net Advances) of all selected PSBs in
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SBI
5.63
4.50
3.48
2.65
1.87
1.56
1.78
1.79
1.72
1.63
2.66
PNB
5.32
3.86
0.98
0.20
0.29
0.76
0.64
0.17
0.53
0.85
1.36
BOB
5.06
3.72
2.99
1.45
0.87
0.60
0.47
0.31
0.34
0.35
1.62
BOI
6.02
5.37
4.50
2.80
1.49
0.95
0.52
0.44
1.31
0.91
2.43
CB
3.89
3.59
2.89
1.88
1.12
0.94
0.84
1.09
1.06
1.11
1.84
UBI
6.26
4.91
2.87
2.64
1.56
0.96
0.17
0.34
0.81
1.19
2.17
CBI
7.98
6.74
5.57
2.98
2.59
1.70
1.45
1.24
0.69
0.65
3.16
SB
4.63
4.29
2.58
1.59
0.86
0.76
0.97
0.77
1.07
0.97
1.85
OBC
3.20
1.40
0.00
1.29
0.49
0.49
0.99
0.65
0.87
0.98
1.04
UCO
5.45
4.36
3.65
2.93
2.10
2.14
1.98
1.18
1.17
1.84
2.68
Mean
5.34 4.27 2.95 2.04 1.32 1.09 0.98 0.80
Score
0.96
1.05
2.08
PSBs
4.4.7 Average NPA Indices of the Selected PSBs in India

After analyzing the NPAs of the selected banks individually over the years, an
attempt has been taken to examine the average performance of the ten selected public sector
banks during the period 2001-02 to 2010-11. For this purpose, the average NPA indices of
PSBs as a whole have been computed based on the year-wise average of Gross NPAs to TA,
Gross NPAs to Total Advances, Net NPAs to TA and Net NPAs to Total Advances.
74
Table 4.23
Statement showing Average NPA Indices of selected PSBs in India taken together based on Selected NPA Ratios during the period 200102 to 2010-11
End March
Years
NPA
Ratios
Gross
NPA/Total
Assets
Gross
NPA/Total
Advances
Net
NPA/Total
Assets
Net
NPA/Net
Advances
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
4.79
4.46
3.85
3.13
2.39
1.80
1.45
1.19
1.30
1.39
2.575
10.73
9.70
8.64
6.47
4.30
3.04
2.43
1.97
2.12
2.21
5.161
2.47
2.03
1.50
1.01
0.74
0.65
0.59
0.48
0.59
0.65
1.071
5.34
4.27
2.95
2.04
1.32
1.09
0.98
0.80
0.96
1.05
2.080
1.644
1.363
1.110
1.241
1.325
2.722
Avg. NPA
5.834
5.115
4.233
3.163
2.191
Indices
(NPAI)
[Source: Collected and compiled from Table 4.18, 4.19, 4.21 and 4.22]
75
Table 4.23 shows average gross NPAs as a percentage of total assets of the selected
public sector banks taken together. The ratio indicates that on an average it has declined up to
the year 2008-09 and thereafter it increased. If we compare it with individual banks ratio
then it is revealed that the ratio of Canara Bank (CB) remained lower throughout the periods.
Similarly, after 2005-06, the performance of BOB was better than the average performance of
the banks in this matter. For all other banks, the ratio was higher than the average for most of
the periods. Similar result is observed if we take into consideration gross NPAs as a
percentage of total advances.
Net NPAs as a percentage of total assets of the selected public sector banking
companies as a whole also declined up to the year 2008-09 and thereafter it increased, but the
ratios are sufficient enough to advocate in favor of the banks inefficiency in the matter of
managing asset quality. In this case PNB shows better performance than the average ratio
(except the year 2001-02). In case of BOB, the ratio declined significantly in the year 201011 and came down to only 0.22% as compared to the average of 0.65% . Net NPAs as a
percentage of net advances, which is considered to be a good indicator of judging asset
quality, remained average 2.08% during the period 2001-02 to 2010-11 for the selected
banks. For most of the years, the ratio was significantly greater than the international norm.
This undoubtedly speaks that the banks must need steps to reduce its NPA levels to make
them internationally competitive which is one of the prime objectives of Banking Sector
Reforms.
76
Table 4.24
Statement showing Rank, Composite Rank and Ultimate Rank of NPAs of Selected PSBs in India based on bank-wise mean values of
Gross NPA to TA, Gross NPA to Total Advances, Net NPA to TA and Net NPA to Net Advances
SBI
Gross NPA/
Total
Assets
2.504
Gross NPA/
Total
Advances
5.612
Net NPA/
Total
Assets
1.208
Net NPA/
Net
Advances
2.661
PNB
2.826
5.632
0.673
1.360
21
BOB
2.720
5.634
0.936
1.616
24
5.5
BOI
2.703
4.732
1.375
2.431
25
CB
1.715
3.262
0.974
1.841
11
UBI
2.661
4.958
1.147
2.171
24
5.5
CBI
3.311
10
7.527
10
1.378
3.159
10
39
10
SB
2.452
4.702
0.931
1.849
14
OBC
2.409
4.737
0.534
1.036
UCO
2.447
4.816
1.397
10
2.680
27
8.5
Banks
Rank
Rank
[Source: Table 4.18, 4.19, 4.21 and 4.22]
77
Rank
Rank
Composite
Rank
Ultimate
Rank
27
8.5
Table 4.24 highlights the rankings of the selected public sector banks in different
ways like rank, composite rank and ultimate rank of the different parameters of ranking.
Ranks have been assigned to each bank on the basis of their gross NPAs to total assets, gross
NPAs to total advances, net NPA to total assets and net NPAs to net advances and highest
rank has been given based on lowest NPA ratios. Composite ranks of each bank have been
computed by aggregating the ranks under four categories of NPA ratios. Thereafter, ultimate
ranks of each bank have been computed based on composite rank values. The findings
indicate that none of the selected banks showed efficient performance in the matter of
managing its loan assets. From the Table 4.24 it can be said that among them performance of
OBC is satisfactory, followed by CB, SB, PNB, BOB and UBI (jointly), BOI, SBI and UCO
(jointly) and CBI. As NPAs arises from the non-recovery of interest and principal on loan
assets, by analyzing NPAs it can be said that the recovery performance of the banks was not
satisfactory. The reason for such performance may be due to granting advances to the priority
sectors and some policies of the Central Government that helped to increased NPA levels.
But after deregulation and in the era of tough competition, it is ardently needed for the banks
to take appropriate steps to minimize NPAs and utilize assets more efficiently. Several steps
can be taken to minimize its NPAs, like compromising with the borrowers, legal steps, rating
of loan assets, Constitution of Assets Reconstruction Committee etc. But it can be said that
no single policy or step can reduce the NPA levels because all these banks operate their
banking business in every parts of this country. Economic background, cultural and some
other environmental factors are different from regions to regions of this country and they
greatly influence the formats of NPAs. So to minimize the NPAs, banks should frame
strategies keeping in mind all these factors and check nationwide drive to check NPAs.
4.5 Analysis of Social Responsibility Performance of Selected PSBs in India

based on Priority Sector Advances and Wage Bill Payment:
The PSBs were mainly formed with the objective of nation-building and socioeconomic upliftment of the Indian masses. In this section it has been tried to analyze the
performance of the selected banking companies on the basis of their direct and indirect
contributions to the society for socio-economic growth. For this purpose two ratios have been
selected to study the social performances of the selected banking companies:
i) Advances to Priority Sectors to Total Advances (%).
ii) Ratio of Wage bills to Total Income (%).
78
4.5.1 Analysis of Advances to Priority Sectors of selected PSBs in India

As a matter of policy decision, the PSBs in India have taken a leading role in
providing finance/ advances to priority sectors of the economy with the noble mission to
accelerate the socio-economic growth process as a part of the social responsibility
performance.
4.5.1-1 Introduction
At a meeting of the National Credit Council held in July 1968, it was emphasized that
commercial banks should increase their involvement in the financing of priority sectors, viz.,
agriculture and small scale industries. The description of the priority sectors was later
formalized in 1972 on the basis of the report submitted by the Informal Study Group on
Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank of India
in May 1971. On the basis of this report, the Reserve Bank of India prescribed a modified
return for reporting priority sector advances and certain guidelines were issued in this
connection indicating the scope of the items to be included under the various categories of
priority sector. Although initially there was no specific target fixed in respect of priority
sector lending, in November 1974 the banks were advised to raise the share of these sectors
in their aggregate advances to the level of 33.33 per cent by March 1979.
At a meeting of the Union Finance Minister with the Chief Executive Officers of
public sector banks held in March 1980, it was agreed that banks should aim at raising the
proportion of their advances to priority sectors to 40 per cent by March 1985. Subsequently,
on the basis of the recommendations of the Working Group on the Modalities of
Implementation of Priority Sector Lending and the Twenty Point Economic Programmed by
Banks, all commercial banks were advised to achieve the target of priority sector lending at
40 per cent of aggregate bank advances by 1985. Sub-targets were also specified for lending
to agriculture and the weaker sections within the priority sector. Since then, there have been
several changes in the scope of priority sector lending and the targets and sub-targets
applicable to various bank groups. On the basis of the recommendations of the Internal
Working Group, set up in Reserve Bank to examine, review and recommend changes, if any,
in the existing policy on priority sector lending including the segments constituting the
priority sector, targets and sub-targets, etc. and the comments/suggestions received thereon
from banks, financial institutions, public and the Indian Banks Association (IBA), it has
been decided to include only those sectors that impact large segments of population and the
weaker sections, and which are employment-intensive, as part of the priority sector.
79
4.5.1-2 Categories of priority sector

The broad categories of priority sector for all scheduled commercial banks are as under:
(i) Agriculture and Allied activities (Direct and Indirect Finance): Direct finance to
agriculture include short, medium and long term loans given for agriculture and allied
activities directly to individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups
(JLGs) of individual farmers without limit and to others (such as corporates, partnership firms
and institutions) up to Rs.20 lakh, for taking up agriculture/allied activities. Indirect finance
to agriculture shall include loans given for agriculture and allied activities as specified in
Section I, appended.
(ii) Small Scale Industries (Direct and Indirect Finance): Direct finance to small scale
industries (SSI) include all loans given to SSI units which are engaged in manufacture,
processing or preservation of goods and whose investment in plant and machinery (original
cost) excluding land and building does not exceed the amounts specified in Section I,
appended. Indirect finance to SSI shall include finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and to
cooperatives of producers in this sector.
(iii) Small Business / Service Enterprises include small business, retail trade, professional
& self employed persons, small road & water transport operators and other service enterprises
as per the definition given in Section I and other enterprises that are engaged in providing or
rendering of services, and whose investment in equipment does not exceed the amount
specified in Section I, appended.
(iv) Micro Credit : Provision of credit and other financial services and products of very
small amounts not exceeding Rs. 50,000 per borrower to the poor in rural, semi-urban and
urban areas, either directly or through a group mechanism, for enabling them to improve their
living standards, will constitute micro credit.
(v) Education loans: Education loans include loans and advances granted to only individuals
for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies
abroad, and do not include those granted to institutions;
(vi) Housing loans: It covers loans up to Rs. 15 lakh for construction of houses by
individuals, (excluding loans granted by banks to their own employees) and loans given for
repairs to the damaged houses of individuals up to Rs.1 lakh in rural and semi-urban areas
and up to Rs.2 lakh in urban areas.
80
4.5.1-3 Analysis of Social Responsibility Performance based on Priority Sector

Advances of the Selected PSBs in India
The amount of priority sector advances of the ten selected PSBs in India over the study
period and also the detailed results of the selected measure i.e. priority sector advances to
total advances ratio of them during the study period from 2001-02 to 2010-11 have been
highlighted. Table 4.25 gives an overview of the amount of priority sector advances of the ten
selected PSBs in India over the study period from 2001-02 to 2010-11. The mean (average)
priority sector advances in India for the said period is also shown in Table 4.25.
It is observed from the Table 4.25 that the amount of priority sector advances in case of
SBI marked an increasing trend throughout the period under study i.e. from 2001-02 to 201011. In the year 2001-02, the amount of priority sector advances is lowest among all the years
under study which is ` 31591.48 crore and in the year 2010-11 it is the highest i.e. `
231597.87 crore. On an average, the priority sector advances is computed at ` 101433.69
crore of SBI.
Table 4.25 portrays that the PNB has registered an overall increasing trend in the
amount of priority sector advances during the period of study. This bank has contributed
highest amount of priority sector advances of ` 78637.01 crore in the year 2010-11 and has
contributed lowest amount of priority sector advances of ` 13441.28 crore in the year 200102. The average amount of priority sector advances of this bank for the study period is
computed at ` 38978.06 crore.
In case of BOB, Table 4.25 exhibits a continuous improving trend in terms of amount of
priority sector advances over the study period. The amount of priority sector advances is
minimum (` 7675.73 crore) in the first year of the study period and is maximum (` 54909.27
crore) in the ultimate year (2010-11) of the study. This continuous increasing trend of priority
sector advances indicates the ability of the bank to contribute more and more amount of funds
to the priority sectors as advances out of its total available advances. On an average, the
priority sector advances of BOB are computed at ` 24943.96 crore.
It is observed from Table 4.25 that the amount of priority sector advances in case of
BOI also recorded an increasing trend throughout the study period from 2001-02 to 2010-11.
In the first year (2001-02) it was minimum i.e. ` 9181.40 crore and in the last year (2010-11)
it was maximum i.e. ` 54883.06 crore. The average amount of priority sector advances of this
bank is computed at ` 26266.94 crore.
81
From Table 4.25 it is found that the priority sector advances in case of CB has
registered a gradual upward trend during the study period. The lowest amount of priority
sector advances (` 9287.60 crore) is found in the year 2001-02 and the highest amount of
priority sector advances (` 67999.31 crore) is found in the year 2010-11. Its average priority
sector advances are found at ` 33726.65 crore.
It is observed from the Table 4.25 that the amount of priority sector advances in case of
UBI has marked an increasing trend throughout the period under study i.e. from 2001-02 to
2010-11. In the year 2001-02, the amount of priority sector advances is lowest among all the
years under study which is ` 7046.35 crore and in the year 2010-11 it is the highest i.e. `
48378.76 crore. On an average, the priority sector advances is computed at ` 24085.89 crore.
Table 4.25 portrays that the CBI has obtained an overall increasing trend in the amount
of priority sector advances during the period of study. This bank has contributed highest
amount of priority sector advances of ` 40509.51 crore in the year 2010-11 and has
contributed lowest amount of priority sector advances of ` 8203.28 crore in the year 2001-02.
The average amount of priority sector advances of this bank for the study period is computed
at ` 20178.89 crore.
In case of SB, Table 4.25 exhibits a continuous improving trend in terms of amount of
priority sector advances over the study period. The amount of priority sector advances is
minimum (` 4101.35 crore) in the first year of the study period and is maximum (` 32175.89
crore) in the ultimate year (2010-11) of the study. This continuous increasing trend of priority
sector advances indicates the ability of the bank to contribute more and more amount of funds
to the priority sectors as advances out of its total available advances. On an average, the
priority sector advances of SB are computed at ` 16623.92 crore.
OBC has also recorded an increasing trend throughout the study period from 2001-02 to
2010-11. In the first year (2001-02) it was minimum i.e. ` 5455.36 crore and in the last year
(2010-11) it was maximum i.e. ` 34958.56 crore. The average amount of priority sector
advances of this bank is computed at ` 15666.01 crore.
From Table 4.25 it is found that the priority sector advances in case of UCO Bank has
registered a gradual upward trend up to year 2010 during the study period and thereafter in
the last year, it slightly decreases again. The lowest amount of priority sector advances (`
3975.46 crore) is found in the year 2001-02 and the highest amount of priority sector
82
advances (` 24359.47 crore) is found in the year 2009-10. Its average priority sector advances
are found at ` 14289.96 crore.
On the basis of mean or average amount of priority sector advances of all the ten
selected PSBs, it is seen from the Table 4.25 that the SBI has achieved the highest average
amount of priority sector advances (i.e. `101433.69 crore) which implies that the SBI has
shown more efficiency or capability to contribute funds as advances to the different priority
sectors as compared to other nine selected PSBs. The lowest average amount of priority
sector advances of ` 14289.96 crore is found in case of UCO Bank. On the basis of this
average amount of priority sector advances, the first and last ranks are occupied by SBI and
UCO Bank respectively. The second, third, fourth, fifth, sixth, seventh, eighth and ninth ranks
for the second, third, fourth, fifth, sixth, seventh, eighth and ninth average values of priority
sector advances (` 38978.06 crore, ` 33726.65 crore, ` 26266.94 crore, ` 24943.96 crore, `
24085.89 crore, ` 20178.89 crore, ` 16623.92 crore and ` 15666.01 crore respectively) have
been occupied by PNB, CB, BOI, BOB, UBI, CBI, SB and OBC respectively.
83
Table 4.25
Statement showing Advances to Priority Sector of selected PSBs in India during the period 2001-02 to 2010-11
Years
PSBs
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
31591.48
13441.28
7675.73
9181.40
9287.60
7046.35
8203.28
4101.35
5455.36
3975.46
35111.80
16033.63
9176.21
11152.57
12170.17
9541.34
9671.05
5041.51
6028.33
4844.11
42705.87
20734.52
9925.42
12959.27
16151.67
11584.32
9925.32
6725.39
7488.26
6549.53
57864.82
28268.45
12265.80
15876.05
20388.66
17042.97
12215.55
9693.92
9467.31
10013.91
80012.88
34093.43
17588.13
20531.21
29926.87
20335.65
16299.57
13488.39
11793.96
13077.68
102015.85
36527.61
24052.54
25372.94
36680.33
24875.02
20262.76
16953.55
14599.37
16272.79
119230.51
46216.88
29474.54
32238.97
41979.80
28264.38
23998.51
20580.36
17531.82
18191.10
143637.56
49212.35
38250.05
37545.07
45991.12
31980.41
26830.21
26393.25
21241.72
21525.88
170568.21
66615.47
46121.89
42928.90
56690.93
41809.72
33873.13
31085.63
28095.40
24359.47
231597.87
78637.01
54909.27
54883.06
67999.31
48378.76
40509.51
32175.89
34958.56
24089.67
84
Mean
101433.69
38978.06
24943.96
26266.94
33726.65
24085.89
20178.89
16623.92
15666.01
14289.96
Priority Sector Advances Ratio = (Priority sector advances/ total advances) 100
This ratio shows the advances made in priority sector as a percentage of total advances.
Higher the ratio better is the contribution to the priority sectors by the banks out of their total
advances and vice-versa. Table 4.26 shows the priority sector advances as a percentage of
total advances of the selected PSBs in India under study during 2001-02 to 2010-11. A
cursory look into the table reveals that ratio of priority sector advances as a percentage of
total advances registered a fluctuating trend for all the selected PSBs during the study period.
Initially, in most of the cases, this ratio was high, but the banks could not maintain it.
Average or mean performance of the ten selected PSBs as a whole also depicts the same in
the Table 4.26. One possible reason behind the decline in this ratio is due to the increase of
non-recoverable amount of loan amount (NPA) and the huge expansion of branches of
private sector (including new) and foreign banks during the concerned period. Improvement
in this ratio during 2003 to 2008 for some banks is a good sign. From Table 4.26 during the
study period PNB showed the satisfactory performance in this matter having the highest
mean value of the ratio of priority sector advances to total advances (39.182).
85
Table 4.26
Statement showing Priority Sector Advances to Total Advances (%) of selected PSBs in India during the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
PSBs
SBI
26.15
25.49
27.04
28.59
30.58
PNB
39.11
39.86
43.91
46.79
45.68
BOB
22.80
25.96
27.88
28.26
29.36
BOI
23.97
26.16
28.26
28.59
31.50
CB
28.04
30.07
33.90
33.74
37.68
UBI
32.95
37.4
39.37
42.50
38.10
CBI
38.54
41.76
43.52
44.78
43.48
SB
27.55
30.92
32.57
36.27
36.99
OBC
38.53
38.45
38.05
37.42
35.12
UCO
31.05
30.42
31.75
36.21
34.99
Mean
30.869
32.649
34.625
36.315
36.348
Indices
86
2007
2008
2009
2010
2011
Mean
30.24
37.81
28.76
29.81
37.24
39.87
39.12
32.81
33.08
34.63
28.61
38.67
27.62
28.41
39.15
28.3
32.88
32.13
32.13
33.03
26.48
31.81
26.70
26.27
33.27
33.13
31.39
32.37
31.01
31.29
26.99
35.70
26.35
25.48
33.48
35.04
32.14
34.38
33.65
29.53
30.61
32.48
24.01
25.76
32.00
32.04
31.23
30.13
36.45
35.04
28.078
39.182
26.770
27.421
33.857
35.870
37.884
32.613
35.389
32.793
34.337
32.093
30.372
31.274
30.975
32.986
4.5.2 Analysis of Social Responsibility Performance based on wage bill payment

to the employees of selected PSBs in India
The overall Indian economy, both before and after its independence, has the morbid
picture of unemployment and inequality in income distribution leading to the furtherance of
gap between the rich and the poor. The PSBs in India have always shown their positive
attitude to provide employment among the vast unemployed youths of the society and have
always been active to pay remuneration to the employees so as to lessen the degree of
inequality of income distribution. The PSBs in India as a part of their social responsibility
performance have also shown their significant attitude to enhance the wage bill of their
employees such that the employees can have the opportunity to enjoy economic selfsufficiency and to eschew poverty as far as possible.
4.5.2-1 Analysis of Wage bills to Total Income (%) of selected PSBs in India
This ratio indicates the social obligation of the banking companies from the view
point of the payment made to their employees as salary, allowances and other benefits out of
their total income. Higher the ratio better is the social responsibility in this regard and viceversa.
Ratio of Wage Bill to Total Income = (PPE / Total income) 100
PPE = Payment to and provisions for employees.
Total income includes interest income and other income.
Table 4.27 shows the ratio of wage bills to total income (%) of the selected PSBs in
India during study period from 2001-02 to 2010-11. A look into the table reveals that this
ratio for all the selected PSBs fluctuated over the periods. In the year 2011, highest
percentage of this ratio is found in case of CBI (17.98) followed by SBI (14.89), PNB
(14.58), SB (14.34), BOI (14.25), UBI (14.06), UCO Bank (12.04), BOB (11.81), CB (11.47)
and OBC (8.04) respectively. Table 4.27 clearly showed that average of this ratio as a whole
of the selected PSBs in India during the study period a fluctuating trend for the period 200102 to 2008-09 and increased thereafter and the highest average of this ratio as a whole is
calculated at 17.985 in the year 2004-05.
87
Table 4.27
Statement showing wage bills to total income (%) of selected PSBs in India during the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
PSBs
SBI
15.16
15.45
16.94
17.47
18.81
PNB
17.26
16.90
17.15
23.92
19.56
BOB
15.20
15.34
15.92
17.83
18.38
BOI
16.19
14.87
15.45
17.58
16.17
CB
14.39
14.23
14.02
15.14
15.02
UBI
15.21
13.43
13.49
14.06
13.36
CBI
21.28
21.09
19.63
20.86
21.56
SB
25.83
25.21
22.57
22.11
22.34
OBC
8.21
9.06
9.11
9.73
10.71
UCO
21.98
20.27
17.94
21.15
18.26
Mean
17.071
16.585
16.222
17.985
17.417
Indices
88
2007
2008
2009
2010
2011
Mean
18.03
18.14
15.83
15.37
12.56
10.83
17.52
13.43
9.03
14.46
13.51
15.14
13.01
11.45
10.12
8.02
13.82
10.56
7.37
12.29
12.75
13.18
13.16
9.99
9.66
8.61
11.04
10.73
7.77
10.91
14.84
12.47
12.05
11.20
10.15
8.87
11.19
11.93
8.48
10.08
14.89
14.58
11.81
14.25
11.47
14.06
17.98
14.34
8.04
12.04
15.784
16.830
14.853
14.252
12.676
11.994
17.597
17.905
8.751
15.938
14.520
11.529
10.779
11.126
13.346
14.658
Table 4.28
Statement showing Average Social Responsibility Indices of selected PSBs in India taken together based on Social Responsibility
Indicators during the period 2001-02 to 2010-11
End March
Years
Ratios
Priority
Sector
Advances
Ratio
Ratio of
Wage bill to
Total
Income
Avg. Social
Responsibility
Indices (SRI)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
30.869
32.649
34.625
36.315
36.348
34.337
32.093
30.372
31.274
30.975
32.986
17.071
16.585
16.222
17.985
17.417
14.520
11.529
10.779
11.126
13.346
14.658
23.970
24.617
25.424
27.150
26.883
24.429
21.811
20.575
21.200
22.161
23.822
[Source: Table 4.26 and 4.27]
89
Table 4.28 highlights the average Social Responsibility Indices (SRI) of the selected
PSBs in India as a whole based on their mean indices of the ratios in regard to Priority Sector
Advances Ratio and Wage Bill to Total Income Ratio over the study period. Highest average
SRI (27.150) is observed in the year 2005 and lowest average SRI (20.575) is noticed in the
year 2009. Mean of mean SRI is calculated at 23.822. Table 4.28 also shows that first six
years (from 2002 to 2007) of the study period average SRI is higher than the mean of average
SRI of 23.822.
Table 4.29
Statement showing Rank, Composite Rank and Ultimate Rank of Social Responsibility
Indicator Ratios of Selected PSBs in India
Mean
Rank
PSAR
SBI
28.078
8
PNB
39.182
1
BOB
26.770
10
BOI
27.421
9
CB
33.857
5
UBI
35.870
3
CBI
37.884
2
SB
32.613
7
OBC
35.389
4
UCO
32.793
6
Banks
Mean
WBTI
15.784
16.830
14.853
14.252
12.676
11.994
17.597
17.905
8.751
15.938
Rank
5
3
6
7
8
9
2
1
10
4
Composite
Rank
13
4
16
16
13
12
4
8
14
10
Ultimate
Rank
6.5
1.5
9.5
9.5
6.5
5
1.5
3
8
4
[Note: PSAR= Priority Sector Advances Ratio and WBTI= Ratio of Wage bill to Total
Income]
It is exhibited from Table 4.29 that the highest mean value of PSAR is computed at
39.182 in case of PNB and for this highest mean value of PSAR, PNB achieved the highest
position which is followed by CBI (37.884), UBI (35.870), OBC (35.389), CB (33.857),
UCO Bank (32.793), SB (32.613), SBI (28.078), BOI (27.421) and BOB (26.770)
respectively. On the basis of the mean value of WBTI of all the ten selected PSBs, Table 4.29
shows that the mean of WBTI is highest (17.905) in case of SB and according to this highest
value of mean of WBTI, the SB occupies the 1st rank position and the 2nd rank is given to CBI
for having the second highest mean of WBTI (17.597). The 3rd, 4th, 5th, 6th, 7th, 8th and 9th
ranks are given to PNB, UCO Bank, SBI, BOB, BOI, CB and UBI respectively. Ultimately
the 10th rank for the minimum mean value (8.751) of WBTI is secured by OBC.
90
According to the composite rank total of the selected PSBs, it is observed that both
PNB and CBI have the same composite rank total of 4 and thus their ultimate ranks are
computed at 1.5 each. The 3rd, 4th and 5th ultimate ranks are obtained by SB, UCO Bank and
UBI for their composite rank total of 8, 10 and 12 respectively. The ultimate rank of both SBI
and CB is computed at 6.5 for having the equal composite rank total of 13. However, for
equality of highest composite rank total of 16 obtained by BOB and BOI each, the ultimate
ranks for them are computed at 9.5 each.

and Profitability Efficiency of the selected Public Sector Banks (PSBs) in India:
PSBs in India are working under a competitive market where a large number of
private sector banks and foreign bank operate also. Naturally, it requires a good degree of
efficiency to be achieved in the areas like minimization of cost, increase in productivity,
earning capacity and profitability so that they can compete with others to achieve market
excellence.

To analyze the efficiency of cost management of the selected PSBs in India in our study the
following relevant ratios have been used:
i) Interest cost of deposits = (Actual interest paid on various deposits/ Average deposits)
100
Where, average deposits do not include demand deposits.
ii) Interest cost of borrowings = (Actual interest paid on borrowings from various
sources/ Average borrowings outstanding) 100
iii) Ratio of Intermediation cost to Total Assets.
iv) Ratio of Burden to Total Assets
Burden is defined as the total non interest expenses less total non-interest income.

To analyze the productivity efficiency of the selected PSBs in India in our study the
i) Output-Input Ratio
ii) Business per Employee (in ` Lakh)
iii) Profit per Employee (in ` Lakh)
91
4.6.3 Analysis of Earnings and Profitability Efficiency of the Selected PSBs in

India
To analyze the earnings and profitability efficiency of the selected PSBs in India in our study
the following relevant ratios have been used:
i) Spread as a percentage of total Assets
ii) Interest yield on loans = (Actual interest earned on loans & advances / Average loans &
advances) 100
iii) Interest yield on investment and Bank balances = (Actual interest earned on
investment and bank balances/ Average bank balances and investment) 100
iv) Return on Assets (ROA)

To analyze the cost control efficiency of the management of the selected PSBs the
following ratios have been used. Lower the ratios under this category indicate better is the
efficiency of the management to control the all types of costs or expenses those are associated
with the selected ratios of the bank and vice-versa.
4.6.1-1 Analysis of Cost of Deposits Ratio (CDR) and Ultimate Rank of the
selected PSBs in India
Interest cost of deposits = (Actual interest paid on various deposits/ Average deposits) 100
Table 4.30 highlights the detailed analysis of Cost of Deposit Ratio (CDR) of the
selected ten PSBs in India for the study period from 2001-02 to 2010-11 and Table 4.31
shows the detailed results of the mean CDR, the CV of CDR, rank based on mean, rank based
on CV, composite rank and also the ultimate rank of those ten selected PSBs for the said
period.
Table 4.30 depicts that in case of all the selected PSBs in India, the CDR marked a
fluctuating trend in all the selected PSBs during the study period. But in case of SBI, PNB,
BOB, BOI, CB, UBI and CBI, the cost of deposit ratio marked a decreasing trend in first five
years of the study period and thereafter it fluctuated in the remaining years of the study.
While in case of SB, OBC and UCO, a mixed trend in the CDR is found during the period
under study. It indicates that the actual interest paid on various deposits of the majority of the
PSBs have been effectively minimized during the study period.
It is exhibited from Table 4.31 that the lowest mean value of CDR is computed at
4.929 in case of BOI and for this lowest mean value BOI achieved the highest position which
92
is followed by BOB (4.974), PNB (5.210), SB (5.378), CBI (5.590), UBI (5.614), SBI
(5.711), UCO (5.745), CB (5.757) and OBC (6.197) respectively. On the basis of the CV of
CDR of all the ten selected PSBs, Table 4.31 shows that the CV of CDR is lowest (12.998%)
in case of UBI and according to this lowest value of coefficient of variation of CDR, the UBI
occupies the 1st rank position and the 2nd rank is given to BOI for having the second lowest
CV of CDR (13.799%). The 3rd, 4th, 5th, 6th, 7th, 8th and 9th ranks are given to UCO, CBI, CB,
SB, OBC, BOB and PNB respectively. Ultimately the 10th rank for the maximum CV value
(17.408%) of CDR is secured by SBI.
According to the composite rank total of the selected PSBs, it is observed that the
composite rank total in case of BOI is the minimum (i.e. 3). Accordingly, the 1st rank position
goes to the BOI and is followed by UBI and CBI respectively in that order. It is also
exhibited from the table that the composite rank totals are equal (i.e. 10) in the case of both
BOB and SB and their ultimate ranks are thus computed at 4.5 each. It is also revealed that
the ultimate ranks are assigned as 6th rank UCO, 7th rank PNB and 8th rank CB for their
consecutive lowest composite rank total of 11, 12 and 14 respectively. However, another
equality of highest composite rank total of 17, the ultimate ranks for both the SBI and OBC
are computed 9.5 each.
93
Table 4.30
Statement showing Ratio of Cost of Deposits (%) of Selected PSBs in India
End March
Years
2002
2003
2004
2005
2006
PSBs
SBI
7.62
7.12
5.90
5.01
4.78
PNB
6.85
5.95
4.80
4.36
4.14
BOB
6.65
5.89
4.83
4.21
4.02
BOI
5.95
5.50
4.56
4.17
4.05
CB
7.07
6.21
5.20
4.60
4.52
UBI
6.89
6.37
5.52
4.82
4.64
CBI
6.75
6.15
5.20
4.63
4.53
SB
6.37
5.51
4.42
4.50
4.11
OBC
7.64
6.97
5.46
4.71
4.92
UCO
7.03
6.32
5.18
4.62
5.01
Mean
6.882
6.199
5.107
4.563
4.472
Indices
2007
2008
2009
2010
2011
Mean
SD
CV%
4.59
4.33
4.56
4.31
5.32
5.07
4.78
5.50
5.77
5.38
5.57
5.40
5.35
5.23
6.71
6.09
5.78
6.38
6.90
6.31
5.93
6.15
5.33
5.76
6.72
6.09
6.55
6.26
7.41
6.58
5.61
5.21
4.56
5.16
5.83
5.52
6.22
5.82
6.43
5.91
4.98
4.91
4.34
4.61
5.39
5.12
5.31
4.90
5.76
5.11
5.711
5.210
4.974
4.929
5.757
5.614
5.590
5.378
6.197
5.745
0.994
0.885
0.829
0.680
0.899
0.730
0.813
0.852
1.026
0.795
17.408
16.991
16.658
13.799
15.611
12.998
14.539
15.837
16.548
13.833
4.961
5.972
6.278
5.626
5.043
5.510
0.850
15.422
94
Table 4.31
Statement showing Rank, Composite Rank and Ultimate Rank of Cost of Deposits (%)
of Selected PSBs in India
Banks
Mean
SBI
5.711
PNB
5.210
BOB
4.974
BOI
4.929
CB
5.757
UBI
5.614
CBI
5.590
SB
5.378
OBC
6.197
UCO
5.745
Rank
based on
Mean
7
3
2
1
9
6
5
4
10
8
CV%
17.408
16.991
16.658
13.799
15.611
12.998
14.539
15.837
16.548
13.833
Rank
based on
CV%
10
9
8
2
5
1
4
6
7
3
Composite
Rank
Ultimate
Rank
17
12
10
3
14
7
9
10
17
11
9.5
7
4.5
1
8
2
3
4.5
9.5
6
4.6.1-2 Analysis of Ratio of Cost of Borrowings (CoB) and Ultimate Rank of the
Interest cost of borrowings = (Actual interest paid on borrowings from various
From the Table 4.32 it is seen that the cost of borrowings in all the selected PSBs registered a
fluctuating trend over the study period.
From the view point of the mean values of CoB of the ten selected PSBs, it is found
that the SB has obtained the lowest mean CoB of 1.477 and accordingly the first rank is given
to this bank and the 10th rank is given to CB for the highest mean value of CoB which is
computed at 12.165. Based on the coefficient of variation of the CoB, it is highlighted from
Table 4.33 that 1st rank position goes to BOI for having the lowest CV of 40.677% and the
last rank for having the highest CV of CoB is given to CB (198.485%).
Comparing the composite rank total of all the ten selected PSBs, it is found that in
case of both SBI and SB have the lowest composite rank totals of 6 each and therefore, the
highest ultimate rank (i.e. 1.5) has been jointly occupied by SBI and SB followed by OBC,
BOI, BOB and UCO Bank (jointly), PNB, UBI and CBI (jointly), CB respectively during the
period under study.
95
Table 4.32
Statement showing Ratio of Cost of Borrowings (%) of Selected PSBs in India
End March
Years
2002
2003
2004
2005
2006
PSBs
SBI
3.63
2.10
1.42
2.51
4.10
PNB
8.85
1.41
1.37
2.08
1.37
BOB
8.83
9.87
6.49
2.42
4.41
BOI
12.29
8.83
7.39
6.07
6.11
CB
1.42
1.07
3.16
4.20
80.05
UBI
10.39
3.07
0.45
1.41
3.94
CBI
1.50
1.84
3.81
2.19
5.82
SB
2.09
3.39
2.47
2.40
2.00
OBC
2.27
0.47
0.81
2.65
5.00
UCO
13.36
3.97
4.53
4.17
4.90
Mean
6.463
3.602
3.190
3.010
11.770
Indices
2007
2008
2009
2010
2011
Mean
SD
CV%
4.12
1.45
5.30
8.68
11.69
6.81
4.35
0.59
3.35
3.82
6.43
1.60
4.17
8.15
10.87
6.88
3.19
0.47
2.92
4.98
3.76
1.33
3.50
4.66
4.69
4.87
14.62
0.21
2.08
4.42
1.31
0.34
1.34
2.92
1.54
1.12
0.55
0.12
0.18
3.36
2.30
1.01
1.94
3.66
2.95
1.01
1.43
1.03
0.44
3.08
3.169
2.082
4.827
6.876
12.165
3.996
3.930
1.477
2.017
5.059
1.557
2.418
2.850
2.797
24.145
3.252
4.077
1.135
1.551
2.980
49.126
116.184
59.038
40.677
198.485
81.389
103.748
76.825
76.916
58.910
5.016
4.966
4.416
1.279
1.885
4.560
4.676
86.130
96
Table 4.33
Statement showing Rank, Composite Rank and Ultimate Rank of Cost of Borrowings
(%) of Selected PSBs in India
Banks
Mean
SBI
3.169
PNB
2.082
BOB
4.827
BOI
6.876
CB
12.165
UBI
3.996
CBI
3.930
SB
1.477
OBC
2.017
UCO
5.059
Rank
based on
Mean
4
3
7
9
10
6
5
1
2
8
CV%
49.126
116.184
59.038
40.677
198.485
81.389
103.748
76.825
76.916
58.910
Rank
based on
CV%
2
9
4
1
10
7
8
5
6
3
Composite
Rank
Ultimate
Rank
6
12
11
10
20
13
13
6
8
11
1.5
7
5.5
4
10
8.5
8.5
1.5
3
5.5
4.6.1-3 Analysis of Ratio of Intermediation cost to Total Assets (%) and Ultimate
Ratio of Intermediation cost to Total Assets = (Operating Expenses/ Total Assets) 100
Intermediation Cost is defined as total operating expenses. Operating expenses include
Payment to and provisions for employees, rent, taxes and lighting, printing and stationary,
advertisement and publicity, depreciation on banks property, directors fees, allowances and
expenses, auditors fees and expenses, law charges, postage, telegrammes, telephones, repairs
and maintenance, insurance and other operating expenses.
Total assets include cash in hand, balances with RBI, balances with banks in India,
money at call and short notice, balances with banks outside India, investment, fixed assets
and other assets.
Higher this ratio lower is the efficiency of the asset management in reducing the total
operating costs or keeping the operating expenses to a certain range. Lower the ratio indicates
better is the efficiency of asset management in reducing the total operating expenses.
It is highlighted from Table 4.34 that the Intermediation Cost to Total Assets marked
an overall fluctuating trend over the study period from 2001-02 to 2010-11 in the case of all
selected PSBs.
It is depicted from Table 4.35 that the OBC has achieved the lowest average
Intermediation Cost to TA which is computed at 1.544 and accordingly, 1st rank position goes
97
to OBC, leaving the second position to UBI, third position to CB, fourth position to BOI, fifth
position to UCO, eighth position jointly go to SBI and CBI, ninth position to PNB. The tenth
position goes to SB for having the highest mean value of 2.272. On the basis of the CV of
Intermediation Cost to TA, it is found that SBI has secured the 1st rank for having the lowest
CV of Intermediation Cost to TA which is computed at 8.935%. However, the last rank for
the highest CV value of 32.892% is achieved by SB.
So far as the composite rank total of all the selected PSBs, it is highlighted from
Table 4.35 that OBC has the composite rank total of 3 and therefore, the 1st or highest
ultimate rank is computed for the OBC. The 2nd ultimate rank is given to UBI for the
composite rank total of 8. The SBI, BOB and BOI have the composite rank total of 9 each
and therefore, the ultimate rank is computed at 4 for those banks. The 7th, 8th, 9th and 10th
ultimate ranks are given to PNB, UCO, CBI and SB respectively for their composite rank
total of 13, 14, 16 and 20.
98
Table 4.34
Statement showing Ratio of Intermediation Cost to Total Assets (%) of Selected PSBs in India
End March
Years
2002
2003
2004
2005
2006
2007
PSBs
SBI
2.17
2.19
2.36
2.32
2.46
2.23
PNB
2.64
2.58
2.51
2.87
2.23
2.16
BOB
2.33
2.24
2.24
2.20
2.29
1.98
BOI
2.37
2.25
2.17
2.15
2.04
2.05
CB
2.30
2.27
2.09
2.01
1.93
1.72
UBI
2.32
2.13
1.98
1.92
1.74
1.54
CBI
2.87
2.78
2.59
2.56
2.40
2.01
SB
3.43
3.28
2.82
2.55
2.54
1.84
OBC
1.78
1.76
1.72
1.67
1.71
1.50
UCO
2.85
2.62
2.21
2.21
2.02
1.74
Mean
2.506
2.410
2.269
2.246
2.136
1.877
Indices
99
2008
2009
2010
2011
Mean
SD
CV%
1.96
1.95
1.82
1.65
1.61
1.41
1.61
1.52
1.31
1.59
1.86
1.89
1.76
1.53
1.53
1.55
1.37
1.51
1.38
1.45
2.01
1.75
1.51
1.47
1.44
1.41
1.35
1.51
1.35
1.27
2.02
1.89
1.45
1.62
1.47
1.83
2.04
1.72
1.27
1.38
2.158
2.247
1.982
1.930
1.837
1.783
2.158
2.272
1.544
1.935
0.193
0.383
0.330
0.330
0.326
0.309
0.569
0.747
0.204
0.538
8.935
17.052
16.637
17.085
17.765
17.349
26.385
32.892
13.220
27.792
1.643
1.583
1.506
1.669
1.984
0.393
19.511
Table 4.35
Statement showing Rank, Composite Rank and Ultimate Rank of Intermediation Cost
to Total Assets of Selected PSBs in India
Banks
Mean
SBI
2.158
PNB
2.247
BOB
1.982
BOI
1.930
CB
1.837
UBI
1.783
CBI
2.158
SB
2.272
OBC
1.544
UCO
1.935
Rank
based on
Mean
8
9
6
4
3
2
8
10
1
5
CV%
8.935
17.052
16.637
17.085
17.765
17.349
26.385
32.892
13.220
27.792
Rank
based on
CV%
1
4
3
5
7
6
8
10
2
9
Composite
Rank
Ultimate
Rank
9
13
9
9
10
8
16
20
3
14
4
7
4
4
6
2
9
10
1
8
4.6.1-4 Analysis of Ratio of Burden to Total Assets (%) and Ultimate Rank of the
Ratio of Burden to Total Assets = (Operating expenses Other Income)/ Total Assets 100
Burden is defined as the total non-interest expenses less total non-interest income.
Lower the ratio better is the capabilities of the asset management in reducing its burden i.e.
sufficient funds are available in terms of other income for the payment of its operating
expenses. On the other hand higher the ratio lower is the efficiency of the asset management
in reducing its burden i.e. sufficient funds is not available as other income for the payment of
operating expenses.
Table 4.36 shows a fluctuating trend in Burden to TA ratio of all the ten selected
PSBs under study. It signifies that all the selected PSBs have been reducing more or less
amount of burden per rupee of their asset value throughout the study period from 2001-02 to
2010-11.
100
Table 4.36
Statement showing Ratio of Burden to Total Assets (%) of Selected PSBs in India
End March
Years
2002
2003
2004
2005
2006
2007
PSBs
SBI
0.91
0.61
0.42
0.68
0.91
0.95
PNB
1.20
1.01
0.53
1.40
1.32
1.04
BOB
0.85
0.53
0.11
0.74
1.15
0.91
BOI
0.66
0.01
-0.05
0.86
0.90
0.82
CB
0.24
0.31
-0.19
0.54
0.80
0.75
UBI
1.12
0.41
0.46
0.75
0.96
0.82
CBI
1.66
1.77
0.99
1.16
1.65
1.44
SB
2.51
1.79
0.92
1.36
1.49
1.02
OBC
0.19
0.13
-0.21
0.61
0.73
0.59
UCO
0.86
0.78
0.63
1.16
1.23
0.94
Mean
1.020
0.735
0.361
0.926
1.114
0.928
Indices
101
2008
2009
2010
2011
Mean
SD
CV%
0.61
0.85
0.55
0.33
0.33
0.45
0.88
0.62
0.56
0.65
0.35
0.51
0.40
0.02
0.38
0.51
0.58
0.74
0.32
0.44
0.53
0.44
0.40
0.42
0.26
0.30
0.29
0.64
0.39
0.50
0.63
0.82
0.57
0.78
0.57
0.89
1.39
1.10
0.62
0.76
0.660
0.912
0.621
0.475
0.398
0.667
1.182
1.219
0.393
0.795
0.207
0.342
0.299
0.380
0.287
0.276
0.492
0.592
0.290
0.261
31.347
37.519
48.138
79.914
71.945
41.368
41.624
48.531
73.849
32.826
0.583
0.426
0.417
0.813
0.732
0.343
50.706
Based on the mean value of Burden to TA of all selected PSBs from Table 4.37, the
lowest mean value (0.393) is observed in case of OBC and the first position is and the first
position is captured by OBC for this average value of Burden to TA. The second position is
given to CB for having the second lowest average of 0.398. The last rank for the highest
average value of 1.219 is occupied by SB. So far as the CV of Burden to TA is concerned, 1st
rank goes to SBI for the lowest CV of 31.347% and the 10th rank position goes to BOI for
having the highest CV value of Burden to TA which is computed at 79.914%.
From the view point of composite rank total of all the selected PSBs, it is observed
from Table 4.37 that the composite rank total is lowest in case of SBI and thus highest
ultimate rank is secured by SBI which is followed by UCO, next four banks jointly occupied
same rank (i.e. 4.5) by BOB, CB, UBI and OBC; PNB, BOI, CBI and SB respectively in that
order.
Table 4.37
Statement showing Rank, Composite Rank and Ultimate Rank of Burden to Total
Assets (%) of Selected PSBs in India
Banks
Mean
SBI
0.660
PNB
0.912
BOB
0.621
BOI
0.475
CB
0.398
UBI
0.667
CBI
1.182
SB
1.219
OBC
0.393
UCO
0.795
Rank
based on
Mean
5
8
4
3
2
6
9
10
1
7
CV%
31.347
37.519
48.138
79.914
71.945
41.368
41.624
48.531
73.849
32.826
102
Rank
based on
CV%
1
3
6
10
8
4
5
7
9
2
Composite
Rank
Ultimate
Rank
6
11
10
13
10
10
14
17
10
9
1
7
4.5
8
4.5
4.5
9
10
4.5
2
Table 4.38
Statement showing Average Cost Efficiency Indices of selected PSBs in India taken together based on Selected Cost Minimizing
End March
Years
2002
2003
Ratios
Cost of
6.882
6.199
Deposit (%)
Cost of
6.463
3.602
Borrowings (%)
Intermediation
2.506
2.41
Cost to TA (%)
Burden to
1.02
0.735
Total Assets (%)
Average
4.218
3.237
Cost Efficiency
Indices (CEI)
[Source: Table 4.30, 4.32, 4.34 and 4.36]
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
5.107
4.563
4.472
4.961
5.972
6.278
5.626
5.043
5.510
3.19
3.01
11.77
5.016
4.966
4.416
1.279
1.885
4.560
2.269
2.246
2.136
1.877
1.643
1.583
1.506
1.669
1.985
0.361
0.926
1.114
0.928
0.583
0.426
0.417
0.813
0.732
2.732
2.686
4.873
3.196
3.291
3.176
2.207
2.353
3.197
103
Table 4.38 highlights the average Cost Efficiency Indices (CEI) of the selected PSBs
in India as a whole based on their mean indices of the ratios in regard to Cost of Deposits,
Cost of Borrowings, Intermediation Cost to Total Assets and Burden to Total Assets over the
study period. Highest average CEI (4.873) is observed in the year 2006 and lowest average
CEI (2.207) is noticed in the year 2010. Mean of mean CEI is calculated at 3.197. Table 4.38
also shows that only in four years of the study period average CEI is higher than the mean of
average CEI of 3.197. So majority of the study period, selected PSBs as a whole perform
better in this respect.

In production theory, the term productivity denotes the ratio of output to input. If the
percentage increase in output is greater than the percentage increase in input, a production
unit is said to be efficient as it indicates the effective utilization of resources. In case of
banking business, employees or human resources are also traditionally considered as inputs
and total business (sum of deposit mobilization and advances), net profit are assumed to be
outputs.
4.6.2-1 Performance Analysis using Input-Output quantities i.e. Output-Input

(O/I) Ratio and Ultimate Rank of selected PSBs in India
In this section performance of selected banking companies has been evaluated by
using output-input ratio. It is very important measure to assess the overall productive ability
of banking companies. Output is treated as total incomes of bank i.e. interest income plus
other income. Here interest incomes include Interest/discount on advances/bills, Income on
Investments, Interest on balances with RBI and other inter-bank funds, others. Other incomes
include commission, exchange and brokerage, Net Profit (loss) on sale of investments, Net
Profit (loss) on revaluation of investments, Net Profit (loss) on exchange transaction, Net
Profit (loss) on sale of land, building & other assets, and miscellaneous income.
Input is treated as total costs of banks, i.e. interest costs plus operating costs. Interest
costs include Interest on deposits, Interest on RBI/inter-bank borrowings, others. Operating
costs include Payments to and provisions for employees, Rent, taxes and lighting, Printing
and stationery, Advertisement and publicity, Depreciation on Bank's property, Directors' fees,
allowances and expenses, Auditors' fees and expenses, Law charges, Postage, telegrams,
telephones, etc., Repairs and maintenance, Insurance, Other expenditure.
104
Output-Input (O/I) ratio indicates how much income can be generated by its total
expenditure. Higher the ratio better is the income generating ability and productivity
efficiency and better is the earning efficiency of bank by employing its total resources or
funds and vice-versa.
It is observed from Table 4.39 that the average O/I ratio throughout the study period
from 2001-02 to 2010-11 marked a fluctuating trend in all the ten selected PSBs under the
study.
Table 4.40 shows the detailed results of the mean O/I ratio, CV of O/I ratio, rank
based on mean, rank based on CV, composite rank and also the ultimate rank of selected
PSBs for the said period.
Table 4.40 highlights that the highest average O/I ratio is found in case of PNB
which is computed at 1.361. On the basis of this average value, the first rank goes to PNB.
Accordingly second, third, fourth, fifth, sixth, seventh, eighth and ninth ranks are given to
OBC, BOB, UBI, CB, BOI, SBI, SB and CBI respectively for the next consecutive highest
average O/I ratio. While the tenth or last rank goes to UCO Bank for the lowest average
(1.220) for this ratio. So far as the coefficient of variation (CV) of O/I ratio is concerned, 1st
rank is given to UBI for having the least CV of output-input ratio which is computed at
3.106%. Similarly, 2nd rank, 3rd rank, 4th rank, 5th rank, 6th rank, 7th rank, 8th rank and 9th rank
for the next eighth consecutives lowest CV values of O/I ratio are occupied by SBI, BOI,
PNB, UCO Bank, BOB, CB, SB and CBI respectively. The 10th rank goes to OBC for having
the highest CV of O/I ratio which is computed at 9.304%.
105
Table 4.39
Statement showing Average Indices of Output-Input (O/I) Ratios of Selected Public Sector Banks in India for the period 2001-02 to
2010-11
End March
Years
2002
2003
2004
2005
2006
PSBs
SBI
1.216
1.268
1.335
1.385
1.354
PNB
1.240
1.361
1.478
1.311
1.362
BOB
1.232
1.304
1.462
1.424
1.325
BOI
1.266
1.366
1.419
1.255
1.261
CB
1.270
1.324
1.460
1.396
1.349
UBI
1.238
1.341
1.384
1.378
1.326
CBI
1.155
1.196
1.340
1.356
1.253
SB
1.127
1.225
1.376
1.306
1.288
OBC
1.353
1.435
1.616
1.434
1.343
UCO
1.180
1.225
1.342
1.260
1.215
Mean
1.228
1.304
1.421
1.350
1.308
Indices
2007
2008
2009
2010
2011
Mean
SD
CV%
1.294
1.387
1.303
1.296
1.294
1.330
1.232
1.262
1.290
1.196
1.294
1.327
1.279
1.344
1.220
1.324
1.169
1.200
1.195
1.151
1.306
1.345
1.318
1.391
1.256
1.300
1.142
1.191
1.202
1.151
1.271
1.414
1.339
1.298
1.306
1.315
1.175
1.201
1.268
1.194
1.352
1.420
1.394
1.283
1.311
1.303
1.187
1.286
1.331
1.281
1.308
1.361
1.338
1.318
1.319
1.324
1.221
1.246
1.347
1.220
0.050
0.066
0.069
0.058
0.070
0.041
0.075
0.071
0.125
0.060
3.828
4.841
5.190
4.425
5.282
3.106
6.154
5.734
9.304
4.933
1.288
1.250
1.260
1.278
1.315
1.300
0.069
5.280
106
From the view point of composite rank, it is seen from Table 4.40 that the composite rank or
composite score (i.e. the sum of the rank based on mean and rank based on CV) is lowest (i.e.
5) in case of PNB and UBI jointly as compared to other selected PSBs. Based on the equal
composite rank total of 5 each, PNB and UBI jointly captured the top most position and is
followed by the another equal composite rank total of 9 each, SBI, BOB and BOI achieved
the ultimate rank of 4 and it is followed by CB and OBC for the composite rank total of 12
each and it is followed by UCO Bank for combined rank total of 15, and it is followed by SB
for the composite rank total of 16 and it is followed by CBI for the composite rank total of 18
and achieved the ultimate rank of 10.
Table 4.40
Statement showing Rank, Composite Rank and Ultimate Rank of O/I ratio of Selected
PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
CV%
Rank
based on
CV%
(1)
(2)
(3)
(4)
(5)=(2)+(4)
(6)
7
1
3
6
5
4
9
8
2
10
3.828
4.841
5.190
4.425
5.282
3.106
6.154
5.734
9.304
4.933
2
4
6
3
7
1
9
8
10
5
9
5
9
9
12
5
18
16
12
15
4
2
4
4
7
2
10
9
7
8
SBI
1.308
PNB
1.361
BOB
1.338
BOI
1.318
CB
1.319
UBI
1.324
CBI
1.221
SB
1.246
OBC
1.347
UCO
1.220
Composite Ultimate
Rank
Rank
4.6.2-2 Analysis of Business per Employee (in ` Lakh) and Ultimate Rank of
If the proportionate increase in total business is greater than the proportionate
increase in the number of employees during a particular period, the productivity of a bank is
said to have improved and vice versa. Here total business is the sum of deposit mobilization
and advances.
107
Table 4.41
Statement showing Business per Employee (in ` Lakh) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
PSBs
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Mean
Indices
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
CV%
173.01
167.76
222.76
218.74
214.88
214.75
148.77
155.12
318.00
134.00
191.00
195.64
237.67
242.97
250.11
249.70
167.85
179.95
343.00
197.00
210.56
228.00
253.00
266.72
297.58
286.48
181.51
240.31
416.00
249.00
243.08
276.87
316.00
320.00
351.12
343.08
206.89
280.22
512.23
321.00
299.23
330.92
396.00
381.00
441.57
436.47
240.46
348.64
570.26
387.00
357.00
407.41
555.00
498.00
548.76
509.21
303.85
489.17
742.64
464.00
456.00
504.52
710.00
652.00
609.41
698.61
400.99
586.02
924.38
580.00
556.00
654.92
914.00
833.00
780.17
694.00
560.28
750.65
1142.43
732.00
636.00
807.95
981.00
1011.00
982.58
853.00
711.76
746.84
1331.17
901.00
704.65
1017.80
1333.00
1284.00
1228.18
1043.00
835.17
875.44
1419.50
1069.00
382.65
459.18
591.84
570.74
570.44
532.83
375.75
465.24
771.96
503.40
50.846
62.204
64.482
64.134
58.919
52.494
65.377
56.424
53.206
62.100
196.779
225.489
262.916
317.049
383.155
487.504
612.193
761.745
896.230
1080.974
522.40
59.019
108
Table 4.42
Statement showing Rank, Composite Rank and Ultimate Rank of Business per
Employee (in ` Lakh) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
382.653
PNB
459.179
BOB
591.843
BOI
570.743
CB
570.436
UBI
532.830
CBI
375.753
SB
465.236
OBC
771.961
UCO
503.400
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
9
8
2
3
4
5
10
7
1
6
50.846
62.204
64.482
64.134
58.919
52.494
65.377
56.424
53.206
62.100
1
7
9
8
5
2
10
4
3
6
10
15
11
11
9
7
20
11
4
12
4
9
6
6
3
2
10
6
1
8
Table 4.41 exhibits an overview of Business per Employee (` In lakh) for selected
PSBs in India for the study period 2001-02 to 2010-11 and Table 4.42 shows the detailed
results of the average Business Per Employee, the CV of Business per Employee, rank based
on average, rank based on CV, combined rank and also the ultimate rank of those selected
PSBs for the said period.
From Table 4.41 it is observed that the Business per Employee of all selected PSBs
marked an increasing trend during the study period and it indicates that efficient utilization of
deposit mobilization and advances by all the selected PSBs in terms of productivity with
reference to the mean index of the banks as a whole (522.40) under study during the period
2001-02 to 2010-11.
109
Table 4.42 depicts that the OBC has achieved the highest mean value (771.961) of
Business per Employee during the study period as compared to other nine selected PSBs.
Accordingly, OBC is given the 1st rank and the 2nd rank is obtained by BOB having the
second average highest value of Business per employee (591.843) and the 3rd, 4th, 5th, 6th, 7th,
8th, 9th and 10th rank go to the BOI, CB, UBI, UCO Bank, SB, PNB, SBI and CBI for the next
eight mean values of Business per Employee. But so far as the CV is concerned, the top rank
goes to SBI for having lowest CV of Business per Employee of 50.846%, the 2nd rank is
achieved by UBI for the second lowest CV of this ratio (52.494%) and for the next eight
lowest CV of this ratio of respectively 53.206%, 56.424%, 58.919%, 62.100%, 62.204%,
64.134%, 64.482% and 65.377% the 3rd, 4th, 5th, 6th, 7th, 8th, 9th and 10th rank go to OBC, SB,
CB, UCO Bank, PNB, BOI, BOB and CBI respectively.
On the basis of composite rank total, the 1st ultimate rank goes to OBC for having
least composite rank total which is computed at 4. The ultimate ranks for the rest of the
selected PSBs as follow: UBI 2nd rank, CB 3rd rank, SBI 4th rank, BOB, BOI and SB
6th rank each for having composite rank total of 11 each, UCO Bank - 8th rank, PNB 9th
rank and 10th rank goes to CBI.
4.6.2-3 Analysis of Profit per Employee (in ` Lakh) and the Ultimate rank of
If the proportionate increase in net profit is greater than the proportionate increase in
the number of employees during a particular period, the productivity of a bank in the same
period is said to have improved and vice versa.
It is observed from Table 4.43 that the Profit per Employee in all the selected PSBs
registered a fluctuating trend throughout the study period but in case of PNB, BOB, CB and
UBI, the Profit per Employee registered an increasing trend in the last six years of the study
period from 2005-06 to 2010-11. The overall fluctuating trend in all the selected PSBs during
the study period indicates that all the PSBs have been more or less able to generate profit in
terms of productivity by proportionate change in the number of employees.
110
From Table 4.44 it is seen that amongst the ten selected PSBs the mean Profit per
Employee in OBC is the highest which is computed at 5.7 and the company occupied 1st rank
position, followed by UBI, CB, BOB, PNB, BOI, SBI, SB and UCO Bank while the average
Profit per Employee in CBI is least (1.624) and is given the last rank. From the view point of
CV of this ratio, again OBC is given the first ranking as its CV of Profit per Employee during
the period under study is lowest (33.008%) and it may be concluded that the OBC has been
more consistent to human resources or employees employed for generating profit than the
other selected PSBs. Then for the second lowest CV (44.505%) of Profit per employee, SB
achieves the 2nd rank and accordingly 3rd rank, 4th rank, 5th rank, 6th rank, 7th rank, 8th rank
and 9th rank go to SBI, UBI, CB, UCO Bank, BOI, PNB and CBI respectively for the next
lowest CV of profit per employee whereas the last rank goes to BOB for having the highest
CV (79.310%) of profit per employee.
Based on the composite rank total of all the selected PSBs, it is observed from Table
4.44 that OBC achieves the 1st ultimate rank for having the minimum composite score of 2.
However, UBI has the second lowest composite rank (6) and therefore, its rank is 2nd and in
the same order the 3rd, 4.5th, 6.5th, 8th ,9th and 10th for the next composite scores of 8, 10, 13,
14, 15 and 19.
111
Table 4.43
Statement showing Profit per Employee (in ` Lakh) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
1.16
0.97
1.40
1.16
1.64
1.22
0.40
0.89
2.40
0.66
1.47
1.43
1.92
1.97
2.26
2.15
0.77
1.30
3.40
1.00
1.77
2.00
2.00
2.35
2.97
2.78
1.58
1.62
5.10
2.00
2.08
2.42
1.71
0.80
2.48
2.81
0.93
1.53
6.67
1.43
2.17
2.48
2.13
1.66
3.02
2.66
0.68
2.05
5.37
0.82
2.37
2.68
2.73
2.71
3.24
3.25
1.35
2.76
5.61
1.30
3.73
3.66
3.94
4.95
3.65
5.39
1.56
3.18
5.84
1.76
4.74
5.64
6.00
7.49
4.97
6.28
1.71
3.64
6.18
2.40
4.46
7.31
8.00
4.39
7.35
7.47
3.30
3.18
7.39
4.43
3.85
8.35
11.00
6.20
9.76
7.50
3.96
3.99
9.04
4.19
2.780
3.694
4.083
3.368
4.134
4.151
1.624
2.414
5.700
1.999
1.295
2.540
3.238
2.270
2.556
2.300
1.153
1.074
1.881
1.330
46.597
68.771
79.310
67.394
61.825
55.407
70.968
44.505
33.008
66.536
Mean
Indices
1.19
1.77
2.42
2.29
2.30
2.80
3.77
4.91
5.73
6.78
3.395
1.964
59.432
PSBs
112
Table 4.44
Statement showing Rank, Composite Rank and Ultimate Rank of Profit per Employee
(in ` Lakh) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
2.780
PNB
3.694
BOB
4.083
BOI
3.368
CB
4.134
UBI
4.151
CBI
1.624
SB
2.414
OBC
5.700
UCO
1.999
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
7
5
4
6
3
2
10
8
1
9
46.597
68.771
79.310
67.394
61.825
55.407
70.968
44.505
33.008
66.536
3
8
10
7
5
4
9
2
1
6
10
13
14
13
8
6
19
10
2
15
4.5
6.5
8
6.5
3
2
10
4.5
1
9
Table 4.45 highlights the average Productivity Indices (PI) of the selected PSBs in
India as a whole based on their mean indices of the ratios in regard to Output-Input (O/I)
ratio, Business per Employee (BPE) and Profit per Employee (PPE) over the study period.
Highest average PI (363.024) is observed in the year 2011 and lowest average PI (66.399) is
noticed in the year 2002. Mean of mean PI is calculated at 175.699. Table 4.45 also shows
that there is an increasing trend and in the last four years of the study period average PI is
higher than the mean of average PI of 175.699.
113
Table 4.45
Statement showing Average Productivity Indices of selected PSBs in India as a whole based on Selected Productivity Ratios during the
period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
1.228
1.304
1.421
1.350
1.308
1.288
1.250
1.260
1.278
1.315
1.300
196.779
225.489
262.916
317.049
383.155
487.504
612.193
761.745
896.23
1080.974
522.403
1.190
1.767
2.417
2.286
2.304
2.800
3.766
4.905
5.728
6.784
3.395
66.399
76.187
88.918
106.895
128.922
163.864
205.736
255.970
301.079
363.024
175.699
Ratios
O/I ratio
Business
Per
Employee
Profit
Per
Employee
Average
Productivity
Indices (PI)
[Source: Table 4.39, 4.41 and 4.43]
114
4.6.3 Analysis of Earnings and Profitability Efficiency of the Selected PSBs in

India
Public Sector Banks in India were primarily established with the noble mission to
provide banking facility in the economy (both in urban, semi-urban and rural areas), to raise
the banking habits of the people, to provide finance to priority sectors, to provide finance to
trade and industry where as earning and profitability aspects have been given less importance
for the cause of the society.
4.6.3-1 Analysis of Spread as a percentage of Total Assets and Ultimate Rank of

the Selected PSBs in India
It is the difference between the interest income and interest expenses or paid as a
percentage of total assets. This ratio is also called Net Interest Margin ratio (NIM). Net
Interest Margin or Spread is defined as the total interest earned less total interest paid.
Net Interest Margin Ratio or Spread as a percentage of Total Assets = (NIM or Spread/
Total Assets) 100.
Here interest incomes include Interest/discount on advances/bills, Income on Investments,
Interest on balances with RBI and other inter-bank funds, others. Interest costs include
Interest on deposits, Interest on RBI/inter-bank borrowings, others.
Higher this ratio better is the profit earning capacity of the banks and vice versa. This
ratio also signifies the capability of asset management of the bank in generating profit.
Higher the ratio better is the efficiency of asset management in generating spread and vice
versa.
Table 4.46 shows that the NIM marked a fluctuating trend in all of the selected PSBs
through over the study period and the NIM in SBI registered a continuous increasing trend up
to the year 2005-06 and thereafter, it started decreasing up to the year 2009-10 and again, it
increasing in the last year of the study period. But the NIM of SB showed a continuous
decreasing trend up to the year 2007-08 and thereafter again it increased and fluctuated up to
the end.
115
Table 4.47 highlights that on an average, the NIM in PNB is 3.424 which is the
highest as compared to other selected PSBs and therefore, PNB achieved the first position,
leaving the second position to SB for the second highest mean of NIM (2.970) and the third,
fourth, fifth, sixth, seventh, eighth and ninth position go to UBI, OBC, BOB, SBI, CBI, CB
and BOI for the next mean values of NIM of 2.916, 2.853, 2.809, 2.800, 2.786, 2.647 and
2.624 respectively and the last position goes to UCO Bank for the least average of NIM
(2.393). So far as the CV is concerned, rank may be classified as 1st rank for the lowest CV
and then the second lowest CV may be classified as 2nd rank and so on and so forth. So, on
the basis of this ranking principle, BOI achieves the 1st rank position for having the lowest
CV (6.312%), followed by PNB, UBI, SBI, BOB, CB, UCO Bank, SB, OBC for the next
lowest CV of NIM of 8.661%, 9.383%, 10.294%, 11.386%, 12.095%, 19.863%, 22.152%
and 22.798% and the 10th rank goes to CBI having the highest CV of NIM.
On the basis of the composite score or composite rank total of ten selected PSBs, the
PNB is given the first rank for the lowest composite rank of 3. Similarly the UBI is given the
second rank for the second lowest composite rank total of 6. But in the cases of SBI, BOB,
BOI and SB the composite rank total is same (i.e.10) and their ultimate rank is computed at
4.5 for having the equal composite rank total of 5. However, the composite rank total of
OBC, CB, CBI and UCO Bank are 13, 14, 17 and 17 respectively, so their ultimate ranks are
categorized as 7th, 8th, 9.5th and 9.5th.
116
Table 4.46
Statement showing Ratio of Net Interest Income to Total Assets (NIM) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2.74
3.37
2.80
2.84
2.63
3.21
3.07
3.69
3.28
2.49
2.76
3.93
2.86
2.78
2.89
3.14
3.46
3.66
3.64
2.66
2.85
3.84
3.18
2.73
2.95
3.17
3.52
3.50
3.88
3.04
3.21
3.51
3.31
2.49
3.01
3.16
3.60
3.41
3.21
2.86
3.28
3.44
3.10
2.54
2.95
2.94
3.32
3.32
2.84
2.69
2.84
3.39
2.79
2.71
2.70
2.91
2.95
2.86
2.55
2.32
2.64
3.06
2.42
2.64
2.04
2.72
2.05
2.11
2.04
1.81
2.48
3.06
2.52
2.72
2.36
2.68
1.64
2.15
1.96
1.63
2.35
3.14
2.35
2.30
2.35
2.35
1.54
2.03
2.33
1.87
2.86
3.50
2.76
2.49
2.60
2.88
2.71
2.97
2.80
2.56
2.800
3.424
2.809
2.624
2.647
2.916
2.786
2.970
2.853
2.393
0.288
0.297
0.320
0.166
0.320
0.274
0.779
0.658
0.650
0.475
10.294
8.661
11.386
6.312
12.095
9.383
27.947
22.152
22.798
19.863
Mean
Indices
3.012
3.178
3.266
3.177
3.042
2.802
2.353
2.320
2.260
2.813
2.822
0.423
15.087
PSBs
117
Table 4.47
Statement showing Rank, Composite Rank and Ultimate Rank of Net Interest Income to
Total Assets (NIM) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
2.800
PNB
3.424
BOB
2.809
BOI
2.624
CB
2.647
UBI
2.916
CBI
2.786
SB
2.970
OBC
2.853
UCO
2.393
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
6
1
5
9
8
3
7
2
4
10
10.294
8.661
11.386
6.312
12.095
9.383
27.947
22.152
22.798
19.863
4
2
5
1
6
3
10
8
9
7
10
3
10
10
14
6
17
10
13
17
4.5
1
4.5
4.5
8
2
9.5
4.5
7
9.5
4.6.3-2 Analysis of Interest Yield on Investments and Bank balances (IYIB) and
Ultimate Rank of the Selected PSBs in India
Interest yield on investment and Bank balances = (Actual interest earned on
Higher the ratio better is the interest earning ability by utilizing its average bank balances and
investment.
118
Table 4.48
Statement showing Yield on Investment and Bank balances (%) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Mean
Indices
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
10.65
11.26
10.84
9.52
11.18
11.52
11.06
10.75
11.82
10.81
9.61
10.6
10.01
8.59
9.88
10.43
10.77
9.94
11.25
9.98
8.78
9.67
8.6
8.03
9.04
9.27
9.25
8.63
10.35
8.52
8.37
8.56
7.96
7.62
8.28
8.33
8.59
8.2
9.52
8.08
7.77
8.79
8.19
7.15
7.61
8.02
8.61
6.43
9.19
8.05
6.71
7.63
7.31
6.59
8.09
7.84
8.03
8.02
8.73
7.51
7.05
7.28
6.95
6.83
8.03
8.14
8.32
7.77
8.48
7.18
6.69
7.27
6.87
7.14
7.62
7.37
6.88
6.92
8.17
6.55
6.31
6.49
6.43
7.46
7.18
7.15
7.07
7.14
7.66
6.00
6.65
6.52
7.21
6.76
7.55
7.10
7.17
6.49
7.13
6.25
7.860
8.406
8.038
7.569
8.447
8.517
8.575
8.029
9.230
7.893
1.459
1.671
1.430
0.919
1.246
1.465
1.451
1.432
1.526
1.565
18.562
19.880
17.793
12.137
14.757
17.201
16.917
17.838
16.530
19.833
10.941
10.106
9.014
8.351
7.981
7.646
7.603
7.148
6.890
6.883
8.256
1.416
17.145
119
Table 4.49
Statement showing Rank, Composite Rank and Ultimate Rank of Interest Yield on
Investment and Bank balances (%) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
7.860
PNB
8.406
BOB
8.038
BOI
7.569
CB
8.447
UBI
8.517
CBI
8.575
SB
8.029
OBC
9.230
UCO
7.893
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
9
5
6
10
4
3
2
7
1
8
18.562
19.880
17.793
12.137
14.757
17.201
16.917
17.838
16.530
19.833
8
10
6
1
2
5
4
7
3
9
17
15
12
11
6
8
6
14
4
17
9.5
8
6
5
2.5
4
2.5
7
1
9.5
It is seen from Table 4.48 that there is a fluctuating trend of Interest yield on
investment and Bank balances (IYIB) in all the selected PSBs over the study period from
2001-02 to 2010-11. The fluctuating trend in the IYIB clearly implies that all the PSBs have
been more or less able to utilize their average bank balances and investment for generating
interest income from the bank balances and advances during the study period.
Table 4.49 discloses that the mean IYIB of OBC is maximum (9.230) by comparing
other nine selected PSBs and on the basis of the average IYIB, OBC secures the highest rank,
the second rank position goes to CBI as its mean is 8.575, leaving the third rank to UBI for
the third highest mean IYIB of 8.517 and fourth rank to CB having mean IYIB of 8.447 and
the fifth rank goes to PNB having the mean IYIB of 8.406. Similarly sixth rank, seventh rank,
eighth rank, ninth rank go to BOB, SB, UCO Bank, SBI having mean IYIB of 8.038, 8.029,
7.893 and 7.860 respectively and the tenth rank goes to BOI having the least mean or lowest
average IYIB.
120
On the basis of CV of the IYIB is concerned, the first rank is achieved by the BOI
due to the lowest CV (12.137%) of IYIB as compared to the other nine selected PSBs. The
second rank goes to CB having the second lowest CV (14.757%) of IYIB and the 3rd rank, 4th
rank, 5th rank, 6th rank, 7th rank, 8th rank and 9th rank for the next lowest CV values of IYIB
are occupied by OBC (16.530%), CBI (16.917%), UBI (17.201%), BOB (17.793%), SB
(17.838%), SBI (18.562%), and UCO Bank (19.833%) but the last rank (i.e. 10th rank) is
secured by the PNB for the highest CV of 19.880%.
By comparing the composite score or combined rank total of the selected ten PSBs,
the first position secured by OBC since its composite rank total is 4 which is the minimum,
jointly followed by CB and CBI as the second lowest composite rank total of 6, the 4th
position, 5th position, 6th position, 7th position and 8th position are occupied by BOI, BOB, SB
and PNB for the composite score of 8, 11, 12 , 14 and 15 respectively and ultimately the SBI
and UCO Bank jointly achieved the last rank for the highest composite score (17).
4.6.3-3 Analysis of Interest Yield on Loans and Advances (IYLA) and Ultimate
Rank of the Selected PSBs in India
Interest yield on loans and advances = (Actual interest earned on loans & advances / Average
loans & advances) 100
Higher the ratio better is the interest earning ability on advances by utilizing its average
balances of loans and advances and vice versa.
121
Table 4.50
Statement showing Interest yield on Loans and Advances (%) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Mean
Indices
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
9.44
9.44
10.02
9.39
10.27
11.15
10.81
11.43
11.22
10.23
8.69
8.69
8.89
8.80
9.76
10.01
10.36
9.83
10.29
9.71
7.62
7.62
7.90
7.48
8.67
8.79
9.52
8.61
9.00
8.84
7.24
7.24
7.35
7.13
7.85
8.31
8.95
8.62
8.06
7.96
7.63
7.63
7.31
7.58
7.85
8.04
8.00
8.65
8.03
8.09
8.29
8.29
8.27
8.51
8.44
8.76
8.20
9.49
8.49
8.39
9.34
9.34
8.84
9.34
9.60
9.85
8.49
9.88
9.80
9.32
9.68
9.68
8.96
9.78
10.44
10.41
9.78
10.13
10.60
10.00
8.62
8.62
7.88
8.42
9.07
8.98
9.06
8.95
9.96
9.39
8.64
9.85
8.03
8.12
8.93
8.90
9.57
9.33
9.98
9.37
8.519
8.640
8.345
8.455
9.088
9.321
9.275
9.493
9.542
9.131
0.830
0.932
0.837
0.890
0.920
0.991
0.912
0.882
1.095
0.786
9.743
10.783
10.030
10.524
10.128
10.635
9.835
9.287
11.479
8.605
10.34
9.50
8.41
7.87
7.88
8.51
9.38
9.95
8.90
9.07
8.981
0.907
10.105
122
Table 4.51
Statement showing Rank, Composite Rank and Ultimate Rank of Interest yield on
Loans and Advances (%) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
8.519
PNB
8.640
BOB
8.345
BOI
8.455
CB
9.088
UBI
9.321
CBI
9.275
SB
9.493
OBC
9.542
UCO
9.131
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
8
7
10
9
6
3
4
2
1
5
9.743
10.783
10.030
10.524
10.128
10.635
9.835
9.287
11.479
8.605
3
9
5
7
6
8
4
2
10
1
11
16
15
16
12
11
8
4
11
6
5
9.5
8
9.5
7
5
3
1
5
2
It is found from Table 4.50 that the IYLA of all selected PSBs marked an overall
fluctuating trend throughout the study period. This fluctuating trend in the IYLA clearly
implies that all the PSBs have been more or less able to utilize their average loans and
advances for generating interest income from the loan amount during the study period from
2001-02 to 2010-11.
Considering the average values of IYLA, it is highlighted from Table 4.51 that the
highest average value of this ratio is obtained by OBC and it computed at 9.542 and for the
highest average value the OBC occupies the 1st rank position and is followed by SB, UBI,
CBI, UCO Bank, CB, PNB, SBI, BOI and BOB for their next consecutive average values of
IYLA. So far as the CV of IYLA is concerned, it is observed from Table 4.51 that in case of
UCO Bank, the CV of UCO Bank is lowest which is computed at 8.605%. Accordingly, 1st
rank position is obtained by UCO Bank, leaving the second position to SB for having the
second lowest CV of 9.287%. The rest eight ranks are secured by SBI, CBI, BOB, CB, BOI,
UBI, PNB and OBC respectively.
123
On the basis of the composite rank total of all selected PSBs, it is seen that the
ultimate highest rank of SB is computed for the having the composite rank total of 4 and is
followed by UCO Bank and CBI in that order. It is also seen that SBI, UBI and OBC have the
same combined rank total of 11 and therefore, their ultimate ranks are computed at 5. The
ultimate rank of CB and BOB is computed at 7 and 8 respectively for having the composite
rank total of 12 and 15 respectively. Finally the last final rank is computed and jointly
occupied by PNB and BOI.
4.6.3-4 Analysis of Return on Assets (ROA) and Ultimate Rank of the Selected
PSBs in India
Return on Asset ratio is the net income or net profit after tax generated by the bank on its
total assets.
ROA = [Net Profit (loss)/Average Total Assets] 100
Net income or profit (loss) is calculated by operating profit less provisions and contingencies.
Operating profit = (interest earned + other income) (interest expended + operating
expenses). Provisions and contingencies include taxation, NPA, investment and others. Other
incomes include commission, exchange and brokerage, Net Profit (loss) on sale of
investments, Net Profit (loss) on revaluation of investments, Net Profit (loss) on exchange
transaction, Net Profit (loss) on sale of land, building & other assets, and miscellaneous
income.
Higher the ratio better is the efficiency of asset management in utilizing its total
assets in generating profits.
124
Table 4.52
Statement showing Return on Assets (ROA) of the Selected PSBs in India for the period 2001-02 to 2010-11
End March
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Mean
Indices
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
0.70
0.77
0.81
0.78
1.03
0.71
0.31
0.98
1.00
0.60
0.86
0.98
1.05
1.16
1.24
1.08
0.85
1.31
1.30
0.66
0.94
1.08
1.20
1.25
1.34
1.22
0.98
1.67
1.70
1.13
0.99
1.17
0.75
0.38
1.01
1.10
0.53
0.82
2.01
0.73
0.89
1.09
0.79
0.68
1.01
0.84
0.37
0.91
1.39
0.34
0.84
1.03
0.80
0.88
0.98
0.92
0.62
0.91
1.21
0.47
1.01
1.15
0.89
1.25
0.92
1.26
0.54
0.88
1.02
0.52
1.04
1.39
1.09
1.49
1.06
1.27
0.45
0.81
0.88
0.59
0.88
1.44
1.21
0.70
1.30
1.25
0.66
0.62
0.91
0.87
0.71
1.34
1.33
0.79
1.42
1.05
0.70
0.76
1.03
0.66
0.886
1.144
0.992
0.936
1.131
1.070
0.601
0.967
1.245
0.657
0.116
0.204
0.210
0.339
0.176
0.194
0.208
0.305
0.368
0.220
13.100
17.820
21.192
36.203
15.581
18.095
34.587
31.510
29.571
33.517
0.77
1.05
1.25
0.95
0.83
0.87
0.94
1.01
0.98
0.98
0.963
0.234
25.118
125
Table 4.53
Statement showing Rank, Composite Rank and Ultimate Rank of Return on Assets
(ROA) of Selected PSBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
SBI
0.886
PNB
1.144
BOB
0.992
BOI
0.936
CB
1.131
UBI
1.070
CBI
0.601
SB
0.967
OBC
1.245
UCO
0.657
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
8
2
5
7
3
4
10
6
1
9
13.100
17.820
21.192
36.203
15.581
18.095
34.587
31.510
29.571
33.517
1
3
5
10
2
4
9
7
6
8
9
5
10
17
5
8
19
13
7
17
5
1.5
6
8.5
1.5
4
10
7
3
8.5
It is highlighted from Table 4.52 that the ROA of all selected PSBs registered an
overall mixed trend over the study period from 2001-02 to 2010-11.
Table 4.53 exhibits that the highest mean value of ROA (1.245) is achieved by OBC
and thus it secures the 1st rank position. Accordingly, the 2nd rank is given to PNB for having
the second highest mean value (1.144) of this ratio. The remaining eight ranks for the next
eight highest mean values of ROA occupied by CB, UBI, BOB, SB, BOI, SBI, UCO and CBI
respectively. On the basis of the CV of ROA it is found from Table 4.53 that in case of SBI,
the CV of this ratio is lowest (13.100%) and thus SBI occupies the 1st rank position. The rest
nine ranks are given to CB, PNB, UBI, BOB, OBC, SB, UCO Bank, CBI and BOI
respectively for their respective lowest CV values of ROA.
Comparing the composite rank total of all ten selected PSBs it is observed from
Table 4.53 that both PNB and CB have the same composite rank total of 5 and their ultimate
ranks are computed at 1.5 each. The 3rd, 4th, 5th, 6th and 7th ultimate ranks are obtained by
OBC, UBI, SBI, BOB and SB for their composite rank total of 7, 8, 9, 10 and 13 respectively.
126
Table 4.54
Statement showing Average Earnings and Profitability Indices of selected PSBs in India as a whole based on Selected Earnings and
Profitability Ratios during the period 2001-02 to 2010-11
End March
Ratios (%)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Score
NIM
3.012
3.178
3.266
3.177
3.042
2.802
2.353
2.320
2.260
2.813
2.822
IYIB
10.941
10.106
9.014
8.351
7.981
7.646
7.603
7.148
6.890
6.883
8.256
IYLA
10.340
9.503
8.405
7.871
7.881
8.513
9.380
9.946
8.896
9.072
8.981
ROA
0.769
1.049
1.251
0.949
0.831
0.866
0.944
1.007
0.984
0.979
0.963
6.266
5.959
5.484
5.087
4.934
4.957
5.070
5.105
4.758
4.937
5.256
Average
Earnings and
Profitability
Indices (EPI)
[Source: Table 4.46, 4.48, 4.50 and 4.52]

Note: NIM = Net Interest Margin Ratio, IYIB = Interest Yield on Investments and bank balances, IYLA = Interest Yield on Loans and
Advances, ROA = Return on Assets.
127
Table 4.54 highlights the average earnings and profitability indices (EPI) of the
selected PSBs in India as a whole based on their mean indices of the ratios in regard to Net
Interest Margin Ratio (NIM), Interest Yield on Investments and bank balances (IYIB),
Interest Yield on Loans and Advances (IYLA) and Return on Assets (ROA) over the study
period 2001-02 to 2010-11. This table also shows that average EPI of the selected PSBs in
India as a whole registered a fluctuating trend throughout the study period and first half of the
study period highlights the better performance as compared to the second half of the study
period. The highest average EPI (6.266) is observed in the starting year 2001-02 and the
lowest average EPI (4.934) is noticed in the year 2005-06. The overall average mean scores
of EPI are 5.256.
4.7 Comprehensive Ranking for the Performance of the selected PSBs in India
In order to determine the overall performance based on cost control efficiency,
productivity efficiency and earnings and profitability efficiency of the ten selected PSBs, a
comprehensive ranking method has been applied or used in this study. For this purpose, a
process of Final Ranking has been applied to arrive at comprehensive measure of
performance, in which the ultimate ranks of selected eleven relevant ratios namely, Interest
Cost of Deposit Ratio (CDR), Interest Cost of Borrowings (ICOB), Intermediation Cost to
Total Assets (IC/TA), Burden to Total Assets (Bur/TA), Output- Input ratio (O/I), Business
per Employee (BPE), Profit per Employee (PPE), Net Interest Margin Ratio (NIM), Interest
Yield on Investments and bank balances (IYIB), Interest Yield on Loans and Advances
(IYLA), Return on Assets (ROA) have been arrived at by aggregating the ultimate ranks of
each of the above ratios by the seleced PSBs. The Final Ranking has been based on the
aggregate of each selected PSBs separate individual ultimate ranking under the above eleven
ratios. The Process of computing Final Ranking has been followed on the principle that
lowers the point score or lowers the aggregate of ultimate ranks better is the performance
position and accordingly, the highest rank is accorded thereto. In case a tie arises, then Final
Rank has been computed by the average of their original position as per aggregate of the
ultimate ranks of each selected bank. The Final Ranking has been shown in Table 4.55.
It is highlighted from Table 4.55 that the UBI has achieved the 1st rank position for
the lowest aggregate of ultimate ranks (i.e. 38). The 2nd, 3rd and 4th ranks for the next three
aggregate values of the ultimate ranks (i.e. 43, 52.5 and 60.5 respectively) are occupied by
OBC, SBI and CB respectively. In the case of both BOB and BOI, the aggregate of ultimate
128
ranks is equal (i.e. 61) and for this tie, the final rank is computed at 5.5 each (by the average
of their original position as per aggregate of the ultimate ranks). The 7th, 8th, 9th and 10th ranks
for the last four aggregate values of the ultimate ranks (i.e. 65, 65.5, 76 and 84.5 respectively)
are occupied by SB, PNB, UCO and CBI.
Chart 4.1 clearly shows the Final Rank (based on aggregate of ultimate rank) of the
selected PSBs in India.
Chart 4.1
100
Final Ranks of Selected PSBs based on total of ultimate ranks

84.5
76
80
60
65.5
61
61
65
60.5
52.5
43
38
40
20
0
SBI
PNB BOB
BOI
CB
Source: Table 4.55
129
UBI
CBI
SB
OBC UCO
Table 4.55
Statement showing Final Rank (based on the aggregate of the Ultimate Ranks) of Selected PSBs in India during the study period from
2001-02 to 2010-11
Name
of
PSBs
Ratios of Cost Analysis

CDR
ICOB
IC/TA
Ultimate Ranks Based on

Productivity Ratios
Bur/TA
O/I
BPE
PPE
SBI
9.5
1.5
4
1
4
4
4.5
PNB
7
7
7
7
2
9
6.5
BOB
4.5
5.5
4
4.5
4
6
8
BOI
1
4
4
8
4
6
6.5
CB
8
10
6
4.5
7
3
3
UBI
2
8.5
2
4.5
2
2
2
CBI
3
8.5
9
9
10
10
10
SB
4.5
1.5
10
10
9
6
4.5
OBC
9.5
3
1
4.5
7
1
1
UCO
6
5.5
8
2
8
8
9
[Source: Table 4.31, 4.33, 4.35, 4.37, 4.40, 4.42, 4.44, 4.47, 4.49, 4.51 and 4.53]
130
Profitability Ratios
NIM
IYIB
IYLA
ROA
4.5
1
4.5
4.5
8
2
9.5
4.5
7
9.5
9.5
8
6
5
2.5
4
2.5
7
1
9.5
5
9.5
8
9.5
7
5
3
1
5
2
5
1.5
6
8.5
1.5
4
10
7
3
8.5
Total
of
Ultimate
Ranks
52.5
65.5
61
61
60.5
38
84.5
65
43
76
Final
Rank
3
8
5.5
5.5
4
1
10
7
2
9
CHAPTER- 5
PERFORMANCE EVALUATION OF SELECTED PRIVATE SECTOR BANKS
IN INDIA
5.1 Introduction
In the previous chapter we have analyzed the financial performance of ten selected
public sector banks. In this chapter, an attempt has been made to examine the financial
performance of ten selected private sector banks, namely ICICI Bank (ICICI), HDFC Bank
(HDFC), Axis Bank (AXIS), Federal Bank (Federal), Jammu & Kashmir Bank (J&K),
Indusind Bank (Indusind), ING Vysya Bank (ING Vys), Karnataka Bank (K.Bnk), South
Indian Bank (SIB) and Karur Vysya Bank (K.Vys) for the period 2001-02 to 2010-11. For
analyzing financial performance we have taken into consideration mobilization of deposits,
granting of loans and advances, investment of funds, recovery of loans and advances,
efficiency of NPA management, productivity efficiency, cost control efficiency, earnings and
profitability efficiency, social responsibility management as the important indicators of
financial performance. Analysis has been made both for individual banks and for all the
selected banks taken together.
5.2 Analysis of Total Deposits, Loans and Advances & Investments of Selected
Private Sector Banks
Mobilization of deposits is one of the prime functions of banks. Banks take deposits
from the public in different forms, viz. demand deposits, saving deposits, term and other
deposits etc. First total quantum of deposits of each bank has been analyzed, and then all the
ten banks have been taken together for measuring performance as a whole.
Lending of funds to the customers constitutes another main function of the banking
company. The major portion of the banks funds is employed by way of loans and advances,
which is the most profitable employments of its funds. The major part of banks income is
earned from interest charged on the funds so lent. The three cardinal principles of bank
lending, namely, safety, liquidity and profitability are firmly followed by the commercial
banks. The loans and advances are traditionally presented in the balance sheet of a bank in
three different formats. In the first format, categorization is based on the type or nature of the
assets. According to this format bank issues loans and advances in three ways- bills
purchased and discounted; cash credits, overdrafts & loans repayable on demand and term
loans. In the second format, loans and advances are categorized into secured and unsecured
131
advances and the third format consists of a categorization based on the sectoral credit
disbursements.
Traditionally, commercial banks lend majority of their funds by way of cash credit
system. For analyzing performance of selected public sector banks in respect of loans and
advances first growth of absolute quantum of total loans and advances along with percentage
increase/ (decrease) i.e. annual growth rate over the previous year for each bank have been
considered. After analyzing the performance of all the selected banks taking together in
respect of loans and advances has been considered.
Apart from advances and fixed assets, a major asset item in the balance sheet of a
bank is investments in various kinds of securities. Banks investments in the domestic market
are classified into six different categories depending upon the nature of security.
These include:
a) Government Securities
b) Other approved securities
c) Shares
d) Debentures and Bonds
e) Subsidiaries and/ or Joint Ventures
f) Other investments
Bank can also invest in overseas market in foreign government securities,
subsidiaries/or joint ventures and other investments.
In this section performance of the selected public sector banks in respect of
investment position has been analyzed. For this, only total amount of investments has been
considered instead of segregating it into six different categories. Only total investments
considered because of lack of appropriate data on investment in different segment. This
section has been organized in the following way whereby the total quantum of investment
along with percentage of investment increase/ (decrease) over the previous year, i.e. annual
growth rate for each bank has been analyzed at first. Year-wise quantum of investment has
been plotted in the figure to see the growth of investment. After analyzing the performance of
all the selected banks taking together in respect of investment has been considered.
132
5.2.1 Analysis of Total Deposits, Loans & Advances and Investments ICICI Bank
(ICICI)
For measuring total deposits, total loans and advances & total investments of ICICI
Bank during the study period, absolute quantum of total deposits, advances and investments
over the periods has been considered and their percentage increase/ (decrease) over the
previous year i.e. annual growth rates have also been taken into consideration.
Table 5.1
Annual Growth Rates of ICICI Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
32085.11
47034.87
35891.08
2002-03
48169.32
50.13
53279.41
13.28
35462.30
(-)1.19
2003-04
68108.59
41.39
62095.51
16.55
42742.87
20.53
2004-05
99818.78
46.56
91405.15
47.20
50487.35
18.12
2005-06
165083.16
65.38
146163.11
59.91
71547.40
41.71
2006-07
230510.19
39.63
195865.6
34.00
91257.83
27.55
2007-08
244431.04
6.04
225616.08
15.19
111454.33
22.13
2008-09
218347.82
(-)10.67
218310.85
(-)3.24
103058.31
(-)7.53
2009-10
202016.60
(-)7.48
181205.60
(-)17.00
120892.80
17.31
2010-11
225602.11
11.68
216365.90
19.40
134685.96
11.41
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
and total investments and their annual growth rates of ICICI Bank during the study period
2001-02 to 2010-11. It is clear from the table that the absolute quantum of total deposits, total
loans & advances and total investments fluctuated and few negative fluctuations have also
been observed during the period under study. Highest annual growth rate of total deposits is
found in the year 2005-06 (65.38%) and lowest with negative growth is observed in the year
2008-09 (-10.67%). In the year 2005-06, percentage of total loans and advances increased by
59.91% over the previous year which speaks in favour of banks efficiency in granting total
advances. Similar results are observed for the periods 2004-05 (47.20%), 2006-07 (34.00%)
133
and 2010-11 (19.40%). But the lowest annual growth rate with negative value of total loans
and advances is found in the year 2009-10 (-17%). On the other hand lowest annual growth
rate with negative value of total investment is observed (-) 7.53% in the year 2008-09 and
highest growth (41.71%) is noticed in the year 2005-06.
Table 5.2
Annual Growth Rates of HDFC Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
17653.81
6813.72
12004.02
2002-03
22376.07
26.75
11754.86
72.52
13388.08
11.53
2003-04
30408.86
35.90
17744.51
50.95
19256.79
43.84
2004-05
36354.25
19.55
25566.30
44.08
19349.81
0.48
2005-06
55796.82
53.48
35061.26
37.14
28393.96
46.74
2006-07
68297.94
22.40
46944.78
33.89
30564.80
7.65
2007-08
100768.6
47.54
63426.90
35.11
49393.54
61.60
2008-09
142811.58
41.72
98883.05
55.90
58817.55
19.08
2009-10
167404.44
17.22
125830.59
27.25
58607.62
(-)0.36
2010-11
208586.41
24.60
159982.67
27.14
70929.37
21.02
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.2 Analysis of Total Deposits, Loans & Advances and Investments of HDFC
Bank (HDFC)
investments and their annual growth rates of HDFC Bank during the study period 2001-02 to
& advances increased significantly during the period of study. But the absolute quantum of
total investments fluctuated and a negative fluctuation is found during the study period. It is
also clear from the table that the annual growth rate of total deposits over the previous year is
satisfactory except in the year 2009-10 a smallest growth is observed (17.22% in 2009-10 as
134
against 41.72% in 2008-09). In the year 2002-03 highest percentage of growth over the
previous year of total advances (72.52%) is noticed and lowest percentage is observed in the
year 2010-11 (27.14%). In the year 2009-10 lowest value with a negative growth rate of total
investment (-0.36%) is found. Highest growth rate of total investments (61.60%) is noticed in
the year 2007-08 though definite trend is not observed.
5.2.3 Analysis of Total Deposits, Loans & Advances and Investments Axis Bank
(AXIS)
and total investments and their annual growth rates of AXIS Bank during the study period
2001-02 to 2010-11. It is clear from the table that the absolute quantum of total deposits and
total loans & advances increased significantly throughout the period of study. But the
absolute quantum of total investments fluctuated over the study period. While highest
percentage of total deposits increase over the previous year is found in 2004-05 (51.34%) and
the lowest one (20.38%) is observed in the year 2009-10. While highest percentages growth
of total loans and advances over the previous year is found in 2004-05 (66.65%) and the
lowest one (27.94%) in the year 2009-10. On the other hand it can be said from the table that
for AXIS Bank total quantum of investments has fluctuated throughout the study period and a
single negative growth rate is also observed in the year 2003-04, so the bank should be
cautious about its unstable growths.
135
Table 5.3
Annual Growth Rates of AXIS Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
12287.21
5352.30
6630.22
2002-03
16964.72
38.07
7179.92
34.15
7841.02
18.26
2003-04
20953.91
23.51
9362.95
30.40
7792.75
(-)0.62
2004-05
31711.99
51.34
15602.92
66.65
14274.95
83.18
2005-06
40113.53
26.49
22314.23
43.01
21527.35
50.81
2006-07
58785.60
46.55
36876.48
65.26
26897.17
24.94
2007-08
87626.22
49.06
59661.14
61.79
33705.10
25.31
2008-09
117374.11
33.95
81556.77
36.70
46330.35
37.46
2009-10
141300.22
20.38
104340.95
27.94
55974.82
20.82
2010-11
189237.80
33.93
142407.83
36.48
71991.62
28.61
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.4 Analysis of Total Deposits, Loans & Advances and Investments of Federal
Bank (Federal)
and total investments and their annual growth rates of Federal Bank during the study period
2001-02 to 2010-11. It is clear from the table that the absolute quantum of total deposits, total
advances and total investments increased significantly during the period of study. Percentage
growth of all selected parameters over the previous year shows an increasing trend over the
years. In the year 2008-09 highest growth rate of total deposits (24.25%) was noticed and
lowest percentage was observed in the year 2009-10 (11.99%). It is also clear from the table
that the percentage increase of total loans and advances over the previous year is satisfactory
except in the year 2004-05 though definite trend is not observed. The improvement in total
investment is quite satisfactory. Percentage growth rate as shown in the table also favor of the
improvement of total investment. Barring a few, percentage increase is seen frequently
136
Table 5.4
Annual Growth Rates of Federal Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
8865.31
5189.11
3755.83
2002-03
10947.42
23.49
6217.52
19.82
4551.68
21.19
2003-04
13476.69
23.10
7700.53
23.85
5507.39
21.00
2004-05
15192.88
12.73
8822.59
14.57
5799.16
5.30
2005-06
17878.74
17.68
11736.47
33.03
6272.37
8.16
2006-07
21584.44
20.73
14899.10
26.95
7032.66
12.12
2007-08
25913.35
20.06
18904.67
26.88
10026.59
42.57
2008-09
32198.19
24.25
22391.88
18.45
12118.97
20.87
2009-10
36057.95
11.99
26950.11
20.36
13054.65
7.72
2010-11
43014.78
19.29
31953.23
18.56
14537.68
11.36
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.5 Analysis of Total Deposits, Loans & Advances and Investments of Jammu
& Kashmir Bank (J&K)
total investments and their annual growth rates of J&K Bank during the study period 2001-02
to 2010-11. It is clear from the table that the absolute quantum of total deposits and total
loans & advances increased significantly during the period of study. But the absolute
quantum of total investments fluctuated throughout the yea and two negative fluctuations are
observed. Though the quantum of total deposits increased throughout the study period but
percentage growth was not consistent during the study period which is evident from the
percentage increase over the previous year. The percentage increases in total loans and
advances over the previous year also speak in favor of the banks efficiency in the matter of
improving net worth by providing loans. There is a fluctuating trend in the percentage change
of the total loans and advances during the study period and in the year 2005-06 highest
percentage of growth over the previous year (25.75%) is noticed and lowest percentage is
observed in the year 2009-10 (10.16%). In case of J&K Bank significant improvement in
137
total investment is noticed for the period 2010-11 (41.13%). For all other years percentage
increases are found is not very high and no definite trend is observed and lowest growth with
negative value (-) 17.81% is found in the year 2006-07.
Table 5.5
Annual Growth Rates of J&K Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
12911.11
6423.89
5752.54
2002-03
14674.91
13.66
8010.94
24.71
6737.82
17.13
2003-04
18661.39
27.17
9284.93
15.90
8451.10
25.43
2004-05
21644.97
15.99
11517.14
24.04
9089.23
7.55
2005-06
23484.64
8.50
14483.11
25.75
8993.84
(-)1.05
2006-07
25194.28
7.28
17079.94
17.93
7392.18
(-)17.81
2007-08
28593.26
13.49
18882.62
10.55
8757.66
18.47
2008-09
33004.10
15.43
20930.41
10.84
10736.33
22.59
2009-10
37237.16
12.83
23057.23
10.16
13956.25
29.99
2010-11
44675.94
19.98
26193.64
13.60
19695.77
41.13
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.6 Analysis of Total Deposits, Loans & Advances and Investments of Indusind
Bank (Indusind)
total investments and their annual growth rates of Indusind Bank during the study period
2001-02 to 2010-11. It is clear from the table that the absolute quantum of total deposits
increased significantly throughout the study period. But the total loans & advances and total
investments fluctuated significantly during the period of study. The percentage increases in
total deposits over the previous year speak in favour of the banks efficiency in the matter of
improving resource base. The percentage change of the total deposit is found during the study
period and in the year 2003-04 highest percentage of growth over the previous year (30.27%)
was noticed and lowest percentage was observed in the year 2002-03 (2.35%). The highest
138
growth with the significant value of increase in loans and advances of Indusind Bank is
observed in the year 2009-10 (154.23%). It is also revealed from the data shown in the table
that the quantum of investments fluctuated throughout the study period. Lowest growth with
negative value is observed (-) 9.23% in the year 2004-05 and highest growth (76.83%) is
noticed in the year 2003-04.
Table 5.6
Annual Growth Rates of Indusind Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
8400.12
5574.20
2484.89
2002-03
8597.89
2.35
5347.85
(-)4.06
2535.07
2.02
2003-04
11200.27
30.27
7812.23
46.08
4482.76
76.83
2004-05
13114.28
17.09
8999.75
15.20
4069.17
(-)9.23
2005-06
15006.30
14.43
9310.47
3.45
5409.90
32.95
2006-07
17644.81
17.58
11084.20
19.05
5891.66
8.91
2007-08
19037.41
7.89
12795.32
15.44
6629.70
12.53
2008-09
22110.25
16.14
8083.41
(-)36.83
8083.41
21.93
2009-10
26710.17
20.80
20550.59
154.23
10401.84
28.68
2010-11
34365.37
28.66
26165.65
27.32
13550.81
30.27
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.7 Analysis of Total Deposits, Loans & Advances and Investments of ING
Vysya Bank (ING Vys)
Table 5.7 shows the absolute quantum of total deposits, loans & advances and total
investments and their annual growth rates of ING Vys during the study period 2001-02 to
& advances increased significantly during the period of study. But the quantum of and total
investments fluctuated during the period under study. So the performance of the ING Vys in
mobilizing total deposits and granting loans & advances is found quite satisfactory. However,
it is observed that a fluctuating annual growth of deposits has been prevailed throughout the
study period in case of ING Vys with peak annual growth rate of 32.94% in 2007-08. Though
139
the quantum of total loans and advances has increased throughout the study period but
percentage of increase is not consistent during the study period which is evident from the
annual growth rate. Highest growth (66.77%) of total investments is noticed in the year 200809 though definite trend is not observed throughout the year and the lowest growth i.e. (-)
0.22 with negative value is found in the year 2009-10, so the bank should be cautious about
its unstable growth.
Table 5.7
Annual Growth Rates of ING Vys Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
8068.28
4418.33
3597.20
2002-03
9186.62
13.86
5611.60
27.01
3640.54
1.20
2003-04
10478.06
14.06
7046.51
25.57
4085.24
12.22
2004-05
12569.30
19.96
9080.58
28.87
4085.17
(-)0.0017
2005-06
13335.25
6.09
10231.52
12.67
4372.34
7.03
2006-07
15418.58
15.62
11976.17
17.05
4527.80
3.56
2007-08
20498.06
32.94
14649.55
22.32
6293.32
38.99
2008-09
24889.47
21.42
16756.38
14.38
10495.54
66.77
2009-10
25865.30
3.92
18507.19
10.45
10472.92
(-)0.22
2010-11
30194.25
16.74
23602.14
27.53
11020.67
5.23
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate

Karnataka Bank (K.Bnk)
and total investments and their annual growth rates of K.Bnk during the study period 2001-02
to 2010-11. It is clear from the table that the absolute quantum of total deposits and total
investments fluctuated during the study period. While highest percentages growth of total
deposits is found in 2005-06 (22.20%) and the lowest one (6.00%) in the year 2006-07.
140
Highest percentages growth of total loans and advances is found in 2004-05 (34.69%) and the
lowest one (8.93%) is seen in the year 2008-09. It is clearly depicted that in the year 2006-07
of the study period lowest growth with negative value of investment (-9.02%) is found.
Highest growth (41.65%) is noticed in the year 2008-09 though definite trend is not observed
during the study period.
Table 5.8
Annual Growth Rates of K.Bnk during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
7001.48
3417.55
3467.15
2002-03
8291.73
18.43
3899.70
14.11
4432.61
27.85
2003-04
9406.95
13.45
4667.91
19.70
4878.91
10.07
2004-05
10837.05
15.20
6287.44
34.69
4555.71
(-)6.62
2005-06
13243.17
22.20
7791.57
23.92
5548.58
21.79
2006-07
14037.44
6.00
9552.68
22.60
5048.16
(-)9.02
2007-08
17016.19
21.22
10841.98
13.50
6326.52
25.32
2008-09
20333.29
19.49
11810.04
8.93
8961.49
41.65
2009-10
23730.65
16.71
14435.68
22.23
9992.05
11.50
2010-11
27336.45
15.19
17348.07
20.17
11506.34
15.15
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.9 Analysis of Total Deposits, Loans & Advances and Investments of South
Indian Bank (SIB)
investments and their annual growth rates of SIB during the study period 2001-02 to 2010-11.
It is clear from the table that the absolute quantum of total deposits and total loans and
investments fluctuated and two negative fluctuations are observed during the period under
study. In the year 2010-11 highest percentage growth (29.16%) of total deposits was noticed
and lowest percentage was observed in the year 2004-05 (2.56%). The performance of the
141
SIB in providing total loans and advances was also satisfactory. Percentage growth of total
loans and advances over the previous year is satisfactory except in the year 2002-03 (11.82%)
though definite trend is not observed. Percentage growth of investment as shown in the table
supports the improvement of total investment except the year 2004-05 where lowest growth
with negative value is found i.e. (-) 20.91%. Barring a few, percentage increase is high
Table 5.9
Annual Growth Rates of SIB during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
5919.70
3231.05
2180.58
2002-03
6861.26
15.91
3612.93
11.82
2999.32
37.55
2003-04
8280.02
20.68
4196.82
16.16
3962.08
32.10
2004-05
8492.32
2.56
5365.26
27.84
3133.42
(-)20.91
2005-06
9578.65
12.79
6370.23
18.73
2739.38
(-)12.58
2006-07
12239.21
27.78
7918.92
24.31
3430.13
25.22
2007-08
15156.12
23.83
10453.75
32.01
4572.22
33.30
2008-09
18092.33
19.37
11847.91
13.34
6075.20
32.87
2009-10
23011.52
27.19
15822.92
33.55
7155.61
17.78
2010-11
29721.08
29.16
20488.73
29.49
8923.77
24.71
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
5.2.10 Analysis of Total Deposits, Loans & Advances and Investments of Karur
Vysya Bank (K.Vys)
total investments and their annual growth rates of K.Vys Bank during the study period 200102 to 2010-11. It is clear from the table that the absolute quantum of total deposits, total loans
& advances and total investments increased significantly during the study period and no
negative fluctuation is observed throughout the year for all the selected parameters. Though
the quantum of total deposits has increased throughout the study period but the percentage
growth is inconsistent. The percentage increase in total loans and advances over the previous
142
year also evident the banks efficacy in the matter of providing loans and advances, though it
is seen that the rate of increase has fluctuated over the time period. Highest growth rate is
found in the year 2002-03 (35.95%) and lowest in the year 2008-09 (10.49%). The significant
improvement in total investment is noticed for the period 2009-10 (40.00%). For all other
years percentage increase are not very high and no definite trend is observed.
Table 5.10
Annual Growth Rates of K.Vys Bank during the period 2001-02 to 2010-11
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
4180.06
2460.03
1538.91
2002-03
5121.92
22.53
3344.40
35.95
1850.17
20.23
2003-04
5911.48
15.42
4023.24
20.30
2173.01
17.45
2004-05
6672.19
12.87
4619.81
14.83
2219.03
2.12
2005-06
7576.84
13.56
5555.44
20.25
2298.13
3.56
2006-07
9340.31
23.27
7040.48
26.73
2873.95
25.06
2007-08
12550.00
34.36
9421.53
33.82
3526.33
22.70
2008-09
15101.39
20.33
10409.88
10.49
4715.98
33.74
2009-10
19271.85
27.62
13447.00
29.18
6602.16
40.00
2010-11
24721.85
28.28
17814.46
32.48
7731.76
17.11
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
selected Pvt.SBs as a whole:

The performance of ten selected private sector banks taken together in the matter of
mobilizing total deposits, providing loans & advances and investments during the study
period is analyzed. It is clear from the table that the absolute quantum of total deposits, total
loans & advances and total investments increased significantly during the study period and no
negative fluctuation is observed throughout the year for all the selected parameters. If it is
looked at the annual growth rate as shown in the Table 5.11 then it is revealed that barring a
few cases increase in percentage of deposit is observed and is found quite satisfactory though
a fluctuating trend is noticed during the study period. If one looked at the percentage growth
143
of loans and advances as shown in the table then it is revealed that barring a few cases,
percentage increase is observed and is found quite satisfactory though definite trend is not
highlighted. From the percentage growth of investment as shown in the table it is revealed
that lowest growth is found (7.94%) in the year 2002-03 and barring a few cases percentage
increase is observed which is also quite satisfactory though definite trend is not found.
Table 5.11
Annual Growth Rates of all selected Pvt.SBs taken together
Annual
Total Loans
Annual
Total
Annual
Total Deposits
Growth
( ` in Crore)
Rate
( ` in Crore)
2001-02
117372.19
89915.05
77302.42
2002-03
151191.86
28.81
108259.13
20.40
83438.61
7.94
2003-04
196886.22
30.22
133935.14
23.72
103332.90
23.84
2004-05
256408.01
30.23
187266.94
39.82
117063.00
13.29
2005-06
361097.10
40.83
269017.41
43.65
157103.25
34.20
2006-07
473052.80
31.00
359238.35
33.54
184916.34
17.70
2007-08
571590.25
20.83
444653.54
23.78
240685.31
30.16
2008-09
644262.53
12.71
500980.58
12.67
269393.13
11.93
2009-10
702605.86
9.06
544147.86
8.62
307110.72
14.00
2010-11
857456.04
22.04
682322.32
25.39
364573.75
18.71
Years
and Advances
Growth
Rate
Investments
( ` in Crore)
Growth
Rate
Investments of the selected Pvt.SBs in India individually and as a whole:

Table 5.12 highlights the analysis of mean growth of total deposits, loans &
advances and investments and their total values of the selected Pvt.SBs individually and the
mean score of the average growth rates of total deposits, loans & advances and investments
of the selected Pvt.SBs in India as a whole. From the table it is clearly observed that highest
mean growth of total deposits (35.92%), total loans & advances (44.71%) and total
investments (32.09%) are found in case of AXIS Bank. Thus table clearly indicates that
highest percentage of growth (112.71%) taking together the mean growth of total deposits,
loans & advance and investments is found in case of AXIS Bank. Mean score is the mean
144
value of mean growth rates of the selected parameters of the selected Pvt.SBs as a whole and
ultimate mean score is calculated at 68.07%.
Table 5.12
Statement showing the Analysis of Mean Growth of Total Deposits, Loans & Advances
and Investments of the selected Pvt.SBs in India individually and as a whole
Mean Growth
Mean Growth
of Loans and
Total
Banks
of Investments
Advances
ICICI
26.96
20.59
16.67
64.22
HDFC
32.13
42.66
23.51
98.30
AXIS
35.92
44.71
32.09
112.71
Federal
19.26
22.50
16.70
58.45
J&K
14.93
17.05
15.94
47.92
Indusind
17.25
26.65
22.77
66.66
ING Vys
16.07
20.65
14.98
51.69
K.Bnk
16.43
19.98
15.30
51.71
SIB
19.92
23.03
18.89
61.84
K.Vys
22.03
24.89
20.22
67.14
22.09
26.27
19.71
68.07
Mean Score
[Source: Collected and compiled from Table 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9 and 5.10]
Mean Growth
of Deposits
Investments
For measuring the performance of the selected Pvt.SBs in India, two independent
ratios based on their activities like Return on Advances (RA) and Investment Deposit Ratio
(IDR) have been computed.
The Return on Advances (RA) ratio highlights the relationship between interest
earned on advances & bill and total advances. This ratio indicates the earning capacity on
advances. The IDR represents the efficiency of banks in converting deposits from customers
into loans and advances as investments made by bank.
5.3.1 Analysis of Return on Advances (RA) of selected Pvt.SBs in India

This ratio is highly significant to judge the interest earning capacity of an entity. The
higher the value of the ratio better is the interest earning capacity of the bank. This ratio is
calculated as follows:
Return on Advances = IEA / Advances
IEA = Interest earned on advances and bills
145
Table 5.13 gives an outline of the interest earning capacity of the selected Pvt.SBs in
India during the study period 2001-02 to 2010-11. The table also highlights the mean, SD,
CV values of the banks under study. From the table it is observed that out of ten selected
Pvt.SBs, 6 banks have average performance above the mean average (10.059) value of RA
under study as a whole. From Table 5.13 it is also observed that the majority of the selected
banks have maintained inconsistent performance in interest earning capacity during the study
period.
Table 5.14 gives an outlook about the ranks and ultimate ranks of the selected
Pvt.SBs in India based on RA. From Table 5.14, it is observed that the highest rank (based on
mean performance of interest earnings) goes to Federal Bank and the rank based on CV,
highest rank goes to K.Vys Bank. The ultimate rank has been computed based on mean rank
of rank based on mean and on CV and ranking methodology have been applied in ultimate
ranking by putting highest rank on the value of least mean rank and on that ideology highest
rank goes to Federal and least rank is occupied by ICICI Bank.
146
Table 5.13 showing Return on Advances (RA) of all selected Pvt.SBs in India for the period 2001-02 to 2010-11
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-02
-03
-04
-05
-06
-07
-08
-09
-10
-11
2.85
11.99
10.53
8.77
8.15
9.41
10.72
10.06
8.70
10.90
8.47
7.52
7.68
8.91
10.57
12.62
14.96
10.61
11.75
9.28
7.84
8.06
9.13
9.83
12.67
11.57
10.26
9.35
8.91
9.62
11.43
10.53
9.5
8.42
8.48
8.73
8.55
10.59
9.95
10.30
9.77
8.83
12.46
10.93
12.63
Mean
SD
CV%
8.26
8.943
2.466
27.573
10.77
10.56
10.295
2.301
22.348
10.57
8.59
8.43
9.410
1.267
13.470
10.81
12.42
11.55
10.76
10.792
1.275
11.816
8.58
10.44
11.53
10.65
10.68
10.024
1.193
11.900
9.34
10.24
11.94
12.56
11.63
12.14
10.567
1.449
13.710
8.08
8.54
8.64
9.74
11.13
9.70
9.65
9.437
0.917
9.720
9.73
8.38
8.73
9.38
11.01
12.28
10.58
10.75
10.424
1.372
13.163
10.89
9.17
9.15
9.36
9.72
10.46
11.40
10.98
10.63
10.438
1.116
10.688
10.75
10.44
9.80
8.93
8.91
9.86
10.43
11.50
11.22
10.77
10.261
0.881
8.585
10.333
10.489
9.521
8.655
8.739
9.515
10.800
11.840
10.437
10.263
10.059
1.424
14.297
147
Table 5.14
Statement showing Rank, Mean Rank and Ultimate Rank of Return on Advances (RA)
of Selected Pvt.SBs in India
Pvt.SBs
Mean
ICICI
8.943
Rank
based
on Mean
10
27.573
Rank
based
on CV%
10
HDFC
10.295
22.348
AXIS
9.410
Federal
10.792
J&K
Mean
Rank
Ultimate
Rank
10.0
10
7.0
13.470
8.0
11.816
2.5
10.024
11.900
6.0
Indusind
10.567
13.710
5.0
ING Vys
9.437
9.720
5.0
K.Bnk
10.424
13.163
5.0
SIB
10.438
10.688
3.0
K.Vys
10.261
8.585
3.5
CV%
5.3.2 Analysis of Investment-Deposit Ratio (IDR) of selected Pvt.SBs in India

This ratio is calculated as follows: IDR = (total investments / total deposits) 100.
Here Investments in investment-deposit ratio represent total investments including
investments in non-approved securities.
Table 5.15 gives an outline of the investment capacity out of the deposits available
with the selected Pvt.SBs in India during the study period 2001-02 to 2010-11. The table also
highlights the mean, SD, CV values of the banks under study. From the table it is observed
that out of ten selected Pvt.SBs, only 4 banks have average performance above the mean
average value of IDR under study as a whole. From Table 5.15 it is also observed that the
majority of the selected banks have maintained inconsistent performance in converting total
deposits into investment during the study period.
148
Table 5.15 showing Investment-Deposit Ratio (IDR) of all selected Pvt.SBs in India for the period 2001-02 to 2010-11
Years
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-02
-03
-04
-05
-06
-07
-08
-09
-10
-11
ICICI
111.86
73.62
62.76
50.58
43.34
39.59
45.60
47.20
59.84
HDFC
68.00
59.83
63.33
53.23
50.89
44.75
49.02
41.19
AXIS
53.96
46.22
37.19
47.45
53.67
45.75
38.46
Federal
42.37
41.58
40.87
38.17
35.08
32.58
J&K
44.55
45.91
45.29
41.73
38.33
Indusind
29.58
29.48
35.46
31.03
ING Vys
44.58
39.63
38.99
K.Bnk
49.52
53.46
SIB
36.84
K.Vys
Pvt.SBs
Mean
Score
Mean
SD
CV%
59.70
59.409
21.169
35.633
35.01
34.00
49.925
11.530
23.094
39.47
39.61
38.04
43.983
6.368
14.478
38.69
37.64
36.20
33.80
37.698
3.311
8.782
29.34
30.63
32.53
37.48
44.09
38.988
6.320
16.210
36.05
33.39
34.82
36.56
38.94
39.43
34.474
3.565
10.341
33.38
32.79
29.37
30.70
42.17
40.49
36.50
36.860
5.121
13.893
51.87
42.04
41.90
35.96
35.05
44.07
42.11
42.09
43.807
6.162
14.067
43.71
47.85
36.90
28.60
28.03
30.17
33.58
31.10
30.03
34.680
6.682
19.266
36.82
36.12
36.76
33.26
30.33
30.77
28.10
31.23
34.26
31.28
32.893
3.022
9.188
51.808
46.956
46.037
40.777
39.098
34.953
36.124
38.563
39.504
38.896
41.272
7.325
16.495
149
Table 5.16 gives an outlook about the ranks and ultimate ranks of the selected
Pvt.SBs in India based on IDR. From Table 5.16, it is observed that the highest rank (based
on mean performance) goes to ICICI Bank and the rank based on CV, highest rank goes to
Federal Bank. The ultimate rank has been computed based on mean rank of rank based on
mean and on CV and ranking methodology have been applied in ultimate ranking by putting
highest rank on the value of least mean rank and on that ideology highest rank goes to
Federal Bank and least rank is occupied by SIB.
Table 5.16
Statement showing Rank, Mean Rank and Ultimate Rank of Investment-Deposit Ratio
(IDR) of Selected Pvt.SBs in India
Pvt.SBs
Mean
ICICI
59.409
Rank
based
on Mean
1
35.633
Rank
based
on CV%
10
HDFC
49.925
23.094
AXIS
43.983
Federal
37.698
J&K
Mean
Rank
Ultimate
Rank
5.5
5.5
14.478
4.5
2.5
8.782
3.5
38.988
16.210
6.0
Indusind
34.474
10.341
6.0
ING Vys
36.860
13.893
5.5
K.Bnk
43.807
14.067
4.5
2.5
SIB
34.680
19.266
8.0
10
K.Vys
32.893
10
9.188
6.0
CV%
5.4 Analysis of Non-Performing Assets (NPAs) of Selected Pvt.SBs in India

A non-performing asset in the banking sector may be termed as an asset not
contributing to the income of the bank. The high level of NPAs in banks has been a matter of
great concern and a barrier to accelerate bank financing as bank credit is a catalyst to the
economic growth of a country and any bottleneck in the smooth flow of credit creates adverse
repercussions in the economy. NPAs are not, therefore, the concerns of only lenders. We
know that lower the percentage of NPAs indicates that the better is the efficiency of asset
management and credit recovery management of the organization and higher the degree of
percentage of NPAs indicates the inefficiency of the asset management of the institution.
150
In this section, an attempt has been made to analyze the NPAs of the selected private sector
banks during the study period. For analyzing the assets quality of the selected banks both
gross NPAs and net NPAs (both in absolute and in relative term) have been considered.
5.4.1 Analysis of Gross NPAs of Selected Private Sector Banks

Table 5.17 shows the amount of gross NPAs of the selected private sector banks for
the period 2001-02 to 2010-11. A look into the table reveals that for HDFC Bank the amount
of gross NPAs increased up to 2008-09 and decreased thereafter. In case of AXIS Bank the
amount of gross NPAs shows the increasing trend throughout the study period. In case of
ICICI Bank the amount shows a fluctuating trend upto the end. No definite trend of gross
NPAs is observed for other selected banks also i.e. Federal Bank, J&K Bank, Indusind Bank,
ING Vys Bank, K.Bnk, SIB and K.Vys Bank during the study period. From the absolute
amount of gross NPAs as shown in the table, it can be argued that no bank is efficient in
managing its loan assets. But to get a clear idea about the asset quality, it requires analyzing
NPAs in relative terms like NPAs to Total Assets, NPAs to Total Advances etc.
5.4.2 Analysis of Gross NPAs to Total Assets (%) of Selected Pvt.SBs in India
Table 5.18 shows Gross NPAs as a percentage of Total Assets for the period 200102 to 2010-2011. Table 5.18 shows that gross NPAs as a percentage of total assets for K.Vys
Bank have decreased continuously throughout the study period. There is a fluctuating trend in
this ratio in case of other selected Pvt.SBs during the study period. In the year 2001-02,
HDFC Bank has the lower ratio (0.94%). However, in 2010-11 the ratio of ICICI Bank is
found to have the highest ratio (2.47%), though this ratio of HDFC Bank remained at lowest
among all the banks. This indicates that HDFC Bank is well aware of its assets and is
utilizing them effectively. Apart from HDFC Bank, the performance of AXIS Bank, J&K
Bank, Indusind Bank, SIB, K.Vys Bank and ING Vys Bank are found to be satisfactory as
compared to remaining banks in the year 2010-11, though average ratio of Gross NPAs to
Total Assets for all the banks during the study period remained very high except HDFC Bank
and AXIS Bank. Thus, there is ample scope for all the selected banks to manage their asset
quality more efficiently. In this competitive environment this is ardently needed.
151
Table 5.17 showing Gross NPAs of all the selected Pvt.SBs in India for the period 2001-02 to 2010-11
(` in crore)
Years
Pvt.SBs
ICICI
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
5013.03
5027.38
3047.59
2770.43
2222.59
4126.06
7579.54
9649.31
9480.65
10034.26
HDFC
222.86
265.45
335.61
439.17
508.89
657.76
906.97
1988.07
1816.76
1694.34
AXIS
282.16
228.93
274.72
311.10
374.28
418.67
494.61
897.77
1318.00
1599.42
Federal
638.36
527.99
600.75
677.79
563.05
450.80
468.59
589.54
820.97
1148.33
J&K
237.00
253.00
286.00
317.25
370.19
501.83
485.23
559.27
462.31
518.82
Indusind
417.00
266.28
259.36
320.53
268.83
342.73
392.31
255.02
255.47
265.86
ING Vys
205.22
202.88
186.60
194.27
180.93
126.38
116.24
209.39
234.51
155.39
K.Bnk
373.52
538.01
598.47
501.78
415.13
387.34
379.57
443.20
549.64
702.17
SIB
335.94
345.84
328.25
366.13
327.82
321.21
188.48
260.56
211.00
230.34
K.Vys
225.98
255.46
239.23
241.91
223.15
202.63
194.26
205.86
235.34
228.15
152
Table 5.18 showing Gross NPAs to Total Assets (%) of all selected Pvt.SBs in India for
the period 2001-02 to 2010-11
End March
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2002 2003 2004 2005 2006 2007 2008 2009
2010
2011 Mean
4.82
0.94
1.96
6.29
1.61
4.09
1.91
4.81
5.12
4.42
2.54
1.08
0.61
1.52
1.48
0.92
0.66
1.94
1.28
1.21
2.61
0.82
0.73
1.88
1.09
0.72
0.69
2.03
0.83
1.07
2.47
0.61
0.66
2.23
1.03
0.58
0.40
2.22
0.70
0.81
2.521
0.806
0.886
3.022
1.400
1.762
1.028
3.360
2.636
2.372
3.598 3.149 2.539 2.291 1.734 1.490 1.249 1.324
1.247
1.171
1.979
4.71
0.87
1.17
4.33
1.51
2.69
1.75
5.81
4.53
4.13
2.43
0.79
1.14
3.97
1.35
1.72
1.41
5.66
3.55
3.37
1.65
0.85
0.82
4.03
1.30
2.05
1.26
4.01
3.86
3.07
0.88
0.69
0.75
2.73
1.40
1.53
1.08
2.78
3.03
2.48
1.20
0.72
0.57
1.80
1.75
1.64
0.66
2.39
2.35
1.83
1.90
0.68
0.45
1.44
1.48
1.69
0.46
1.96
1.10
1.33
5.4.3 Analysis of Gross NPAs to Total Advances (%) of Selected Pvt.SBs in India
Table 5.19 shows Gross NPAs as a percentage of Total Advances of the selected
private sector banks for the period 2001-02 to 2010-11. A look into the table reveals that
gross NPAs as a percentage of total advances remained very high for all the selected banks,
particularly in the year 2001-02. Thereafter, the ratio started to significantly decline up to
2007-08 of the selected Pvt.SBs as a whole for the study period, but the percentages even at
the end of the study undoubtedly speak to take cautious effort to minimize their NPA level.
Among the banks, the performance of HDFC Bank is satisfactory, followed by ING Vys
Bank. On the other hand, K.Bnk Bank shows a poor performance in this regard.
153
Table 5.19 showing Gross NPAs to Total Advances (%) of all selected Pvt.SBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Pvt.SBs
ICICI
10.66
9.44
4.91
3.03
1.52
2.11
3.36
4.42
5.23
4.64
4.931
HDFC
3.27
2.26
1.89
1.72
1.45
1.40
1.43
2.01
1.44
1.06
1.793
AXIS
5.27
3.19
2.93
1.99
1.68
1.14
0.83
1.10
1.26
1.12
2.052
Federal
12.30
8.49
7.80
7.68
4.80
3.03
2.48
2.63
3.05
3.59
5.585
J&K
3.69
3.16
3.08
2.75
2.56
2.94
2.57
2.67
2.01
1.98
2.740
Indusind
7.48
4.98
3.32
3.56
2.89
3.09
3.07
3.15
1.24
1.02
3.380
ING Vys
4.64
3.62
2.65
2.14
1.77
1.06
0.79
1.25
1.27
0.66
1.984
K.Bnk
10.93
13.80
12.82
7.98
5.33
4.05
3.50
3.75
3.81
4.05
7.002
SIB
10.40
9.57
7.82
6.82
5.15
4.06
1.80
2.20
1.33
1.12
5.028
4.02
2.88
2.06
1.98
1.75
1.28
4.197
3.115
2.574
2.189
2.517
2.239
2.052
3.869
K.Vys
9.19
7.64
5.95
5.24
Mean
7.783
6.613
5.317
4.292
Score
154
5.4.4 Analysis of Net NPAs of the Selected Private Sector Banks in India
For analyzing Net NPAs of the selected private sector banks, it is important to look
at the movement of Net NPAs in absolute term during the period 2001-02 to 2010-11. Net
NPAs are Gross NPAs minus Provisions on NPAs and Interest in Suspense Account. Quality
of Assets can be judged better from the level of Net NPAs.
Table 5.20 shows amount of Net NPAs of the selected private sector banks over the
period under study. It is revealed from the table that amount of net NPAs increased at the end
of March, 2011 as compared to the end of March, 2002 for all the banks except Federal Bank,
J&K Bank, Indusind Bank, ING Vys Bank, SIB and K.Vys Bank though due to the
unavailability of data of 2002, ICICI Bank does not reflect the starting amount of net NPAs.
In case of K.Vys Bank the amount has declined by about 11.17% during the study period (as
compared to ` 155.06 crore in 2002 to ` 13.87 crore in 2011), followed by Indusind Bank
(5.04%), SIB (3.55%), Federal Bank (2.33%), J&K Bank (2.27%) and ING Vys Bank
(2.21%). In the contrary, during this period highest growth of net NPAs is found in case of
HDFC Bank (8.62%), followed by AXIS Bank (2.21%) and K.Bnk (1.39%). Though the
absolute amount of net NPAs cannot be a sole indicator for determining efficiency or
otherwise, but it cannot be denied that the banks should take special effort to improve their
asset quality by reducing the amount of NPAs.
155
Table 5.20 showing Net NPAs of all selected Pvt.SBs in India for the period 2001-02 to 2010-11
Years
Pvt.SBs
2002
2003
2004
2005
ICICI
NA
2823.77
1422.58
1505.27
HDFC
34.36
42.92
27.95
60.63
AXIS
185.42
162.01
112.21
216.85
Federal
445.84
307.81
222.75
194.51
J&K
121.00
127.00
138.00
162.93
Indusind
367.13
227.31
212.32
244.27
ING Vys
202.72
199.13
183.36
193.29
K.Bnk
201.06
286.08
231.43
143.30
SIB
213.36
215.51
190.33
204.22
K.Vys
155.06
139.07
91.60
75.75
2006
2007
2008
2009
2010
2011
1052.68
155.18
217.60
111.60
133.87
194.97
180.47
91.52
118.20
44.83
1992.04
202.89
266.33
65.05
193.57
273.75
114.02
116.04
77.81
15.97
3490.55
298.52
248.29
43.20
203.44
291.02
103.23
106.48
33.97
17.29
4553.94
627.62
327.13
68.12
287.82
179.13
205.95
116.10
134.31
25.82
3841.11
392.05
419.00
128.79
64.33
101.83
221.83
188.61
61.57
30.95
2407.36
296.41
410.35
190.69
53.24
72.82
91.79
280.34
60.02
13.87
156
5.4.5 Analysis of Net NPAs to Total Assets (%) of Selected Pvt.SBs in India
Now an attempt has been taken to examine the Net NPAs of the selected private
sector banks in relative terms. Table 5.21 shows that net NPAs as a percentage of total assets
for all the selected private sector banks have fluctuated over the years during the study period
2001-02 to 2010-11. It is revealed from the table that in the year 2001-02, Federal Bank had
the highest NPA percentage (4.39), but in 2010-11 the ratio reached to 0.37 percent.
Similarly, for K.Vys Bank, the ratio came down from 3.03 percent in 2001-02 to a very low
of 0.05 percent in 2010-11. Thus, it reveals that the banks have utilized their assets
effectively and also took necessary steps to reduce the level of NPAs. Among the other
banks, performance of HDFC Bank, J&K Bank and Indusind Bank at the end of the period
2010-11 is also satisfactory. If one looks at the average level of net NPAs as percentage of
total assets, then it can be said that for most of the banks (except HDFC Bank) the ratio is not
so negligible and as such it needs appropriate steps to reduce it.
Table 5.21 showing Net NPAs to Total Assets (%) of all selected Pvt.SBs in India for the
period 2001-02 to 2010-11
End March
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
NA
0.14
1.29
4.39
0.82
3.60
1.89
2.59
3.25
3.03
2.64
0.14
0.83
2.52
0.76
2.30
1.72
3.09
2.83
2.25
1.14
0.07
0.46
1.47
0.65
1.41
1.39
2.19
2.06
1.29
0.90
0.12
0.57
1.16
0.67
1.56
1.26
1.14
2.15
0.96
0.42
0.21
0.44
0.54
0.51
1.11
1.08
0.61
1.09
0.50
0.58
0.22
0.36
0.26
0.68
1.31
0.59
0.72
0.57
0.14
0.87
0.22
0.23
0.13
0.62
1.25
0.40
0.55
0.20
0.12
1.20
0.34
0.22
0.18
0.76
0.65
0.65
0.51
0.66
0.15
1.06
0.18
0.23
0.29
0.15
0.29
0.65
0.70
0.24
0.14
0.59
0.11
0.17
0.37
0.11
0.16
0.24
0.88
0.18
0.05
1.044
0.175
0.481
1.132
0.572
1.363
0.986
1.298
1.323
0.864
2.336
1.907
1.212
1.049
0.650
0.543
0.460
0.532
0.393
0.286
0.937
157
5.4.6 Analysis of Net NPAs to Net Advances (%) of the Selected Pvt.SBs in India
Table 5.22 shows net NPAs as a percentage of net advances of all the selected banks
during the period 2001-02 to 2010-11. Net NPAs as a percentage of advances is the most
standard measure of asset quality. As per international norms, a ratio of 1% is considered to
be tolerable and desirable. From Table 5.22 it is observed that HDFC Bank, AXIS Bank,
Federal Bank, J&K Bank, Indusind Bank, ING Vys Bank, SIB and K.Vys Bank in the year
2010-11 have net NPAs as a percentage of advances below 1%. But for the preceding years
most of the banks have significantly high ratio. Similarly, for remaining banks the ratio is
very high as compared to international standard. The average ratio for the period 2001-02 to
2010-11 strongly supports this. Viewed from this angle it can be argued that the banks should
reduce their NPA levels immediately and improve their asset quality so that they can compete
with the tough competitive environment.
Table 5.22 showing Net NPAs Ratio (Net NPAs to Net Advances) of all selected Pvt.SBs
End March
Years
PSBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
5.48
0.5
2.74
11.66
1.88
6.59
4.59
5.9
6.64
6.33
5.21
0.37
2.39
4.95
1.58
4.25
3.55
7.36
5.98
4.2
2.21
0.16
1.29
2.89
1.48
2.72
2.6
4.98
4.55
2.32
1.65
0.24
1.39
2.21
1.41
2.71
2.13
2.29
3.81
1.66
0.72
0.44
0.98
0.95
0.92
2.09
1.76
1.18
1.86
0.81
1.02
0.43
0.72
0.44
1.13
2.47
0.70
1.22
0.98
0.23
1.55
0.47
0.42
0.23
1.07
2.27
0.79
0.98
0.33
0.18
2.09
0.63
0.40
0.30
1.38
1.14
1.20
0.98
1.13
0.25
2.12
0.31
0.40
0.48
0.28
0.50
1.20
1.31
0.39
0.23
1.11
0.19
0.29
0.60
0.20
0.28
0.39
1.62
0.29
0.07
2.316
0.374
1.102
2.471
1.133
2.502
1.891
2.782
2.596
1.628
5.231
3.984
2.520
1.950
1.171
0.934
0.829
0.950
0.722
0.504
1.880
158
5.4.7 Average NPA Indices of the Selected Pvt.SBs in India

After analyzing the NPAs of the selected banks individually over the years, an
attempt has been taken to examine the average performance of the ten selected private sector
banks during the period 2001-02 to 2010-11. For this purpose, the average NPA indices of
Pvt.SBs as a whole have been computed based on the year-wise average of Gross NPAs to
TA, Gross NPAs to Total Advances, Net NPAs to TA and Net NPAs to Net Advances.
Table 5.23 shows average gross NPAs as a percentage of total assets of the selected
private sector banks taken together. The ratio indicates that on an average it has declined up
to the year end of March 2008 and thereafter it increased and again it decreased up to the end
of March 2011. The mean score of mean value of gross NPA to total assets as a whole during
the study period is computed at 1.979. Similar result is observed if we take into consideration
gross NPAs as a percentage of total advances and the ultimate mean score of this ratio as a
whole during the study period is computed of 3.869.
Net NPAs as a percentage of total assets of the selected private sector banking
companies as a whole also declined up to the year end of March 2008 and thereafter it
increased, but the ratios are sufficient enough to advocate in favor of the banks inefficiency
in the matter of managing asset quality. The mean score of the ratio as a whole during the
study period is obtained at 0.937. Net NPAs as a percentage of net advances, which is
considered to be a good indicator of judging asset quality, obtained at 1.880 during the period
2001-02 to 2010-11 for the selected banks. Out of study period of 10 years, the ratio was
significantly greater than the international norm in five years. This undoubtedly speaks that
the banks must take steps to reduce their NPA levels to make them internationally
competitive which is one of the prime objectives of Banking Sector Reforms.
159
Table 5.23
Statement showing Average NPA Indices of selected Pvt.SBs in India taken together based on Selected NPA Ratios during the period
2001-02 to 2010-11
End March
Years
NPA
Ratios
Gross
NPA/Total
Assets
Gross
NPA/Total
Advances
Net
NPA/Total
Assets
Net
NPA/Net
Advances
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
3.598
3.149
2.539
2.291
1.734
1.490
1.249
1.324
1.247
1.171
1.979
7.783
6.613
5.317
4.292
3.115
2.574
2.189
2.517
2.239
2.052
3.869
2.336
1.907
1.212
1.049
0.650
0.543
0.460
0.532
0.393
0.286
0.937
5.231
3.984
2.52
1.95
1.171
0.934
0.829
0.95
0.722
0.504
1.880
1.385
1.182
1.331
1.150
1.003
2.166
Avg. NPA
4.737
3.913
2.897
2.396
1.667
Indices
(NPAI)
160
Table 5.24
Statement showing Rank, Composite Rank and Ultimate Rank of NPAs of Selected Pvt.SBs in India based on bank-wise mean values of
Gross NPA to TA, Gross NPA to Total Advances, Net NPA to TA and Net NPA to Net Advances
Gross NPA/
Gross NPA/
Banks
Total
Rank
Total
Assets
Advances
ICICI
2.521
7
4.931
HDFC
0.806
1
1.793
AXIS
0.886
2
2.052
Federal
3.022
9
5.585
J&K
1.400
4
2.740
Indusind
1.762
5
3.380
ING Vys
1.028
3
1.984
K.Bnk
3.360
10
7.002
SIB
2.636
8
5.028
K.Vys
2.372
6
4.197
[Source: Table 5.18, 5.19, 5.21 and 5.22]
Rank
7
1
3
9
4
5
2
10
8
6
Net NPA/
Total
Assets
1.044
0.175
0.481
1.132
0.572
1.363
0.986
1.298
1.323
0.864
161
Rank
6
1
2
7
3
10
5
8
9
4
Net NPA/
Net
Advances
2.316
0.374
1.102
2.471
1.133
2.502
1.891
2.782
2.596
1.628
Rank
Composite
Rank
Ultimate
Rank
6
1
2
7
3
8
5
10
9
4
26
4
9
32
14
28
15
38
34
20
6
1
2
8
3
7
4
10
9
5
Table 5.24 highlights the rankings of the selected private sector banks in different
ways like rank, composite rank and ultimate rank on the basis of the different parameters of
ranking. Ranks have been assigned to each bank on the basis of their gross NPAs to total
assets, gross NPAs to total advances, net NPA to total assets and net NPAs to net advances
and highest rank has been given based on lowest NPA ratios. Composite ranks of each bank
have been computed by aggregating the ranks under four categories of NPA ratios.
Thereafter, ultimate ranks of each bank have been computed based on composite rank values.
The findings indicate that none of the selected banks showed efficient performance in the
matter of managing its loan assets. From the Table 5.24 it can be said that among the selected
banks performance of HDFC Bank is found satisfactory, followed by AXIS Bank, J&K Bank,
ING Vys Bank, K.Vys Bank, ICICI Bank, Indusind Bank, Federal Bank, SIB and K.Bnk
Bank.
5.5 Analysis of Social Responsibility Performance of Selected Pvt.SBs in India

In this section it has been tried to analyze the performance of the selected banking
companies on the basis of their direct and indirect contributions to the society for socioeconomic growth. For this purpose two ratios have been selected to study the social
performances of the selected banking companies:
i) Advances to Priority Sectors to Total Advances (%).
ii) Ratio of Wage bills to Total Income (%).
5.5.1 Analysis of Social Responsibility Performance based on Priority Sector

Advances of the Selected Pvt.SBs in India
In todays Indian scenario, it is observed that the private sector banks have also taken
a leading role in providing finance/ advances to priority sectors of the economy with the
noble mission to accelerate the socio-economic growth process as a part of their social
responsibility performance.
The amount of priority sector advances of the ten selected Pvt.SBs in India over the
study period and also the detailed results of the selected measure i.e. priority sector advances
to total advances ratio of them during the study period from 2001-02 to 2010-11 have been
analysed. Table 5.25 gives an overview of the amount of priority sector advances of the ten
selected Pvt.SBs in India over the study period from 2001-02 to 2010-11. The mean (average)
priority sector advances in India for the said period by the selected Pvt.SBs has also been
shown in Table 5.25. From the overall picture of Table 5.52 it is observed that there are
162
fluctuating trends in providing finances to priority sectors by the selected Pvt.SBs under
study.
It is observed from the Table 5.25 that the amount of priority sector advances in case
of ICICI Bank marked a fluctuating trend throughout the period under study i.e. from 200102 to 2010-11. In the year 2001-02, the amount of priority sector advances is lowest among
all the years under study which is ` 1985.91 crore and in the year 2008-09 it is the highest i.e.
` 62051.60 crore. On an average, the priority sector advances is computed at ` 37265.95
crore of ICICI.
Table 5.25 portrays that the HDFC Bank has registered an overall increasing trend in
the amount of priority sector advances during the period of study. This bank has contributed
at ` 18496.36 crore.
In case of AXIS Bank, Table 5.25 exhibits a continuous improving trend in terms of
amount of priority sector advances over the study period. The amount of priority sector
advances is minimum (` 867.52 crore) in the first year of the study period and is maximum (`
41289.12 crore) in the ultimate year (2010-11) of the study. This continuous increasing trend
of priority sector advances indicates the ability of the bank to contribute more and more
amount of funds to the priority sectors as advances out of its total available advances. On an
average, the priority sector advances of AXIS Bank are computed at ` 14104.37 crore.
Federal Bank also recorded an increasing trend throughout the study period from 2001-02 to
2010-11. In the first year (2001-02) it was minimum i.e. ` 1656.56 crore and in the last year
(2010-11) it was maximum i.e. ` 10585.80 crore. The average amount of priority sector
advances of this bank is computed at ` 5423.78 crore.
From Table 5.25 it is found that the priority sector advances in case of J&K Bank has
registered a gradual upward trend during the study period. The lowest amount of priority
sector advances (` 1317.03 crore) is found in the year 2001-02 and the highest amount of
priority sector advances (` 10274.47 crore) is found in the year 2010-11. Its average priority
sector advances are found at ` 4454.08 crore.
It is observed from the Table 5.25 that the amount of priority sector advances in case
of Indusind Bank has marked an increasing trend throughout the period under study i.e. from
163
2001-02 to 2010-11. In the year 2001-02, the amount of priority sector advances is lowest
among all the years under study which is ` 948.18 crore and in the year 2010-11 it is the
highest i.e. ` 9356.97 crore. On an average, the priority sector advances is computed at `
3834.03 crore.
Table 5.25 portrays that the ING Vys Bank has obtained an overall increasing trend in
the amount of priority sector advances during the period of study. This bank has contributed
at ` 4196.63 crore.
In case of K.Bnk, Table 5.25 exhibits a continuous improving trend in terms of
amount of priority sector advances over the study period. The amount of priority sector
advances is minimum (` 1194.81 crore) in the first year of the study period and is maximum
(` 6238.36 crore) in the ultimate year (2010-11) of the study. This continuous increasing
trend of priority sector advances indicates the ability of the bank to contribute more and more
amount of funds to the priority sectors as advances out of its total available advances. On an
average, the priority sector advances of K.Bnk are computed at ` 3236.16 crore.
SIB has also recorded an increasing trend throughout the study period from 2001-02 to 201011. In the first year (2001-02) it was minimum i.e. ` 918.57 crore and in the last year (201011) it was maximum i.e. ` 6197.83 crore. The average amount of priority sector advances of
this bank is computed at ` 2887.08 crore.
From Table 5.25 it is found that the priority sector advances in case of K.Vys Bank
has registered a gradual upward trend up to year 2010 during the study period and thereafter
in the last year, it slightly decreases again. The lowest amount of priority sector advances (`
892.82 crore) is found in the year 2001-02 and the highest amount of priority sector advances
(` 5625.59 crore) is found in the year 2009-10. Its average priority sector advances are found
at ` 2739.94 crore.
On the basis of mean or average amount of priority sector advances of all the ten
selected Pvt.SBs, it is seen from the Table 5.25 that the ICICI Bank has achieved the highest
average amount of priority sector advances (i.e. ` 37265.95 crore) which implies that the
ICICI Bank has shown its greater activity to contribute funds as advances to the different
priority sectors as compared to other nine selected Pvt.SBs. The lowest average amount of
164
priority sector advances of ` 2739.94 crore is found in case of K.Vys Bank. On the basis of
the average amount of priority sector advances, the first and last ranks are occupied by ICICI
Bank and K.Vys Bank respectively. The second, third, fourth, fifth, sixth, seventh, eighth and
ninth rank positions in terms of average values of priority sector advances (` 18496.36 crore,
` 14104.37 crore, ` 5423.78 crore, ` 4454.08 crore, ` 4196.63 crore, ` 3834.03 crore, `
3236.16 crore and ` 2887.08 crore respectively) have been occupied by HDFC Bank, AXIS
Bank, Federal Bank, J&K Bank, ING Vys Bank, Indusind Bank, K.Bnk and SIB respectively.
165
Table 5.25
Statement showing Advances to Priority Sector of selected Pvt.SBs in India during the period 2001-02 to 2010-11
Years
Banks
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1985.91
732.46
867.52
1656.56
1317.03
948.18
1550.96
1194.81
918.57
892.82
8937.60
1421.82
1639.26
1952.22
1506.23
999.76
1960.04
1500.93
1003.95
1112.21
14530.74
2498.39
2456.22
2411.89
1965.59
2003.92
2157.08
1910.21
1290.60
1508.87
20089.29
5616.62
4403.59
2836.21
2510.11
2115.11
2830.78
2094.19
1709.73
1803.17
42675.62
10864.53
7729.93
4025.85
2827.86
2493.35
3100.80
2772.20
2266.85
2377.12
55277.24
17683.07
13196.33
5552.02
3286.98
3522.05
4200.12
3058.90
2932.81
2671.49
59732.52
17426.29
16572.25
6902.30
4874.33
5005.53
5089.00
3966.87
3579.78
3176.13
62051.60
29781.60
22949.04
8463.91
7345.95
5568.79
6155.00
4372.16
4029.26
3781.09
53977.39
44157.57
29940.42
9851.07
8632.29
6326.63
6875.35
5252.96
4941.44
4450.87
53401.56
54781.23
41289.12
10585.80
10274.47
9356.97
8047.12
6238.36
6197.83
5625.59
166
Mean
37265.95
18496.36
14104.37
5423.78
4454.08
3834.03
4196.63
3236.16
2887.08
2739.94
Priority Sector Advances Ratio = (Priority sector advances/ total advances) 100
This ratio shows the advances made in priority sector as a percentage of total advances.
Higher the ratio better is the contribution to the priority sectors by the banks out of their total
advances and vice-versa. Table 5.26 shows the priority sector advances as a percentage of
total advances of the selected Pvt.SBs in India under study during 2001-02 to 2010-11. A
study of the table reveals that ratio of priority sector advances as a percentage of total
advances registered a fluctuating trend for all the selected Pvt.SBs during the study period.
Initially, in most of the cases, this ratio was high, but the banks could not maintain it.
Average or mean performance of the ten selected Pvt.SBs as a whole also depicts the same in
Table 5.26. The reason behind the decline in this ratio may be due to the increase of nonrecoverable amount of loan amount (NPA) and the huge expansion of branches of different
banks including foreign banks during the concerned period. Improvement in this ratio during
2006-07 to 2010-11 for some banks is a good sign. From Table 5.26 during the study period
K.Vys Bank showed the satisfactory performance in this matter having the highest mean
value of the ratio of priority sector advances to total advances (36.152).
167
Table 5.26
Statement showing Priority Sector Advances to Total Advances (%) of selected Pvt.SBs in India during the period 2001-02 to 2010-11
Years
2001
2002
2003
2004
Pvt.SBs
-02
-03
-04
-05
4.22
16.78
23.40
21.98
ICICI
10.75
12.10
14.08
21.97
HDFC
16.21
22.83
26.23
28.22
AXIS
31.92
31.40
31.32
32.15
Federal
20.50
18.80
21.17
21.79
J&K
17.01
18.69
32.19
23.50
Indusind
35.10
34.93
30.61
31.17
ING Vys
34.96
38.49
40.92
33.31
K.Bnk
28.43
27.79
30.75
31.87
SIB
36.29
33.26
37.50
39.03
K.Vys
Mean
23.539
25.507
28.817
28.499
Indices
2005
-06
29.20
30.99
34.64
34.30
19.53
26.78
30.31
35.58
35.59
42.79
2006
-07
28.22
37.67
35.79
37.26
19.24
31.78
35.07
32.02
37.04
37.94
2007
-08
26.48
27.47
27.78
36.51
25.81
39.12
34.74
36.59
34.24
33.71
2008
-09
28.42
30.12
28.14
37.80
35.10
35.31
36.73
37.02
34.00
36.32
2009
-10
29.79
35.09
28.69
36.55
37.44
30.79
37.15
36.39
31.23
33.10
2010
-11
24.68
34.24
28.99
33.13
39.23
35.76
34.09
35.96
30.25
31.58
23.317
25.448
27.752
34.234
25.861
29.093
33.990
36.124
32.119
36.152
31.971
33.203
32.245
33.896
33.622
32.791
30.409
168
Mean
5.5.2 Analysis of Social Responsibility Performance based on wage bill payment

to the employees of selected Pvt.SBs in India
The overall Indian economy, both before and after its independence, has the morbid
picture of unemployment and inequality in income distribution leading to the furtherance of
gap between the rich and the poor. In todays context the Pvt.SBs in India as a part of their
social responsibility performance have also shown their significant attitude to enhance the
wage bill of their employees such that the employees can have the opportunity to enjoy
economic self-sufficiency, to have motivation to do hard work at work place and to eschew
poverty as far as possible.
5.5.2-1 Analysis of Wage bills to Total Income (%) of selected Pvt.SBs in India
This ratio indicates the social obligation of the banking companies from the view
point of the payment made to their employees as salary, allowances and other benefits out of
their total income. Higher the ratio better is the social responsibility performance in this
regard and vice-versa.
Ratio of Wage Bill to Total Income = (PPE / Total income) 100
PPE = Payment to and provisions for employees.
Total income includes interest income and other income
Table 5.27 shows the ratio of wage bills to total income (%) of the selected Pvt.SBs
in India during study period from 2001-02 to 2010-11. A look into the table reveals that this
ratio for all the selected Pvt.SBs fluctuated over the periods. In the year 2011, highest
percentage of this ratio is found in case of ING Vys Bank (18.08) followed by K.Bnk (12.96),
J&K Bank (12.84), HDFC Bank (11.69), SIB (10.97), Federal Bank (10.52), K.Vys Bank
(9.25), Indusind Bank (8.89), ICICI Bank (8.64) and AXIS Bank (8.16) respectively. Table
5.27 clearly showed that average of this ratio as a whole of the selected Pvt.SBs in India
during the study period had an increasing trend for the period 2001-02 to 2005-06 and
decreased thereafter and again it increased at the end and the highest average of this ratio as a
whole is calculated at 11.200 in the year 2010-11.
169
Table 5.27
Statement showing Wage bills to Total Income (%) of selected Pvt.SBs in India during the period 2001-02 to 2010-11
Years
Pvt.SBs
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
5.40
3.22
4.57
5.75
5.77
ICICI
5.36
6.09
6.74
7.39
8.69
HDFC
3.11
4.54
5.70
7.56
6.64
AXIS
9.58
10.36
11.96
13.24
13.81
Federal
8.95
9.24
9.24
10.87
10.46
J&K
2.27
2.82
3.78
4.34
5.99
Indusind
11.60
13.71
13.01
15.82
16.58
ING Vys
9.04
8.49
8.41
11.80
9.80
K.Bnk
11.19
11.26
14.28
14.61
16.72
SIB
9.05
9.27
10.93
10.85
11.00
K.Vys
Mean
7.555
7.900
8.862
10.223
10.546
Indices
170
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
5.59
9.52
6.97
12.38
10.69
5.52
14.63
9.02
12.34
9.40
5.25
10.50
7.62
9.32
8.43
5.60
14.41
10.07
10.21
7.89
5.10
11.41
7.27
8.29
8.62
6.77
14.07
8.39
11.57
7.18
5.80
11.36
8.06
8.71
10.55
8.91
15.03
8.78
10.56
8.14
8.64
11.69
8.16
10.52
12.84
8.89
18.08
12.96
10.97
9.25
5.509
8.875
6.562
10.816
9.989
5.489
14.694
9.676
12.371
9.296
9.606
8.930
8.865
9.590
11.200
9.328
Table 5.28
Statement showing Average Social Responsibility Indices of selected Pvt.SBs in India taken together based on Social Responsibility
Indicators during the period 2001-02 to 2010-11
End March
Years
Ratios
Priority
Sector
Advances
Ratio
Ratio of
Wage bill to
Total
Income
Avg. Social
Responsibility
Indices (SRI)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
23.539
25.507
28.817
28.499
31.971
33.203
32.245
33.896
33.622
32.791
30.409
7.555
7.900
8.862
10.223
10.546
9.606
8.930
8.865
9.590
11.200
9.328
15.547
16.704
18.840
19.361
21.259
21.405
20.588
21.380
21.606
21.996
19.868
171
Table 5.28 highlights the average Social Responsibility Indices (SRI) of the selected
Pvt.SBs in India as a whole based on their mean indices of the ratios in regard to Priority
Sector Advances Ratio and Wage Bill to Total Income Ratio over the study period. Highest
average SRI (21.996) is observed in the year 2011 and lowest average SRI (15.547) is noticed
in the year 2002. Mean of mean SRI is calculated at 19.868. Table 5.28 also shows that last
six years (from 2006 to 2011) of the study period average SRI is higher than the ultimate
mean of average SRI of 19.868.
Table 5.29
Statement showing Rank, Composite Rank and Ultimate Rank of Social Responsibility
Indicator Ratios of Selected Pvt.SBs in India
Mean
Rank
PSAR
ICICI
23.317
10
HDFC
25.448
9
AXIS
27.752
7
Federal
34.234
3
J&K
25.861
8
Indusind
29.093
6
ING Vys
33.990
4
K.Bnk
36.124
2
SIB
32.119
5
K.Vys
36.152
1
Banks
Mean
WBTI
5.509
8.875
6.562
10.816
9.989
5.489
14.694
9.676
12.371
9.296
Rank
9
7
8
3
4
10
1
5
2
6
Composite
Rank
19
16
15
6
12
16
5
7
7
7
Ultimate
Rank
10
8.5
7
2
6
8.5
1
4
4
4
[Note: PSAR= Priority Sector Advances Ratio and WBTI= Ratio of Wage bill to Total
Income]
It is exhibited from Table 5.29 that the highest mean value of PSAR is computed at
36.152 in case of K.Vys Bank and for this highest mean value of PSAR, K.Vys Bank
achieved the highest position followed by K.Bnk Bank (36.124), Federal Bank (34.234), ING
Vys Bank (33.990), SIB (32.119), Indusind Bank (29.093), AXIS Bank (27.752), J&K Bank
(25.861), HDFC Bank (25.448) and ICICI Bank (23.317) respectively. On the basis of the
mean value of WBTI of all the ten selected Pvt.SBs, Table 5.29 shows that the mean of
WBTI is highest (14.694) in case of ING Vys Bank and according to this highest mean value
of WBTI, the ING Vys Bank occupies the 1st rank position and the 2nd rank is given to SIB
for having the second highest mean of WBTI (12.371). The 3rd, 4th, 5th, 6th, 7th, 8th and 9th
ranks are given to Federal Bank, J&K Bank, K.Bnk, K.Vys Bank, HDFC Bank, AXIS Bank
172
and ICICI Bank respectively. Ultimately the 10th rank for the minimum mean value (5.489)
of WBTI is secured by Indusind Bank.
According to the composite rank total of the selected Pvt.SBs, it is observed that
ING Vys Bank has the lowest composite rank total i.e. 5 and thus highest ultimate rank is
given to ING Vys Bank. The 2nd ultimate rank is obtained by Federal Bank for having the
second lowest composite rank total of 6. The ultimate rank of K.Bnk, SIB and K.Vys Bank is
computed at 4 for having the equal composite rank total of 7. The 6rd and 7th ultimate ranks
are obtained by J&K Bank and AXIS Bank for their composite rank total of 12 and 15
respectively. The ultimate rank of both HDFC Bank and Indusind Bank is computed at 8.5
for having the equal composite rank total of 16. However, for the highest composite rank
total of 19 obtained by ICICI Bank, the ultimate rank is computed at 10.

and Profitability Efficiency of the selected Private Sector Banks (Pvt.SBs) in
India:
Private sector banks in India are working under a competitive market where a large
number of public sector banks and foreign banks operate also. Naturally, it requires a good
degree of efficiency to be achieved in the areas like minimization of cost, increase in
productivity, earning capacity and profitability so that they can compete with others to
achieve market excellence.
5.6.1 Efficiency Analysis of Cost Management of the Selected Pvt.SBs in India

To analyze the efficiency of cost management of the selected Pvt.SBs in India in the study
the following relevant ratios have been used:
i) Interest cost of deposits = (Actual interest paid on various deposits/ Average deposits)
100
ii) Interest cost of borrowings = (Actual interest paid on borrowings from various
iii) Ratio of Intermediation cost to Total Assets.
iv) Ratio of Burden to Total Assets
173

To analyze the productivity efficiency of the selected Pvt.SBs in India in the study the
i) Output-Input Ratio
ii) Business per Employee (in ` Lakh)
iii) Profit per Employee (in ` Lakh)
5.6.3 Analysis of Earnings and Profitability Efficiency of the Selected Pvt.SBs in

India
To analyze the earnings and profitability efficiency of the selected Pvt.SBs in India in the
study the following relevant ratios have been used:
i) Spread as a percentage of total Assets
ii) Interest yield on loans = (Actual interest earned on loans & advances / Average loans &
advances) 100
iii) Interest yield on investment and Bank balances = (Actual interest earned on
iv) Return on Assets (ROA)
5.6.1 Efficiency Analysis of Cost Management of the Selected Pvt.SBs in India

To analyze the cost control efficiency of the management of the selected Pvt.SBs the
following ratios have been used. Lower the ratios under this category better is the efficiency
of the management to control the all types of costs or expenses those are associated with the
selected ratios of the bank and vice-versa.
5.6.1-1 Analysis of Cost of Deposits Ratio (CDR) and Ultimate Rank of the
Interest cost of deposits = (Actual interest paid on various deposits/ Average deposits) 100
Table 5.30 highlights the detailed analysis of Cost of Deposit Ratio (CDR) of the
selected ten Pvt.SBs in India for the study period from 2001-02 to 2010-11 and Table 5.31
shows the detailed results of the mean CDR, the CV of CDR, rank based on mean, rank based
on CV, composite rank and also the ultimate rank of those ten selected Pvt.SBs for the said
period.
Table 5.30 depicts that in case of all the selected Pvt.SBs in India, the CDR marked a
fluctuating trend in all the selected Pvt.SBs during the study period. But in case of J&K
Bank, SIB and K.Vys Bank the cost of deposit ratio marked a decreasing trend in first five
174
years of the study period and thereafter it fluctuated in the remaining years of the study.
While in case of remaining selected Pvt.SBs, a mixed trend in the CDR is found during the
period under study. In most of the years of the study period the mean score of CDR is lower
than the ultimate mean of mean CDR of 5.882. It indicates that the actual interest paid on
various deposits of the majority of the Pvt.SBs have been effectively minimized during the
study period.
It is exhibited from Table 5.31 that the lowest mean value of CDR is computed at
4.707 in case of HDFC Bank and for this lowest mean value HDFC Bank achieved the
highest position which is followed by AXIS Bank (5.370), J&K Bank (5.485), ICICI Bank
(5.550), ING Vys Bank (5.716), Federal Bank (6.112), Indusind Bank (6.148), SIB (6.343),
K.Vys Bank (6.437) and K.Bnk (6.949) respectively. On the basis of the CV of CDR of all
the ten selected Pvt.SBs, Table 5.31 shows that the CV of CDR is lowest (14.045%) in case
of K.Vys Bank and according to this lowest value of coefficient of variation of CDR, the
K.Vys Bank occupies the 1st rank position and the 2nd rank is given to Indusind Bank for
having the second lowest CV of CDR (15.769%). The 3rd, 4th, 5th, 6th, 7th, 8th and 9th ranks are
given to J&K Bank, SIB, K.Bnk, ICICI Bank, Federal Bank, ING Vys Bank and HDFC Bank
respectively. Ultimately the 10th rank for the maximum CV value (24.596%) of CDR is
secured by AXIS Bank.
According to the composite rank total of the selected Pvt.SBs, it is observed that the
composite rank total in case of J&K Bank is the minimum (i.e. 6). Accordingly, the 1st rank
position goes to the J&K Bank and is followed by Indusind Bank (2nd rank) in that order. It is
also exhibited from the table that the composite rank totals are equal (i.e. 10) in the case of
ICICI Bank, HDFC Bank and K.Vys Bank and their ultimate ranks are thus computed at 4
each. The ultimate rank of AXIS Bank and SIB is computed at 6.5 for having the equal
composite rank total of 12. However, another equality of highest composite rank total of 13,
the ultimate ranks for both the Federal Bank and ING Vys Bank are computed 8.5 each.
Finally the last rank goes to K.Bnk for the highest composite rank total of 15.
175
Table 5.30
Statement showing Ratio of Cost of Deposits (%) of Selected Pvt.SBs in India
End March
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
5.73
6.25
8.01
8.53
7.30
6.03
8.25
9.06
8.48
7.72
6.18
5.31
7.23
7.36
6.27
6.01
7.36
8.43
7.33
7.07
5.20
3.93
4.93
5.92
5.26
5.05
5.89
7.03
6.15
6.04
3.87
3.32
4.06
4.58
4.61
4.69
4.48
5.09
5.20
5.13
4.41
3.38
4.32
4.82
4.55
5.53
4.76
5.30
4.80
5.00
5.89
4.34
5.02
5.22
4.50
6.49
4.96
6.01
5.43
5.99
7.21
5.18
5.11
6.42
5.85
7.64
5.83
6.89
6.53
6.88
6.82
6.58
6.06
6.45
6.22
7.66
6.18
7.53
6.84
7.34
5.48
4.51
4.42
6.35
5.24
6.39
4.61
7.54
6.52
6.84
4.71
4.27
4.54
5.47
5.05
5.99
4.84
6.60
6.15
6.36
5.550
4.707
5.370
6.112
5.485
6.148
5.716
6.949
6.343
6.437
1.047
1.112
1.321
1.199
0.912
0.970
1.265
1.271
1.077
0.904
18.872
23.628
24.596
19.611
16.632
15.769
22.126
18.288
16.987
14.045
7.536
6.855
5.540
4.503
4.687
5.385
6.354
6.767
5.790
5.398
5.882
1.108
19.055
176
Table 5.31
Statement showing Rank, Composite Rank and Ultimate Rank of Cost of Deposits (%)
of Selected Pvt.SBs in India
Banks
Mean
ICICI
5.550
HDFC
4.707
AXIS
5.370
Federal
6.112
J&K
5.485
Indusind
6.148
ING Vys
5.716
K.Bnk
6.949
SIB
6.343
K.Vys
6.437
Rank
based on
Mean
4
1
2
6
3
7
5
10
8
9
CV%
18.872
23.628
24.596
19.611
16.632
15.769
22.126
18.288
16.987
14.045
Rank
based on
CV%
6
9
10
7
3
2
8
5
4
1
Composite
Rank
Ultimate
Rank
10
10
12
13
6
9
13
15
12
10
4
4
6.5
8.5
1
2
8.5
10
6.5
4
5.6.1-2 Analysis of Ratio of Cost of Borrowings (CoB) and Ultimate Rank of the
Interest cost of borrowings = (Actual interest paid on borrowings from various
From the Table 5.32 it is seen that the cost of borrowings in all the selected Pvt.SBs
registered a fluctuating trend over the study period.
From the view point of the mean values of CoB of the ten selected Pvt.SBs, it is
found that the ICICI Bank has obtained the lowest mean CoB of 1.575 and accordingly the
first rank is given to this bank and the 10th rank is given to HDFC Bank for the highest mean
value of CoB which is computed at 7.860. Based on the coefficient of variation of the CoB, it
is highlighted from Table 5.33 that 1st rank position goes to HDFC Bank for having the
lowest CV of 31.794% and the last rank for having the highest CV of CoB is given to SIB
(128.304%).
Comparing the composite rank total of all the ten selected Pvt.SBs, it is found that
for having the lowest composite rank total of 7, Federal bank occupies the 1st rank position
and accordingly followed by AXIS Bank and K.Vys Bank (jointly), ICICI Bank, ING Vys
Bank, HDFC Bank, J&K Bank, Indusind Bank, K.Bnk and SIB respectively during the period
under study.
177
Table 5.32
Statement showing Ratio of Cost of Borrowings (%) of Selected Pvt.SBs in India
End March
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Score
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
0.19
8.69
4.44
2.93
14.23
4.60
6.60
5.75
4.15
2.66
0.44
5.03
2.72
1.87
12.61
2.04
1.88
6.26
0.39
3.29
0.71
6.25
3.12
1.61
5.83
7.33
1.11
4.17
0.38
6.25
0.79
4.68
1.09
0.78
4.41
7.60
2.30
1.14
1.90
7.97
2.57
8.24
2.70
0.86
2.00
8.71
3.39
1.39
23.23
4.53
2.90
9.66
4.29
2.07
8.00
14.88
2.76
2.64
5.49
4.80
3.13
6.65
3.26
3.17
7.44
6.62
3.20
4.95
22.62
3.06
2.52
12.86
2.70
2.50
8.36
6.13
2.32
14.12
6.50
8.94
1.28
6.75
0.91
0.00
7.93
1.25
0.38
1.26
0.81
3.28
1.22
9.79
0.74
0.57
4.20
1.62
1.22
0.65
2.68
4.40
1.575
7.860
2.597
1.637
7.501
6.078
2.516
4.233
6.815
4.918
1.098
2.499
1.315
1.062
3.743
4.086
1.722
4.036
8.744
2.150
69.690
31.794
50.634
64.908
49.894
67.236
68.424
95.346
128.304
43.714
5.424
3.653
3.676
3.266
5.762
5.749
6.410
6.697
2.386
2.709
4.573
3.046
66.994
178
Table 5.33
Statement showing Rank, Composite Rank and Ultimate Rank of Cost of Borrowings
(%) of Selected Pvt.SBs in India
Banks
Mean
ICICI
1.575
HDFC
7.860
AXIS
2.597
Federal
1.637
J&K
7.501
Indusind
6.078
ING Vys
2.516
K.Bnk
4.233
SIB
6.815
K.Vys
4.918
Rank
based on
Mean
1
10
4
2
9
7
3
5
8
6
CV%
69.690
31.794
50.634
64.908
49.894
67.236
68.424
95.346
128.304
43.714
Rank
based on
CV%
8
1
4
5
3
6
7
9
10
2
Composite
Rank
Ultimate
Rank
9
11
8
7
12
13
10
14
18
8
4
6
2.5
1
7
8
5
9
10
2.5
5.6.1-3 Analysis of Ratio of Intermediation cost to Total Assets (%) and Ultimate
Ratio of Intermediation cost to Total Assets = (Operating Expenses/ Total Assets) 100
Intermediation Cost is defined as total operating expenses. Operating expenses include
payment to and provisions for employees, rent, taxes and lighting, printing and stationary,
advertisement and publicity, depreciation on banks property, directors fees, allowances and
expenses, auditors fees and expenses, law charges, postage, telegrammes, telephones, repairs
and maintenance, insurance and other operating expenses.
Total assets include cash in hand, balances with RBI, balances with banks in India,
money at call and short notice, balances with banks outside India, investment, fixed assets
and other assets.
Higher this ratio lower is the efficiency of the asset management in reducing the total
operating costs or keeping the operating expenses to a certain range. Lower the ratio better is
the efficiency of asset management in reducing the total operating expenses.
179
It is highlighted from Table 5.34 that the Intermediation Cost to TA marked an overall
fluctuating trend over the study period from 2001-02 to 2010-11 in the case of all selected
Pvt.SBs.
It is depicted from Table 5.35 that the J&K Bank has achieved the lowest average
Intermediation Cost to TA which is computed at 1.474 and accordingly, 1st rank position goes
to J&K Bank, leaving the second position to K.Bnk, third position to Indusind Bank, fourth
position to Federal Bank, fifth position to SIB, sixth position to ICICI Bank, seventh position
to K.Vys Bank, eighth position to AXIS Bank and ninth position to HDFC Bank. The tenth
position goes to ING Vys Bank for having the highest mean value of 2.764. On the basis of
the CV of Intermediation Cost to TA, it is found that K.Bnk has secured the 1st rank for
having the lowest CV of Intermediation Cost to TA which is computed at 7.703%. However,
the last rank for the highest CV value of 25.640% is achieved by Indusind Bank.
So far as the composite rank total of all the selected Pvt.SBs, it is highlighted from
Table 5.35 that K.Bnk has the composite rank total of 3 and therefore, the 1st or highest
ultimate rank is computed for the K.Bnk. The 2nd ultimate rank is given to J&K Bank for the
composite rank total of 5. The 3th, 4th and 5th ultimate ranks are given to Federal Bank, SIB
and ING Vys Bank respectively for their composite rank total of 7, 11 and 12.
The AXIS Bank and Indusind Bank have the composite rank total of 13 each and
therefore, the ultimate rank is computed at 6.5 for those banks. The 8th, 9th and 10th ultimate
ranks are given to K.Vys Bank, ICICI Bank and HDFC Bank respectively for their composite
rank total of 14, 15 and 17.
180
Table 5.34
Statement showing Ratio of Intermediation Cost to Total Assets (%) of Selected Pvt.SBs in India
End March
Years
2002
2003
2004
2005
2006
2007
Pvt.SBs
1.00
1.91
2.22
2.25
2.14
2.25
ICICI
2.13
2.18
2.23
2.32
2.71
2.94
HDFC
1.63
1.90
1.92
1.88
1.86
1.98
AXIS
2.02
1.99
2.07
1.97
1.95
1.78
Federal
1.71
1.65
1.54
1.41
1.36
1.35
J&K
1.00
1.17
1.74
1.73
1.90
1.78
Indusind
2.48
2.99
2.79
2.66
3.23
2.80
ING Vys
1.81
1.65
1.55
1.71
1.49
1.52
K.Bnk
2.05
2.00
2.29
2.00
2.23
1.79
SIB
2.30
1.84
2.36
2.28
2.34
1.92
K.Vys
Mean
1.813
1.928
2.071
2.021
2.121
2.011
Score
181
2008
2009
2010
2011
Mean
SD
CV%
2.19
3.34
2.36
1.63
1.31
1.82
2.72
1.72
1.61
1.69
1.81
3.50
2.22
1.60
1.34
2.15
2.69
1.64
1.75
1.63
1.58
2.93
2.26
1.64
1.44
2.34
2.46
1.55
1.60
1.79
1.72
2.86
2.26
1.76
1.63
2.49
2.82
1.87
1.59
1.72
1.907
2.714
2.027
1.841
1.474
1.812
2.764
1.651
1.891
1.986
0.400
0.488
0.234
0.179
0.147
0.465
0.227
0.127
0.260
0.299
21.003
17.967
11.558
9.707
9.984
25.640
8.228
7.703
13.762
15.033
2.039
2.033
1.957
2.072
2.007
0.283
14.059
Table 5.35
Statement showing Rank, Composite Rank and Ultimate Rank of Intermediation Cost
to Total Assets of Selected Pvt.SBs in India
Banks
Mean
ICICI
1.907
HDFC
2.714
AXIS
2.027
Federal
1.841
J&K
1.474
Indusind
1.812
ING Vys
2.764
K.Bnk
1.651
SIB
1.891
K.Vys
1.986
Rank
based on
Mean
6
9
8
4
1
3
10
2
5
7
CV%
21.003
17.967
11.558
9.707
9.984
25.640
8.228
7.703
13.762
15.033
Rank
based on
CV%
9
8
5
3
4
10
2
1
6
7
Composite
Rank
Ultimate
Rank
15
17
13
7
5
13
12
3
11
14
9
10
6.5
3
2
6.5
5
1
4
8
5.6.1-4 Analysis of Ratio of Burden to Total Assets (%) and Ultimate Rank of the
Ratio of Burden to Total Assets = (Operating expenses Other Income)/ Total Assets 100
Lower the ratio better is the capabilities of the asset management in reducing its burden i.e.
sufficient funds are available in terms of other income for the payment of its operating
expenses. On the other hand higher the ratio lower is the efficiency of the asset management
in reducing its burden i.e. sufficient funds is not available as other income for the payment of
operating expenses.
Table 5.36 shows a fluctuating trend in Burden to TA ratio of all the ten selected
Pvt.SBs under study. It signifies that all the selected Pvt.SBs have been reducing more or less
amount of burden per rupee of their asset value throughout the study period from 2001-02 to
2010-11.
Based on the mean value of Burden to TA of all selected Pvt.SBs, the lowest mean
value (-0.261) is observed in case of ICICI Bank and the first position is captured by ICICI
Bank for this average value of Burden to TA. The second position is given to K.Bnk for
having the second lowest average of -0.192. The last rank for the highest average value of
0.953 is occupied by HDFC Bank. So far as the CV of Burden to TA is concerned, 1st rank
182
goes to AXIS Bank for the lowest CV of -465.101% and the 10th rank position goes to
Indusind Bank for having the highest CV value of Burden to TA which is computed at
7578.395%.
From the view point of composite rank total of all the selected Pvt.SBs, it is
observed from Table 5.37 that the lowest composite rank total of 4 which is jointly occupied
by ICICI Bank, AXIS Bank and K.Bnk, thus highest ultimate rank (i.e. 2) is given to each of
them and is followed by J&K Bank, next two banks jointly occupied same rank (i.e. 5.5) by
Federal Bank and K.Vys Bank respectively, another next two banks jointly occupied same
rank (i.e. 7.5) by HDFC Bank and Indusind Bank respectively in that order. However, the 9th
and 10th ultimate ranks are given to ING Vys Bank and SIB respectively for their composite
rank total of 15 and 17.
183
Table 5.36
Statement showing Ratio of Burden to Total Assets (%) of Selected Pvt.SBs in India
End March
Years
2002
2003
2004
2005
2006
2007
Pvt.SBs
ICICI
0.08
-1.09
-0.43
-0.08
-0.24
-0.08
HDFC
0.43
0.44
0.91
0.93
0.91
1.10
AXIS
-1.67
-0.52
-0.55
0.54
0.19
0.33
Federal
-0.31
-0.11
-0.11
0.64
0.79
0.45
J&K
-0.17
-0.17
-0.04
0.99
0.83
0.77
Indusind
-0.95
-1.39
-1.02
0.09
0.54
0.52
ING Vys
-0.21
-0.22
-0.14
1.80
2.04
1.22
K.Bnk
-1.53
-1.16
-1.17
-0.21
0.27
0.41
SIB
-0.30
-0.57
-0.49
0.90
1.51
0.95
K.Vys
0.06
-0.50
1.24
0.77
0.64
0.73
Mean
-0.457 -0.529 -0.180
0.637
0.748
0.640
Score
184
2008
2009
2010
2011
Mean
SD
CV%
-0.18
1.30
0.39
0.26
0.52
0.65
0.85
0.44
0.80
0.47
-0.14
1.42
-0.03
0.16
0.59
0.36
0.78
0.12
0.88
-0.05
-0.44
0.96
-0.14
0.35
0.40
0.58
0.57
0.03
0.69
0.52
-0.01
1.13
0.07
0.67
0.85
0.73
1.02
0.88
0.91
0.66
-0.261
0.953
-0.139
0.279
0.458
0.011
0.771
-0.192
0.527
0.454
0.335
0.321
0.648
0.372
0.439
0.807
0.800
0.813
0.713
0.494
-128.520
33.721
-465.101
133.270
95.944
7578.395
103.637
-422.964
135.199
108.666
0.550
0.408
0.353
0.691
0.286
0.574
717.225
Table 5.37
Statement showing Rank, Composite Rank and Ultimate Rank of Burden to Total
Assets (%) of Selected Pvt.SBs in India
Banks
Mean
ICICI
-0.261
HDFC
0.953
AXIS
-0.139
Federal
0.279
J&K
0.458
Indusind
0.011
ING Vys
0.771
K.Bnk
-0.192
SIB
0.527
K.Vys
0.454
Rank
based on
Mean
1
10
3
5
7
4
9
2
8
6
CV%
-128.520
33.721
-465.101
133.270
95.944
7578.395
103.637
-422.964
135.199
108.666
Rank
based on
CV%
3
4
1
8
5
10
6
2
9
7
Composite
Rank
Ultimate
Rank
4
14
4
13
12
14
15
4
17
13
2
7.5
2
5.5
4
7.5
9
2
10
5.5
Table 5.38 highlights the average Cost Efficiency Indices (CEI) of the selected
Pvt.SBs in India as a whole based on their mean indices of the ratios in regard to Cost of
Deposits, Cost of Borrowings, Intermediation Cost to Total Assets and Burden to Total
Assets over the study period. Highest average CEI (3.976) is observed in the year 2009 and
lowest average CEI (2.607) is noticed in the year 2005. Mean of mean CEI is calculated at
3.187. Table 5.38 also shows that in five years of the study period average CEI is higher than
the mean of average CEI of 3.187.
185
Table 5.38
Statement showing Average Cost Efficiency Indices of selected Pvt.SBs in India taken together based on Selected Cost Minimizing
End March
Years
2002
2003
Ratios
Cost of
7.536
6.855
Deposit (%)
Cost of
5.424
3.653
Borrowings (%)
Intermediation
1.813
1.928
Cost to TA (%)
Burden to
-0.457
-0.529
Total Assets (%)
Average
3.579
2.977
Cost Efficiency
Indices (CEI)
[Source: Table 5.30, 5.32, 5.34 and 5.36]
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
5.540
4.503
4.687
5.385
6.354
6.767
5.790
5.398
5.882
3.676
3.266
5.762
5.749
6.410
6.697
2.386
2.709
4.573
2.071
2.021
2.121
2.011
2.039
2.033
1.957
2.072
2.007
-0.180
0.637
0.748
0.640
0.550
0.408
0.353
0.691
0.286
2.777
2.607
3.330
3.446
3.838
3.976
2.622
2.718
3.187
186

In production theory, the term productivity denotes the ratio of output to input. If the
percentage increase in output is greater than the percentage increase in input, a production
unit is said to be efficient as it indicates the effective utilization of resources. In case of
banking business, employees or human resources are also traditionally considered as inputs
and total business (sum of deposit mobilization and advances), net profit are assumed to be
outputs.
5.6.2-1 Performance Analysis using Input-Output quantities i.e. Output-Input

(O/I) Ratio and Ultimate Rank of selected Pvt.SBs in India
In this section performance of selected banking companies has been evaluated by
using output-input ratio. It is a very important measure to assess the overall productive ability
of banking companies. Output is treated as total incomes of bank i.e. interest income plus
other income. Here interest incomes include Interest/discount on advances/bills, Income on
Investments, Interest on balances with RBI and other inter-bank funds, others. Other incomes
include commission, exchange and brokerage, Net Profit (loss) on sale of investments, Net
Profit (loss) on revaluation of investments, Net Profit (loss) on exchange transaction, Net
Profit (loss) on sale of land, building & other assets, and miscellaneous income.
Input is treated as total costs of banks, i.e. interest costs plus operating costs.
Interest costs include Interest on deposits, Interest on RBI/inter-bank borrowings, others.
Operating costs include Payments to and provisions for employees, Rent, taxes and lighting,
Printing and stationery, Advertisement and publicity, Depreciation on Bank's property,
Directors' fees, allowances and expenses, Auditors' fees and expenses, Law charges, Postage,
telegrams, telephones, etc., Repairs and maintenance, Insurance, Other expenditure.
Output-Input (O/I) ratio indicates how much income can be generated by its total
expenditure. Higher the ratio better is the income generating ability and productivity
efficiency and better is the earning efficiency of bank by employing its total resources or
funds and vice-versa.
It is observed from Table 5.39 that the average O/I ratio throughout the study period
from 2001-02 to 2010-11 marked a fluctuating trend in all the ten selected Pvt.SBs under the
study.
187
Table 5.40 shows the detailed results of the mean O/I ratio, CV of O/I ratio, rank based on
mean, rank based on CV, composite rank and also the ultimate rank of selected Pvt.SBs for
the said period.
Table 5.40 highlights that the highest average O/I ratio is found in case of HDFC
Bank which is computed at 1.456. On the basis of this average value, the first rank goes to
HDFC Bank. Accordingly second, third and fourth (jointly), fifth, sixth, seventh, eighth and
ninth ranks are given to Federal Bank, AXIS Bank and J&K Bank (jointly), K.Vys Bank,
K.Bnk, ICICI Bank, Indusind Bank and SIB respectively for the next consecutive highest
average O/I ratio. While the tenth or last rank goes to ING Vys Bank for the lowest average
(1.196) for this ratio. So far as the coefficient of variation (CV) of O/I ratio is concerned, 1st
rank is given to Federal Bank for having the least CV of output-input ratio which is computed
at 3.536%. Similarly, 2nd rank, 3rd rank, 4th rank, 5th rank, 6th rank, 7th rank, 8th rank and 9th
rank for the next eight consecutive lowest CV values of O/I ratio are occupied by K.Vys
Bank, SIB, ICICI Bank, HDFC Bank, ING Vys Bank, J&K Bank, AXIS Bank and K.Bnk
respectively. The 10th rank goes to Indusind Bank for having the highest CV of O/I ratio
which is computed at 11.673%.
From the view point of composite rank, it is seen from Table 5.40 that the composite
rank or composite score (i.e. the sum of the rank based on mean and rank based on CV) is
lowest (i.e.3) in case of Federal Bank as compared to other selected Pvt.SBs. Based on the
composite rank total of 3, Federal Bank captured the top most position and is followed by
HDFC Bank and K.Vys Bank for the composite rank total of 6 and 7 respectively. For equal
composite rank total of 11 each, ICICI Bank and J&K Bank achieved the ultimate rank of 4.5
and it is followed by AXIS Bank and SIB for the composite rank total of 12 each and it is
followed by K.Bnk for combined rank total of 15, and it is followed by ING Vys Bank for the
composite rank total of 16 and it is followed by Indusind Bank for the composite rank total of
18 and achieved the ultimate rank of 10.
188
Table 5.39
Statement showing Average Indices of Output-Input (O/I) Ratios of Selected Private Sector Banks in India for the period 2001-02 to
2010-11
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
Pvt.SBs
1.250
1.258
1.247
1.299
1.333
1.255
ICICI
1.365
1.399
1.499
1.560
1.547
1.458
HDFC
1.346
1.280
1.476
1.319
1.379
1.300
AXIS
1.319
1.354
1.415
1.399
1.376
1.411
Federal
1.401
1.477
1.526
1.290
1.325
1.369
J&K
1.393
1.479
1.502
1.408
1.189
1.109
Indusind
1.205
1.237
1.255
1.098
1.121
1.171
ING Vys
1.342
1.318
1.418
1.473
1.383
1.332
K.Bnk
1.298
1.348
1.359
1.269
1.231
1.304
SIB
1.380
1.438
1.423
1.395
1.404
1.384
K.Vys
Mean
1.330
1.359
1.412
1.351
1.329
1.309
Indices
189
2007
-08
2008
-09
2009
-10
2010
-11
Mean
SD
CV%
1.252
1.436
1.339
1.375
1.322
1.099
1.172
1.278
1.233
1.314
1.300
1.359
1.372
1.490
1.315
1.154
1.180
1.268
1.240
1.323
1.415
1.468
1.507
1.430
1.381
1.275
1.290
1.125
1.237
1.300
1.384
1.467
1.480
1.454
1.393
1.336
1.234
1.154
1.248
1.319
1.299
1.456
1.380
1.402
1.380
1.294
1.196
1.309
1.277
1.368
0.060
0.069
0.081
0.050
0.075
0.151
0.060
0.109
0.048
0.050
4.641
4.717
5.836
3.536
5.415
11.673
5.010
8.317
3.781
3.638
1.282
1.300
1.343
1.347
1.336
0.075
5.656
Table 5.40
Statement showing Rank, Composite Rank and Ultimate Rank of O/I ratio of Selected
Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
CV%
Rank
based on
CV%
(1)
(2)
(3)
(4)
7
1
3.5
2
3.5
8
10
6
9
5
4.641
4.717
5.836
3.536
5.415
11.673
5.010
8.317
3.781
3.638
4
5
8
1
7
10
6
9
3
2
ICICI
1.299
HDFC
1.456
AXIS
1.380
Federal
1.402
J&K
1.380
Indusind
1.294
ING Vys
1.196
K.Bnk
1.309
SIB
1.277
K.Vys
1.368
190
Composite
Rank
(5)=(2)+(4)
11
6
12
3
11
18
16
15
12
7
Ultimate
Rank
(6)
4.5
2
6.5
1
4.5
10
9
8
6.5
3
Table 5.41
Statement showing Business per Employee (in ` Lakh) of the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
Years
Pvt.SBs
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Indices
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
486.49
778.00
896.00
199.24
264.00
1587.91
197.95
247.24
218.00
219.00
1120.00
865.00
926.00
270.00
287.00
1284.06
242.00
275.32
265.00
288.00
1010.00
866.00
808.00
327.00
345.00
1079.95
324.34
320.23
306.00
330.00
880.00
806.00
1021.00
366.00
435.00
925.78
394.92
380.90
352.00
387.00
905.00
758.00
1020.00
431.00
516.00
880.18
426.00
478.29
422.00
439.00
1027.00
607.00
1024.00
544.00
585.00
1039.77
486.09
524.00
508.00
489.00
1008.00
506.00
1117.00
640.00
596.00
1062.67
547.28
589.00
600.43
604.00
1154.00
446.00
1060.00
750.00
500.00
836.00
606.39
649.00
645.00
638.00
765.00
590.00
1111.00
813.00
731.00
837.46
623.78
727.00
771.00
789.00
735.00
653.00
1366.00
923.00
856.00
843.98
674.79
771.00
918.00
935.00
909.049
687.500
1034.900
526.324
511.500
1037.776
452.354
496.198
500.543
511.800
22.270
21.629
14.617
46.969
37.139
23.195
36.257
37.815
46.124
44.681
509.383
582.238
571.652
594.860
627.547
683.386
727.038
728.439
775.824
867.577
666.794
33.070
191
5.6.2-2 Analysis of Business per Employee (in ` Lakh) and Ultimate Rank of
If the proportionate increase in total business is greater than the proportionate
increase in the number of employees during a particular period, the productivity of a bank is
said to have improved and vice versa. Here total business is the sum of deposit mobilization
and advances.
Table 5.42
Statement showing Rank, Composite Rank and Ultimate Rank of Business per
Employee (in ` Lakh) of Selected Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
(1)
ICICI
909.049
HDFC
687.500
AXIS
1034.900
Federal
526.324
J&K
511.500
Indusind
1037.776
ING Vys
452.354
K.Bnk
496.198
SIB
500.543
K.Vys
511.800
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
3
4
2
5
7
1
10
9
8
6
22.270
21.629
14.617
46.969
37.139
23.195
36.257
37.815
46.124
44.681
3
2
1
10
6
4
5
7
9
8
6
6
3
15
13
5
15
16
17
14
3.5
3.5
1
7.5
5
2
7.5
9
10
6
Table 5.41 exhibits an overview of Business per Employee (` In lakh) for selected
Pvt.SBs in India for the study period 2001-02 to 2010-11 and Table 5.42 shows the detailed
results of the average Business Per Employee, the CV of Business per Employee, rank based
on average, rank based on CV, combined rank and also the ultimate rank of those selected
Pvt.SBs for the said period.
From Table 5.41 it is observed that the Business per Employee of all selected
Pvt.SBs marked a fluctuating trend during the study period and it indicates the inconsistent
utilization of deposit mobilization and advances by all the selected Pvt.SBs in terms of
productivity with reference to the mean index of the banks as a whole (666.794) under study
during 2001-02 to 2010-11.
192
Table 5.42 depicts that the Indusind Bank has achieved the highest mean value
(1037.776) of Business per Employee during the study period as compared to other nine
selected Pvt.SBs. Accordingly, Indusind Bank is given the 1st rank and the 2nd rank is
obtained by AXIS Bank having the second average highest value of Business per employee
(1034.900) and the 3rd, 4th, 5th, 6th, 7th, 8th, 9th and 10th rank go to the ICICI Bank, HDFC
Bank, Federal Bank, K.Vys Bank, J&K Bank, SIB, K.Bnk and ING Vys Bank for the next
eight mean values of Business per Employee. But so far as the CV is concerned, the top rank
goes to AXIS Bank for having lowest CV of Business per Employee of 14.617%, the 2nd rank
is achieved by HDFC Bank for the second lowest CV of this ratio (21.629%) and for the next
eight lowest CV of this ratio of respectively 22.270%, 23.195%, 36.257%, 37.139%,
37.815%, 44.681%, 46.124% and 46.969% the 3rd, 4th, 5th, 6th, 7th, 8th, 9th and 10th rank go to
ICICI Bank, Indusind Bank, ING Vys Bank, J&K Bank, K.Bnk, K.Vys Bank, SIB and
Federal Bank respectively.
On the basis of composite rank total, the 1st ultimate rank goes to AXIS Bank for
having least composite rank total which is computed at 3. The ultimate ranks for the rest of
the selected Pvt.SBs as follow: Indusind Bank 2nd rank, ICICI Bank 3.5th rank, HDFC
Bank 3.5th rank, J&K Bank 5th rank, K.Vys Bank 6th rank, Federal Bank 7.5th rank,
ING Vys Bank 7.5th rank, K.Bnk 9th rank and 10th rank goes to SIB.
5.6.2-3 Analysis of Profit per Employee (in ` Lakh) and the Ultimate rank of
If the proportionate increase in net profit is greater than the proportionate increase in
the number of employees during a particular period, the productivity of a bank in the same
period is said to have improved and vice versa.
It is observed from Table 5.43 that the Profit per Employee in most of the selected
Pvt.SBs registered a fluctuating trend throughout the study. The overall fluctuating trend in
all the selected Pvt.SBs during the study period indicates that all the Pvt.SBs have been more
or less able to generate profit in terms of productivity by proportionate change in the number
of employees. Highest mean index (7.749) of profit per employee is observed in the year
2010-11 as compared to other selected years.
From Table 5.44 it is seen that amongst the ten selected Pvt.SBs the mean Profit per
Employee in ICICI Bank is the highest which is computed at 9.833 and the company
occupied 1st rank position, followed by AXIS Bank, HDFC Bank, Indusind Bank, K.Vys
Bank, J&K Bank, Federal Bank, K.Bnk and SIB while the average Profit per Employee in
193
ING Vys is least (1.928) and is given the last rank. From the view point of CV of this ratio,
again ICICI Bank is given the first ranking as its CV of Profit per Employee during the
period under study is lowest (18.731%) and it may be concluded that the ICICI Bank has
been more consistent to human resources in terms of employees employed for generating
profit than the other selected Pvt.SBs. Then for the second lowest CV (22.891%) of Profit per
employee, AXIS Bank achieves the 2nd rank and accordingly 3rd rank, 4th rank, 5th rank, 6th
rank, 7th rank, 8th rank and 9th rank go to K.Bnk, HDFC Bank, K.Vys Bank, J&K Bank, SIB,
Federal Bank and Indusind Bank respectively for the next lowest CV of profit per employee
whereas the last rank goes to ING Vys Bank for having the highest CV (84.259%) of profit
per employee.
Based on the composite rank total of all the selected Pvt.SBs, it is observed from
Table 5.44 that ICICI Bank achieves the 1st ultimate rank for having the minimum composite
score of 2. However, AXIS Bank has the second lowest composite rank (4) and therefore, its
rank is 2nd and in the same order the 3rd, 4th, 5th, 6th , 7th, 8th, 9th and 10th rank for the next
composite scores of 7, 10, 11, 12, 13, 15, 16 and 20.
Table 5.43
Statement showing Profit per Employee (in ` Lakh) of the Selected Pvt.SBs in India for
the period 2001-02 to 2010-11
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
SD
CV%
ICICI
5.33
11.00
12.00
11.00
10.00
9.00
10.00
11.00
9.00
10.00
9.833
1.842
18.731
HDFC
9.75
10.09
9.39
8.80
7.39
6.13
4.97
4.18
5.98
7.37
7.405
2.070
27.961
AXIS
7.79
8.22
8.07
8.02
8.69
7.59
8.39
10.00
12.00
14.00
9.277
2.124
22.891
Federal
0.78
1.69
2.14
1.39
3.54
4.43
5.30
6.90
6.01
7.26
3.944
2.383
60.421
J&K
4.00
5.00
6.00
2.00
3.00
4.00
5.00
5.00
7.00
8.00
4.900
1.792
36.571
Indusind
6.88
9.50
14.98
10.12
1.56
2.61
2.62
3.49
6.51
8.24
6.651
4.224
63.515
ING Vys
1.22
1.69
1.15
-0.73
0.17
1.66
2.68
3.03
3.88
4.53
1.928
1.625
84.259
K.Bnk
2.20
2.55
3.10
3.35
4.05
4.00
5.00
5.00
3.00
4.00
3.625
0.953
26.285
SIB
1.68
2.04
2.39
0.24
1.37
2.69
3.59
4.00
5.00
5.00
2.800
1.576
56.287
K.Vys
Mean
Indices
3.79
4.41
5.65
3.75
4.65
4.87
5.82
5.98
8.05
9.09
5.606
1.762
31.423
4.342
5.619
6.487
4.794
4.442
4.698
5.337
5.858
6.643
7.749
5.597
2.035
42.834
Pvt.SBs
194
Table 5.44
Statement showing Rank, Composite Rank and Ultimate Rank of Profit per Employee
(in ` Lakh) of Selected Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
(1)
ICICI
9.833
HDFC
7.405
AXIS
9.277
Federal
3.944
J&K
4.900
Indusind
6.651
ING Vys
1.928
K.Bnk
3.625
SIB
2.800
K.Vys
5.606
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
1
3
2
7
6
4
10
8
9
5
18.731
27.961
22.891
60.421
36.571
63.515
84.259
26.285
56.287
31.423
1
4
2
8
6
9
10
3
7
5
2
7
4
15
12
13
20
11
16
10
1
3
2
8
6
7
10
5
9
4
Table 5.45 highlights the average Productivity Indices (PI) of the selected Pvt.SBs in
India as a whole based on their mean indices of the ratios in regard to Output-Input (O/I)
ratio, Business per Employee (BPE) and Profit per Employee (PPE) over the study period.
Highest average PI (292.224) is observed in the year 2011 and lowest average PI (171.685) is
noticed in the year 2002. Mean of mean PI is calculated at 224.576. Table 5.45 also shows
that there is an increasing trend in the last eight years of the study period and in five cases
average PI is higher than the mean of average PI of 224.576.
195
Table 5.45
Statement showing Average Productivity Indices of selected Pvt.SBs in India as a whole based on Selected Productivity Ratios during
the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Scores
1.330
1.359
1.412
1.351
1.329
1.309
1.282
1.300
1.343
1.347
1.336
509.383
582.238
571.652
594.86
627.547
683.386
727.038
728.439
775.824
867.577
666.794
4.342
5.619
6.487
4.794
4.442
4.698
5.337
5.858
6.643
7.749
5.597
171.685
196.405
193.184
200.335
211.106
229.798
244.552
245.199
261.270
292.224
224.576
Ratios
O/I ratio
Business
Per
Employee
Profit
Per
Employee
Average
Productivity
Indices (PI)
196
5.6.3 Analysis of Earnings and Profitability Efficiency of the Selected Pvt.SBs in

India
Private Sector Banks in India were primarily established to fill up the gap of
deficiency of the services generating from the PSBs. So Pvt.SBs were established with the
noble mission to provide the additional and extra banking facility in the economy (both in
urban, semi-urban and rural areas), to raise the modern banking habits of the people, to
provide finance to priority sectors, to provide finance to trade and industry where as earning
and profitability aspects also have been given the importance for the survival and growth of
the Pvt.SBs.
5.6.3-1 Analysis of Spread as a percentage of Total Assets and Ultimate Rank of

the Selected Pvt.SBs in India
It is the difference between the interest income and interest expenses or paid as a
percentage of total assets. This ratio is also called Net Interest Margin ratio (NIM). Net
Interest Margin or Spread is defined as the total interest earned less total interest paid.
Net Interest Margin Ratio or Spread as a percentage of Total Assets = (NIM or Spread/
Total Assets) 100.
Here interest incomes include Interest/discount on advances/bills, Income on Investments,
Interest on balances with RBI and other inter-bank funds, others. Interest costs include
Interest on deposits, Interest on RBI/inter-bank borrowings, others.
Higher this ratio indicates better is the profit earning capacity of the banks and vice
versa. This ratio also signifies the capability of asset management of the bank in generating
profit. Higher the ratio better is the efficiency of asset management in generating spread and
vice versa.
Table 5.46 shows that the NIM marked a fluctuating trend in all of the selected
Pvt.SBs throughout over the study period. Highest mean index of NIM (3.067) is observed in
the year 2011. Lowest mean index of NIM (2.346) is observed in the beginning year, i.e. in
2002. Ultimate mean index value of mean value of NIM is calculated as 2.717.
Table 5.47 highlights that on an average, the NIM in HDFC Bank is 3.974 which is
the highest as compared to other selected Pvt.SBs and therefore, HDFC Bank achieved the
first position, leaving the second position to K.Vys Bank for the second highest mean of NIM
(3.264) and the third, fourth, fifth, sixth, seventh, eighth and ninth position go to Federal
Bank, J&K Bank, SIB, AXIS Bank, ING Vys Bank, K.Bnk and Indusind Bank for the next
mean values of NIM of 3.231, 2.935, 2.683, 2.513, 2.338, 2.221 and 2.169 respectively and
197
the last position goes to ICICI Bank for the least average of NIM (1.839). So far as the CV is
concerned, rank may be classified as 1st rank for the lowest CV and then the second lowest
CV may be classified as 2nd rank and so on and so forth. So, on the basis of this ranking
principle, Federal Bank achieves the 1st rank position for having the lowest CV (8.395%),
followed by SIB, J&K Bank, HDFC Bank, K.Vys Bank, ING Vys Bank, AXIS Bank, ICICI
Bank, K.Bnk for the next lowest CV of NIM of 8.404%, 10.461%, 13.673%, 15.945%,
16.490%, 19.347%, 22.775% and 23.467% and the 10th rank goes to Indusind Bank having
the highest CV of NIM, i.e. 30.118%.
On the basis of the composite score or composite rank total of ten selected Pvt.SBs,
Federal Bank is given the first rank for the lowest composite rank of 4. Similarly HDFC Bank
is given the second rank for the second lowest composite rank total of 5. But in the cases of
J&K Bank, SIB and K.Vys Bank the composite rank total is same (i.e.7) and their ultimate
rank is computed at 4 for having the equal composite rank total of 7. In the cases of AXIS
Bank and ING Vys Bank the composite rank total is same (i.e.13) and their ultimate rank is
computed at 6.5 for having the equal composite rank total of 13. However, the composite
rank total of K.Bnk, ICICI Bank and Indusind are 17, 18 and 19 respectively, so their
ultimate ranks are categorized as 8th, 9th and 10th.
198
Table 5.46
Statement showing Ratio of Net Interest Income to Total Assets (NIM) of the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
Banks
0.96
1.35
1.62
1.94
2.00
ICICI
3.21
3.07
3.68
3.79
4.08
HDFC
1.59
1.90
2.58
2.36
2.47
AXIS
2.91
3.04
3.09
3.15
3.20
Federal
3.20
3.34
3.26
2.61
2.61
J&K
1.73
1.84
2.54
2.71
1.90
Indusind
1.75
1.94
1.97
2.49
2.99
ING Vys
1.95
1.82
2.15
2.74
2.66
K.Bnk
2.64
2.48
2.37
2.74
3.06
SIB
3.52
3.00
4.47
3.42
3.35
K.Vys
Mean
2.346
2.378
2.773
2.795
2.832
Indices
2007
2008
2009
2010
2011
Mean
SD
CV%
1.89
4.21
2.39
3.13
2.79
1.41
2.47
2.69
3.00
3.46
1.96
4.66
2.83
3.01
2.64
1.54
2.22
2.64
2.56
2.87
2.15
4.69
2.87
3.69
2.79
1.80
2.26
2.39
2.79
2.59
2.19
4.13
3.05
3.42
2.79
2.81
2.52
1.08
2.48
2.90
2.34
4.22
3.10
3.67
3.32
3.40
2.76
2.09
2.71
3.06
1.839
3.974
2.513
3.231
2.935
2.169
2.338
2.221
2.683
3.264
0.419
0.543
0.486
0.271
0.307
0.653
0.386
0.521
0.225
0.520
22.775
13.673
19.347
8.395
10.461
30.118
16.490
23.467
8.404
15.945
2.744
2.693
2.803
2.737
3.067
2.717
0.433
16.908
199
Table 5.47
Statement showing Rank, Composite Rank and Ultimate Rank of Net Interest Income to
Total Assets (NIM) of Selected Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
(1)
ICICI
1.839
HDFC
3.974
AXIS
2.513
Federal
3.231
J&K
2.935
Indusind
2.169
ING Vys
2.338
K.Bnk
2.221
SIB
2.683
K.Vys
3.264
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
10
1
6
3
4
9
7
8
5
2
22.775
13.673
19.347
8.395
10.461
30.118
16.490
23.467
8.404
15.945
8
4
7
1
3
10
6
9
2
5
18
5
13
4
7
19
13
17
7
7
9
2
6.5
1
4
10
6.5
8
4
4
5.6.3-2 Analysis of Interest Yield on Investments and Bank balances (IYIB) and
Ultimate Rank of the Selected Pvt.SBs in India
Interest yield on investment and Bank balances = (Actual interest earned on
Higher the ratio better is the interest earning ability by utilizing its average bank balances and
investment.
200
Table 5.48
Statement showing Yield on Investment and Bank balances (%) of the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
End March
Years
Banks
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Indices
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
SD
CV%
5.60
9.02
11.14
11.35
11.66
10.23
11.41
10.15
11.29
13.82
8.16
8.77
7.96
10.19
10.01
9.72
9.37
9.87
10.10
9.81
6.22
8.10
8.17
8.68
8.75
8.00
7.01
8.70
8.88
13.22
4.75
6.79
7.60
6.70
7.38
7.16
6.41
7.56
7.26
8.65
6.05
6.84
7.03
7.59
6.22
6.56
7.07
7.37
6.37
8.28
6.13
6.98
6.74
7.01
6.20
6.94
6.26
7.79
7.09
8.44
7.37
7.18
6.94
7.29
6.70
7.08
6.47
7.86
7.27
8.23
6.90
7.41
7.63
6.32
6.62
6.57
5.60
7.13
6.74
6.71
5.77
6.78
6.70
6.22
5.71
6.05
4.94
6.68
5.71
7.00
6.19
7.22
6.94
6.29
6.34
6.12
6.01
5.97
5.99
7.31
6.315
7.509
7.685
7.765
7.559
7.443
7.055
7.909
7.670
9.147
0.957
0.830
1.319
1.769
1.956
1.452
1.927
1.324
1.836
2.475
15.156
11.053
17.163
22.779
25.881
19.502
27.311
16.745
23.936
27.058
10.567
9.396
8.573
7.026
6.938
6.958
7.239
6.763
6.158
6.438
7.606
1.584
20.658
201
Table 5.49
Investment and Bank balances (%) of Selected Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
(1)
ICICI
6.315
HDFC
7.509
AXIS
7.685
Federal
7.765
J&K
7.559
Indusind
7.443
ING Vys
7.055
K.Bnk
7.909
SIB
7.670
K.Vys
9.147
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
10
7
4
3
6
8
9
2
5
1
15.156
11.053
17.163
22.779
25.881
19.502
27.311
16.745
23.936
27.058
2
1
4
6
8
5
10
3
7
9
12
8
8
9
14
13
19
5
12
10
6.5
2.5
2.5
4
9
8
10
1
6.5
5
It is seen from Table 5.48 that there is a fluctuating trend of Interest Yield on
Investment and Bank balances (IYIB) in all the selected Pvt.SBs over the study period from
2001-02 to 2010-11. The fluctuating trend in the IYIB clearly implies that all the Pvt.SBs
have been more or less able to utilize their average bank balances and investment for
generating interest income from the bank balances and advances during the study period.
Highest mean index of IYIB (10.567) is observed in the year 2002. Lowest mean index of
IYIB (6.158) is observed in the 2010. Ultimate mean index value of mean value of IYIB is
calculated as 7.606.
Table 5.49 discloses that the mean IYIB of K.Vys is maximum (9.147) by comparing
other nine selected Pvt.SBs and on the basis of the average IYIB, K.Vys Bank secures the
highest rank, the second rank position goes to K.Bnk as its mean is 7.909, leaving the third
rank to Federal Bank for the third highest mean IYIB of 7.765 and fourth rank to AXIS Bank
having mean IYIB of 7.685 and the fifth rank goes to SIB having the mean IYIB of 7.670.
Similarly sixth rank, seventh rank, eighth rank, ninth rank go to J&K Bank, HDFC Bank,
Indusind Bank, ING Vys Bank having mean IYIB of 7.559, 7.509, 7.443 and 7.055
respectively and the tenth rank goes to ICICI Bank having the least mean or lowest average
IYIB.
202
On the basis of CV of the IYIB is concerned, the first rank is achieved by the HDFC Bank
due to the lowest CV (11.053%) of IYIB as compared to the other nine selected Pvt.SBs. The
second rank goes to ICICI Bank having the second lowest CV (15.156%) of IYIB and the 3rd
rank, 4th rank, 5th rank, 6th rank, 7th rank, 8th rank and 9th rank for the next lowest CV values
of IYIB are occupied by K.Bnk (16.745%), AXIS Bank (17.163%), Indusind Bank (19.502%),
Federal Bank (22.779%), SIB (23.936%), J&K Bank (25.881%), and K.Vys Bank (27.058%)
but the last rank (i.e. 10th rank) is secured by the ING Vys Bank for the highest CV of
27.311%.
By comparing the composite score or combined rank total of the selected ten
Pvt.SBs, the first position secured by K.Bnk since its composite rank total is 5 which is the
lowest, jointly followed by HDFC Bank and AXIS Bank as the second lowest composite rank
total of 8, the 4th and 5th positions are occupied by Federal Bank and K.Vys Bank for the
composite score of 9 and 10 respectively and jointly followed by ICICI Bank and SIB for the
next lowest composite rank total of 12 and finally 8th, 9th and 10th rank positions are occupied
by the Indusind Bank, J&K Bank and ING Vys Bank respectively for the next lowest
consecutive composite scores, i.e. 13, 14 and 19.
5.6.3-3 Analysis of Interest Yield on Loans and Advances (IYLA) and Ultimate
Rank of the Selected Pvt.SBs in India
Interest yield on loans and advances = (Actual interest earned on loans & advances / Average
loans & advances) 100
Higher the ratio better is the interest earning ability on advances by utilizing its average
balances of loans and advances and vice versa.
203
Table 5.50
Statement showing Interest Yield on Loans and Advances (%) of the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
2007
Banks
2.85
11.99
10.53
8.77
8.15
9.41
ICICI
10.90
8.47
7.52
7.68
8.91
10.57
HDFC
10.61
11.75
9.28
7.84
8.06
9.13
AXIS
12.67
11.57
10.26
9.35
8.91
9.62
Federal
11.43
10.53
9.5
8.42
8.48
8.58
J&K
8.73
8.55
10.59
9.95
9.34
10.24
Indusind
10.30
9.77
8.83
8.08
8.54
8.64
ING Vys
12.46
10.93
9.73
8.38
8.73
9.38
K.Bnk
12.63
10.89
9.17
9.15
9.36
9.72
SIB
10.75
10.44
9.80
8.93
8.91
9.86
K.Vys
Mean
10.333
10.489
9.521 8.655 8.739 9.515
Indices
2008
2009
2010
2011
Mean
SD
CV%
10.72
12.62
9.83
10.81
10.44
11.94
9.74
11.01
10.46
10.43
10.06
14.96
10.57
12.42
11.53
12.56
11.13
12.28
11.40
11.50
8.70
10.77
8.59
11.55
10.65
11.63
9.70
10.58
10.98
11.22
8.26
10.56
8.43
10.76
10.68
12.14
9.65
10.75
10.63
10.77
8.943
10.295
9.410
10.792
10.024
10.567
9.437
10.424
10.438
10.261
2.466
2.301
1.267
1.275
1.193
1.449
0.917
1.372
1.116
0.881
27.573
22.348
13.470
11.816
11.900
13.710
9.720
13.163
10.688
8.585
10.800
11.840
10.437
10.263
10.059
1.424
14.297
204
Table 5.51
Loans and Advances (%) of Selected Pvt.SBs in India
Name of
PSBs
Mean
Rank
based on
Mean
(1)
ICICI
8.943
HDFC
10.295
AXIS
9.410
Federal
10.792
J&K
10.024
Indusind
10.567
ING Vys
9.437
K.Bnk
10.424
SIB
10.438
K.Vys
10.261
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
10
5
9
1
7
2
8
4
3
6
27.573
22.348
13.470
11.816
11.900
13.710
9.720
13.163
10.688
8.585
10
9
7
4
5
8
2
6
3
1
20
14
16
5
12
10
10
10
6
7
10
8
9
1
7
5
5
5
2
3
It is found from Table 5.50 that the IYLA of all selected Pvt.SBs marked an overall
fluctuating trend throughout the study period. This fluctuating trend in the IYLA clearly
implies that all the Pvt.SBs have been more or less able to utilize their average loans and
advances for generating interest income from the loan amount during the study period from
2001-02 to 2010-11. Highest mean index of IYLA (11.840) is observed in the year 2009.
Lowest mean index of IYLA (8.655) is observed in the 2005. Ultimate mean index value of
mean value of IYLA is calculated as 10.059.
Considering the average values of IYLA, it is highlighted from Table 5.51 that the
highest average value of this ratio is obtained by Federal Bank and it is computed at 10.792
and for the highest average value Federal Bank occupies the 1st rank position and is followed
by Indusind Bank, SIB, K.Bnk, HDFC Bank, K.Vys Bank, J&K Bank, ING Vys Bank, AXIS
Bank and ICICI Bank for their next consecutive average values of IYLA. So far as the CV of
IYLA is concerned, it is observed from Table 5.51 that in case of K.Vys Bank, the CV of
K.Vys Bank is lowest which is computed at 8.585%. Accordingly, 1st rank position is
obtained by K.Vys Bank leaving the second position to ING Vys Bank for having the second
lowest CV of 9.720%. The rest eight ranks are secured by SIB, Federal Bank, J&K Bank,
K.Bnk, AXIS Bank, Indusind Bank, HDFC Bank and ICICI Bank respectively.
205
On the basis of the composite rank total of all selected Pvt.SBs, it is seen that the
ultimate highest rank is occupied by Federal Bank for having the composite rank total of 5
and is followed by SIB and K.Vys Bank in that order. It is also seen that Indusind Bank, ING
Vys Bank and K.Bnk have the same combined rank total of 10 and therefore, their ultimate
ranks are computed at 5 each. The ultimate rank of J&K Bank, HDFC Bank, AXIS Bank and
ICICI Bank is computed at 7, 8, 9 and 10 respectively for having the composite rank total of
12, 14, 16 and 20 respectively.
5.6.3-4 Analysis of Return on Assets (ROA) and Ultimate Rank of the Selected
Pvt.SBs in India
Return on Asset ratio is the net income or net profit after tax generated by the bank on its
total assets.
ROA = [Net Profit (loss)/Average Total Assets] 100
Net income or profit (loss) is calculated by operating profit less provisions and contingencies.
Operating profit = (interest earned + other income) (interest expended + operating
expenses). Provisions and contingencies include taxation, NPA, investment and others. Other
incomes include commission, exchange and brokerage, Net Profit (loss) on sale of
investments, Net Profit (loss) on revaluation of investments, Net Profit (loss) on exchange
transaction, Net Profit (loss) on sale of land, building & other assets, and miscellaneous
income.
Higher the ratio better is the efficiency of asset management in utilizing its total
assets in generating profits.
206
Table 5.52
Statement showing Return on Assets (ROA) of the Selected Pvt.SBs in India for the period 2001-02 to 2010-11
End March
Years
2002
2003
2004
2005
2006
Banks
0.67
1.13
1.31
1.48
1.30
ICICI
1.48
1.52
1.45
1.47
1.38
HDFC
0.93
1.17
1.42
1.21
1.18
AXIS
0.53
0.86
0.90
0.62
1.28
Federal
1.77
2.01
1.92
0.47
0.67
J&K
0.50
0.91
1.74
1.50
0.22
Indusind
0.64
0.74
0.45
-0.25
0.05
ING Vys
1.26
1.29
1.34
1.27
1.28
K.Bnk
1.07
1.25
1.00
0.09
0.53
SIB
2.42
2.25
2.43
1.45
1.65
K.Vys
Mean
1.127
1.313
1.396
0.931
0.954
Indices
2007
2008
2009
2010
2011
Mean
SD
CV%
1.09
1.33
1.10
1.38
0.96
0.34
0.52
1.15
0.88
1.53
1.12
1.32
1.24
1.34
1.09
0.34
0.74
1.37
1.01
1.63
0.98
1.28
1.44
1.48
1.09
0.58
0.70
1.25
1.09
1.49
1.13
1.53
1.67
1.15
1.20
1.14
0.80
0.67
1.07
1.76
1.35
1.58
1.68
1.34
1.22
1.46
0.89
0.72
1.05
1.71
1.156
1.434
1.304
1.088
1.240
0.873
0.528
1.160
0.904
1.832
0.226
0.101
0.244
0.337
0.514
0.556
0.362
0.252
0.342
0.384
19.583
7.052
18.698
31.008
41.466
63.681
68.490
21.729
37.860
20.953
1.028
1.120
1.138
1.212
1.300
1.152
0.332
33.052
207
Table 5.53
Statement showing Rank, Composite Rank and Ultimate Rank of Return on Assets
(ROA) of Selected Pvt.SBs in India
Name of
Pvt.SBs
Mean
Rank
based on
Mean
(1)
ICICI
1.156
HDFC
1.434
AXIS
1.304
Federal
1.088
J&K
1.240
Indusind
0.873
ING Vys
0.528
K.Bnk
1.160
SIB
0.904
K.Vys
1.832
CV%
Rank
based on
CV%
Composite
Rank
Ultimate
Rank
(2)
(3)
(4)
(5)=(2)+(4)
(6)
6
2
3
7
4
9
10
5
8
1
19.583
7.052
18.698
31.008
41.466
63.681
68.490
21.729
37.860
20.953
3
1
2
6
8
9
10
5
7
4
9
3
5
13
12
18
20
10
15
5
4
1
2.5
7
6
9
10
5
8
2.5
It is highlighted from Table 5.52 that the ROA of all selected Pvt.SBs registered an
overall mixed trend over the study period from 2001-02 to 2010-11. Highest mean index of
ROA (1.396) is observed in the year 2004. Lowest mean index of ROA (0.931) is observed in
the 2005. Ultimate mean index value of mean value of ROA is calculated as 1.152.
Table 5.53 exhibits that the highest mean value of ROA (1.832) is achieved by
K.Vys Bank and thus it secures the 1st rank position. Accordingly, the 2nd rank is given to
HDFC Bank for having the second highest mean value (1.434) of this ratio. The remaining
eight ranks for the next eight highest mean values of ROA occupied by AXIS Bank, J&K
Bank, K.Bnk, ICICI Bank, Federal Bank, SIB, Indusind Bank and ING Vys Bank
respectively. On the basis of the CV of ROA it is found from Table 5.53 that in case of
HDFC Bank, the CV of this ratio is lowest (7.052%) and thus HDFC Bank occupies the 1st
rank position. The rest nine ranks are given to AXIS Bank, ICICI Bank, K.Vys Bank, K.Bnk,
Federal Bank, SIB, J&K Bank, Indusind Bank and ING Vys Bank respectively for their
respective lowest CV values of ROA. Comparing the composite rank total of all ten selected
Pvt.SBs it is observed from Table 5.53 that HDFC Bank occupies the lowest composite rank
total (i.e. 3) and accordingly 1st rank is assigned to HDFC Bank. On the other hand both
AXIS Bank and K.Vys Bank have the same composite rank total of 5 and their ultimate ranks
are computed at 2.5 each. The 4th, 5th, 6th, 7th, 8th, 9th and 10th ultimate ranks are obtained by
208
ICICI Bank, K.Bnk, J&K Bank, Federal Bank, SIB, Indusind Bank and ING Vys Bank for
their composite rank total of 9, 10, 12, 13, 15, 18 and 20 respectively.
Table 5.54 highlights the average earnings and profitability indices (EPI) of the
selected Pvt.SBs in India as a whole based on their mean indices of the ratios in regard to Net
Interest Margin Ratio (NIM), Interest Yield on Investments and Bank balances (IYIB),
Interest Yield on Loans and Advances (IYLA) and Return on Assets (ROA) over the study
period 2001-02 to 2010-11. This table also shows that average EPI of the selected Pvt.SBs in
India as a whole registered a fluctuating trend throughout the study period and second half of
the study period highlights the better performance as compared to the first half of the study
period. The highest average EPI (6.093) is observed in the starting year 2001-02 and the
lowest average EPI (4.852) is noticed in the year 2004-05. The overall average mean scores
of EPI are 5.383.
209
Table 5.54
Statement showing Average Earnings and Profitability Indices of selected Pvt.SBs in India as a whole based on Selected Earnings and
Profitability Ratios during the period 2001-02 to 2010-11
End March
Ratios (%)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mean
Score
NIM
2.346
2.378
2.773
2.795
2.832
2.744
2.693
2.803
2.737
3.067
2.717
IYIB
10.567
9.396
8.573
7.026
6.938
6.958
7.239
6.7628
6.15802
6.438
7.606
IYLA
10.333
10.489
9.521
8.655
8.739
9.515
10.800
11.840
10.437
10.263
10.059
ROA
1.127
1.313
1.396
0.931
0.954
1.028
1.120
1.138
1.212
1.300
1.152
6.093
5.894
5.566
4.852
4.866
5.061
5.463
5.636
5.136
5.267
5.383
Average
Earnings and
Profitability
Indices (EPI)
[Source: Table 5.46, 5.48, 5.50 and 5.52]

Note: NIM = Net Interest Margin Ratio, IYIB = Interest Yield on Investments and Bank balances, IYLA = Interest Yield on Loans and
Advances, ROA = Return on Assets.
210
5.7 Comprehensive Ranking for the Performance of the selected Pvt.SBs in India
In order to determine the overall performance based on cost control efficiency,
productivity efficiency and earnings and profitability efficiency of the ten selected Pvt.SBs, a
comprehensive ranking method has been applied or used in this study. For this purpose, a
process of Final Ranking has been applied to arrive at comprehensive measure of
performance, in which the ultimate ranks of selected eleven relevant ratios namely, Interest
Cost of Deposit Ratio (CDR), Interest Cost of Borrowings (COB), Intermediation Cost to
Total Assets (IC/TA), Burden to Total Assets (Bur/TA), Output- Input ratio (O/I), Business
per Employee (BPE), Profit per Employee (PPE), Net Interest Margin Ratio (NIM), Interest
Yield on Investments and Bank balances (IYIB), Interest Yield on Loans and Advances
(IYLA), Return on Assets (ROA) have been arrived at by aggregating the ultimate ranks of
each of the above ratios by the selected Pvt.SBs. The Final Ranking has been based on the
aggregate of each selected Pvt.SBs separate individual ultimate ranking under the above
eleven ratios. The Process of computing Final Ranking has been followed on the principle
that lowers the point score or lowers the aggregate of ultimate ranks the better is the
performance position and accordingly, the highest rank is accorded thereto. In case a tie
arises, then Final Rank has been computed by the average of their original position as per
aggregate of the ultimate ranks of each selected bank. The Final Ranking has been shown in
Table 5.55.
It is highlighted from Table 5.55 that AXIS Bank, Federal Bank and K.Vys Bank
have jointly achieved the highest top position for the lowest aggregate of ultimate ranks (i.e.
47.5 each). The 4th, 5th, 6th, 7th, 8th, 9th and 10th final ranks for the last seven aggregate values
of the ultimate ranks (i.e. 49.5, 55.5, 57.5, 63.0, 75.0, 76.5 and 85.5 respectively) are
occupied by HDFC Bank, J&K Bank, ICICI Bank, K.Bnk, Indusind Bank, SIB and ING Vys
Bank respectively.
211
Table 5.55
Statement showing Final Rank (based on the aggregate of the Ultimate Ranks) of Selected Pvt.SBs in India during the study period from
2001-02 to 2010-11
Name
of
Banks
Ratios of Cost Analysis

CDR
ICOB
IC/TA
Ultimate Ranks Based on

Productivity Ratios
Bur/TA
O/I
BPE
PPE
ICICI
4
4
9
2
4.5
3.5
1
HDFC
4
6
10
7.5
2
3.5
3
AXIS
6.5
2.5
6.5
2
6.5
1
2
Federal
8.5
1
3
5.5
1
7.5
8
J&K
1
7
2
4
4.5
5
6
Indusind
2
8
6.5
7.5
10
2
7
ING Vys
8.5
5
5
9
9
7.5
10
K.Bnk
10
9
1
2
8
9
5
SIB
6.5
10
4
10
6.5
10
9
K.Vys
4
2.5
8
5.5
3
6
4
[Source: Table 5.31, 5.33, 5.35, 5.37, 5.40, 5.42, 5.44, 5.47, 5.49, 5.51 and 5.53]
212
Profitability Ratios
NIM
IYIB
IYLA
ROA
9
2
6.5
1
4
10
6.5
8
4
4
6.5
2.5
2.5
4
9
8
10
1
6.5
5
10
8
9
1
7
5
5
5
2
3
4
1
2.5
7
6
9
10
5
8
2.5
Total
of
Ultimate
Ranks
57.5
49.5
47.5
47.5
55.5
75.0
85.5
63.0
76.5
47.5
Final
Rank
6
4
2
2
5
8
10
7
9
2
Chart 5.1 clearly shows the Final Rank (based on aggregate of ultimate rank) of the selected
Pvt.SBs in India.
Chart 5.1
Final Ranks of Selected Pvt.SBs based on total of Ultimate Ranks
90.00
85.50
80.00
76.50
75.00
70.00
63.00
60.00 57.50
55.50
49.50 47.50 47.50
50.00
47.50
40.00
30.00
20.00
10.00
Source: Table 5.55
213
K.Vys
SIB
K.Bnk
ING Vys
Indusind
J&K
Federal
AXIS
HDFC
ICICI
0.00
CHAPTER- 6
COMPARATIVE PERFORMANCE OF SELECTED PUBLIC SECTOR AND
PRIVATE SECTOR BANKS USING STATISTICAL TOOLS
In this section an attempt has been taken to find out the overall strengths and weaknesses of
the selected public and private sector banks in terms of their financial performance through
different statistical tools and techniques.
6.1 Correlation Analysis
A study has been conducted to analyze the degree of association or relationship
between the average values of earnings and profitability efficiency indices (i.e. EPI) and
other selected average efficiency measures (i.e. CEI, PI, NPAI and SRI) of the different
selected public and private sector banks individually and as a whole during the study period
from 2001-02 to 2010-11, for which correlation analysis has been applied taking into account
their magnitudes by Pearsons simple correlation coefficient, for ranking of their magnitudes
by Spearmans rank correlation coefficient and for highlighting the nature of their associated
changes Kendalls correlation coefficient. In order to examine whether the computed values
of correlation coefficients between the earnings and profitability indices and other efficiency
parameter indices are statistically significant or not, t-test has been used. Table 6.1(A) to
Table 6.5(B) highlights pictures of EPI, CEI, PI, NPAI and SRI of selected PSBs and Pvt.SBs
under study over the period from 2001-02 to 2010-11 and also shows the bank wise average
performance in terms of the different indices so computed.
214
Table 6.1(A)
Analysis of Earnings and Profitability Indices (EPI) of the selected PSBs in India for the study period from 2001-02 to 2010-11
PSBs
UBI
CBI
SB
OBC
UCO
Total
Average
5.88
6.21
6.12
5.63
6.28
6.65
2001-02
5.48
6.05
5.70
5.33
5.94
6.17
2002-03
5.05
5.55
5.22
4.87
5.50
5.61
2003-04
4.95
5.12
4.84
4.41
5.04
5.23
2004-05
4.89
5.24
4.85
4.49
4.86
4.96
2005-06
4.67
5.09
4.79
4.67
5.05
5.11
2006-07
5.01
5.21
4.78
5.02
5.15
5.49
2007-08
4.97
5.35
4.86
5.28
5.37
5.43
2008-09
4.54
4.92
4.47
4.72
4.97
4.93
2009-10
4.72
5.30
4.83
4.54
5.13
4.98
2010-11
5.016
5.404
5.046
4.896
5.328
5.456
Average
6.31
6.36
5.82
5.42
5.08
4.95
4.85
4.69
4.58
5.04
5.309
6.71
6.19
5.60
5.26
4.83
5.32
5.16
5.00
4.69
4.89
5.365
6.83
6.62
6.23
5.70
5.36
5.25
5.34
5.40
5.21
5.24
5.717
6.03
5.75
5.38
4.91
4.79
4.67
4.71
4.69
4.53
4.71
5.018
62.655
59.590
54.840
50.870
49.338
49.568
50.700
51.053
47.576
49.368
52.556
6.266
5.959
5.484
5.087
4.934
4.957
5.070
5.105
4.758
4.937
5.256
Years
SBI
PNB
BOB
BOI
CB
215
Table 6.1(B)
Analysis of Earnings and Profitability Indices (EPI) of the selected Pvt.SBs in India for the study period from 2001-02 to 2010-11
Pvt.SBs
Years
ICICI
HDFC
AXIS
Federal
J&K
Indusind
2.52
6.15
6.07
6.87
7.02
5.30
2001-02
5.66
5.46
5.70
6.42
6.47
5.26
2002-03
4.92
5.19
5.36
5.73
5.86
5.72
2003-04
4.24
4.93
4.75
4.96
4.72
5.33
2004-05
4.38
5.30
4.69
5.25
4.50
4.51
2005-06
4.63
5.77
4.84
5.29
4.63
4.73
2006-07
5.29
6.45
5.21
5.61
5.22
5.23
2007-08
5.02
7.08
5.63
5.98
5.51
5.38
2008-09
4.45
5.80
5.00
5.59
5.09
5.41
2009-10
4.54
5.90
5.04
5.52
5.39
5.78
2010-11
4.563
5.803
5.228
5.719
5.439
5.263
Average
216
ING Vys
K.Bnk
SIB
K.Vys
Total
Average
6.03
5.46
4.57
4.18
4.66
4.47
4.79
4.92
4.49
4.83
4.839
6.46
5.98
5.48
4.99
5.01
5.25
5.72
5.76
4.75
4.88
5.428
6.91
6.18
5.36
4.81
4.83
5.17
5.33
5.50
5.06
5.10
5.424
7.63
6.38
7.48
5.61
5.55
5.82
5.79
5.57
5.72
5.71
6.126
60.933
58.940
55.658
48.518
48.658
50.613
54.630
56.358
51.359
52.670
53.834
6.093
5.894
5.566
4.852
4.866
5.061
5.463
5.636
5.136
5.267
5.383
Table 6.2(A)
Analysis of Cost Efficiency Indices (CEI) of the selected PSBs in India for the study period from 2001-02 to 2010-11
PSBs
UBI
CBI
SB
OBC
UCO
Total
Average
3.58
4.89
4.67
5.32
2.76
5.18
2001-02
3.01
2.74
4.63
4.15
2.47
3.00
2002-03
2.53
2.30
3.42
3.52
2.57
2.10
2003-04
2.63
2.68
2.39
3.31
2.84
2.23
2004-05
3.06
2.27
2.97
3.28
21.83
2.82
2005-06
2.97
2.25
3.19
3.97
4.87
3.56
2006-07
3.64
2.45
2.97
3.84
4.88
3.71
2007-08
2.98
2.47
2.75
2.99
3.33
3.26
2008-09
2.37
1.94
1.95
2.49
2.27
2.09
2009-10
2.48
2.16
2.08
2.67
2.60
2.21
2010-11
2.924
2.613
3.101
3.552
5.039
3.015
Average
3.20
3.14
3.15
2.64
3.60
3.15
2.87
5.78
2.10
2.54
3.215
3.60
3.49
2.66
2.70
2.54
2.24
2.25
2.18
2.03
2.19
2.586
2.97
2.33
1.95
2.41
3.09
2.80
2.92
2.80
2.09
2.02
2.538
6.03
3.42
3.14
3.04
3.29
2.97
3.38
3.22
2.76
2.58
3.383
42.178
32.365
27.318
26.863
48.730
31.955
32.910
31.757
22.071
23.525
31.967
4.218
3.237
2.732
2.686
4.873
3.196
3.291
3.176
2.207
2.353
3.197
Years
SBI
PNB
BOB
BOI
CB
217
Table 6.2(B)
Analysis of Cost Efficiency Indices (CEI) of the selected Pvt.SBs in India for the study period from 2001-02 to 2010-11
Pvt.SBs
Years
ICICI
HDFC
AXIS
Federal
J&K
Indusind
1.75
4.38
3.10
3.29
5.77
2.67
2001-02
1.86
3.24
2.83
2.78
5.09
1.96
2002-03
1.93
3.33
2.36
2.37
3.15
3.28
2003-04
1.71
2.81
1.89
1.99
2.86
3.53
2004-05
2.22
3.81
2.27
2.11
2.19
4.17
2005-06
2.74
4.51
2.91
2.38
3.66
5.92
2006-07
3.09
4.12
2.78
2.87
3.78
4.18
2007-08
2.75
6.09
2.74
2.68
4.13
4.08
2008-09
1.98
3.79
1.86
2.09
3.75
2.64
2009-10
1.91
4.51
1.90
2.12
2.93
2.71
2010-11
2.193
4.059
2.464
2.467
3.729
3.512
Average
218
ING Vys
K.Bnk
SIB
K.Vys
Total
Average
4.28
3.00
2.41
2.81
3.36
2.94
3.15
2.99
2.00
2.48
2.942
3.77
3.80
2.90
1.93
2.11
2.65
3.50
5.85
2.60
2.50
3.160
3.60
2.29
2.08
2.50
7.94
3.42
7.89
3.99
2.40
2.83
3.894
3.19
2.93
3.97
4.04
3.13
3.36
3.03
4.46
3.11
3.29
3.449
35.790
29.768
27.768
26.068
33.295
34.463
38.383
39.762
26.217
27.175
31.869
3.579
2.977
2.777
2.607
3.330
3.446
3.838
3.976
2.622
2.718
3.187
Table 6.3(A)
Analysis of Productivity Indices (PI) of the selected PSBs in India for the study period from 2001-02 to 2010-11
PSBs
Years
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Average
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Total
Average
58.46
64.58
71.22
82.18
100.92
120.22
153.67
187.35
213.91
236.62
128.914
56.66
66.14
77.16
93.53
111.59
137.16
169.84
220.64
272.22
342.52
154.746
75.13
80.30
85.49
106.38
133.15
186.34
238.41
307.11
330.11
448.46
199.088
73.72
82.10
90.16
107.35
127.97
167.34
219.43
280.63
338.90
430.49
191.810
72.60
84.56
100.67
118.33
148.65
184.43
204.76
262.13
330.41
413.08
191.963
72.40
84.40
96.88
115.76
146.82
171.26
235.11
233.86
287.26
350.60
179.435
50.11
56.61
61.48
69.73
80.80
102.14
134.57
187.71
238.75
280.11
126.199
52.38
60.83
81.10
94.35
117.33
164.40
196.80
251.83
250.41
293.57
156.299
107.25
115.95
140.91
173.44
192.32
249.85
310.47
383.27
446.61
476.62
259.669
45.28
66.41
84.11
107.90
129.68
155.50
194.30
245.18
302.21
358.16
168.873
663.989
761.868
889.181
1068.952
1289.222
1638.641
2057.364
2559.701
3010.787
3630.243
1756.995
66.399
76.187
88.918
106.895
128.922
163.864
205.736
255.970
301.079
363.024
175.699
[Source: Collected and compiled from Table 4.39, 4.41 and 4.43]
219
Table 6.3(B)
Analysis of Productivity Indices (PI) of the selected Pvt.SBs in India for the study period from 2001-02 to 2010-11
Pvt.SBs
Years
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Average
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Total
164.36
377.42
341.08
297.43
305.44
345.75
339.75
388.77
258.47
248.79
306.727
263.04
292.16
292.30
272.12
255.65
204.86
170.80
150.51
199.15
220.61
232.120
301.71
311.83
272.52
343.45
343.36
344.30
375.58
357.12
374.84
460.49
348.519
67.11
91.01
110.18
122.93
145.31
183.28
215.56
252.80
273.48
310.57
177.223
89.80
97.83
117.51
146.10
173.44
196.79
200.77
168.77
246.46
288.46
172.593
532.06
431.68
365.48
312.44
294.31
347.83
355.46
280.21
281.75
284.52
348.574
66.79
81.64
108.92
131.76
142.43
162.97
183.71
203.53
209.65
226.85
151.826
83.59
93.06
108.25
128.57
161.24
176.44
198.43
218.42
243.71
258.72
167.044
73.66
89.46
103.25
117.84
141.53
170.66
201.75
216.75
259.08
308.08
168.207
74.72
97.95
112.36
130.71
148.35
165.08
203.71
215.10
266.12
315.14
172.925
1716.85
1964.05
1931.84
2003.35
2111.06
2297.98
2445.52
2451.99
2612.70
2922.24
2245.76
[Source: Collected and compiled from Table 5.39, 5.41 and 5.43]
220
Average
171.685
196.405
193.184
200.335
211.106
229.798
244.552
245.199
261.270
292.224
224.576
Table 6.4(A)
Analysis of NPA Indices (NPAI) of the selected PSBs in India for the study period from 2001-02 to 2010-11
PSBs
UBI
CBI
SB
OBC
UCO
Total
Average
6.22
6.38
6.86
6.09
3.75
6.51
2001-02
4.88
5.95
5.80
5.56
3.62
5.35
2002-03
3.99
3.97
5.23
4.87
3.49
4.08
2003-04
3.17
2.36
3.32
3.36
2.24
3.02
2004-05
2.23
1.70
1.86
2.09
1.35
2.20
2005-06
1.80
1.70
1.23
1.37
0.98
1.59
2006-07
1.92
1.37
0.93
0.91
0.86
0.96
2007-08
1.82
0.80
0.65
0.89
1.09
0.93
2008-09
1.92
0.92
0.70
1.70
1.06
1.23
2009-10
2.02
1.09
0.71
1.27
1.05
1.47
2010-11
2.996
2.623
2.727
2.810
1.948
2.734
Average
8.37
7.29
6.51
4.40
3.66
2.60
1.86
1.56
1.19
1.01
3.845
5.82
4.80
3.95
2.63
1.99
1.49
1.49
1.11
1.36
1.43
2.606
3.57
3.19
3.03
4.12
2.67
1.51
1.34
0.88
1.06
1.19
2.254
5.63
4.71
3.98
3.01
2.17
2.18
2.01
1.38
1.28
2.02
2.836
59.189
51.140
43.086
31.623
21.908
16.445
13.630
11.103
12.403
13.248
27.377
5.919
5.114
4.309
3.162
2.191
1.645
1.363
1.110
1.240
1.325
2.738
Years
SBI
PNB
BOB
BOI
CB
221
Table 6.4(B)
Analysis of NPA Indices (NPAI) of the selected Pvt.SBs in India for the study period from 2001-02 to 2010-11
Pvt.SBs
Years
ICICI
HDFC
AXIS
Federal
J&K
Indusind
6.98
1.21
2.82
8.66
2.00
5.44
2001-02
5.50
0.91
1.89
5.07
1.75
3.55
2002-03
2.67
0.73
1.46
4.03
1.64
2.29
2003-04
1.81
0.73
1.20
3.77
1.53
2.47
2004-05
0.89
0.70
0.96
2.25
1.35
1.90
2005-06
1.23
0.69
0.70
1.38
1.62
2.13
2006-07
1.92
0.70
0.48
1.07
1.44
2.07
2007-08
2.56
1.02
0.58
1.16
1.57
1.47
2008-09
2.75
0.69
0.66
1.43
0.88
0.69
2009-10
2.20
0.49
0.56
1.70
0.83
0.51
2010-11
2.851
0.787
1.130
3.053
1.461
2.252
Average
222
ING Vys
K.Bnk
SIB
K.Vys
Total
Average
3.26
2.66
2.01
1.70
1.42
0.75
0.61
0.94
0.95
0.42
1.472
6.06
7.51
6.41
3.86
2.47
2.09
1.75
1.79
1.96
2.19
3.610
6.35
5.73
4.49
4.16
2.78
1.99
0.86
1.32
0.70
0.57
2.896
5.74
4.56
3.23
2.73
1.95
1.27
0.92
0.90
0.80
0.55
2.265
48.531
39.134
28.971
23.956
16.675
13.853
11.818
13.307
11.504
10.031
21.778
4.853
3.913
2.897
2.396
1.667
1.385
1.182
1.331
1.150
1.003
2.178
Table 6.5(A)
Analysis of Social Responsibility Indices (SRI) of the selected PSBs in India for the study period from 2001-02 to 2010-11
PSBs
SBI
PNB
BOB
BOI
CB
Years
20.66
28.19
19.00
20.08
21.22
2001-02
20.47
28.38
20.65
20.52
22.15
2002-03
21.99
30.53
21.90
21.86
23.96
2003-04
23.03
35.36
23.05
23.09
24.44
2004-05
24.70
32.62
23.87
23.84
26.35
2005-06
24.14
27.98
22.30
22.59
24.90
2006-07
21.06
26.91
20.32
19.93
24.64
2007-08
19.62
22.50
19.93
18.13
21.47
2008-09
20.92
24.09
19.20
18.34
21.82
2009-10
22.75
23.53
17.91
20.01
21.74
2010-11
21.932
28.006
20.812
20.837
23.267
Average
[Source: Collected and compiled from Table 4.26 and 4.27]
UBI
CBI
SB
OBC
UCO
Total
Average
24.08
25.42
26.43
28.28
25.73
25.35
18.16
20.87
21.96
23.05
23.932
29.91
31.43
31.58
32.82
32.52
28.32
23.35
21.22
21.67
24.61
27.741
26.69
28.07
27.57
29.19
29.67
23.12
21.35
21.55
23.16
22.24
25.259
23.37
23.76
23.58
23.58
22.92
21.06
19.75
19.39
21.07
22.25
22.070
26.52
25.35
24.85
28.68
26.63
24.55
22.66
21.10
19.81
23.54
24.366
239.700
246.170
254.235
271.500
268.825
244.285
218.110
205.760
212.000
221.605
238.219
23.970
24.617
25.424
27.150
26.883
24.429
21.811
20.576
21.200
22.161
23.822
223
Table 6.5(B)
Analysis of Social Responsibility Indices (SRI) of the selected Pvt.SBs in India for the study period from 2001-02 to 2010-11
Pvt.SBs
Years
ICICI
HDFC
AXIS
Federal
J&K
4.81
8.06
9.66
20.75
14.73
2001-02
10.00
9.10
13.69
20.88
14.02
2002-03
13.99
10.41
15.97
21.64
15.21
2003-04
13.87
14.68
17.89
22.70
16.33
2004-05
17.49
19.84
20.64
24.06
15.00
2005-06
16.91
23.60
21.38
24.82
14.97
2006-07
15.87
18.99
17.70
22.92
17.12
2007-08
16.76
20.76
17.70
23.04
21.86
2008-09
17.80
23.23
18.38
22.63
23.99
2009-10
16.66
22.97
18.58
21.83
26.04
2010-11
22.525
17.925
Average 14.413 17.161 17.157
[Source: Collected and compiled from Table 5.26 and 5.27]
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Total
Average
9.64
10.76
17.99
13.92
16.39
18.65
22.36
21.04
19.85
22.33
17.291
23.35
24.32
21.81
23.50
23.45
24.85
24.58
25.40
26.09
26.09
24.342
22.00
23.49
24.67
22.56
22.69
20.52
23.33
22.70
22.59
24.46
22.900
19.81
19.53
22.52
23.24
26.16
24.69
22.23
22.78
20.89
20.61
22.245
22.67
21.27
24.22
24.94
26.90
23.67
20.80
21.75
20.62
20.42
22.724
155.470
167.035
188.395
193.610
212.585
214.045
205.875
213.803
216.060
219.955
198.683
15.547
16.704
18.840
19.361
21.259
21.405
20.588
21.380
21.606
21.996
19.868
224
Table 6.6(A) and Table 6.6(B) show the correlation coefficients between the
efficiency measure of earnings and profitability (EPI) and the measures of the other
efficiency indicators (PI, CEI, NPAI and SRI) indicating their nature of relationship or their
nature of association of the ten selected public sector banks (PSBs) and ten selected private
sector banks (Pvt.SBs) in India during the study period 2001-02 to 2010-11.
The measurement of correlation coefficients between EPI & PI of the ten selected
PSBs in India during the study period from 2001-02 to 2010-11 have been shown in Table
6.6(A). A careful scrutiny of Table 6.6(A) reveals that out of 30 measures of correlation
coefficients computed under three methods (Pearson, Spearman and Kendall) for the ten
selected PSBs in India, all 30 correlation coefficients are found to be negative. Out of the 30
negative correlation coefficients, 12 coefficients are found statistically significant at 1% level
and all are highly negatively correlated (highest negative value of 0.903** occupied by OBC
and the lowest negative value of 0.644** jointly occupied by SBI and BOB) and 8 coefficients
are found statistically significant at 5% level and are moderately negatively correlated
(highest negative value of 0.758* is occupied by SBI and lowest negative value of 0.556* is
occupied by UBI) and the remaining 10 negative coefficients are found to be statistically
insignificant (highest and lowest negative values of 0.617 and 0.244 are occupied by BOB
and BOI respectively). The study suggests that in the cases of all the selected PSBs in India,
the efficiency of earnings and profitability (EPI) is not at all influenced by the efficiency of
productive management (PI) during the study period, rather in few cases the productivity
efficiency of management made highly negative influence on the profitability efficiency of
the selected PSBs during the period under study.
It is observed from the Table 6.6(A) that out of 30 correlation coefficients between
EPI and PI of the ten selected Pvt.SBs in India, only 4 coefficients are found positive. Out of
the 4 positive coefficients, 2 coefficients are found to be statistically significant at 1% level
(highest coefficient of 0.882**under Pearsons method and lowest coefficient of 0.782**under
Spearmans method) and 1 coefficient (i.e. 0.556*) is statistically significant at 5% level or
moderately positively correlated in case of ICICI Bank. Remaining 1 positive coefficient is
proved to be statistically insignificant and considered as a low degree of correlation
(coefficient value of 0.007 is occupied by Indusind Bank). Out of the 30 measures of
correlation coefficients, 26 coefficients are found to be negative of which 2 coefficients are
found statistically significant at 5% level (negative value of 0.600* and 0.636* are occupied
by HDFC Bank and K.Bnk respectively) while another 2 coefficients are found to be
statistically significant at 1% level (both of 0.820**and 0.770** occupied by HDFC Bank)
225
while the remaining 24 negative coefficients are found to be statistically insignificant. The
study suggests that except ICICI Bank, all of the selected Pvt.SBs are least influenced by the
management of productivity in order to increase the capacity of earnings and profitability
during the period under study while in case of Indusind Bank, the influence of productivity
management (PI) on the overall profitability has not been so satisfactory despite having
positive Pearson correlation coefficient (i.e. 0.007) during the study period.
From Table 6.6(A), it is also observed that in cases of selected PSBs in India, all the
25 correlation coefficients out of 30 measures of correlation coefficients between EPI and
CEI (cost efficiency indices) computed under three methods are positive. Of the 25 positive
coefficients, 5 coefficients are found to be statistically significant at 1% level and all are
highly positively correlated (both highest and lowest value of 0.924**and 0.644**occupied by
SB under Pearsons and Kendalls method respectively), another 9 measures are found to be
statistically significant at 5% level and remaining 11 measures of correlation are found to be
statistically insignificant with low values of positive correlations (highest and lowest values
are 0.620 and 0.090 respectively occupied by SBI and OBC). In case of CB, all 3 measures of
correlation are found to be negative and statistically insignificant. But in case of CBI, only 1
measure of correlation is found negative i.e. (-) 0.119 under Pearsons method and is
statistically insignificant. Another 1 measure of correlation in case of OBC is found to be
negative i.e. (-) 0.033 under Pearsons method and is statistically insignificant. The study
reveals that there exists a considerable impact of the cost control management (CEI) to
influence the earnings and profitability (EPI) efficiency made by the selected nine PSBs
(other than CB) during the study period while in case of CB, there exists a very low degree
and negative association between EPI and CEI.
Table 6.6(A) gives the detailed information about the correlation coefficient between
EPI & CEI under the three methods for the ten selected Pvt.SBs in India. From the Table
6.6(A) it is observed that out of 30 measures of correlation coefficients under the three
methods, 21 measures are positive of which only 9 coefficients are statistically significant at
1% level (highest value of 0.895**occupied by HDFC Bank under Pearsons measure and
lowest value of 0.644**jointly occupied by Federal Bank, J&K Bank and K.Bnk under
Kendalls measure) and all are very highly positively correlated, 5 measures are found to be
statistically significant at 5% level and are moderately positively correlated (highest value of
0.733* occupied by J&K Bank under Spearmans measure and lowest value of 0.584*
occupied by HDFC Bank under Kendalls measure) and the remaining 7 coefficients are
found statistically insignificant with low values of positive correlations (highest value of
226
0.588 occupied by AXIS Bank under Spearmas method and lowest value of 0.378 occupied
by ICICI Bank under Kendalls method). Out of 30 correlation coefficients between EPI &
CEI, 9 coefficients are found to be negative and all of them are statistically insignificant
(highest insignificant negative value of 0.605 occupied by Indusind Bank and lowest
insignificant negative value of 0.022 occupied by SIB under Kendalls method). The study
concluded that in the case of HDFC Bank, Federal Bank, J&K Bank and K.Bnk; there exists
a highly significant and favorable influence of the cost control management (CEI) on the
earnings and profitability while AXIS Bank and ING Vys Bank are least influenced by the
management of cost control in order to increase the capacity of profitability. The study also
reveals that the management of cost control in case of ICICI Bank, Indusind Bank, SIB and
K.Vys Bank did not have significant influence on the earnings & profitability during the
period under study.
The measurement of correlation coefficients between EPI & NPAI of the ten selected
PSBs in India during the study period from 2001-02 to 2010-11 have been shown in Table
6.6(B). A careful scrutiny of Table 6.6(B) reveals that all the 30 measures of correlation
selected PSBs in India are found to be positive. Out of the 30 positive correlation
coefficients, 13 coefficients are found statistically significant at 1% level and all are highly
positively correlated (highest value of 0.982** occupied by UCO Bank and the lowest value
of 0.674** occupied by SB) and the 8 coefficients are statistically significant at 5% level and
they are moderately correlated (highest value of 0.912*occupied by SBI and lowest value of
0.600*is jointly occupied by BOB and OBC) and the remaining 9 coefficients are found to be
statistically insignificant (highest and lowest insignificant values of 0.547 and 0.111 are
occupied by PNB and BOI respectively). The correlation coefficient values between the EPI
and NPAI as shown in the Table 6.6(B) suggest that the most of the selected PSBs in India
under study have achieved higher efficiency in profitability at the cost of increasing NPAs. It
is thus revealed that the PSBs in India under study have significantly failed to achieve
efficiency in NPA management. The these PSBs viz. CBI, SB and UCO Bank are found least
efficient in managing NPAs since they process the highest positive values of correlation
coefficients between EPI and NPAI during the study period.
It is observed from Table 6.6(B) that out of 30 correlation coefficients between EPI
and NPAI under three methods of the ten selected Pvt.SBs in India, 4 coefficients are
negative and 26 coefficients are positive. Out of the 26 positive coefficients, only 1
coefficient of K.Vys Bank is found to be statistically significant at 1% level (value of
227
0.784**under Pearsons method), 4 coefficient are statistically significant at 5% level or

moderately positively correlated (highest value of 0.696*occupied by Federal Bank and
lowest value of 0.658*occupied by SIB both are under Pearsons method). Remaining 21
positive coefficients and 4 negative coefficients are proved to be statistically insignificant.
This suggests that most of the selected Pvt.SBs are found capable of managing NPA and are
competent in this respect despite having positive correlation. In comparison to the
performance of NPA by PSBs, the Pvt.SBs are found more able to manage NPA while
increasing their earning efficiency.
From Table 6.6(B), it is observed that in cases of selected PSBs in India, all the 20
coefficients out of 30 measures of correlation coefficients between EPI and SRI (social
responsibility indices) computed under three methods are positive and remaining 10
coefficients are negative. Of the 20 positive coefficients, 7 coefficients are found to be
statistically significant at 5% level and all are moderately correlated (both highest and lowest
values of 0.758*and 0.556*occupied by CBI under Spearmans and Kendalls method
respectively). Remaining 13 measures of positive correlation and the 10 negative measures
are mostly found to be statistically insignificant with low values of correlation coefficients.
Only in case of CBI, all 3 measures of correlation are found to be statistically significant at
5% level. But in cases of OBC and UCO Bank each, only 2 measures of correlation are found
statistically significant. It can be said that there exists a moderate impact of social
responsibility efficiency (SRI) on the earnings and profitability (EPI) efficiency made by the
selected nine PSBs (other than CBI) during the study period. The positive correlations
existing between EPI and SRI suggest that the PSBs as a whole during the study period have
been moderately influenced to perform their social obligation at par with the increase of their
earning efficiency. This is really a good sign and a matter of great achievement in the social
sphere.
Table 6.6(B) gives the detailed information about the correlation coefficient between
EPI & SRI under the three methods for the ten selected Pvt.SBs in India. From the Table
6.6(B) it is observed that out of 30 measures of correlation coefficients under the three
methods, 10 measures are positive and all of them are statistically insignificant. Out of the
rest 20 negative measures of correlation coefficient, 6 measures are found to be statistically
significant. 3 negative measures of AXIS Bank are found to be significant at 1% level and
they are highly negatively correlated (highest negative value of 0.882** under Pearsons
method and lowest negative value of 0.719** under Kendalls method). Remaining 3 negative
coefficients are found to be statistically significant at 5% level with moderate values of
228
negative correlations (highest negative value of 0.723*occupied by Federal Bank under

Pearsons method and also lowest negative value of 0.636* occupied by Federal bank under
Spearmas method). The result highlights that the selected Pvt.SBs have not showing their
tendency to serve the society and have been busy to earn profits disregarding the social
responsibility performance. The Pvt.SBs do not maintain social obligations as a part of their
normal course of business operation as compared to that of the PSBs in India.
Table 6.6(A)
Analysis of Correlation Coefficient between Earnings and Profitability Indices and
other efficiency parameter indices (i.e. EPI & PI and EPI & CEI) of the selected PSBs
and Pvt.SBs in India during 2001-02 to 2010-11
Correlation Coefficient between
EPI & PI
EPI & CEI
Pearson's Spearman's Kendall's Pearson's Spearman's Kendall's
SBI
(-)0.678*
(-)0.758*
(-)0.644**
0.620
0.600
0.467
**
*
PNB
(-)0.554
(-)0.588
(-)0.467
0.774
0.661
0.511*
BOB
(-)0.617
(-)0.770**
(-)0.644**
0.918**
0.723*
0.629*
BOI
(-)0.294
(-)0.370
(-)0.244
0.665*
0.527
0.378
CB
(-)0.525
(-)0.527
(-)0.378
(-)0.402
(-)0.309
(-)0.244
*
*
*
*
UBI
(-)0.653
(-)0.721
(-)0.556
0.687
0.539
0.422
*
**
**
CBI
(-)0.700
(-)0.867
(-)0.778
(-)0.119
0.188
0.135
*
**
**
**
**
SB
(-)0.752
(-)0.794
(-)0.689
0.924
0.794
0.644**
OBC
(-)0.773**
(-)0.903**
(-)0.778**
(-)0.033
0.170
0.090
*
**
**
*
*
UCO
(-)0.753
(-)0.863
(-)0.764
0.760
0.669
0.539*
Name of
EPI & PI
EPI & CEI
Pvt.SBs
ICICI
0.882**
0.782**
0.556*
0.424
0.503
0.378
**
**
*
**
**
HDFC
(-)0.820
(-)0.770
(-)0.600
0.895
0.772
0.584*
AXIS
(-)0.402
(-)0.297
(-)0.111
0.651*
0.588
0.467
**
**
Federal
(-)0.369
(-)0.370
(-)0.244
0.855
0.794
0.644**
J&K
(-)0.580
(-)0.576
(-)0.422
0.837**
0.733*
0.644**
Indusind
0.007
(-)0.297
(-)0.111
(-)0.605
(-)0.515
(-)0.333
*
ING Vys
(-)0.528
(-)0.224
(-)0.111
0.707
0.576
0.422
*
*
**
K.Bnk
(-)0.606
(-)0.636
(-)0.422
0.664
0.842
0.644**
SIB
(-)0.501
(-)0.442
(-)0.289
(-)0.188
(-)0.079
(-)0.022
K.Vys
(-)0.626
(-)0.576
(-)0.467
(-)0.035
(-)0.261
(-)0.244
[Source: Table 6.1(A), 6.1(B), 6.2(A), 6.2(B), 6.3(A), 6.3(B), 6.4(A), 6.4(B), 6.5(A) and
6.5(B)]; * Statistically significant at 5% level; ** Statistically significant at 1% level
Name of
PSBs
229
Table 6.6(B)
Analysis of Correlation Coefficient between Earnings and Profitability Indices and
other efficiency parameter indices (i.e. EPI & NPAI and EPI & SRI) of the selected
PSBs and Pvt.SBs in India during 2001-02 to 2010-11
EPI & NPAI
EPI & SRI
SBI
0.912*
0.711*
0.629*
(-)0.435
(-)0.515
(-)0.333
**
PNB
0.920
0.547
0.405
0.052
0.091
(-)0.022
**
*
*
BOB
0.907
0.697
0.600
0.036
0.170
0.090
BOI
0.497
0.212
0.111
(-)0.539
(-)0.539
(-)0.422
**
CB
0.822
0.503
0.378
(-)0.574
(-)0.576
(-)0.467
**
UBI
0.539
0.467
0.039
0.079
0.022
0.854
**
**
**
*
*
CBI
0.961
0.867
0.778
0.695
0.758
0.556*
SB
0.936**
0.796**
0.674**
0.375
0.176
0.067
*
*
*
*
*
OBC
0.727
0.733
0.600
0.663
0.632
0.405
**
**
**
*
UCO
0.982
0.875
0.809
0.489
0.742
0.584*
Name of
EPI & NPAI
EPI & SRI
Pvt.SBs
ICICI
(-)0.398
0.103
0.067
0.516
(-)0.018
(-)0.067
HDFC
0.381
0.000
0.092
0.304
0.200
0.067
*
**
**
AXIS
0.670
0.309
0.156
(-)0.882
(-)0.869
(-)0.719**
Federal
0.696*
0.297
0.156
(-)0.723*
(-)0.636*
(-)0.467
J&K
0.523
0.612
0.467
(-)0.187
(-)0.224
(-)0.111
Indusind
(-)0.148
(-)0.333
(-)0.244
0.190
0.261
0.200
*
ING Vys
0.670
0.236
0.156
(-)0.082
(-)0.067
(-)0.045
K.Bnk
0.566
0.273
0.200
(-)0.074
0.030
0.022
*
*
SIB
0.658
0.467
0.333
(-)0.657
(-)0.588
(-)0.378
**
K.Vys
0.784
0.576
0.467
0.048
(-)0.127
(-)0.022
Name of
PSBs
230
6.2 Analysis of Performance Efficiency Indices of the selected PSBs in India as a whole
during the study period 2001-02 to 2010-11
Table 6.7(A) clearly shows that there is a fluctuating trend in average earnings and
profitability indices of the selected PSBs in India as a whole. It ranges between 4.758 in
2009-10 and 6.266 in 2001-02. On an average, the EPI of selected PSBs as a whole in India
during the study period is computed at 5.256. If we compare on the basis of overall mean
EPI, it can be said that earnings and profitability efficiency of the selected PSBs as a whole in
India during the first three years (i.e. 2001-02, 2002-03 and 2003-04) are greater than the
mean EPI of 5.256 and in the last seven years of the study the EPI is less than the mean EPI
of 5.256 as a whole in India. It indicates that the earnings and profitability efficiency of the
selected PSBs in India is quite encouraging for the first three years of the study as compared
to the rest years of the study period. The standard deviation (SD) and coefficient of variation
(CV) as a whole are 0.494 and 9.396% respectively.
Table 6.7(A) highlights that the average overall productivity efficiency indices of the
selected PSBs in India as a whole recorded an upward rising trend during the study period. It
is good sign for the selected PSBs as a whole in terms of productivity efficiency. It ranges
between 66.399 in 2001-02 and 363.024 in 2010-11. On an average, the PI of selected PSBs
as a whole in India during the study period is computed at 175.699. If we compare on the
basis of overall mean PI, it can be said that productivity efficiency of the selected PSBs as a
whole in India during the last four years (i.e. from 2007-08 to 2010-11) are greater than the
mean PI of 175.699 and in the first six years of the study the PI is less than the mean PI of
175.699 as a whole in India. It indicates that the productivity efficiency of the selected PSBs
in India as a whole is not good enough for most of the study period as compared to the
overall average PI. The standard deviation (SD) and coefficient of variation (CV) of PI as a
whole are 102.523 and 58.351% respectively.
It is observed from Table 6.7(A) that there is a fluctuating trend in average cost
efficiency indices of the selected PSBs in India as a whole. It ranges between 2.207 in 200910 and 4.873 in 2005-06. On an average, the CEI of selected PSBs as a whole in India during
the study period is computed at 3.197. If we compare on the basis of overall mean CEI, it can
be said that cost indices of the selected PSBs as a whole in India during four years (i.e. 200102, 2002-03, 2005-06 and 2007-08) are greater than the overall mean CEI of 3.197 and for
the rest of the study period the CEI is less than the mean CEI of 3.197 as a whole in India. It
indicates that the cost managing efficiency of the selected PSBs in India as a whole is quite
satisfactory as most the CEI values are lower than the overall mean CEI during the study
231
period. The standard deviation (SD) and coefficient of variation (CV) of CEI as a whole are
0.819 and 25.611% respectively.
Table 6.7(A) also depicts that there is a fluctuating trend in average non-performing
assets indices of the selected PSBs in India as a whole. It ranges between 1.110 in 2008-09
and 5.834 in 2001-02. On an average, the NPAI of selected PSBs as a whole in India during
the study period is computed at 2.722. If we compare on the basis of overall mean NPAI, it
can be said that NPA indices of the selected PSBs as a whole in India during the first four
years (i.e. 2001-02, 2002-03, 2003-04 and 2004-05) are greater than the overall mean NPAI
of 2.722 and for the rest six years of the study period the NPAI is less than the mean NPAI of
2.722 as a whole in India. It indicates that in most of the cases the NPA management of the
selected PSBs in India as a whole shows better performance. The standard deviation (SD) and
coefficient of variation (CV) of NPAI as a whole are 1.762 and 64.720% respectively.
Table 6.7(A) clearly highlights that there is a fluctuating trend in average social
responsibility indices of the selected PSBs in India as a whole during the study period. It
ranges between 20.575 in 2008-09 and 27.150 in 2004-05. On an average, the SRI of selected
PSBs as a whole in India during the study period is computed at 23.822. If we compare on the
basis of overall mean SRI, it can be said that efficiency regarding contribution to the society
of the selected PSBs as a whole in India during the first six years (i.e. from 2001-02 to 200607) are greater than the mean SRI of 23.822 and in the last four years of the study the SRI is
less than the mean SRI of 23.822 as a whole in India. It indicates that the efficiency of the
selected PSBs in India regarding contribution into the society is quite encouraging for most of
the time of the study period. The standard deviation (SD) and coefficient of variation (CV) of
SRI as a whole are 2.315 and 9.720% respectively.
232
Table 6.7(A)
Analysis of Average Earnings and Profitability Indices, Productivity Indices, Cost
Efficiency Indices, NPA Indices and Social Responsibility Indices of the Selected PSBs
in India as a whole for the study period from 2001-02 to 2010-11
Performance
Indices
Years
Earnings
and
Profitability
Indices
(EPI)
Productivity
Indices
(PI)
Cost
Efficiency
Indices
(CEI)
NPA
Index
(NPAI)
Social
Responsibility
Indices
(SRI)
6.266
66.399
4.218
5.834
23.970
2001-02
5.959
76.187
3.237
5.115
24.617
2002-03
5.484
88.918
2.732
4.233
25.424
2003-04
5.087
106.895
2.686
3.163
27.150
2004-05
4.934
128.922
4.873
2.191
26.883
2005-06
4.957
163.864
3.196
1.644
24.429
2006-07
5.070
205.736
3.291
1.363
21.811
2007-08
5.105
255.970
3.176
1.110
20.575
2008-09
4.758
301.079
2.207
1.241
21.200
2009-10
4.937
363.024
2.353
1.325
22.161
2010-11
5.256
175.699
3.197
2.722
23.822
Mean
0.494
102.523
0.819
1.762
2.315
SD
9.396
58.351
25.611
64.720
9.720
CV (%)
[Source: Collected and compiled from Table 6.1(A), 6.2(A), 6.3(A), 6.4(A) and 6.5(A)]
6.3 Analysis of Performance Efficiency Indices of the selected Pvt.SBs in India as a
whole during the study period 2001-02 to 2010-11
Table 6.7(B) clearly shows that there is a fluctuating trend in average earnings and
profitability indices of the selected Pvt.SBs in India as a whole. It ranges between 4.852 in
2004-05 and 6.093 in 2001-02. On an average, the EPI of selected Pvt.SBs as a whole in
India during the study period is computed at 5.383. If we compare with the overall mean EPI,
it can be said that in 5 cases out of the 10 cases, earnings and profitability efficiency of the
selected Pvt.SBs as a whole in India are greater than the mean EPI of 5.383 except in five
years (i.e. 2004-05, 2005-06, 2006-07, 2009-10 and 2010-11). It indicates that the earnings
and profitability efficiency of the selected Pvt.SBs in India is moderately encouraging for the
study period. The standard deviation (SD) and coefficient of variation (CV) as a whole are
0.421 and 7.825% respectively.
Table 6.7(B) highlights that the average overall productivity efficiency indices of the
selected Pvt.SBs in India as a whole recorded a fluctuating trend during the study period. It
ranges between 171.685 in 2001-02 and 292.224 in 2010-11. On an average, the PI of
233
selected Pvt.SBs as a whole in India during the study period is computed at 224.576. If we
compare with the overall mean PI, it can be said that productivity efficiency of the selected
Pvt.SBs as a whole in India during the last five years (i.e. from 2006-07 to 2010-11) are
greater than the mean PI of 224.576 and in the first five years of the study the PI is less than
the mean PI of 224.576 as a whole in India. It indicates that the productivity efficiency of the
selected Pvt.SBs in India as a whole is not good enough for most of the study period as
compared to the overall average PI. The standard deviation (SD) and coefficient of variation
(CV) of PI as a whole are 36.697 and 16.341% respectively.
It is observed from Table 6.7(B) that there is a fluctuating trend in average cost
efficiency indices of the selected Pvt.SBs in India as a whole. It ranges between 2.607 in
2004-05 and 3.976 in 2008-09. On an average, the CEI of selected Pvt.SBs as a whole in
India during the study period is computed at 3.187. If we compare with the overall mean CEI,
it can be said that cost efficiency indices of the selected Pvt.SBs as a whole in India during
five years (i.e. 2001-02, 2005-06, 2006-07, 2007-08 and 2008-09) are greater than the overall
mean CEI of 3.187 and for the rest 5 years of the study period the CEI is less than the mean
CEI of 3.187 as a whole in India. It indicates that the cost managing efficiency of the selected
Pvt.SBs in India as a whole is not quite satisfactory as in half of the study period the CEI is
lower than the overall mean CEI. The standard deviation (SD) and coefficient of variation
(CV) of CEI as a whole are 0.514 and 16.128% respectively.
Table 6.7(B) also depicts that there is a fluctuating trend in average NPA indices of
the selected Pvt.SBs in India as a whole. It ranges between 1.003 in 2010-11 and 4.853 in
2001-02. On an average, the NPAI of selected Pvt.SBs as a whole in India during the study
period is computed at 2.178. If we compare with the overall mean NPAI, it can be said that
NPA indices of the selected Pvt.SBs as a whole in India during the last six years (i.e. 2005-06
to 2010-2011) are lower than the overall mean NPAI of 2.178 and for the rest four years of
the study period the NPAI is higher than the mean NPAI of 2.178 as a whole in India. It
indicates that in most of the study period the NPA management of the selected Pvt.SBs in
India as a whole shows better performance as compared to rest of the study periods. The
standard deviation (SD) and coefficient of variation (CV) of NPAI as a whole are 1.324 and
60.778% respectively.
Table 6.7(B) clearly highlights that there is a fluctuating trend in average social
responsibility indices of the selected Pvt.SBs in India as a whole during the study period. It
ranges between 15.547 in 2001-02 and 21.996 in 2010-11. On an average, the SRI of selected
Pvt.SBs as a whole in India during the study period is computed at 19.868. If we compare on
234
the basis of overall mean SRI, it can be said that efficiency regarding contribution to the
society of the selected Pvt.SBs as a whole in India during the last six years (i.e. 2005-06 to
2010-2011) are greater than the mean SRI of 19.868 and in the remaining four years of the
study the SRI is less than the mean SRI of 19.868 as a whole in India. It indicates that the
efficiency of the selected Pvt.SBs in India regarding contribution into the society is quite
satisfactory during the study period. The standard deviation (SD) and coefficient of variation
(CV) of SRI as a whole are 2.227 and 11.210% respectively.
Table 6.7(B)
Analysis of Average Earnings and Profitability Indices, Productivity Indices, Cost
Efficiency Indices, NPA Indices and Social Responsibility Indices of the Selected
Pvt.SBs in India as a whole for the study period from 2001-02 to 2010-11
Performance
Indices
Earnings
and
Profitability
Indices
(EPI)
Productivity
Indices
(PI)
Cost
Efficiency
Indices
(CEI)
NPA
Index
(NPAI)
Social
Responsibility
Indices
(SRI)
2001-02
6.093
171.685
3.579
4.853
15.547
2002-03
5.894
196.405
2.977
3.913
16.704
2003-04
5.566
193.184
2.777
2.897
18.840
2004-05
4.852
200.335
2.607
2.396
19.361
2005-06
4.866
211.106
3.330
1.667
21.259
2006-07
5.061
229.798
3.446
1.385
21.405
2007-08
5.463
244.552
3.838
1.182
20.588
2008-09
5.636
245.199
3.976
1.331
21.380
2009-10
5.136
261.270
2.622
1.150
21.606
2010-11
5.267
292.224
2.718
1.003
21.996
Mean
5.383
224.576
3.187
2.178
19.868
SD
0.421
36.697
0.514
1.324
2.227
CV (%)
7.825
16.341
16.128
60.778
11.210
Years
[Source: Collected and compiled from Table 6.1(B), 6.2(B), 6.3(B), 6.4(B) and 6.5(B)]
235
other efficiency parameters of the selected PSBs as a whole in India
Table 6.8(A) shows the degree of association or relationship between the measure of
earnings and profitability (EPI) and other efficiency parameters (PI, CEI, NPAI and SRI) of
the selected PSBs as a whole in India during the study period 2001-02 to 2011-11. It is
observed from the Table 6.8(A) that out of 12 correlation coefficients under three methods
(Pearsons, Spearmans & Kendalls) between the EPI and other efficiency parameters (PI,
CEI, NPAI and SRI) of the selected PSBs in India as a whole during the study period, 9
coefficients are found to be positive and 3 coefficients are found to be negative. Negative
correlation coefficients are found between EPI and PI under all of three correlation measures.
It indicates there is a negative relationship between EPI and PI (highest negative coefficient is
0.758* under Spearmans method and lowest negative coefficient is 0.600* under Kendalls
method); however it is revealed that all three measures of correlation coefficients between
EPI and PI are statistically significant at 5% level. On the other hand out of 9 positive
correlation coefficients 6 are found to be statistically insignificant at both 1% and 5% level.
In this case highest and lowest values of correlation coefficients (0.343 and 0.067) of the
selected PSBs in India as a whole are observed between EPI & CEI under Pearsons method
and between EPI & SRI under Kendalls method respectively. Rest 3 positive correlation
coefficients between EPI & NPAI under three methods are found to be statistically
significant. Out of these 3 positive correlation coefficients 1 coefficient between EPI & NPAI
is found to be statistically significant at 1% level under Pearsons method (value is 0.928**)
and remaining 2 correlation coefficients between EPI & NPAI are found to be statistically
significant at 5% level and highest and lowest coefficient values are 0.661* under Spearmans
method and 0.556* under Kendalls method respectively. The study highlights that the degree
of association between the profitability measures and other efficiency measures (i.e.
productivity, cost control, non-performing assets and social responsibility) of the selected
PSBs in India as a whole has not been so satisfactory despite having positive correlations.
236
Table 6.8(A)
Analysis of Correlation between EPI & PI, EPI & CEI, EPI & NPAI and EPI & SRI of
the selected PSBs as a whole in India during the study period from 2001-02 to 2010-11
Correlation Analysis
between
Pearsons
Coefficient
Spearmans
Coefficient
Kendalls
Coefficient
EPI & PI
(-)0.680*
(-)0.758*
(-)0.600*
EPI & CEI
0.343
0.321
0.289
EPI & NPAI
0.928**
0.661*
0.556*
EPI & SRI
0.199
0.152
0.067
[Source: Table 6.7(A)]

Note: * Statistically significant at 5% level; ** Statistically significant at 1% level
other efficiency parameters of the selected Pvt.SBs as a whole in India
Table 6.8(B) shows the degree of association or relationship between the measure of
earnings and profitability (EPI) and other efficiency parameters (PI, CEI, NPAI and SRI) of
the selected Pvt.SBs as a whole in India during the study period 2001-02 to 2011-11. It is
observed from the Table 6.8(B) that out of 12 correlation coefficients under three methods
(Pearsons, Spearmans & Kendalls) between the EPI and other efficiency parameters (PI,
CEI, NPAI and SRI) of the selected Pvt.SBs in India as a whole during the study period, 6
coefficients are found to be positive and 6 coefficients are found to be negative. Out of 6
negative coefficients 3 correlation coefficients (-0.357, -0.333 and -0.156) are found between
EPI and PI under Pearsons method, Spearmans method and Kendalls method respectively
and all these 3 coefficients are statistically insignificant. Remaining 3 negative coefficients
i.e. (-) 0.717*, (-) 0.503 and (-) 0.333 are found between EPI & SRI under Pearsons method,
Spearmans and Kendalls method respectively and among these 3 coefficients 1 coefficient
under Pearsons method is found statistically significant at 5% level. On the other hand out of
6 positive correlation coefficients highest and lowest positive values of correlation
coefficients (0.681* and 0.244) of the selected Pvt.SBs in India as a whole are observed
between EPI & NPAI under Pearsons method (which is also statistically significant at 5%
level) and Kendalls methods respectively. The study highlights that the degree of association
237
between the profitability measures and other efficiency measures (i.e. productivity, cost
control, non-performing assets and social responsibility measures) of the selected Pvt.SBs in
India as a whole has not been so significant and satisfactory despite having positive
correlations.
Table 6.8(B)
Analysis of Correlation between EPI & PI, EPI & CEI, EPI & NPAI and EPI & SRI of
the selected Pvt.SBs as a whole in India during the period from 2001-02 to 2010-11
Correlation Analysis
between
Pearsons
Coefficient
Spearmans
Coefficient
Kendalls
Coefficient
EPI & PI
(-)0.357
(-)0.333
(-)0.156
EPI & CEI
0.356
0.503
0.422
EPI & NPAI
0.681*
0.382
0.244
EPI & SRI
(-)0.717*
(-)0.503
(-)0.333
[Source: Table 6.7(B)]

Note:
Statistically significant at 5% level.
238
6.6 Analysis of Multiple Correlation between Earnings and Profitability and other
efficiency measures of the selected PSBs and Pvt.SBs as a whole in India
An attempt has been made to judge the joint influence of the selected measures
relating to productivity, cost control, NPA and social responsibility on earnings and
profitability of the selected PSBs and Pvt.SBs as a whole, of the selected ten public sector
banks and ten private sector banks in India under study, also to test whether the multiple
correlation coefficient (R) is statistically significant or not, F test has been used. In addition
to this, to judge the effectiveness or the reliability of this relationship the multiple coefficient
of determination (denoted by R2) has been used and it is defined as the ratio of explained
variation to the total variation of the dependent variable (EPI).
Table 6.9 shows the results of the analysis of multiple correlation between the
earnings and profitability indices (EPI) and other performance efficiency indices of the
selected PSBs as a whole in India and reveals that the multiple correlation coefficient (R) of
EPI on PI, CEI, NPAI and SRI for the study period from 2001-02 to 2010-11 is computed at
0.988 and it is found statistically significant (51.159**) at 1% level which indicates the joint
influence of the four indicators i.e. PI, CEI, NPAI & SRI on earnings and profitability in
terms of EPI has been very satisfactory and in this case it is also observed that multiple
coefficient of determination (R2) is 0.976 which interprets that the 97.6% of the total
variation in EPI is explained jointly by the variation in the four indicators of other efficiency
measures. Therefore, it may be stated that the contribution made by the four indicators of
efficiency measures for improving the earnings and profitability of the selected PSBs as a
whole in India is 97.6% during the study period.
Similarly on the other hand, from Table 6.9 it is also observed the result of the
selected Pvt.SBs as a whole in India that multiple correlation coefficient (R) of EPI on PI,
CEI, NPAI and SRI for the study period from 2001-02 to 2010-11 is computed at 0.927 and it
is found statistically significant (7.654*) at 5% level which indicates the joint influence of the
four indicators i.e. PI, CEI, NPAI & SRI on earnings and profitability in terms of EPI has
been quite satisfactory. Table 6.9 also reveals that the multiple coefficient of determination
(R2) is 0.860 which interprets that the 86% of the total variation in EPI is explained jointly by
the variation in the four indicators of other efficiency measures. Therefore, it may be that the
contribution made by the four indicators of efficiency measures for improving the earnings
and profitability of the selected Pvt.SBs as a whole in India is 86% during the study period.
From the above discussion it may be concluded that as a whole selected PSBs are the better
239
performer as compared to that of the selected Pvt.SBs in India as a whole during the study
period.
Table 6.9
Analysis of Multiple Correlations between EPI & other selected efficiency measures of
all the selected PSBs and Pvt.SBs in India as a whole during the study period from
2001-02 to 2010-11
Multiple Correlation Coefficient of EPI on PI, CEI, NPAI and SRI
Multiple Correlation
Coefficient (R)
Coefficient of Multiple
Determination (R2)
All the selected

PSBs taken together
0.988
0.976
51.159**
All the selected

0.927
0.860
7.654*
[Source: Table 6.7(A) and 6.7(B)]

Note: * Statistically significant at 5% level and ** Statistically significant at 1% level;
6.7 Analysis of Multiple Correlation between Earnings and Profitability and other
efficiency measures of the selected PSBs and Pvt.SBs in India
Table 6.10 highlights an overview of the analysis of multiple correlation between
earnings and profitability and other efficiency measures of the ten selected PSBs and ten
selected Pvt.SBs in India showing the multiple correlation coefficients of EPI on PI, CEI,
NPAI & SRI for the study period from 2001-02 to 2010-11. The multiple coefficient of
determination (R2) of the ten selected PSBs and ten selected Pvt.SBs in India are also shown
in Table 6.10.
6.7.1 Analysis of Multiple Correlation between Earnings and Profitability and other
efficiency measures of the selected PSBs in India
It is observed from Table 6.10 that in case of selected PSBs in India, the multiple
correlation coefficients (R) between EPI and PI, CEI, NPAI & SRI of the ten selected PSBs
are positive and they vary between 0.812 (in case of OBC) and 0.993 (in case of SB) and the
coefficient of multiple determination (R2) of the ten selected PSBs shows that the percentage
of the total variation in the EPI of the selected ten PSBs due to the variation in PI, CEI, NPAI
& SRI varies between 6.59% (in case of OBC) and 9.85% (in case of SB). Out of 10 positive
coefficients of multiple correlation of the ten selected banking companies under PSBs, 7
240
coefficients (in case of SBI, BOB, BOI, UBI, CBI, SB and UCO Bank) are found to be
statistically significant at 1% level and 2 coefficients (in case of PNB and CB) are found to
be statistically significant at 5% level which implies that joint influence of the management
of productivity, cost control, NPA and social responsibility on the overall earnings and
profitability is highly commendable in the cases of these 7 PSBs (SBI, BOB, BOI, UBI, CBI,
SB and UCO Bank) while in cases of 2 PSBs (PNB and CB), there exists a moderate impact
and in case of rest 1 of PSBs (OBC), there exists an unfavorable impact of the different
efficiency measures on the overall earnings and profitability during the study period.
6.7.2 Analysis of Multiple Correlation between Earnings and Profitability and other
efficiency measures of the selected Pvt.SBs in India
In case of ten selected Pvt.SBs, Table 6.10 depicts that the highest coefficient of
multiple correlation (R) and the highest coefficient of multiple determination (R2) are
computed at 0.986 and 0.972 respectively in case of HDFC Bank and the lowest value of R
(0.798) and R2 (0.637) are observed in case of Indusind Bank. The multiple correlation
coefficient is statistically significant at 1% level in case of HDFC Bank (43.356**) and AXIS
Bank (15.369**). On the other hand multiple correlation coefficient is statistically significant
at 5% level in case of ICICI Bank (6.896*), Federal Bank (10.084*), J&K Bank (5.462*), ING
Vys Bank (5.327*) and K.Bnk (5.868*) which implies that the joint influence of the
management of productivity, cost control, NPA and social responsibility on the overall
earnings and profitability is notable in the cases of those 7 Pvt.SBs during the study period
while in cases of Indusind Bank, SIB and K.Vys Bank, the multiple correlation coefficients
are found to be statistically insignificant. The study also reveals that in case of HDFC Bank,
97.2% of the variation in the measurement of earnings and profitability (EPI) is explained
jointly by the variation in the management of productivity (PI), management of cost control
(CEI), management of NPA (NPAI) and the management of social responsibility (SRI)
during the study period while in case of Indusind Bank, the variation in the EPI due to
variation of the management efficiency of other selected measures is 63.7%.
241
Table 6.10
Analysis of Multiple Correlation between EPI & other selected efficiency measures of
selected PSBs and Pvt.SBs in India during the study period from 2001-02 to 2010-11
(Multiple Correlation Coefficient of EPI on PI, CEI, NPAI and SRI)
Name of
Banks
Multiple Correlation Coefficient of Multiple

Coefficient (R)
Determination (R2)
PSBs
SBI
0.986
0.972
43.327**
PNB
0.960
0.922
14.809*
BOB
0.982
0.964
33.674**
BOI
0.967
0.935
17.978**
CB
0.945
0.894
10.539*
UBI
0.979
0.958
28.830**
CBI
0.977
0.954
25.936**
SB
0.993
0.985
84.629**
OBC
0.812
0.659
2.413
UCO
0.992
0.983
72.790**
Pvt.SBs
ICICI
0.920
0.847
6.896*
HDFC
0.986
0.972
43.356**
AXIS
0.962
0.925
15.369**
Federal
0.943
0.890
10.084*
J&K
0.902
0.814
5.462*
Indusind
0.798
0.637
2.197
ING Vys
0.900
0.810
5.327*
K.Bnk
0.908
0.824
5.868*
SIB
0.871
0.759
3.932
K.Vys
0.803
0.645
2.270
6.5(B)]; Note: * Statistically significant at 5% level and ** Statistically significant at 1% level
6.8 Analysis of Multiple Regression of Earnings and Profitability on Overall Efficiency

Measures
In order to assess the joint influence of four selected efficiency measures on
overall earnings and profitability of the ten selected PSBs and ten selected Pvt.SBs as a whole
in India under study, multiple regression analysis has been applied. While fitting the
regression equation, EPI has been taken as the dependent variable and PI, CEI, NPAI and SRI
have been considered as the independent variables. The multiple regression equation which
242
has been fitted in this study is: EPI = b0 + b1.PI + b2.CEI + b3.NPAI + b4.SRI where b0 is the
constant, b1, b2, b3 and b4 are the respective partial regression coefficients. In order to
examine whether the partial regression coefficients are statistically significant or not, t test
has been used.
Efficiency Measures of the selected PSBs as a whole in India
Table 6.11 exhibits the results of multiple regression analysis of EPI on PI, CEI,
NPAI & SRI of selected PSBs as a whole in India during the study period from 2001-02 to
2010-11. It is revealed from Table 6.11 that the partial regression coefficients of PI (b1), CI
(b2), NPAI (b3) and SRI (b4) are -0.00039, 0.09195, 0.28802 and -0.09162 respectively and
the constant (b0) is computed at 6.430. The multiple regression equation of earnings and
profitability on selected efficiency measures so fitted is EPI = 6.430 + (-) 0.00039.PI +
0.09195.CEI + 0.28802.NPAI + (-) 0.09162.SRI. This regression equation highlights that for
one unit increase in PI (keeping CEI, NPAI & SRI constant), the EPI is increased by ()0.00039 unit and similarly for one unit increase in CEI, NPAI and SRI respectively keeping
all other respective independent variables constant, the values of EPI is increased by 0.09195
unit, 0.28802unit and (-)0.09162 unit respectively. Out of 4 partial regression coefficients 2
coefficients are positive and remaining 2 coefficients are negative. Out of these 4
coefficients, 1 positive coefficient is statistically significant (8.106**) at 1% level (in case of
NPAI) which indicates the significant positive influence of NPA management on overall
profitability of the selected PSBs in India as a whole and 1 negative partial coefficient is
statistically significant (-4.047*) at 5% level (in case of SRI) which indicates the significant
negative influence of management of social responsibility on overall profitability of the
selected PSBs in India as a whole during the study period. However, remaining 2 partial
regression coefficients are found to be statistically insignificant at both 1% and 5% levels
Efficiency Measures of the selected Pvt.SBs as a whole in India
It is also observed from Table 6.11 that the selected Pvt.SBs as a whole in
India has 3 positive partial coefficients and 1 negative coefficient (in case of SRI). All the 3
positive and 1 negative coefficients of PI, CEI, NPAI and SRI respectively highlighted that
for one unit increase in PI, CEI, NPAI and SRI (keeping all other respective independent
variables constant), the EPI is reflected by 0.01032 unit, 0.36144 unit, 0.25246 unit and ()0.12748 unit respectively over the study period. Out of these 4 coefficients, 1 positive
243
coefficient is statistically significant (2.7749*) at 5% level (in case of PI) which indicates the
significant positive influence of productivity management on overall profitability of the
selected Pvt.SBs in India as a whole during the study period. However, remaining 3 partial
regression coefficients are found to be statistically insignificant at both 1% and 5% levels
during the study period from 2001-02 to 2010-11.
Table 6.11
Analysis of Multiple Regression of EPI on PI, CEI, NPAI and SRI of the selected PSBs
and Pvt.SBs as a whole in India during 2001-02 to 2010-11
(Regression Equation: EPI = b0 + b1.PI + b2.CEI + b3.NPAI + b4.SRI)
Partial Regression Coefficient
Constant (b0)
PI (b1)
CEI (b2)
NPAI (b3)
SRI (b4)
All the selected

PSBs taken together
6.430
-0.00039
(-0.468)
0.09195
(1.813)
0.28802
(8.106**)
-0.09162
(-4.047*)
All the selected

3.897
0.01032
(2.7749*)
0.36114
(2.5185)
0.25246
(0.7510)
-0.12748
(-0.6894)
[Source: Table 6.7(A) and 6.7(B)]; * Statistically significant at 5% level and
**
Statistically
significant at 1% level; Note: Figures in the parentheses indicate t- values

6.9 Analysis of Multiple Regression of Earnings and Profitability on Overall Efficiency
Measures of the selected PSBs and Pvt.SBs in India
Table 6.12 represents an overview of the multiple regression analysis of the ten
selected PSBs and ten selected Pvt.SBs in India showing the multiple regression coefficients
of EPI on PI, CEI, NPAI and SRI for the study period from 2001-02 to 2010-11.
Efficiency Measures of the selected PSBs in India
Table 6.12 shows the results of multiple regression analysis of EPI on PI, CEI, NPAI
and SRI of the selected ten PSBs in India and highlights that when PI is increased by one unit
(keeping CEI, NPAI and SRI constant), the EPI is increased in case of SBI, BOB and CBI
respectively and a negative impact of PI on EPI is found to be statistically significant (3.077*) at 5% level in case if SB. However, in the case of SBI, BOB and CBI, the low but
positive partial regression coefficients (i.e. 0.00009, 0.0014 and 0.0027 respectively) are
found statistically insignificant. However for one unit increase in PI (keeping CEI, NPAI and
SRI constant), the EPI is changed by -0.00015 unit, -0.0015 unit, -0.0025 unit, -0.0013 unit, -
244
0.0037 unit and -0.00012 unit in case of PNB, BOI, CB, UBI, OBC and UCO Bank
respectively and are found to be statistically insignificant during the study period.
Table 6.12 highlights that in case of CEI is increased by one unit (when all other
independent variables remain constant), the EPI is increased in case of all the selected PSBs
at low rate (except in case of CBI and OBC where the EPI is decreased). The positive
influence of CEI on EPI is found to be statistically significant (4.303*) and (3.210*) at 5%
level in case of SBI and BOB respectively. The positive coefficients 0.0792, 0.2464, 0.0069,
0.0696, 0.5963, 0.0311 of PNB, BOI, CB, UBI, SB and UCO Bank respectively and negative
coefficients -0.0129 and -0.3279 of CBI and OBC respectively are found to be statistically
insignificant during the study period.
It is observed from Table 6.12 that for every additional unit of NPAI (when PI,
CEI and SRI held constant), the EPI is increased in case of SBI, PNB, BOB, CB, UBI, CBI,
SB and UCO Bank at a low rate (i.e. by 0.199 unit, 0.1741 unit, 0.1445 unit, 0.0708 unit,
0.2542 unit, 0.2767 unit, 0.1609 unit and 0.3598 unit respectively) and the positive influence
of NPA management (NPAI) on overall earnings & profitability (EPI) of those banks are
statistically significant (5.450**), (5.568**), (6.697**) and (8.742**) at 1% level in case of SBI,
UBI, CBI and UCO Bank respectively and 1 positive coefficient is statistically significant
(3.489*) at 5% level in case of PNB. While in case of BOB, CB and SB, the positive
coefficients are statistically insignificant. However, the negative impact of NPA management
on the overall profitability is found in case of BOI and OBC (negative partial regression
coefficients are -0.0002 and -0.0312 respectively and found statistically insignificant).
Table 6.12 shows that for every additional unit of SRI keeping all other
independent variables constant, the EPI is changed at a low rate (i.e. by -0.026 unit, -0.0277
unit, -0.0047 unit, -0.1849 unit, -0.2005 unit, -0.0952 unit, 0.0173 unit, -0.1109 unit, 0.0282
unit and -0.0322 unit) in cases of all the selected PSBs in India during the study period. The
negative impact of social responsibility (SRI) on overall profitability (EPI) is found in all of
the selected PSBs (except CBI and OBC). But 2 negative impacts are statistically significant
(-5.337**) and (-5.683**) at 1% level in case of BOI and SB respectively. Another 2 negative
impacts are statistically significant (-2.888*) and (-3.134*) at 5% level in case CB and UBI
respectively. While in the cases of other remaining six selected Pvt.SBs, the coefficients are
found to be statistically insignificant during the study period.
245

Efficiency Measures of the selected Pvt.SBs in India
Table 6.12 shows the results of multiple regression analysis of EPI on PI, CEI,
NPAI and SRI of the selected ten Pvt.SBs in India and highlights that when PI is increased by
one unit (keeping CEI, NPAI and SRI constant), the EPI is increased in case of ICICI Bank,
Federal Bank, ING Vys Bank and K.Vys Bank and EPI is decreased in cases of remaining six
banks of the selected Pvt.SBs. Out of all ten selected Pvt.SBs, 1 positive coefficient is found
statistically significant (4.061**) at 1% level in case of ICICI Bank and another 1 negative
coefficient is found to be statistically significant (-5.255**) at 1% level in case of HDFC
Bank. However, in the cases of Federal Bank, ING Vys Bank and K.Vys Bank positive
partial regression coefficients (i.e. 0.0017, 0.0038 and 0.0007 respectively) are found to be
statistically insignificant. However for one unit increase in PI (keeping CEI, NPAI and SRI
constant), the EPI is changed by -0.0004 unit, -0.0107 unit, -0.0003 unit, -0.0051 unit and 0.0019 unit in case of AXIS Bank, J&K Bank, Indusind Bank, K.Bnk and SIB respectively
and are found to be statistically insignificant during the study period.
Table 6.12 highlights that in case of CEI is increased by one unit (when all other
independent variables remain constant), the EPI is increased in case of all the selected
Pvt.SBs (except in case of ICICI Bank and Indusind Bank where the EPI is decreased). The
positive influence of CEI on EPI is found to be statistically significant (3.439*), (3.545*) and
(3.520*) at 5% level in case of HDFC Bank, Federal Bank and K.Bnk respectively. The
positive coefficients 0.3316, 0.5338, 0.4464, 0.0887 and 0.1935 of AXIS Bank, J&K Bank,
ING Vys Bank, SIB and K.Vys Bank respectively and negative coefficients -0.2153 and 0.3051 of ICICI Bank and Indusind Bank respectively are found to be statistically
insignificant during the study period.
It is observed from Table 6.12 that for every additional unit of NPAI (when PI,
CEI and SRI held constant), the EPI is increased in case of ICICI Bank, Federal Bank,
Indusind Bank, ING Vys Bank, K.Bnk, SIB and K.Vys Bank at a low rate (i.e. by 0.1992
unit, 0.0825 unit, 0.1513 unit, 0.5928 unit, 0.0092 unit, 0.1053 unit and 0.397 unit
respectively) and the positive influence of NPA management (NPAI) on overall earnings and
profitability (EPI) of those banks are statistically insignificant at both 1% level and 5% level.
However, the negative impact of NPA management on the overall profitability is found in
case of HDFC Bank, AXIS Bank and J&K Bank (negative partial regression coefficients are 0.2116, -0.3451 and -0.8305 respectively found statistically insignificant).
246
Table 6.12 shows that for every additional unit of SRI keeping all other
independent variables constant, the EPI is changed at a low rate (i.e. by -0.0660 unit, -0.1614
unit, -0.1179 unit, -0.0214 unit, -0.2229 unit and -0.0519 unit) in case of 6 selected Pvt.SBs
(i.e. by HDFC Bank, AXIS Bank, Federal Bank, K.Bnk, SIB and K.Vys Bank) in India
during the study period. The negative impact of social responsibility (SRI) on overall
profitability (EPI) is found in majority (6) of the selected Pvt.SBs (except ICICI Bank, J&K
Bank, Indusind Bank and ING Vys Bank). But 1 negative impact is statistically significant (4.357**) at 1% level in case of AXIS Bank. Another 1 negative impact is statistically
significant (-3.097*) at 5% level in case of HDFC Bank. While in the cases of other
remaining eight selected Pvt.SBs, the coefficients are found to be statistically insignificant
The overall study of the partial regression coefficients (from Table 6.12) in the
regression equation of EPI on PI, CEI, NPAI & SRI (i.e. EPI = b0 + b1.PI + b2.CEI + b3.NPAI
+ b4.SRI) of the ten selected PSBs and ten selected Pvt.SBs in India shown how EPI changes
with respect to changes in PI, CEI, NPAI and SRI. The study reveals (from Table 6.12) that
out of 20 selected banking companies, the partial regression coefficients of PI are found to be
positive in 7 cases of which the effects of productivity management on overall banking
earnings and profitability is found to be significant in 1 case (in case of ICICI Bank).
However in remaining 13 cases, the coefficients are found to be negative of which in 2 cases,
the coefficients are found statistically significant (in case of SB under PSBs and HDFC Bank
under Pvt.SBs).
From Table 6.12 it is seen that the partial regression coefficients of CEI are
positive in 16 cases out of 20 cases and in the remaining 4 cases, the coefficients are
negative. Of the 16 positive coefficients, in 5 cases (i.e. SBI and BOB under PSBs and HDFC
Bank, Federal Bank and K.Bnk under Pvt.SBs), the positive effects of cost control
management on banking profitability are found to be statistically significant.
It is also observed from Table 6.12 that in 15 cases out of 20 cases, partial
regression coefficients of NPAI are found to be positive of which in 5 cases (i.e. SBI, PNB,
UBI, CBI, and UCO Bank under PSBs), the coefficients are found statistically significant. In
the remaining 5 cases, the coefficients are found to be negative.
Table 6.12 also shows that out of the 20 partial regression coefficients of SRI, in
6 cases, the coefficients are observed positive and statistically insignificant. While in the
remaining 14 cases, the coefficients are found to be negative of which in 6 cases (i.e. BOI,
247
CB, UBI and SB under PSBs and HDFC Bank and AXIS Bank under Pvt.SBs), are found to
be statistically significant.
Thus the study of multiple regression analysis of profitability on other efficiency
measures of the 20 selected banking companies in India suggests that the management of
productivity, cost control management, NPA management and social responsibility
management have made positive and significant contribution towards the improvement of
profitability in cases of some selected PSBs and some selected Pvt.SBs in India under study
period 2001-02 to 2010-11.
248
Table 6.12
Analysis of Multiple Regression of EPI on PI, CEI, NPAI and SRI of the selected PSBs and
Pvt.SBs in India during 2001-02 to 2010-11
(Regression Equation: EPI = b0 + b1.PI + b2.CEI + b3.NPAI + b4.SRI)
Name of
Banks
PSBs
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
Constant (b0)
4.018
5.539
3.469
8.159
10.305
7.062
3.460
6.713
6.965
4.696
Partial Regression Coefficient

CEI (b2)
NPAI (b3)
PI (b1)
SRI (b4)
0.00009
(0.103)
-0.00015
(-0.116)
0.0014
(0.839)
-0.0015
(-1.675)
-0.0025
(-1.803)
-0.0013
(-1.161)
0.0027
(1.595)
-0.0032
(-3.077*)
-0.0037
(-1.356)
-0.00012
(-0.217)
0.330
(4.303*)
0.0792
(0.842)
0.3214
(3.210*)
0.2464
(2.714)
0.0069
(0.456)
0.0696
(0.873)
-0.0129
(-0.185)
0.5963
(2.671)
-0.3279
(-0.613)
0.0311
(0.669)
0.199
(5.450**)
0.1741
(3.489*)
0.1445
(2.468)
-0.0002
(-0.006)
0.0708
(0.557)
0.2542
(5.568**)
0.2767
(6.697**)
0.1609
(2.155)
-0.0312
(-0.075)
0.3598
(8.742**)
-0.026
(-1.107)
-0.0277
(-1.269)
-0.0047
(-0.069)
-0.1849
(-5.337**)
-0.2005
(-2.888*)
-0.0952
(-3.134*)
0.0173
(0.657)
-0.1109
(-5.683**)
0.0282
(0.115)
-0.0322
(-1.937)
0.0107
(4.061**)
-0.0114
(-5.255**)
-0.0004
(-0.2548)
0.0017
(0.852)
-0.0107
(-1.680)
-0.0003
(-0.055)
0.0038
(0.488)
-0.0051
(-1.184)
-0.0019
(-0.227)
0.0007
(0.094)
-0.2153
(-0.5684)
0.3572
(3.439*)
0.3316
(2.336)
0.8582
(3.545*)
0.5338
(2.441)
-0.3051
(-2.383)
0.4464
(2.094)
0.3227
(3.520*)
0.0887
(1.045)
0.1935
(0.448)
0.1992
(1.0596)
-0.2116
(-0.432)
-0.3451
(-1.778)
0.0825
(0.863)
-0.8305
(-0.615)
0.1513
(0.381)
0.5928
(1.647)
0.0092
(0.072)
0.1053
(0.340)
0.397
(1.374)
0.1266
(1.4131)
-0.0660
(-3.097*)
-0.1614
(-4.357**)
-0.1179
(-1.064)
0.0621
(0.783)
0.0826
(1.346)
0.1768
(1.265)
-0.0214
(-0.183)
-0.2229
(-2.052)
-0.0519
(-0.368)
Pvt.SBs
ICICI
-0.639
HDFC
8.292
AXIS
7.717
Federal
5.704
J&K
5.393
Indusind
4.668
ING Vys
-2.228
K.Bnk
5.719
SIB
10.045
K.Vys
5.614
[Source: Table 6.1(A), 6.1(B), 6.2(A), 6.2(B), 6.3(A), 6.3(B), 6.4(A), 6.4(B), 6.5(A) and 6.5(B)]; * Statistically
significant at 5% level; ** Statistically significant at 1% level
Note: Figures in the parentheses indicate t- values
249
6.10 Analysis of Correlation coefficient between Non-performing Asset Index (NPAI)

and Social Responsibility Index (SRI) of the selected PSBs and selected Pvt.SBs in India
Table 6.13 highlights the correlation coefficient between NPAI and SRI of the
selected PSBs and selected Pvt.SBs in India as a whole under Pearsons method, Spearmans
method and Kendalls method. The objective of this analysis is to show how social
responsibility performance affects the NPA level of the selected banking companies under
study. Thus an attempt has been taken to find out the degree of association between SRI and
NPAI of the selected PSBs and selected Pvt.SBs as a whole and also on individual banks.
Table 6.13 shows the degree of association or relationship between the measure of
social responsibility (SRI) and NPA index of the selected PSBs and Pvt.SBs as a whole in
India during the study period 2001-02 to 2011-11. It is observed from the Table 6.13 that out
of 3 positive correlation coefficients under three methods (Pearsons, Spearmans
and
Kendalls) between the SRI and NPAI of the selected PSBs in India as a whole during the
study period, 2 coefficients are found to be statistically significant (0.697*and 0.511*) at 5%
level under Spearmans and Kendalls method respectively. However, on the other hand it is
revealed from the Table 6.13 that all three measures of correlation coefficients between SRI
and NPAI in case of selected Pvt.SBs as a whole in India during the study period are negative
but statistically highly significant at 1% level (highest negative value of -0.984** under
Pearsons method and lowest negative value of -0.822** under Kendalls method is found).
The results of the analysis reveal that there is a positive association between the social
responsibility performance and increase in NPAs so far as the selected PSBs in India are
concerned. It corroborates the fact that the selected PSBs in India have to face much of NPAs
in consideration of their social responsibility performance. From social viewpoint it is to be
highly admired though the same is not favourable to bank management as it significantly
affects the overall financial performance of the banks. It is also to be noted that so as the
social responsibility performance and NPAs forming are concerned, the selected PSBs in
India have made commendable performance in comparison to that of the Pvt.SBs in India
under study if viewed through the lens of the society.
250
Table 6.13
Analysis of Correlation coefficient between SRI & NPAI of the selected PSBs and
Pvt.SBs as a whole in India during the period from 2001-02 to 2010-11
SRI & NPAI
Bank Groups
Pearsons
Spearmans
Kendalls
all the selected PSBs

taken together
0.494
0.697*
0.511*
all the selected Pvt.SBs

taken together
(-)0.984**
(-)0.915**
(-)0.822**
[Source: Table 6.7(A) and 6.7(B)];

Note: * Statistically significant at 5% level and ** Statistically significant at 1% level;
The measurement of correlation coefficients between SRI & NPAI of the ten
selected PSBs in India during the study period from 2001-02 to 2010-11 have been shown in
Table 6.14. A careful scrutiny of Table 6.14 reveals that out of 30 measures of correlation
selected PSBs in India, 24 correlation coefficients are found to be positive and 6 coefficients
are found to be negative. Out of the 24 positive correlation coefficients, 5 coefficients are
found statistically significant at 1% level and all are highly positively correlated (highest
value of 0.862**under Pearsons method and the lowest value of 0.674**under Kendalls
method occupied by OBC) and the 7 coefficients are statistically significant at 5% level and
they are moderately correlated to each other (highest value of 0.739* under Pearsons method
occupied by CBI and lowest value of 0.539* under Kendalls method is occupied by PNB)
and the remaining 12 positive coefficients are found to be statistically insignificant (highest
and lowest values of 0.606 and 0.073 are occupied by UCO Bank and BOB respectively).
This table also reveals that only 6 coefficients are negative and these negative coefficients are
occupied by SBI and CB. The study suggests that in most of the cases of selected PSBs in
India, the social responsibility and NPA level of the banks are positively associated. That
means higher the social responsibility higher is the NPA level and vice-versa. In some cases
i.e. in cases of OBC and UCO Bank, contribution to the society as social responsibility highly
influences the NPA level of the bank. On the other hand NPA level is moderately influenced
251
by SRI in some cases, i.e. in cases of PNB, UBI, CBI and SB. Only in two cases i.e. in cases
of SBI and CB negative association is found between SRI and NPAI. This indicates that more
contribution to the society boost up the NPA level or adversely affects the NPA level. This
result also indicates that NPA management of the selected PSBs in India shows the poor
performance to reduce the NPA level and at the same time it shows their higher contribution
to the society as a matter of their social responsibility performance.
It is observed from the Table 6.14 that out of 30 correlation coefficients between SRI
and NPAI under three methods of the ten selected Pvt.SBs in India, 23 coefficients are found
negative and only 7 coefficients are found to be positive. Out of the 23 negative coefficients,
9 coefficient are found to be statistically significant at 1% level (highest negative value of
0.912**under Pearsons method is occupied by ICICI Bank and lowest negative value of
0.644**under Kendalls method is occupied by J&K Bank), 7 negative coefficients are found
to be statistically significant at 5% level or moderately correlated [both highest moderate
negative value of (-)0.748* under Spearmans method and lowest moderate negative value of
(-)0.494*under Kendalls method are occupied by ING Vys Bank]. Remaining 7 positive
coefficients and 7 negative coefficients are proved to be statistically insignificant and
considered as a low degree of correlation. The study suggests that in most of the cases of
selected Pvt.SBs social responsibility index (SRI) are formed adversely or negatively
associated with NPA level. The results of the analysis highlight that the selected Pvt.SBs in
India did not have performance towards social responsibility performance and there is no
relationship between the increase of NPAs and social responsibility performance. It thus
suggests that the in the case of selected Pvt.SBs, NPAs have increased in the normal course
of banking business during the study period. The selected Pvt.SBs in India under study are
found reluctant to social responsibility performance and have given much preference to
control the level of NPAs.
From the above analysis, it can be said that as a whole the selected PSBs in India
have shown their greater interests towards social responsibility performance and contributed
significantly for the overall socio-economic development of the country by providing loans
and advances to different priority sectors including liberal advances to rural and urban areas
disregarding the emergence of NPAs. It is very crucial and highly significant for the country
like India where the vast majority of the population lives in rural and urban areas and they
require financial help from banks for their sustenance. The PSBs in India have come formed
to help the common people and business entities to go ahead with financial supports. Where
as it is observed that the selected Pvt.SBs banks have been busy with maintain banking
252
operations with strict approach not to increase NPAs and accordingly they have shown their
much reluctance to social responsibility performance.
Table 6.14
Analysis of Correlation coefficient between SRI & NPAI of the selected PSBs and
Pvt.SBs in India during the period from 2001-02 to 2010-11
SRI & NPAI
Pearson's
Spearman's
Kendall's
SBI
(-)0.317
(-)0.158
(-)0.090
*
PNB
0.539*
0.317
0.736
BOB
0.073
0.285
0.156
BOI
0.178
0.503
0.289
CB
(-)0.248
(-)0.358
(-)0.289
*
UBI
0.556*
0.499
0.721
CBI
0.739*
0.685*
0.422
*
SB
0.602
0.632
0.360
**
**
OBC
0.862
0.827
0.674**
UCO
0.606
0.770**
0.689**
Name of
SRI & NPAI
Pvt.SBs
Pearson's
Spearman's
Kendall's
**
ICICI
(-)0.912
(-)0.491
(-)0.378
**
HDFC
(-)0.606
(-)0.771
(-)0.644*
AXIS
(-)0.877**
(-)0.517
(-)0.405
*
*
Federal
(-)0.711
(-)0.745
(-)0.600*
J&K
(-)0.823**
(-)0.806**
(-)0.644**
Indusind
(-)0.858**
(-)0.806**
(-)0.689**
ING Vys
(-)0.632*
(-)0.748*
(-)0.494*
K.Bnk
0.280
0.176
0.022
SIB
(-)0.270
(-)0.127
0.022
K.Vys
0.222
0.576
0.422
Name of
PSBs
6.11 Analysis of Performance Efficiency Indices and their Grand Average values of the
selected PSBs and Pvt.SBs in India
Table 6.15 shows the grand average values of the different efficiency parameter
indices of selected PSBs and Pvt.SBs in India for the period from 2001-02 to 2010-11.
Highest grand average value of 75.378 is occupied by Indusind Bank, 2nd highest grand
average value of 74.900 is occupied by AXIS Bank, 3rd highest grand average value of
253
66.149 is occupied by ICICI Bank, and all these banks belong under the Pvt.SBs group. The
lowest grand average value of 32.356 is occupied by SBI under PSBs. So it can be said that
as a whole selected Pvt.SBs are the better performers in terms of overall financial
performance efficiency as compared to that of the selected PSBs as a whole in India during
the period 2001-02 to 2010-2011.
Table 6.15
Analysis of performance efficiency indices and their grand average values of the
selected PSBs and Pvt.SBs in India during the period 2001-02 to 2010-11
Banks
EPI
PI
CEI
NPAI
SRI
Grand
average
PSBs
5.016
128.914
2.924
2.996
21.932
32.356
SBI
5.404
154.746
2.613
2.623
28.006
38.678
PNB
5.046
199.088
3.101
2.727
20.812
46.155
BOB
4.896
191.810
3.552
2.810
20.837
44.781
BOI
5.328
191.963
5.039
1.948
23.267
45.509
CB
5.456
179.435
3.015
2.734
23.932
42.914
UBI
5.309
126.199
3.215
3.845
27.741
33.262
CBI
5.365
156.299
2.586
2.606
25.259
38.423
SB
5.717
259.669
2.538
2.254
22.070
58.450
OBC
5.018
168.873
3.383
2.836
24.366
40.895
UCO
Pvt.SBs
4.563
306.727
2.193
2.851
14.413
66.149
ICICI
5.803
232.120
4.059
0.787
17.161
51.986
HDFC
5.228
348.519
2.464
1.130
17.157
74.900
AXIS
5.719
177.223
2.467
3.053
22.525
42.197
Federal
5.439
172.593
3.729
1.461
17.925
40.229
J&K
5.263
348.574
3.512
2.252
17.291
75.378
Indusind
4.839
151.826
2.942
1.472
24.342
37.084
ING Vys
5.428
167.044
3.160
3.610
22.900
40.428
K.Bnk
5.424
168.207
3.894
2.896
22.245
40.533
SIB
6.126
172.925
3.449
2.265
22.724
41.498
K.Vys
[Source: Collected and compiled from Table 6.1(A), 6.1(B), 6.2(A), 6.2(B), 6.3(A), 6.3(B),
6.4(A), 6.4(B), 6.5(A) and 6.5(B)]
6.12 Analysis of Rank Sum Tests using Wilcoxon-Mann-Whitney or U-test
This is a very popular test amongst the rank sum tests. This is used to determine
whether two independent samples have been drawn from the same population or not. This
test applies under very general conditions and requires only that the populations sampled are
254
continuous. However, in practice even the violation of this assumption does not affect the
results very much.
Table 6.16
Analysis of U-rank sum test of selected samples based on the ascending values of grand
average of selected efficiency parameter indices of the selected PSBs and Pvt.SBs in
Size of sample item in
Rank
ascending order
32.356
33.262
37.084
38.423
38.678
40.229
40.428
40.533
40.895
41.498
42.197
42.914
44.781
45.509
46.155
51.986
58.450
66.149
74.900
75.378
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Banks
Bank Group
SBI
CBI
ING Vys
SB
PNB
J&K
K.Bnk
SIB
UCO
K.Vys
Federal
UBI
BOI
CB
BOB
HDFC
OBC
ICICI
AXIS
Indusind
PSB
PSB
Pvt.SB
PSB
PSB
Pvt.SB
Pvt.SB
Pvt.SB
PSB
Pvt.SB
Pvt.SB
PSB
PSB
PSB
PSB
Pvt.SB
PSB
Pvt.SB
Pvt.SB
Pvt.SB
Name of related sample:

[A for sample one (PSBs) and
B for sample two (Pvt.SBs)]
A
A
B
A
A
B
B
B
A
B
B
A
A
A
A
B
A
B
B
B
From Table 6.16 first of all we assign ranks to all observations, adopting low to high
ranking process on the presumption that all selected items belong to single sample. From the
above we find that the sum of the ranks assigned to first or sample one i.e. sample A items
(PSBs) or R1 = 1+ 2 + 4 + 5 + 9 + 12 + 13 + 14 + 15 + 17 = 92 and similarly we find that the
sum of ranks assigned to sample two items or R2 = 3 + 6 + 7 + 8 + 10 + 11 + 16 + 18 + 19 +
20 = 118. We have sample size of A (PSBs) items i.e. n1 = 10 and sample size of B (Pvt.SBs)
items i.e. n2 = 10.
255
Hence, Wilcoxon-Mann-Whitney test statistic U = (n1n2) + [n1 (n1+1)]/2 R1

= (1010) + [10 (10+1)]/2 92
= 100 + 55.5 92 = 63.5
As n1 and n2 both are greater than 8, so the sampling distribution of U
approximates closely with normal curve. Keeping this in view, we work out the mean and
standard deviation taking the null hypothesis that the two samples come from identical
populations as under:
Mean = U = (n1n2)/2 = (1010)/2 = 50 and
Standard Deviation (or standard error):
U = (n1n2)(n1+n2+1)/10 = (1010)(10+10+1)/10
= 14.49.
As the alternative hypothesis is that the means of the two populations are not
equal, a two-tailed test is appropriate. Accordingly the limits of acceptance region of normal
distribution, keeping in view 10% level of significance z value for 0.45 of the area under
normal curve is 1.64, we have the following limits of acceptance region:
Upper limit = U + 1.64 U = 50 +1.64 (14.49) = 73.76
Lower limit = U - 1.64 U = 50 - 1.64 (14.49) = 26.24
As the observed value of U is 63.5 which is in the acceptance region of the normal
distribution curve, we accept the null hypothesis and conclude that the two samples come
from identical populations (or that the two populations have the same mean) at 10% level.
We can as well calculate the U statistic as under using R2 value:
U = (n1n2) + [n1 (n1+1)]/2 R2
= (1010) + [10 (10+1)]/2 118
= 100 + 55.5 118 = 37.5
The value of U also lies in the acceptance region and as such our conclusion remains
the same, even if we adopt this alternative way of finding U.
So from the above, it can be concluded that the two samples i.e. selected PSBs and
Pvt.SBs in India come from the population with the same mean during the period under study
2001-02 to 2010-11.
256
CHAPTER- 7
COMPARATIVE PERFORMANCE OF SELECTED PUBLIC SECTOR AND
PRIVATE SECTOR BANKS
In Chapter 4 and Chapter 5 we have analyzed the performance of selected public sector banks
and private sector banks seperately using different parameters. In this chapter an attempt has
been undertaken to investigate comparative performance of selected public sector banks
(PSBs) and selected private sector banks (Pvt.SBs) taken together.
For analyzing comparative performance of the selected banking companies between
the groups, among the individual banking companies and their overall performance, CAMEL
Model has been used and thereafter comprehensive rank test and statistical measures have
been used. Before analyzing the performance of the selected banks a brief discussion about
CAMEL is given. CAMEL stands for Capital Adequacy, Asset Quality, Management
Efficiency, Earnings Capacity and Liquidity. CAMEL ratios have the requisite vitality to
highlight the sound financial position as well as health of banks through micro analysis of
balance sheet and income statement items. Capital adequacy analysis reflects the overall
financial conditions of the banks and also the ability of the management to meet the need for
additional capital. It reflects a banks leverage. Asset quality is another important aspect of
the evaluation of banks performance. The prime motto behind measuring asset quality is to
ascertain the quality of assets and to identify ability of a bank to reduce the NPAs. The
quality of loan asset is one of the most crucial aspects that decide the financial health of a
bank. Management plays a vital role for banks to achieve efficiency. Management decides the
financing models of banking operations, choice of asset portfolio, amount of risk taken and
all other operational strategies. With increased competition in the banking industry,
efficiency and effectiveness have become the rule as banks consistently strive to improve the
productivity.
Another important indicator of banks performance is the capacity of earnings. It
determines the ability of a bank to earn consistently. In this tough environment when Indian
banks are emphasizing their activities to improve their profitability position so as to combat
with other players in national frontiers, measuring earning capacity has got much of
importance. Another parameter of CAMEL rating is Liquidity. Liquidity is very important for
any organization dealing with money. Banks have to take proper care in hedging liquidity
risk while at the same time they should ensure that a good percentage of funds are invested in
257
higher return generating investing, so that banks can generate profit after ensuring sufficient
liquidity to the depositors.
In order to examine the overall efficiency of the selected public sector and private
sector banks using CAMEL technique, some selected ratios have been computed on the lines
of CAMEL model analysis over the study period for each parameter.
7.1 Capital Adequacy Analysis of Selected PSBs and Pvt.SBs

Capital adequacy analysis reflects the overall financial conditions of the banks and
also the ability of the management to meet the need for additional capital. For analyzing
capital adequacy of the selected banks, following ratios have been used:
i) Capital Risk Weighted Assets Ratio [CRAR (%)]
ii) Debt-Equity Ratio [D/E (Times)]
iii) Advances to Assets Ratio [Adv/TA (%)]
iv) Govt.-Securities to Total Investment Ratio [G-Sec/TI (%)]
The empirical findings of capital adequacy of the selected banks on the basis of the
above mentioned ratios are highlighted below.
7.1.1 Analysis of Capital Risk Weighted Assets Ratio (CRAR)

Capital adequacy has been computed as per Basel I by the following formula:
CRAR = [(Tier I capital + Tier II capital)/ Risk weighted Assets] 100
It is the ratio of banks capital to its risk. Positive CRAR ratio of a bank indicates
that the amount of loss can be absorbed by its total capital. As per Basel I norms, total capital
is segregated into two parts:Tier I capital = Equity Share Capital + Disclosed Reserves
Tier II capital = Undisclosed Reserves + General loss Reserves + Subordinate term debts
Table 7.1 shows the CRAR of selected public and private sector banks during the
period under study. The table shows that there is a fluctuating trend in CRAR for each of the
banks during the study period. A perusal of the table reveals that all the banks satisfied the
minimum CRAR of 9% as prescribed by the RBI during the study period. Mean CRAR of
Karur Vysya Bank (K.Vys) during the study period is 15.279, which is a healthy sign and the
bank occupied the highest average CRAR among the selected banks. Similarly, in case of
Federal Bank (Federal) the mean CRAR is found to be 15.022 percent and it occupied the
second highest position. Though the mean CRAR of ING Vysya bank is found to be lowest
(11.245) among all the selected banks, but it can be said that all the banks have satisfactory
financial position and the ability to meet the need of additional capital. If we consider the
258
consistency of performance regarding CRAR during the period, it is found that UBI occupies
the highest consistency as its CV (coefficient of variation) of CRAR is found to be 5.440 %
and the lowest consistency in terms of CRAR is occupied by Federal Bank as it has the
highest CV of CRAR is 27.728 %. If we compare the performance as a whole regarding
CRAR between the selected PSBs and Pvt.SBs, the mean score (13.418) of mean values of
CRAR for selected Pvt.SBs is higher as compared to the mean score (12.354) of mean values
of CRAR for selected PSBs, so it can be said that the selected Pvt.SBs are the better
performers as compared to the selected PSBs in terms of the healthy financial position and
the efficiency to meet the need of additional capital when demanded.
Table 7.1
Statement showing Capital Risk Weighted Assets Ratio (%) of selected public and
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
13.35
10.7
11.32
10.68
11.88
11.07
9.58
12.12
10.99
9.64
13.5
12.02
12.65
12.02
12.5
12.41
10.51
11.03
14.04
10.04
13.53
13.1
13.91
13.01
12.66
12.32
12.43
11.49
14.47
11.88
12.45
14.78
12.61
11.52
12.78
12.09
12.15
10.7
9.21
11.26
11.88
11.95
13.65
10.75
11.22
11.41
11.03
11.73
12.46
11.12
12.34
12.29
11.80
11.75
13.50
12.80
10.40
11.74
12.51
11.56
12.64
12.96
12.91
12.04
13.25
12.51
10.42
11.22
12.12
10.09
14.25
14.03
14.05
13.01
14.10
13.27
13.12
12.68
12.98
11.93
13.39 11.98
14.16 12.42
14.36 14.52
12.94 12.17
13.43 15.38
12.51 12.95
12.23 11.64
12.70 13.04
12.54 14.23
13.21 13.71
Mean Score
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
11.44
13.93
10.65
11.23
15.46
12.51
11.57
12.96
11.2
16.9
11.1
11.12
10.9
11.23
16.48
12.13
9.81
13.44
10.75
17.01
10.36
11.66
11.21
11.48
16.88
12.75
11.05
13.03
11.32
17.11
11.78
12.16
12.66
11.27
15.15
11.62
9.09
14.16
9.89
16.07
13.35
11.41
11.08
13.75
12.14
10.54
10.67
11.78
13.02
14.79
11.69
13.08
11.57
13.43
13.24
12.54
10.56
11.03
11.08
14.51
14.92
13.60
13.73
22.46
12.80
11.91
10.20
12.17
13.80
12.58
15.53
15.69
13.69
20.22
14.48
12.55
11.65
13.48
14.76
14.92
19.41 19.54
17.44 16.22
15.80 12.65
18.36 16.79
15.89 13.72
15.33 15.89
14.91 12.94
12.37 13.33
15.39 14.01
14.49 14.41
Mean Score
259
2010
-11
Mean
CV%
12.931
12.841
13.178
11.989
13.070
12.334
11.351
11.845
12.555
11.444
12.354
13.912
13.631
12.394
15.022
14.624
12.777
11.245
12.775
12.522
15.279
13.418
6.036
9.547
8.290
7.116
8.893
5.440
9.961
6.568
12.649
11.611
24.195
16.060
13.253
27.728
11.017
12.754
14.883
7.301
15.215
9.565
7.1.2 Analysis of Debt-Equity Ratio

Debt-Equity Ratio = (Total Borrowings + Total Deposits)/ Net Worth
While calculating net worth revaluation reserves & miscellaneous expenses not
written off have been deducted from the addition of equity share capital, preference share
capital and reserves and surplus.
Debt-Equity ratio is generally referred in capital structure decision as well as in the
legislation dealing with the capital structure decision. This ratio indicates the debt component
in terms of capital investment.
Table 7.2 shows the debt-equity ratio of selected public and private sector banks in
India during the period 2001-02 to 2010-11. The table clearly reveals that there is a
fluctuating trend in debt-equity ratio for each of the banks during the study period.
Internationally a debt-equity ratio of 50 times is considered to be healthy for banking sector.
This table shows that the debt-equity ratio for all the selected banks is below 50. This
indicates that all banks are low-geared and have scope to increase the debt component to their
capital structure. UCO Bank has the highest mean of debt-equity ratio during the study period
among the selected banks followed by SB and CBI. On the other hand lowest debt-equity
ratio is observed for ICICI Bank. It is evident from the debt-equity ratios of the selected
banks that all the banks are operating with lower risk and they have ample scope for
improvement of resource base as per international standard. If we consider the consistency of
performance regarding utilization of debt components of the capital structure during the
period, it is found that J&K Bank occupied the highest consistency as its CV of debt-equity
ratio is found to be 4.676 % and the lowest consistency in terms of debt-equity ratio is
occupied by Federal Bank as it has the highest CV of debt-equity ratio is 42.906 %. If we
compare the performance as a whole regarding debt-equity ratio between the selected PSBs
and Pvt.SBs, the mean score (17.672) of mean values of debt-equity ratio for selected PSBs is
higher as compared to the mean score (13.213) for the selected Pvt.SBs, so it can be said that
the selected PSBs are the better performers as their capital structure is high geared as
compared to that of the selected Pvt.SBs.
260
Table 7.2
Statement showing Debt-Equity Ratio of selected public and private sector banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
18.38
19.09
16.33
22.16
18.90
18.91
23.72
20.27
17.97
9.87
17.75
18.96
15.27
19.34
17.40
17.61
21.17
19.46
14.50
26.33
16.41
17.80
14.39
18.84
16.59
16.68
18.83
22.47
13.59
22.23
16.04
12.97
14.74
18.99
15.86
17.67
18.65
21.20
14.60
24.06
14.86
13.48
12.55
20.03
16.38
17.13
19.41
19.05
9.88
22.70
15.18
13.59
14.57
21.46
13.90
17.23
22.05
22.06
11.54
25.29
12.02
13.96
14.12
14.84
14.91
14.78
18.64
22.48
13.80
27.89
14.26
15.16
15.93
15.22
16.46
16.87
20.60
24.21
13.69
26.63
12.32
10.03
22.01
20.59
13.97
16.48
13.51
16.06
21.78
10.43
11.32
10.95
19.26
20.84
11.99
14.67
14.32
14.50
21.67
9.65
11.82
12.15
18.88
20.97
11.90
16.88
15.31
13.74
21.17
8.45
10.34
9.10
13.83
21.26
13.19
16.55
18.89
11.33
18.66
8.89
9.03
11.07
14.83
14.79
13.20
17.94
14.16
12.08
14.95
8.92
11.42
11.05
18.81
14.88
12.85
17.26
14.74
11.67
16.95
9.00
6.62
9.16
10.63
6.80
12.87
14.92
14.16
12.44
13.08
10.82
6.29
9.93
12.49
7.62
12.96
14.40
15.88
12.98
14.07
11.20
15.487
15.618
15.038
18.716
16.235
17.097
20.277
21.474
13.779
23.001
17.672
9.099
10.061
15.195
14.455
12.882
15.215
14.673
12.982
17.429
10.136
13.213
12.229
14.635
8.258
12.575
8.424
6.015
9.569
7.656
15.599
22.349
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
13.75 16.21
15.16 16.02
16.85 15.61
17.72 18.56
16.57 15.38
17.20 16.90
22.03 17.68
22.96 20.58
15.19 13.04
24.70 20.32
Mean Score
5.74 6.08
8.38 8.79
9.88 11.34
8.02 8.79
12.73 13.16
13.20 9.85
12.67 13.09
13.33 11.70
15.72 16.25
12.19 11.82
Mean Score
29.331
12.103
27.993
42.906
4.676
15.750
12.058
11.380
18.479
13.217
7.1.3 Analysis of Advances to Assets Ratio

Advances to Assets Ratio = Total Advances/ Total Assets.
This ratio indicates the proportion of loans and advances deployed to the total funds.
Higher the ratio better is the availability of funds for loans and advances out of their total
assets and vice versa. Advances to Assets ratio of selected banks for the period 2001-02 to
2010-11 are shown in the Table 7.3. A look into the percentages of advances to assets as
shown in the Table 7.3 reveals that none of the selected banks followed any definite trend
during the period of study. This ratio is found to be highest among the banks in case of Karur
Vysya Bank for the period 2001-02 to 2010-11. BOI occupies first position among the public
sector banks. HDFC Bank and AXIS Bank followed conservative policy in this matter. It is
also evident from the table that there is no significant difference in the ratio maintained by the
selected banks over the years. If we consider the consistency of performance regarding the
261
percentage of loans and advances to the deployment of total funds, it is found that BOI
occupies the highest consistency as its CV of advances to assets ratio is found to be 5.710 %
and the lowest consistency in terms of advances to assets ratio is occupied by SBI as it has
the highest CV of advances to assets ratio is 21.127%. If we compare the performance as a
whole regarding advances to assets ratio between the selected PSBs and Pvt.SBs, the mean
score (54.738) of mean values of advances to assets ratio for selected PSBs is higher as
compared to the mean score (52.905) of selected Pvt.SBs, so it can be said that the selected
PSBs are the better performers as they are providing more and more loans and advances out
of their total funds as compared to that of the selected Pvt.SBs.
Table 7.3
Statement showing Advances to Assets Ratio (%) of selected public and private sector
banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
34.69
47.14
47.47
54.88
45.87
48.19
40.46
46.87
43.88
40.81
36.65
46.66
46.26
55.64
49.32
49.97
40.56
47.35
46.13
45.61
38.73
46.15
41.83
54.04
47.86
50.46
36.00
43.72
47.99
47.09
44.01
47.85
45.85
58.46
54.78
55.38
39.77
51.29
46.79
50.66
52.98
51.37
52.84
58.05
59.80
59.89
50.19
59.71
56.97
60.44
59.54
59.47
58.42
60.02
59.35
60.76
55.69
57.88
59.70
62.77
57.76
60.04
59.41
63.45
59.40
59.92
58.89
59.79
60.16
61.34
56.25
62.65
63.20
63.37
62.93
59.97
57.89
62.59
60.84
61.62
45.18
28.64
37.23
51.15
43.70
54.62
41.22
44.02
49.29
48.14
49.88
38.64
36.61
50.96
47.70
54.01
48.39
42.09
47.36
54.13
49.59
41.94
38.77
50.95
43.79
51.78
53.39
44.13
45.35
56.61
54.52
49.71
41.34
52.45
47.16
57.61
59.00
50.19
56.61
58.59
58.14
47.70
44.87
56.85
54.76
52.83
61.02
52.11
58.83
61.67
56.83
51.45
50.34
59.38
59.62
52.97
62.10
58.89
58.00
63.55
56.43
47.63
54.45
58.16
57.65
55.01
57.36
56.06
61.17
64.61
57.56
53.95
55.21
57.64
55.53
29.27
52.59
51.67
58.14
61.02
50.243
54.824
54.196
58.988
56.650
56.966
49.898
56.243
54.266
55.105
54.738
53.125
47.391
47.525
56.134
51.596
52.354
55.019
50.729
55.915
59.257
52.905
21.127
13.880
15.397
5.710
11.935
9.759
19.523
14.946
13.073
14.847
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
59.99 61.84
62.91 63.99
62.89 63.81
61.28 60.68
63.96 63.22
61.14 63.98
57.69 61.85
65.02 68.21
60.75 59.44
60.08 60.63
Mean Score
49.86 53.26
56.56 57.68
57.76 58.67
61.71 62.10
54.19 51.86
58.10 57.34
54.63 60.50
53.40 54.74
61.97 62.43
61.14 63.12
Mean Score
262
8.139
18.780
18.437
7.880
11.030
16.033
11.818
11.078
11.210
8.564
7.1.4 Analysis of Government Securities (G-Sec) to Total Investment Ratio

G-Securities to Total Investment Ratio = [(Investment in government securities in India +
Investment in government securities outside India)/ Total Investment] 100
Higher G-Sec to total investment ratio indicates the percentage of risk-free
investment in banks investment portfolio. However, it may affect the return on investment
because of lower return from Government Securities (G-Sec).
G-Sec to Total Investment ratio of the selected banks for the period 2001-02 to
2010-11 are shown in the Table 7.4. Data in Table 7.4 indicate that all the selected private
sector and public sector banks followed a conservative policy showing a preference towards
risk-free securities to other investment avenue. Among the selected banking companies, SB
had the highest investment in G-Securities than other during the period 2001-02 to 2010-11
followed by SIB, CB and SBI. New private sector banks showed comparatively less
conservative policy among the banks selected for this purpose, though average investment in
G-Sec exceeds 50% for all. It is also worth noting that highest proportion of investment in GSec is found at the middle and end of the study period which indicates the banks tendency
towards investment in risk-free securities.
While considering the consistency of performance regarding this ratio, it is found
that SB occupies the highest consistency as its CV of G-Sec to total investment ratio is found
to be 3.151% and the lowest consistency in terms of proportionate investment in G-Sec out of
the total investment is occupied by HDFC Bank as it has the highest CV of G-Sec to total
investment ratio is 22.559%. If we compare the performance as a whole regarding G-Sec to
total investment ratio between the selected PSBs and Pvt.SBs, the mean score (79.860) of
mean values of G-Sec to total investment ratio for selected PSBs is higher as compared to the
mean score (72.571) of selected Pvt.SBs, so it can be said that the selected PSBs are the
better performers as they are adopting risk-free investment policy.
263
Table 7.4
Statement showing Govt.-Securities to Total Investment Ratio (%) of selected public
and private sector banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
80.83
68.46
64.46
67.62
71.37
69.67
69.59
81.86
62.31
70.48
83.61
74.48
72.99
66.37
76.52
72.17
73.23
85.99
68.61
71.88
84.85
78.52
73.88
69.24
78.60
70.93
78.18
89.21
74.14
76.91
87.24
81.30
78.24
70.81
76.19
69.48
78.96
91.29
79.33
80.56
83.24
81.40
74.06
72.77
82.82
76.24
81.36
89.07
80.92
86.25
79.30
81.06
75.14
72.73
82.52
80.08
77.96
89.32
83.25
86.40
74.47
81.90
78.10
81.99
85.98
82.30
82.68
89.57
85.95
83.41
82.25
86.03
77.89
83.83
87.98
81.07
87.97
89.47
87.49
81.32
63.31
44.11
55.04
69.90
60.28
78.65
65.20
81.18
85.55
66.12
72.04
47.48
59.08
75.93
56.63
79.68
62.57
75.98
87.16
71.49
69.96
59.88
64.88
80.89
59.64
84.10
71.53
60.88
90.36
77.58
68.31
58.02
52.67
87.43
63.84
83.68
82.69
73.93
91.87
83.00
71.57
69.14
54.67
90.54
70.61
84.72
85.83
73.10
89.66
80.99
74.15
73.76
60.74
85.85
74.83
82.31
89.33
78.58
85.46
83.82
67.76
64.11
59.58
77.78
79.20
81.99
77.58
71.78
78.52
86.07
61.59
88.68
59.55
68.44
70.84
77.87
88.21
66.13
66.62
80.91
81.193
80.156
76.169
75.470
81.709
75.981
80.623
87.788
80.052
79.459
79.860
65.367
66.792
58.870
77.637
64.878
80.888
77.552
70.382
82.989
80.350
72.571
4.691
6.531
7.291
10.198
7.238
6.549
7.900
3.151
11.495
7.392
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
77.32 78.82
84.88 83.54
82.45 84.49
88.63 80.71
90.10 85.01
78.40 79.46
88.69 87.62
85.69 86.41
91.53 86.99
73.68 83.69
Mean Score
56.71 48.27
87.10 75.64
61.09 61.39
71.07 68.54
60.49 52.42
81.92 73.96
78.24 74.33
64.06 58.19
78.60 76.09
86.07 87.45
Mean Score
12.294
22.559
6.272
10.633
13.244
4.135
11.939
10.946
9.526
8.545
From the above analysis it is observed that out of four measures of capital adequacy,
selected PSBs as a whole performed better in three measures as compared to that of the
selected Pvt.SBs during the study period (selected PSBs performed better in three parameters
of Capital Adequacy Analysis viz. Debt-Equity Ratio, Advances to Assets Ratio and Govt.
Securities to Total Investment Ratio than the private sector banks under study).
Now an attempt has been taken to rank the banks on the basis of their average values
of different measures of Capital Adequacy. Table 7.5 shows the average value and rank of the
selected banks relating to different measures under Capital Adequacy.
264
Table 7.5
Statement showing Rank of the selected public and private sector banks under different
measures of Capital Adequacy
Ratios
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
Mean
Mean
Mean
Mean
Rank
Rank
Rank
Rank
G-Sec/TI (%)
Adv/TA (%)
D/E(Times)
CRAR (%)
12.931
12.841
13.178
11.989
13.070
12.334
11.351
11.845
12.555
11.444
13.912
13.631
12.394
15.022
14.624
12.777
11.245
12.775
12.522
15.279
8
9
6
16
7
15
19
17
12
18
4
5
14
2
3
10
20
11
13
1
15.487
15.618
15.038
18.716
16.235
17.097
20.277
21.474
13.779
23.001
9.099
10.061
15.195
14.455
12.882
15.215
14.673
12.982
17.429
10.136
9
8
12
4
7
6
3
2
15
1
20
19
11
14
17
10
13
16
5
18
50.243
54.824
54.196
58.988
56.650
56.966
49.898
56.243
54.266
55.105
53.125
47.391
47.525
56.134
51.596
52.354
55.019
50.729
55.915
59.257
17
10
12
2
4
3
18
5
11
8
13
20
19
6
15
14
9
16
7
1
81.193
80.156
76.169
75.470
81.709
75.981
80.623
87.788
80.052
79.459
65.367
66.792
58.870
77.637
64.878
80.888
77.552
70.382
82.989
80.350
4
8
13
15
3
14
6
1
9
10
18
17
20
11
19
5
12
16
2
7
[Source: Table 7.1, 7.2, 7.3 and 7.4]

It is revealed from the Table 7.5 that highest mean CRAR is found in case of Karur
Vysya Bank which is computed at 15.279. On the basis of this highest average value, the first
rank goes to K.Vys Bank. Accordingly second, third, fourth, fifth, sixth, seventh, eighth,
ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth,
eighteenth and nineteenth ranks are given to Federal Bank, J&K Bank, ICICI Bank, HDFC
Bank, BOB, CB, SBI, PNB, Indusind Bank, K.Bnk, OBC, SIB, AXIS Bank, UBI, BOI, SB,
UCO Bank and CBI respectively for the next consecutive highest mean CRAR. While the
twentieth or the last rank goes to ING Vys Bank for the lowest mean CRAR (11.245).
Table 7.5 also depicts that the UCO Bank has achieved the highest mean value
(23.001) of D/E ratio during the study period as compared to other nine selected PSBs and
ten selected Pvt.SBs. Accordingly, UCO Bank is given the 1st rank and the 2nd rank is
obtained by SB having the second highest average of D/E ratio (21.474) and the 3rd, 4th, 5th,
265
6th, 7th, 8th, 9th ,10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th and 20th rank go to the CBI,
BOI, SIB, UBI, CB, PNB, SBI, Indusind Bank, AXIS Bank, BOB, ING Vys Bank, Federal
Bank, OBC, K.Bnk, J&K Bank, K.Vys Bank, HDFC Bank and ICICI Bank for the next
eighteen mean values of D/E ratio.
From Table 7.5 it is also seen that amongst the ten selected PSBs and ten selected
Pvt.SBs, the mean advances to total assets ratio of K.Vys Bank is the highest which is
computed at 59.257 and the banks occupies 1st rank position, followed by BOI, UBI, CB, SB,
Federal Bank, SIB, UCO Bank, ING Vys Bank, PNB, OBC, BOB, ICICI Bank, Indusind
Bank, J&K Bank, K.Bnk, SBI, CBI and AXIS Bank while the average advances to total
assets ratio in HDFC Bank is least (47.391) and is given the last rank.
Table 7.5 also highlights that on an average, the Govt.-security to total investments
ratio in SB is 87.788 which is highest as compared to other selected PSBs and Pvt.SBs and
therefore, SB achieves the first rank position, leaving the second position to SIB for the
second highest mean of Govt.-security to total investments ratio (82.989) and the third,
fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth,
fifteenth, sixteenth, seventeenth, eighteenth and nineteenth rank position go to CB, SBI,
Indusind, CBI, K.Vys Bank, PNB, OBC, UCO Bank, Federal Bank, ING Vys Bank, BOB,
UBI, BOI, K.Bnk, HDFC Bank, ICICI Bank and J&K Bank for the next lowest mean values
of Govt.-security to total investments ratio of 81.709, 81.193, 80.888, 80.623, 80.350, 80.156,
80.052, 79.459, 77.637, 77.552, 76.169, 75.981, 75.470, 70.382, 66.792, 65.367 and 64.878
respectively and the last rank position goes to AXIS Bank for the least average (58.870) of
Govt.-security to total investments ratio.
It is, thus, evident from the above that none of the specific banks selected for this
study showed consistently good performance in all the four measures of capital adequacy.
Now we look at the overall rank of the banks in capital adequacy. For assigning final rank,
first we add all the ranks occupied by individual bank based on mean values of four measures
of capital adequacy and 1st rank is given to the bank whose total score is the lowest, then the
second lowest one and so on.
266
Table 7.6
Statement showing Composite Rank and Final Rank of the selected public and private
sector banks based on different measures of Capital Adequacy
Banks
Nature
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Rank in mean
Composite
Final Rank
D/E
Rank
CRAR (%)
Adv/TA (%) G-Sec/TI (%)
(Times)
8
9
17
4
38
9.5
9
8
10
8
35
6
6
12
12
13
43
12
16
4
2
15
37
7.5
7
7
4
3
21
1
15
6
3
14
38
9.5
19
3
18
6
46
13
17
2
5
1
25
2
12
15
11
9
47
14
18
1
8
10
37
7.5
4
20
13
18
55
17
5
19
20
17
61
19
14
11
19
20
64
20
2
14
6
11
33
5
3
17
15
19
54
15.5
10
10
14
5
39
11
20
13
9
12
54
15.5
11
16
16
16
59
18
13
5
7
2
27
3.5
1
18
1
7
27
3.5
[Source: Table 7.5]

From the Table 7.6, on the basis of the composite score or composite rank total of
ten selected PSBs and ten selected Pvt.SBs, the CB is given the 1st rank position for
occupying the lowest composite score of 21. Similarly the SB is given the 2nd rank position
for the second lowest composite rank total of 25. But in the cases of SIB and K.Vys Bank the
composite rank total is same (i.e.27) and their final rank is computed at 3.5 for having the
equal composite rank total of 27. However, the composite rank total of Federal Bank under
Pvt.SBs and PNB under PSBs are 33 and 35 respectively, so their final ranks are assigned as
5th and 6th respectively. It is also highlighted from the table that incase of both BOI and UCO
Bank, the aggregate score is equal (i.e.37) and for this tie, the final rank is computed at 7.5
each. In the cases of SBI and UBI the composite rank total is same and their final rank is
computed at 9.5 each for having the equal composite rank total of 38. The 11th, 12th, 13th and
14th ranks for the next four aggregate of rank scores (i.e. 39, 43, 46 and 47 respectively) are
267
occupied by Indusind Bank, BOB, CBI and OBC respectively. In the cases of J&K Bank and
ING Vys Bank the composite rank total is same (i.e.54) and their final rank is computed at
15.5 each for having the equal composite rank total of 54. The 17th, 18th, 19th and 20th rank
positions for the last four aggregate values of rank scores based on different measures of
capital adequacy (i.e.55, 59, 61 and 64 respectively) are categorized by ICICI Bank, K.Bnk,
HDFC Bank and AXIS Bank. So, as a whole it can be said that most of the PSBs as
compared to the Pvt.SBs maintain better performance on overall capital adequacy measures
7.2 Analysis of Asset Quality of Selected PSBs and Pvt.SBs

Asset quality is another important parameter to assess the financial performance of
selected PSBs and Pvt.SBs under study. The quality of assets is very important to gauge the
strength of any banking company. One important objective of the financial sector reforms is
to improve the quality of loan assets and for this; assets have been classified into performing
and non-performing assets. The RBI gradually reduced the time of segregating an asset into
performing or non-performing asset so that banks should take due attention in improving
asset quality. In this study the quality of assets has been examined with the help of following
three ratios:
i) Net NPAs to Total Assets [Net NPAs/TA (%))
ii) Net NPAs to Net Advances [Net NPAs/Net Adv (%)]
iii) Total Investments to Total Assets [TI/TA (%)]
7.2.1 Analysis of Net NPAs to Total Assets (%)

Net NPAs = Gross NPAs (Provisions on NPAs + Interest on suspense account)
When total assets are calculated, revaluations reserves are excluded. Table 7.7 shows
the net NPAs as a percentage of total assets of the selected PSBs and Pvt.SBs for the period
2001-02 to 2010-11. It is evident from the table that most of the selected banks made
significant improvement in terms of reduction of net NPAs as a percentage of total assets
during the period under consideration. Initially the ratio was high for most of the banks and
gradually it shows a declining trend, which advocate in favor of the efficacy of the banks in
managing quality of loan assets. For instance, in case of BOB the ratio declined from a high
of 2.70% in 2001-02 to 0.20% in 2008-09. In case of BOI, It declined from 3.30% in 2001-02
to 0.28% in 2008-09 and in case of CB it also declined from 1.78% in 2001-02 to 0.50% in
2007-08. The performance of new private sector banks in this regard is better than that of
selected public sector banks or old private sector banks. More specifically, ICICI Bank,
268
HDFC Bank and AXIS Bank performed well over the years during the period of study. If we
compare the average or mean value of this ratio among the selected banks it is found that
lowest mean value (0.175) is found in case of HDFC Bank, followed by AXIS Bank (0.481),
OBC (0.534), J&K Bank (0.572), PNB (0.673), K.Vys Bank (0.864), SB (0.931), BOB
(0.936), CB (0.974) and ING Vys Bank (0.986). For all other selected banks considered in
this study this ratio is more than 1. Though there is no definite standard for this ratio, but it is
expected to reduce the ratio to the maximum possible extent and approximately equal to zero.
In considering the consistency of performance regarding this ratio, it is found that
SBI occupies the highest consistency as its CV of net NPAs to total assets ratio is found to be
28.17% and the lowest consistency is noted in case of Federal Bank as it has the highest CV
of net NPAs to total assets ratio is 121.41%. If we compare the performance as a whole
regarding net NPAs to total assets ratio between the selected PSBs and Pvt.SBs, the mean
score (1.055) of mean values of net NPAs to total assets ratio for selected PSBs is higher as
compared to the mean score (0.924) for selected Pvt.SBs. So it can be said that the selected
Pvt.SBs are the better performers in reducing NPAs or in increasing quality of loan assets. In
spite of significant declining of this ratio, it remained very high even at the end of March
2011 for all banks except new private sector banks. It is very necessary for the banks to
reduce it to the maximum possible extent and for this bank should increase the efficiency of
loan recovery management.
269
Table 7.7
Statement showing Net NPAs to Total Assets (%) of selected public and private sector
banks
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
1.96
2.48
2.70
3.30
1.78
3.02
3.23
NA
1.41
2.39
1.64
1.77
2.22
2.98
1.77
2.45
2.74
2.06
0.66
2.00
1.33
0.44
2.07
2.43
1.38
1.45
2.01
2.13
0.00
1.72
1.16
0.09
0.65
1.64
1.02
1.46
1.19
0.82
0.61
1.49
0.99
0.14
0.46
0.86
0.66
0.94
1.30
0.51
0.28
1.27
0.93
0.45
0.35
0.57
0.56
0.59
0.94
0.44
0.29
1.34
1.03
0.38
0.27
0.33
0.50
0.10
0.86
0.58
0.59
1.22
0.99
0.11
0.20
0.28
0.69
0.20
0.72
0.49
0.39
0.73
2.64
0.14
0.83
2.52
0.76
2.30
1.72
3.09
2.83
2.25
1.14
0.07
0.46
1.47
0.65
1.41
1.39
2.19
2.06
1.29
0.90
0.12
0.57
1.16
0.67
1.56
1.26
1.14
2.15
0.96
0.42
0.21
0.44
0.54
0.51
1.11
1.08
0.61
1.09
0.50
0.58
0.22
0.36
0.26
0.68
1.31
0.59
0.72
0.57
0.14
0.87
0.22
0.23
0.13
0.62
1.25
0.40
0.55
0.20
0.12
1.20
0.34
0.22
0.18
0.76
0.65
0.65
0.51
0.66
0.15
1.208
0.673
0.936
1.375
0.974
1.147
1.378
0.931
0.534
1.397
1.055
1.044
0.175
0.481
1.132
0.572
1.363
0.986
1.298
1.323
0.864
0.924
28.17
118.61
105.06
82.82
50.81
83.78
70.57
74.97
68.95
37.86
NA
0.14
1.29
4.39
0.82
3.60
1.89
2.59
3.25
3.03
1.03 1.01
0.33 0.54
0.22 0.22
0.80 0.55
0.68 0.70
0.49 0.76
0.40 0.40
0.69 0.66
0.53 0.58
0.70 1.12
Mean Score
1.06 0.59
0.18 0.11
0.23 0.17
0.29 0.37
0.15 0.11
0.29 0.16
0.65 0.24
0.70 0.88
0.24 0.18
0.14 0.05
Mean Score
67.24
44.95
72.41
121.41
43.66
73.80
57.37
73.60
87.30
120.37
7.2.2 Analysis of Net NPAs to Net Advances (%)

Net NPAs as a percentage of net advances is considered to be the most standard
measure of asset quality. Table 7.8 shows the net NPAs as a percentage of net advances of
the selected PSBs and Pvt.SBs for the period 2001-02 to 2010-11. As per international norms,
a ratio of 1% is considered to be tolerable and desirable. As per this norm, only HDFC Bank
among the selected Pvt.SBs conformed to international standard for the period 2001-02 to
2010-11. All other selected banks fail to satisfy this standard during the study period. For the
purpose of CAMEL rating, the average performance of the selected banking companies over
the study period. As shown in the Table 7.8 the lowest mean ratio or best performance is
achieved by the HDFC Bank (0.374) followed by OBC (1.036) and AXIS Bank (1.102). For
other selected banks, the average ratio is significantly higher than the international standard.
270
While considering the consistency of performance regarding this ratio, it is found

that HDFC Bank occupies the highest consistency as its CV of the net NPAs as a percentage
of net advances ratio is found to be 39.84% and the lowest consistency is observed in case of
Federal Bank as it has the highest CV of the net NPAs as a percentage of net advances ratio is
144.33%. If we compare the performance as a whole regarding net NPAs as a percentage of
net advances between the selected PSBs and Pvt.SBs, the mean score (2.080) of mean values
of percentage of net advances ratio for selected PSBs is higher as compared to the mean score
(1.880) for selected Pvt.SBs. So it can be said that the selected Pvt.SBs are the better
performers in reducing the amount of NPAs from the amount of loans and advances. It is also
evident from the table that this ratio declined for all the selected banks over the years and
performance of NPA management or loan recovery management of new private sector banks
found better than that of other selected banks considered here.
271
Table 7.8
Statement showing Net NPAs Ratio (Net NPAs to Net Advances) of selected public and
Years
2001
-02
2002 2003 2004 2005 2006 2007 2008 2009 2010

Mean
-03
-04
-05
-06
-07
-08
-09
-10
-11
CV%
5.63
5.32
5.06
6.02
3.89
6.26
7.98
4.63
3.20
5.45
4.50
3.86
3.72
5.37
3.59
4.91
6.74
4.29
1.40
4.36
3.48
0.98
2.99
4.50
2.89
2.87
5.57
2.58
0.00
3.65
2.65
0.20
1.45
2.80
1.88
2.64
2.98
1.59
1.29
2.93
1.87
0.29
0.87
1.49
1.12
1.56
2.59
0.86
0.49
2.10
1.56
0.76
0.60
0.95
0.94
0.96
1.70
0.76
0.49
2.14
1.78
0.64
0.47
0.52
0.84
0.17
1.45
0.97
0.99
1.98
1.79
0.17
0.31
0.44
1.09
0.34
1.24
0.77
0.65
1.18
53.42
129.25
105.26
86.94
63.76
93.32
83.99
80.17
83.48
52.55
ICICI
5.48
HDFC
0.50
AXIS
2.74
Federal 11.66
J&K
1.88
Indusind 6.59
ING Vys 4.59
K.Bnk
5.90
SIB
6.64
K.Vys
6.33
5.21
0.37
2.39
4.95
1.58
4.25
3.55
7.36
5.98
4.20
2.21
0.16
1.29
2.89
1.48
2.72
2.6
4.98
4.55
2.32
1.65
0.24
1.39
2.21
1.41
2.71
2.13
2.29
3.81
1.66
0.72
0.44
0.98
0.95
0.92
2.09
1.76
1.18
1.86
0.81
1.02
0.43
0.72
0.44
1.13
2.47
0.70
1.22
0.98
0.23
1.55
0.47
0.42
0.23
1.07
2.27
0.79
0.98
0.33
0.18
2.09
0.63
0.40
0.30
1.38
1.14
1.20
0.98
1.13
0.25
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
272
1.72 1.63
0.53 0.85
0.34 0.35
1.31 0.91
1.06 1.11
0.81 1.19
0.69 0.65
1.07 0.97
0.87 0.98
1.17 1.84
Mean Score
2.12 1.11
0.31 0.19
0.40 0.29
0.48 0.60
0.28 0.20
0.50 0.28
1.20 0.39
1.31 1.62
0.39 0.29
0.23 0.07
Mean Score
2.661
1.360
1.616
2.431
1.841
2.171
3.159
1.849
1.036
2.680
2.080
2.316
0.374
1.102
2.471
1.133
2.502
1.891
2.782
2.596
1.628
1.880
72.25
39.84
78.48
144.33
48.01
74.04
71.50
85.37
94.11
129.83
7.2.3 Analysis of Total Investments to Total Assets (%)

The ratio of total investments to total assets is used as a tool to measure the
percentage of total assets locked up in investment. Alternatively, it indicates the extent of
development of assets in investment as against advances. This ratio is used as a proxy to
measure the quality of assets.
Table 7.9 shows the ratio of total investments to total assets (%) of the selected
banking companies for the period 2001-02 to 2010-11. This table clearly reveals that this
ratio has fluctuated in case of few selected banks and gradually increases in case of the rest of
the selected banks during the study period. This implies the lack of credit facility provided in
the market. Highest average ratio is found in case of Karnataka Bank (38.841) followed by
HDFC Bank (37.084) and AXIS Bank (35.896). For all other banks, this ratio is not
significantly different from each other.
Whereas consistency of performance regarding this ratio is concerned, it is found
that Indusind Bank occupies the highest consistency as its CV of the total investments as a
percentage to total assets is found to be 7.46% and the lowest consistency is noticed in case
of BOB as it has the highest CV of the total investments as a percentage to total assets ratio is
28.79%. If we compare the performance as a whole regarding total investments as a
percentage of total assets between the selected PSBs and Pvt.SBs, the mean score (31.515) of
mean values of this ratio for selected PSBs is lower as compared to the mean score (32.538)
for selected Pvt.SBs. So it can be said that the selected Pvt.SBs are the better performers in
converting the amount of total assets locked up in investments as compared to that of the
selected PSBs.
So from the above analysis it is observed that as a whole selected Pvt.SBs are the
better performers under all three measures of asset quality as compared to that of the selected
PSBs.
273
Table 7.9
Statement showing Total Investments to Total Assets (%) of selected public and private
sector banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
41.68
38.69
33.61
31.64
32.16
34.73
40.10
37.51
42.54
39.20
45.85
39.47
39.49
31.89
37.12
37.94
45.61
40.14
43.49
40.49
45.53
41.17
44.67
32.01
35.96
38.48
49.58
37.94
40.95
40.21
42.86
40.14
39.16
30.20
34.50
31.48
44.95
39.09
33.92
34.92
32.91
28.26
30.97
28.31
27.84
29.08
38.35
28.27
28.53
31.75
26.33
27.82
24.41
25.03
27.25
27.25
29.83
28.26
26.79
26.08
26.26
27.13
24.43
23.38
27.59
27.26
25.38
26.21
26.40
27.01
28.61
25.67
23.14
23.33
26.30
26.71
29.16
23.44
25.30
26.32
34.47
50.46
46.12
37.02
39.14
24.35
33.56
44.66
33.27
30.11
33.20
44.00
39.98
37.30
40.12
25.60
31.39
47.84
39.32
29.94
34.13
45.52
32.27
36.44
39.85
29.71
30.95
46.13
42.81
30.57
30.11
37.62
37.82
34.48
37.22
26.05
26.54
36.37
33.06
28.14
28.46
38.63
43.29
30.39
34.00
30.70
26.08
37.11
25.30
25.51
26.48
33.50
36.72
28.03
25.80
28.15
23.48
31.12
25.12
25.94
27.88
37.09
30.76
30.84
26.74
28.50
24.64
32.71
26.75
24.18
27.17
32.09
31.36
31.19
28.48
29.27
32.94
39.21
29.81
27.64
34.227
31.970
30.175
27.462
29.994
30.555
35.662
30.701
32.006
32.395
31.515
30.833
37.084
35.896
32.384
34.315
28.144
28.874
38.841
31.066
27.946
32.538
25.61
21.53
28.79
13.52
15.00
16.00
25.52
23.29
23.58
18.51
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
28.08 24.16
26.20 25.15
21.98 19.88
24.40 24.45
26.32 24.90
27.88 24.75
27.68 25.98
23.74 22.40
26.04 26.08
31.69 26.27
Mean Score
33.27 33.15
26.35 25.57
30.99 29.66
29.89 28.25
32.80 39.00
29.41 29.69
30.91 28.25
36.96 36.31
28.02 27.19
30.02 27.39
Mean Score
10.16
21.76
16.17
11.11
16.38
7.46
12.33
14.47
19.43
7.95
Now a ranking is done of the selected banks on the basis of average value of
different measures of asset quality. Table 7.10 shows the average value and rank based on
different measures of asset quality of the selected banks.
274
Table 7.10
measures of Asset Quality
Ratios
Mean
Net NPAs/
Rank
Banks
TA (%)
SBI
1.208
14
PNB
0.673
5
BOB
0.936
8
BOI
1.375
18
CB
0.974
9
UBI
1.147
13
CBI
1.378
19
SB
0.931
7
OBC
0.534
3
UCO
1.397
20
ICICI
1.044
11
HDFC
0.175
1
AXIS
0.481
2
Federal
1.132
12
J&K
0.572
4
Indusind
1.363
17
ING Vys
0.986
10
K.Bnk
1.298
15
SIB
1.323
16
K.Vys
0.864
6
Mean
Net NPAs/
Net Adv (%)
2.661
1.360
1.616
2.431
1.841
2.171
3.159
1.849
1.036
2.680
2.316
0.374
1.102
2.471
1.133
2.502
1.891
2.782
2.596
1.628
Rank
Mean
TI/TA (%)
Rank
17
5
6
13
8
11
20
9
2
18
12
1
3
14
4
15
10
19
16
7
34.227
31.970
30.175
27.462
29.994
30.555
35.662
30.701
32.006
32.395
30.833
37.084
35.896
32.384
34.315
28.144
28.874
38.841
31.066
27.946
6
10
15
20
16
14
4
13
9
7
12
2
3
8
5
18
17
1
11
19
A look into the ranks of the selected banks according to different measures of asset
quality, Table 7.10 shows that new private sector banks have occupied better quality of assets
among the selected banks. The lowest mean net NPAs as a percentage of total assets are
found in case of HDFC Bank which is computed at 0.175. On the basis of this average value
of net NPAs/TA (%), the first rank goes to HDFC Bank. Accordingly the second, third,
fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth,
fifteenth, sixteenth, seventeenth, eighteenth and nineteenth ranks are given to AXIS Bank,
OBC, J&K Bank, PNB, K.Vys Bank, SB, BOB, CB, ING Vys Bank, ICICI Bank, Federal
Bank, UBI, SBI, K.Bnk, SIB, Indusind Bank, BOI and CBI respectively for the next
consecutive lowest mean net NPAs as a percentage of total assets ratio. While the twentieth
or last rank goes to UCO Bank for having the highest mean (1.397) of net NPAs/TA.
275
Table 7.10 also depicts that the HDFC Bank has achieved the lowest mean value
(0.374) of net NPAs as a percentage of total advances ratio during the study period as
compared to other nine selected Pvt.SBs and ten selected PSBs. Accordingly, HDFC Bank is
given the 1st rank position and the 2nd rank position is obtained by OBC of PSBs having the
second lowest average value of net NPAs as a percentage of total advances ratio (1.036), and
the 3rd, 4th, 5th, 6th, 7th, 8th, 9th ,10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th and 20th rank
go to the AXIS Bank, J&K Bank, PNB, BOB, K.Vys Bank, CB, SB, ING Vys Bank, UBI,
ICICI Bank, BOI, Federal Bank, Indusind Bank, SIB, SBI, UCO Bank, K.Bnk and CBI for
the next lowest consecutive eighteen mean values of net NPAs as a percentage of total
advances ratio.
From Table 7.10 it is also observed that amongst the ten selected PSBs and ten
selected Pvt.SBs, the mean of total investments to total assets ratio of K.Bnk is the highest
which is computed at 38.841and the company occupies 1st rank position, followed by HDFC
Bank, AXIS Bank, CBI, J&K Bank, SBI, UCO Bank, Federal Bank, OBC, PNB, SIB, ICICI
Bank, SB, UBI, BOB, CB, ING Vys Bank, Indusind Bank and K.Vys Bank while the average
total investments to total assets ratio in BOI is least (27.462) and is given the last rank.
Indeed, net NPAs as a percentage of total assets and net NPAs as a percentage of
total advances ratio are most appropriate measures of asset quality though researchers also
used total investments as a percentage of total assets as an important indicator of asset quality
while applying CAMEL Model. It is, thus, evident from the above that none of the banks
selected for this study showed consistently good performance in all the three measures of
asset quality except new private sector banks, specifically HDFC Bank and AXIS Bank
showed very remarkable performance in respect of quality of assets. For other selected banks,
the performance was not up to the mark. Now an attempt is made to rank the banks under
study on the basis of different asset quality measures achieved by them and shown in Table
7.11.
276
Table 7.11
sector banks based on different measures of Asset Quality
Rank in mean
Net NPAs/
Net Adv
(%)
17
Composite
Rank
Final Rank
37
13.5
10
20
15
29
6.5
PSB
18
13
20
51
20
CB
PSB
16
33
UBI
PSB
13
11
14
38
15
CBI
PSB
19
20
43
16.5
SB
PSB
13
29
6.5
OBC
PSB
14
UCO
PSB
20
18
45
18
ICICI
Pvt.SB
11
12
12
35
11.5
HDFC
Pvt.SB
AXIS
Pvt.SB
Federal
Pvt.SB
12
14
34
10
J&K
Pvt.SB
13
Indusind
Pvt.SB
17
15
18
50
19
ING Vys
Pvt.SB
10
10
17
37
13.5
K.Bnk
Pvt.SB
15
19
35
11.5
SIB
Pvt.SB
16
16
11
43
16.5
K.Vys
Pvt.SB
19
32
Banks
Nature
Net NPAs/
TA (%)
SBI
PSB
14
PNB
PSB
BOB
PSB
BOI
TI/TA
(%)

It is evident from Table 7.11 that on the basis of the composite score or composite
rank total among ten selected PSBs and ten selected Pvt.SBs, new private sector banks have
occupied first three positions in assets quality. Thus HDFC Bank is given the 1st rank position
for the lowest composite score of 4. Similarly the AXIS Bank is given the 2nd rank position
for the second highest composite rank total of 8 and the 3rd rank position is given to J&K
Bank for the composite rank total of 13. The 4th and 5th final ranks for the next two aggregate
of rank scores (i.e. 14 and 20 respectively) are occupied by OBC and PNB respectively. But
in the cases of BOB and SB the composite rank total is same (i.e.29) and their final rank is
computed at 6.5 for having the equal composite rank total of 29. However, the composite
rank total of K.Vys Bank, CB and Federal Bank are 32, 33 and 34 respectively, so their final
ranks are assigned as 8th, 9th and 10th respectively. It is also highlighted from the table that
incase of both ICICI Bank and K.Bnk, the aggregate score is equal (i.e. 35) and for this tie,
the final rank is computed at 11.5 each. In the cases of SBI and ING Vys Bank the composite
277
rank total is same and their final rank is computed at 13.5 each for having the equal
composite rank total of 37. The 15th rank for the next aggregate of rank scores (i.e.38) are
occupied by UBI. In the cases of CBI and SIB the composite rank total is same (i.e.43) and
their final rank is computed at 16.5 each for having the equal composite rank total of 43. The
18th, 19th and 20th ranks for the last three aggregate of rank scores (i.e. 45, 50 and 51
respectively) based on different measures of asset quality are occupied by UCO Bank,
Indusind Bank and BOI respectively. So, most of the selected Pvt.SBs as compared to the
selected PSBs maintained better performance on overall asset quality measures during the
study period.
It is, thus, evident from the analysis of asset quality that new private sector banks are
more cautious about the quality of their assets than the other banks selected for this study.
Indeed, the public sector banks operated their banking service in a regulated environment
prior to banking sector reforms. At that time much more important was given by them to the
economic well-being of weaker section, agricultural sectors etc. It is generally said that
advances to priority sector was one of the important causes of overdue. In the deregulated
environment the banks tried to reduce the overdue and made notable improvement. But still
the quantum of NPAs (both in absolute and relative terms) is significantly higher than that of
new private sector banks and as per international standard.
7.3 Analysis of Management Efficiency

Management is most important ingredient that ensures the sound functioning of
banks. With increased competition in the Indian banking sector, efficiency and effectiveness
have become the rule as banks constantly strive to improve the productivity of their
employees. In order to satisfy customers, banks maintained extended working hours, flexible
time schedules, outsourcing marketing etc. Another significant development has been made
in the operation of banks by using technology. Internet banking is a common phenomenon in
Indian banks. Banks are now moving from traditional banking to universal banking. In this
changing scenario the task of management is very challenging. For measuring the efficiency
and effectiveness of the selected banks, following three ratios have been used:
i) Business per Employee (BPE) = Total Business/ No. of employees
ii) Profit per Employee (PPE) = Profit after tax/ No. of employees
iii) Credit-Deposit Ratio (CDR) = [Advances and loans (Credit)/Total Deposits] 100
7.3.1 Analysis of Business per Employee

Improvement and enlargement of business (total of deposits and advances) is the
main function of banks. Increase in business per employee is an important indicator of
productivity of banks because employees are generally considered as input and business as
output of a bank.
278
Table 7.12
Statement showing Business per Employee (` in lakh) of the selected public and private sector banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
2001
-02
173.01
191.00
210.56
243.08
299.23
357.00
456.00
556.00
636.00
704.65
382.653
50.846
PNB
167.76
195.64
228.00
276.87
330.92
407.41
504.52
654.92
807.95
1017.80
459.179
62.204
BOB
222.76
237.67
253.00
316.00
396.00
555.00
710.00
914.00
981.00
1333.00
591.843
64.482
BOI
218.74
242.97
266.72
320.00
381.00
498.00
652.00
833.00
1011.00
1284.00
570.743
64.134
CB
214.88
250.11
297.58
351.12
441.57
548.76
609.41
780.17
982.58
1228.18
570.436
58.919
UBI
214.75
249.70
286.48
343.08
436.47
509.21
698.61
694.00
853.00
1043.00
532.830
52.494
CBI
148.77
167.85
181.51
206.89
240.46
303.85
400.99
560.28
711.76
835.17
375.753
65.377
SB
155.12
179.95
240.31
280.22
348.64
489.17
586.02
750.65
746.84
875.44
465.236
56.424
OBC
318.00
343.00
416.00
512.23
570.26
742.64
924.38
1142.43
1331.17
1419.50
771.961
53.206
UCO
134.00
197.00
249.00
321.00
387.00
464.00
580.00
732.00
901.00
62.100
ICICI
486.49
1120.00
1010.00
880.00
905.00
1027.00
1008.00
1154.00
765.00
503.400
522.403
909.049
22.270
HDFC
778.00
865.00
866.00
806.00
758.00
607.00
506.00
446.00
590.00
653.00
687.500
21.629
AXIS
896.00
926.00
808.00
1021.00
1020.00
1024.00
1117.00
1060.00
1111.00
1366.00
1034.900
14.617
Federal
199.24
270.00
327.00
366.00
431.00
544.00
640.00
750.00
813.00
923.00
526.324
46.969
J&K
264.00
287.00
345.00
435.00
516.00
585.00
596.00
500.00
731.00
856.00
511.500
37.139
Indusind
1587.91
1284.06
1079.95
925.78
880.18
1039.77
1062.67
836.00
837.46
843.98
1037.776
23.195
ING Vys
197.95
242.00
324.34
394.92
426.00
486.09
547.28
606.39
623.78
674.79
452.354
36.257
K.Bnk
247.24
275.32
320.23
380.90
478.29
524.00
589.00
649.00
727.00
771.00
496.198
37.815
SIB
218.00
265.00
306.00
352.00
422.00
508.00
600.43
645.00
771.00
918.00
500.543
46.124
K.Vys
219.00
288.00
330.00
387.00
439.00
489.00
604.00
638.00
789.00
511.800
666.794
44.681
279
1069.00
Mean Score
735.00
935.00
Mean Score
Table 7.12 shows the business per employee of the selected banking companies for the period
2001-02 to 2010-2011. It is evident from the table that most of the selected PSBs made
significant improvement in terms of business per employee over the years whereas it has been
fluctuated for most of the selected Pvt.SBs during the period under consideration. Higher the
ratio better is the productivity efficiency of the employees of the banks. This ratio is found
gradually increasing for most of the selected PSBs during the study period, which advocate in
favor of the efficacy of the management of the banks in increasing productivity as compared
to that of the selected Pvt.SBs. For instance, in case of SBI the ratio increased from 173.01 (`
in lakh) in 2001-02 to 704.65 (` in lakh) in 2010-11. In case of PNB, it also has increased
from 167.76 (` in lakh) in 2001-02 to 1017.80 (` in lakh) in 2010-11. The overall
performance of selected private sector banks in this regard is better than that of selected
public sector banks, more specifically new private sector banks. For instance, ICICI Bank,
Indusind Bank, AXIS Bank and Indusind Bank performed well as their average or mean
values of this ratio are found higher as compared to the rest of the selected banks. Highest
mean value (1037.776) of this ratio is occupied by Indusind Bank followed by AXIS Bank
(1034.900) and ICICI Bank (909.049). These top three banks belong under selected Pvt.SBs.
Lowest mean value of this ratio is occupied by CBI (375.753) under PSBs.
If we consider the consistency of performance regarding this ratio, it is found that
AXIS Bank is occupied the highest consistency as its CV of business per employee is found
to be 14.617% and the lowest consistency is noticed in case of CBI as it has the highest CV
of business per employee is 65.377%. If we compare the performance as a whole regarding
business per employee between the selected PSBs and Pvt.SBs, the mean score (522.403) of
mean values of business per employee for selected PSBs is lower as compared to the mean
score (666.794) for selected Pvt.SBs. So it can be said that the selected Pvt.SBs are the better
performers in increasing the productivity efficiency of the employees as compared to that of
the selected PSBs.
7.3.2 Analysis of Profit per Employee

To measure the productivity efficiency of the selected banks, another productivity
indicator is profit per employee. Improvement in profit per employee advocate efficiency of
the management in the matter of efficiency utilization of input (employee) in generating
output (profit). Table 7.13 shows profit per employee of the selected banks for the period
2001-02 to 2010-2011.
280
A look into the table reveals that there is a fluctuating trend in profit per employee
for all the selected banks during the study except PNB, because PNB under PSBs showed an
increasing trend of profit per employee throughout the period of study. First four highest
mean values of profit per employee are occupied by new private sector banks. Highest mean
value (9.833) of this ratio is occupied by ICICI Bank followed by AXIS Bank (9.277), HDFC
Bank (7.405) and Indusind Bank (6.651). All these banks are belonging to the group of
selected Pvt.SBs. Lowest mean value (1.624) of this ratio is occupied by CBI under PSBs.
If consistency of performance regarding this ratio is concerned, it is found that ICICI
Bank has occupied the highest consistency as its CV of profit per employee is found to be
18.73% and the lowest consistency is noticed in case of ING Vys Bank as it has the highest
CV of profit per employee is 84.26%. If we compare the performance as a whole regarding
profit per employee between the selected PSBs and Pvt.SBs, the mean score (3.395) of mean
values of profit per employee in selected PSBs is lower as compared to that of the mean score
(5.597) of this ratio in selected Pvt.SBs. So it can be said that the selected Pvt.SBs are the
better performers in terms of increasing the productivity efficiency of the employees in
relation to profit earned as compared to that of the selected PSBs.
281
Table 7.13
Statement showing Profit per Employee (` in lakh) of the selected public and private sector banks
Years
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
1.16
0.97
1.40
1.16
1.64
1.22
0.40
0.89
2.40
0.66
1.47
1.43
1.92
1.97
2.26
2.15
0.77
1.30
3.40
1.00
1.77
2.00
2.00
2.35
2.97
2.78
1.58
1.62
5.10
2.00
2.08
2.42
1.71
0.80
2.48
2.81
0.93
1.53
6.67
1.43
2.17
2.48
2.13
1.66
3.02
2.66
0.68
2.05
5.37
0.82
2.37
2.68
2.73
2.71
3.24
3.25
1.35
2.76
5.61
1.30
3.73
3.66
3.94
4.95
3.65
5.39
1.56
3.18
5.84
1.76
4.74
5.64
6.00
7.49
4.97
6.28
1.71
3.64
6.18
2.40
4.46
7.31
8.00
4.39
7.35
7.47
3.30
3.18
7.39
4.43
5.33
9.75
7.79
0.78
4.00
6.88
1.22
2.20
1.68
3.79
11.00
10.09
8.22
1.69
5.00
9.50
1.69
2.55
2.04
4.41
12.00
9.39
8.07
2.14
6.00
14.98
1.15
3.10
2.39
5.65
11.00
8.80
8.02
1.39
2.00
10.12
-0.73
3.35
0.24
3.75
10.00
7.39
8.69
3.54
3.00
1.56
0.17
4.05
1.37
4.65
9.00
6.13
7.59
4.43
4.00
2.61
1.66
4.00
2.69
4.87
10.00
4.97
8.39
5.30
5.00
2.62
2.68
5.00
3.59
5.82
11.00
4.18
10.00
6.90
5.00
3.49
3.03
5.00
4.00
5.98
9.00
5.98
12.00
6.01
7.00
6.51
3.88
3.00
5.00
8.05
282
2010
-11
3.85
8.35
11.00
6.20
9.76
7.50
3.96
3.99
9.04
4.19
Mean Score
10.00
7.37
14.00
7.26
8.00
8.24
4.53
4.00
5.00
9.09
Mean Score
Mean
CV%
2.780
3.694
4.083
3.368
4.134
4.151
1.624
2.414
5.700
1.999
3.395
9.833
7.405
9.277
3.944
4.900
6.651
1.928
3.625
2.800
5.606
5.597
46.60
68.77
79.31
67.39
61.82
55.41
70.97
44.50
33.01
66.54
18.73
27.96
22.89
60.42
36.57
63.52
84.26
26.29
56.29
31.42
7.3.3 Analysis of Credit-Deposit Ratio

This ratio measures the efficiency of the management in converting the deposits
available with the bank into loans and advances (credit). Higher the ratio better is the
efficiency of the management and vice versa. It is also known as the ratio of total advances to
total deposits. Credit-Deposit Ratios (CDR) of the selected PSBs and Pvt.PSBs are shown in
the Table 7.14. This table shows that none of the selected banking companies followed any
definite trend in CDR during the period under consideration. BOI among the selected PSBs
and ICICI Bank among the selected Pvt.SBs maintained very high and consistent
performance with this ratio throughout the study period. Thus ICICI Bank has occupied the
first position as it has the highest mean value (99.134) of credit-deposit ratio followed by BOI
(70.132), ING Vys Bank (69.825), K.Vys Bank (69.599), Indusind Bank (68.342) and so on.
Thus we can see that most of the selected private sector banks have occupied the highest
mean values of CDR as compared to rest of the selected banks. This indicates the attitude of
the management of the selected Pvt.SBs, specifically new private sector banks towards
aggressive policy in the tough competitive environment, whereas most of the selected PSBs
followed conservative policy.
In considering the consistency of performance regarding CDR, it is found that BOI
has occupied the highest consistency as its CV of CDR is found to be 5.87% and the lowest
consistency is noticed in case of SBI as it has the highest CV of profit per employee is
22.42%. If we compare the performance as a whole based on CDR between the selected
PSBs and Pvt.SBs, the mean score (63.984) of mean values of CDR for selected PSBs is
lower as compared to that of the mean score (67.336) for selected Pvt.SBs. So it can be said
that the selected Pvt.SBs are the better performers in increasing the productivity efficiency in
terms of converting deposits available with the bank into advances (credit) as compared to
that of the selected PSBs.
So from the above analysis it is observed that as a whole the selected Pvt.SBs are the
better performers under all three measures of management efficiency as compared to that of
the selected PSBs.
283
Table 7.14
Statement showing Credit-Deposit Ratio (%) of the selected public and private sector
banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
2001
-02
44.65
53.60
46.52
53.06
49.57
53.72
55.14
58.56
68.84
62.35
77.46
69.07
77.55
71.79
73.11
73.75
78.58
74.84
81.03
77.38
65.245
64.812
22.42
14.88
BOB
54.47
53.26
48.79
53.36
63.97
66.94
70.18
74.46
72.55
74.87
63.285
15.74
BOI
64.16
66.15
64.58
70.45
69.38
71.00
75.64
75.33
73.33
71.30
70.132
5.87
CB
51.74
56.14
55.17
62.42
68.00
69.18
69.60
73.96
72.16
72.27
65.064
12.44
UBI
53.74
57.02
58.20
64.86
72.04
73.24
71.59
69.60
70.17
74.58
66.504
11.37
CBI
45.16
45.26
40.79
44.90
56.38
62.57
66.17
65.12
65.01
72.33
56.369
20.17
SB
52.14
53.18
48.48
57.74
68.00
65.71
67.30
70.36
77.25
78.75
63.891
16.51
OBC
49.70
52.59
55.17
52.87
66.89
68.97
70.09
69.64
69.43
68.97
62.431
13.80
UCO
47.69
50.80
52.56
55.90
68.53
72.45
68.93
68.65
67.40
68.19
62.110
14.87
Mean Score
63.984
ICICI
146.59
110.61
91.17
91.57
88.54
84.97
92.30
99.98
89.70
95.91
99.134
18.31
HDFC
38.60
52.53
58.35
70.33
62.84
68.74
62.94
69.24
75.17
76.70
63.544
18.06
AXIS
43.56
42.32
44.68
49.20
55.63
62.73
68.09
69.48
73.84
75.25
58.478
22.20
Federal
58.53
56.79
57.14
58.07
65.64
69.03
72.95
69.54
74.74
74.28
65.672
11.31
J&K
49.75
54.59
49.75
53.21
61.67
67.79
66.04
63.42
61.92
58.63
58.677
11.15
Indusind
66.36
62.20
69.75
68.63
62.04
62.82
67.21
71.33
76.94
76.14
68.342
7.85
ING Vys
54.76
61.08
67.25
72.24
76.73
77.67
71.47
67.32
71.55
78.17
69.825
10.75
K.Bnk
48.81
47.03
49.62
58.02
58.83
68.05
63.72
58.08
60.83
63.46
57.645
12.21
SIB
54.58
52.66
50.69
63.18
66.50
64.70
68.97
65.49
68.76
68.94
62.447
11.35
K.Vys
58.85
65.3
68.06
69.24
73.32
75.38
75.07
68.93
69.78 72.06
Mean Score
69.599
67.336
7.11
Table 7.15 shows the ranks of the selected banks based on mean values under
different measures of management efficiency and it is found from the table that new private
sector banks have showed better performance in terms of overall management efficiency
among all the selected banks under the study period. The highest mean of Business per
Employee (BPE) is found in case of Indusind Bank which is computed at 1037.776. On the
basis of this average value, the first rank position goes to Indusind Bank which belongs under
Pvt.SBs. Accordingly second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh,
twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth and nineteenth
rank positions are given to AXIS Bank, ICICI Bank, OBC, HDFC Bank, BOB, BOI, CB,
UBI, Federal Bank, K.Vys Bank, J&K Bank, UCO Bank, SIB, K.Bnk, SB, PNB, ING Vys
284
Bank and SBI respectively for the next consecutive highest mean of BPE. While the
twentieth or last rank goes to CBI for the lowest mean (375.753) of BPE.
Table 7.15 also depicts that the ICICI Bank has achieved the highest mean value
(9.833) of profit per employee during the study period as compared to other nine selected
Pvt.SBs and ten selected PSBs. Accordingly, ICICI Bank is given the 1st rank position and
the 2nd rank position is obtained by AXIS Bank under Pvt.SBs having the second highest
average value (9.277) of PPE, and the 3rd, 4th, 5th, 6th, 7th, 8th, 9th ,10th, 11th, 12th, 13th, 14th,
15th, 16th, 17th, 18th, 19th and 20th rank go to the HDFC Bank, Indusind Bank, OBC, K.Vys
Bank, J&K Bank, UBI, CB, BOB, Federal Bank, PNB, K.Bnk, BOI, SIB, SBI, SB, UCO
Bank, ING Vys Bank and CBI for the next highest consecutive eighteen mean values of PPE.
It is also seen from Table 7.15 that amongst the ten selected PSBs and ten selected
Pvt.SBs, the mean of CDR for ICICI Bank is the highest which is computed at 99.134 and the
company occupied 1st rank position, followed by BOI (70.132), ING Vys Bank (69.825),
K.Vys Bank (69.599), Indusind Bank (68.342), UBI (66.504), Federal Bank (65.672), SBI
(65.245), CB (65.064), PNB (64.812), SB (63.891), HDFC Bank (63.544), BOB (63.285),
SIB (62.447), OBC (62.431), UCO Bank (62.110), J&K Bank (58.677), AXIS Bank (58.478)
and K.Bnk (57.645) respectively while the last rank position is given to CBI having the
lowest mean (56.369) of CDR.
285
Table 7.15
measures of Management Efficiency
Mean
Rank
BPE
SBI
382.653
19
PNB
459.179
17
BOB
591.843
6
BOI
570.743
7
CB
570.436
8
UBI
532.830
9
CBI
375.753
20
SB
465.236
16
OBC
771.961
4
UCO
503.400
13
ICICI
909.049
3
HDFC
687.500
5
AXIS
1034.900
2
Federal
526.324
10
J&K
511.500
12
Indusind
1037.776
1
ING Vys
452.354
18
K.Bnk
496.198
15
SIB
500.543
14
K.Vys
511.800
11
Banks
Mean
PPE
2.780
3.694
4.083
3.368
4.134
4.151
1.624
2.414
5.700
1.999
9.833
7.405
9.277
3.944
4.900
6.651
1.928
3.625
2.800
5.606
Rank
16
12
10
14
9
8
20
17
5
18
1
3
2
11
7
4
19
13
15
6
Mean
CDR (%)
65.245
64.812
63.285
70.132
65.064
66.504
56.369
63.891
62.431
62.110
99.134
63.544
58.478
65.672
58.677
68.342
69.825
57.645
62.447
69.599
Rank
8
10
13
2
9
6
20
11
15
16
1
12
18
7
17
5
3
19
14
4
Now we assign the final rank for the banks based on management efficiency. For this
purpose composite rank score (addition of ranks based on mean of management efficiency
measures) for each bank has been computed and 1st rank is assigned to the bank having the
lowest composite score. Thus it is clear from the Table 7.16, on the basis of the composite
score or composite rank total among all the selected banking companies top five final rank
positions have been occupied by new private sector banks under different measures of
management efficiency. Thus ICICI Bank is given the 1st rank position for the lowest
composite score of 5. Similarly the Indusind Bank is given the 2nd rank position for the
second lowest composite rank total of 10 and the 3rd rank position is given to HDFC Bank
having the composite rank total of 20. The 4th and 5th final ranks for the next two aggregate of
rank scores (i.e. 21 and 22 respectively) are occupied by K.Vys Bank and AXIS Bank
respectively. But in the cases of BOI and UBI the composite rank total is same and their final
286
rank is computed at 6.5 for having the equal composite rank total of 23. However, the
composite rank total of OBC, CB, Federal Bank, BOB, J&K Bank, PNB and ING Vys Bank
are 24, 26, 28, 29, 36, 39 and 40 respectively, so their final ranks are assigned as 8th, 9th, 10th,
11th, 12th, 13th and 14th respectively. It is also highlighted from the table that in case of both
SBI and SIB, the aggregate score is equal (i.e. 43) and for this tie, the final rank is computed
at 15.5 each. The 17th final rank for the next aggregate of rank scores (i.e.44) are occupied by
SB. In the cases of UCO Bank and K.Bnk the composite rank total is same and their final
rank is computed at 18.5 each for having the equal composite rank total of 47. The 20th or last
final rank is assigned by CBI having the composite rank score of 60. So, most of the selected
Pvt.SBs specifically new private sector banks maintain better performance on overall
management efficiency measures as compared to that of the selected PSBs during the study
period.
Table 7.16
sector banks based on different measures of Management Efficiency
Banks
Nature
SBI
PSB
PNB
PSB
BOB
PSB
BOI
PSB
CB
PSB
UBI
PSB
CBI
PSB
SB
PSB
OBC
PSB
UCO
PSB
ICICI
Pvt.SB
HDFC
Pvt.SB
AXIS
Pvt.SB
Federal
Pvt.SB
J&K
Pvt.SB
Indusind
Pvt.SB
ING Vys
Pvt.SB
K.Bnk
Pvt.SB
SIB
Pvt.SB
K.Vys
Pvt.SB
BPE
19
17
6
7
8
9
20
16
4
13
3
5
2
10
12
1
18
15
14
11
Rank in mean
PPE CDR (%)
16
8
12
10
10
13
14
2
9
9
8
6
20
20
17
11
5
15
18
16
1
1
3
12
2
18
11
7
7
17
4
5
19
3
13
19
15
14
6
4
287
Composite
Rank
43
39
29
23
26
23
60
44
24
47
5
20
22
28
36
10
40
47
43
21
Final Rank
15.5
13
11
6.5
9
6.5
20
17
8
18.5
1
3
5
10
12
2
14
18.5
15.5
4
7.4 Analysis of Earning Capacity

Earning capacity is another important parameter for judging the operational
performance of a bank. Total income of a bank is divided into two parts- income from core
activities (i.e. income from lending operations) and income generated by non-core activities
like investments, treasury operations, corporate advisory services etc. To measure the earning
capacity of the selected PSBs and Pvt.SBs, following four widely used ratios have been
computed and analyzed:
i) Spread as a percentage of Total Assets or Net Interest Income to Total Assets (%) [NIM]
ii) Percentage Growth in Net Profit (NP Growth)
iii) Interest Income to Total Income [Int.I/TI (%)]
iv) Non-Interest Income to Total Income [NII/TI (%)]
7.4.1 Analysis of Spread as a percentage of Total Assets

Spread or net interest margin is the difference between the interest received and
interest income and spread as a percentage of total assets (NIM) is an important measure of a
banks core income i.e. income from lending operations. Higher this ratio better is the income
generating ability of the bank and vice versa. Table 7.17 shows the spread as a percentage of
total assets of the selected banking companies for the period 2001-02 to 2010-11.
It is evident from the table that PNB among the selected PSBs and HDFC Bank,
Federal Bank and K.Vys Bank among the selected Pvt.SBs show the best performance in
respect of NIM during the period 2001-02 to 2010-11, though definite trend is not observed
for all the selected banking companies during the study period. Apart from these four selected
banks, NIM is also found satisfactory for the rest of the selected banks. However,
performance of ICICI Bank in this respect is very poor as compared to other selected bank
because it has the lowest mean (1.839) of NIM. The individual performance among selected
private sector banks in this regard is better than that of selected public sector banks, more
specifically new private sector banks. For instance, highest mean value (3.974) of this ratio is
occupied by HDFC Bank under Pvt.SBs followed by PNB (3.424) under PSBs, K.Vys Bank
(3.264) and Federal Bank (3.231) under Pvt.SBs.
If we consider the consistency of performance regarding this ratio, it is found that
BOI is occupied the highest consistency as its CV of NIM is found to be 6.31% and the
lowest consistency is observed in case of Indusind Bank as it has the highest CV of NIM is
30.12%. If we compare the performance as a whole regarding NIM between the selected
PSBs and Pvt.SBs, the mean score (2.822) of mean values of NIM for selected PSBs is higher
288
as compared to the mean score (2.717) of mean values of selected Pvt.SBs. So it can be said
that the selected PSBs are the better performers in terms of earning spread as compared to
that of the selected Pvt.SBs. This is a good sign for the public sector banks.
Table 7.17
Statement showing Spread as a percentage of Total Assets of selected public and private
sector banks
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
2.74
2.76
2.85
3.21
3.28
2.84
2.64
2.48
2.35
2.86
2.800
10.29
PNB
3.37
3.93
3.84
3.51
3.44
3.39
3.06
3.06
3.14
3.50
3.424
8.66
BOB
2.80
2.86
3.18
3.31
3.10
2.79
2.42
2.52
2.35
2.76
2.809
11.39
BOI
2.84
2.78
2.73
2.49
2.54
2.71
2.64
2.72
2.30
2.49
2.624
6.31
CB
2.63
2.89
2.95
3.01
2.95
2.70
2.04
2.36
2.35
2.60
2.647
12.09
UBI
3.21
3.14
3.17
3.16
2.94
2.91
2.72
2.68
2.35
2.88
2.916
9.38
CBI
3.07
3.46
3.52
3.60
3.32
2.95
2.05
1.64
1.54
2.71
2.786
27.95
SB
3.69
3.66
3.50
3.41
3.32
2.86
2.11
2.15
2.03
2.97
2.970
22.15
OBC
3.28
3.64
3.88
3.21
2.84
2.55
2.04
1.96
2.33
2.80
2.853
22.80
UCO
2.49
2.66
3.04
2.86
2.69
2.32
1.81
1.63
0.96
1.35
1.62
1.94
2.00
1.89
1.96
2.15
2.393
2.822
1.839
19.86
ICICI
1.87
2.56
Mean Score
2.19
2.34
HDFC
3.21
3.07
3.68
3.79
4.08
4.21
4.66
4.69
4.13
4.22
3.974
13.67
AXIS
1.59
1.90
2.58
2.36
2.47
2.39
2.83
2.87
3.05
3.10
2.513
19.35
Federal
2.91
3.04
3.09
3.15
3.20
3.13
3.01
3.69
3.42
3.67
3.231
8.39
J&K
3.20
3.34
3.26
2.61
2.61
2.79
2.64
2.79
2.79
3.32
2.935
10.46
Indusind
1.73
1.84
2.54
2.71
1.90
1.41
1.54
1.80
2.81
3.40
2.169
30.12
ING Vys
1.75
1.94
1.97
2.49
2.99
2.47
2.22
2.26
2.52
2.76
2.338
16.49
K.Bnk
1.95
1.82
2.15
2.74
2.66
2.69
2.64
2.39
1.08
2.09
2.221
23.47
SIB
2.64
2.48
2.37
2.74
3.06
3.00
2.56
2.79
2.48
2.71
2.683
8.40
K.Vys
3.52
3.00
4.47
3.42
3.35
3.46
2.87
2.59
2.90
3.06
Mean Score
3.264
2.717
15.94
Banks
SBI
22.77
7.4.2 Analysis of Percentage Growth in Net Profit

This is the ratio of percentage growth in net profit after tax over the previous year or
last year. Higher the ratio better is the profitability of the bank and vice versa. Table 7.18
shows the percentage growth in net profit over the previous year of the selected banking
companies during the period 2001-02 to 2010-11.
A look into the table reveals that none of the selected banks was efficient in
maintaining steady growth in net profit. Rather, wide fluctuations of increase or decrease in
289
net profit over the previous year indicate inconsistency associated with net earnings over the
periods of selected banks. For instance, in case of BOI, net profit in 2004-05 has declined by
about 66.28 over the previous year but it went up by 106.28 in the immediate following year.
This type of wide fluctuation in net profit is observed for most of the banks over the period.
So it is very difficult to interpret the results and compare the performance. But if we compare
the mean or average value of percentage growth in net profit, it is clearly observed from the
table that SIB has occupied the highest average growth in net profit (70.227) followed by
UCO Bank (66.844), ICICI Bank (59.379), CBI (58.203) and so on. On the other hand, SBI,
SB, J&K Bank, ING Vys Bank, K.Bnk and K.Vys Bank do not perform well as their mean
percentage growths in net profit are very poor. The mean percentage growths in net profit for
rest of the selected banks are found to be moderate. Lowest with negative mean value (14.473) of percentage growth in net profit is observed by ING Vys Bank under the group of
Pvt.SBs.
If we look on the consistency of performance regarding the growth in net profit, it is
found that AXIS Bank has occupied the highest consistency as its positive lowest CV of net
profit growth is found to be 48.63% and the lowest consistency is observed in case of SIB as
it has the highest CV of net profit growth is 218.67%. If we compare the performance as a
whole regarding percentage growth in net profit between the selected PSBs and Pvt.SBs, the
mean score (36.587) of mean values of growth in net profit for selected PSBs is higher as
compared to that of the mean score (34.297) in selected Pvt.SBs. So it can be said that as a
whole the selected PSBs are the better performers in in terms of earning net profit after tax as
compared to that of the selected Pvt.SBs.
290
Table 7.18
Statement showing Percentage Growth in Net Profit of selected public and private
sector banks
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
51.57
27.69
18.55
16.94
2.37
3.06
48.18
35.55
0.49
-9.84
19.456
107.93
PNB
21.30
49.75
31.64
27.19
2.07
7.00
33.03
50.86
26.35
13.52
26.272
61.84
BOB
98.77
41.56
25.13
-31.13
24.18
24.13
39.85
55.15
37.32
38.69
35.363
90.72
BOI
102.01
67.25
18.49
-66.28
106.28
60.12
78.91
49.66
-42.11
42.94
41.727
137.14
CB
160.05
37.43
31.32
-17.08
21.06
5.77
10.15
32.42
45.79
33.24
36.017
131.37
UBI
102.05
75.94
28.84
0.98
-6.10
25.20
64.07
24.48
20.18
0.34
33.598
106.44
CBI
251.41
87.09
102.31
-42.18
-27.98
93.47
10.47
3.83
85.25
18.35
58.203
147.59
SB
6.64
37.35
26.16
-7.20
33.16
33.47
18.44
7.64
-10.90
28.85
17.360
100.33
OBC
58.00
42.56
50.13
5.83
-23.26
4.23
-39.18
152.08
27.43
32.45
31.028
170.28
UCO
398.70
26.11
109.86
-20.61
-43.11
60.73
30.39
35.31
81.49
-10.44
66.844
187.86
Mean Score
36.587
ICICI
60.34
366.97
35.73
22.49
26.67
22.45
33.68
-9.61
7.10
27.99
59.379
184.57
HDFC
41.37
30.49
31.45
30.63
30.83
3.40
76.62
41.17
31.35
33.16
35.046
51.18
AXIS
55.74
43.27
44.82
20.22
44.98
15.50
91.16
69.50
38.51
34.76
45.846
48.63
Federal
34.37
28.07
29.75
-33.89
149.96
29.99
25.73
35.98
-7.18
26.37
31.914
147.37
J&K
55.00
30.01
20.30
-68.21
54.18
37.82
31.16
13.83
25.02
20.07
21.919
157.63
Indusind
25.16
77.71
190.66
-19.83
-64.74
-7.88
9.96
97.68
136.15
64.81
50.968
152.08
ING Vys
78.32
25.55
-31.67
-164.72
-257.70
42.70
82.61
20.32
28.31
31.55
-14.473
764.21
K.Bnk
100.68
20.85
20.93
10.49
19.62
0.57
36.56
10.32
-37.34
22.43
20.512
167.61
SIB
50.39
15.93
16.54
-89.68
485.40
104.44
45.63
28.43
20.03
25.15
70.227
218.67
K.Vys
50.60
15.18
28.86
-34.60
28.50
18.23
30.19
13.21
42.49
23.67
21.633
106.05
Mean Score
34.297
7.4.3 Analysis of Interest Income to Total Income (%)

Interest income includes interest or discount earned on advances or bills, interest on
deposits with RBI and other-interbank funds, income on investment and others. This ratio
measures the income from lending operation as a percentage of total income generated by a
bank in a year. Higher the ratio better is the interest earning capacity and vice versa.
Interest income as a percentage of total income of the selected PSBs and Pvt.PSBs
are shown in the Table 7.19. This table shows that none of the selected banking companies
followed any definite trend in interest income as a percentage of total income during the
period under study. Though a fluctuating trend is observed, the figures over the years are not
significantly different. This indicates that consistency in the percentage of interest income to
291
total income is observed for all the selected banks during the study period. The average
figures also depict that there is no significant difference among the selected banks over the
study period in percentage of interest income to total income. Highest mean percentage of
interest income to total income is found in case of CBI (89.312) followed by J&K Bank
(89.171). The average of percentage of interest income to total income for UBI, SB, OBC and
UCO Bank is observed to be the almost same. In this regard the lowest average percentage of
interest income to total income is found in case of ICICI Bank (76.613) which is also not
significantly different from highest figure.
If consistency of performance regarding percentage of interest income to total
income is concerned, it is found that HDFC Bank occupies the highest consistency as its CV
of interest income to total income is found to be 1.73% and the lowest consistency is
observed in case of SIB as it has the highest CV of interest income to total income is 7.43%.
If we compare the performance as a whole based on interest income to total income between
the selected PSBs and Pvt.SBs, the mean score (86.475) of mean values of interest income to
total income for selected PSBs is higher as compared to the mean score (82.744) for selected
Pvt.SBs. So it can be said that the selected PSBs are the better performers in terms of the
earning interest income as compared to that of the selected Pvt.SBs.
292
Table 7.19
Statement showing Interest Income to Total Income (%) of selected public and private
sector banks
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
2001
-02
87.72
84.41
80.01
82.00
82.89
84.63
84.92
83.41
82.59
83.72
83.628
2.44
PNB
87.18
85.69
80.65
83.47
88.62
86.66
87.72
86.19
85.58
88.19
85.993
2.79
BOB
85.71
82.86
78.15
83.13
85.63
86.70
85.21
84.55
85.61
88.62
84.616
3.32
BOI
83.56
78.31
76.38
83.92
85.58
85.11
85.37
84.27
87.23
89.17
83.891
4.59
CB
81.68
81.49
77.17
83.06
86.35
88.68
86.52
88.11
86.78
89.51
84.934
4.63
UBI
88.94
83.93
84.45
86.64
90.37
91.49
89.68
88.91
87.07
88.97
88.047
2.81
CBI
88.58
90.16
84.00
84.98
91.03
92.91
91.00
90.72
87.43
92.33
89.312
3.37
SB
91.26
85.31
79.89
86.42
87.26
90.71
89.88
91.24
89.59
92.60
88.416
4.30
OBC
86.52
85.90
82.06
87.61
88.17
89.54
91.73
89.21
89.53
92.64
88.289
3.44
UCO
81.34
82.09
83.20
87.31
90.38
90.44
89.39
88.84
78.92
74.78
74.37
73.37
73.45
76.05
77.75
80.35
87.627
86.475
76.613
4.56
ICICI
90.79 92.47
Mean Score
77.47 79.62
HDFC
83.63
81.05
84.15
82.61
79.93
81.43
81.58
83.23
80.24
82.13
81.998
1.73
AXIS
73.93
78.11
74.60
82.23
79.84
81.54
79.60
78.90
74.68
76.59
78.003
3.78
Federal
82.55
82.58
80.01
84.89
86.88
85.62
86.43
86.54
87.37
88.69
85.155
3.13
J&K
84.04
83.25
83.45
94.16
92.76
92.22
90.85
91.91
88.02
91.06
89.171
4.68
Indusind
79.39
74.24
74.09
81.90
84.01
86.00
88.16
83.50
83.02
83.41
81.773
5.65
ING Vys
76.63
71.63
71.78
88.98
86.53
81.61
80.06
80.35
78.26
80.44
79.627
6.96
K.Bnk
75.51
77.23
75.84
79.16
85.92
87.82
87.37
85.83
83.92
89.04
82.764
6.38
SIB
81.63
78.23
74.31
87.38
91.33
90.45
91.31
91.13
90.28
92.56
86.860
7.43
K.Vys
82.16
79.56
89.71
83.93
81.98
87.92
87.95
84.50
87.68 89.35
Mean Score
85.475
82.744
4.12
3.36
7.4.4 Analysis of Non-Interest Income to Total Income (%)

Non-interest income is any income earned by the banks other than interest income
i.e. excluding the interest income or discount earned on advances or bills, interest on deposits
with RBI and other-interbank funds, income on investment and others from total income. The
ratio of non-interest income to total income measures the income from various operations
other than lending as a percentage of total income.
Table 7.20 shows the percentage of non-interest income to total income of the
selected PSBs and Pvt.SBs for the period 2001-02 to 2010-11. It is evident from the table that
the proportion of non-interest income to total income is not high for all the selected banks
during the study period. While in most of the cases the share of interest income in total
income of the selected banks are more than 80 percent over the study period and the share of
293
non-interest income to total income remain below 20 percent for some of the periods. This
indicates that major portion of banks income comes from interest income. Highest average
non-interest income as a percentage of total income is found in case of ICICI Bank (23.387)
followed by AXIS Bank (21.997), ING Vys Bank (20.373) and so on. Lowest average noninterest income as a percentage of total income is found in case of CBI (10.688). For other
banks, the average figure is more or less the same.
So far as the consistency of performance regarding the earnings capability of noninterest income out of the total income is concerned, it is found that HDFC Bank has
occupied the highest consistency as its CV of non-interest income as a percentage of total
income is found to be 7.86% and the lowest consistency is observed in case of SIB as it has
the highest CV of non-interest income as a percentage of total income is 49.10%. If we
compare the performance as a whole regarding non-interest income as a percentage of total
income between the selected PSBs and Pvt.SBs, the mean score (13.525) of mean values of
non-interest income as a percentage of total income for selected PSBs is lower as compared
to the mean score (17.256) of mean values for selected Pvt.SBs. So it can be said that the
selected Pvt.SBs are the better performers in terms of earning the proportion of non-interest
income in total income as compared to that of the selected PSBs. This is because of many
extra charges that have been made by private banks to their customers in their day to day
activities as compared to the public banks.
294
Table 7.20
Statement showing Non-Interest Income to Total Income (%) of selected public and
Years
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
2001
-02
12.28
12.82
14.29
16.44
18.32
11.06
11.42
8.74
13.48
18.66
15.59
14.31
17.14
21.69
18.51
16.07
9.84
14.69
14.10
17.91
19.99
19.35
21.85
23.62
22.83
15.55
16.00
20.11
17.94
16.80
18.00
16.53
16.87
16.08
16.94
13.36
15.02
13.58
12.39
12.69
17.11
11.38
14.37
14.42
13.65
9.63
8.97
12.74
11.83
9.62
15.37
13.34
13.30
14.89
11.32
8.51
7.09
9.29
10.46
9.56
15.08
12.28
14.79
14.63
13.48
10.32
9.00
10.12
8.27
10.61
16.59
13.81
15.45
15.73
11.89
11.09
9.28
8.76
10.79
11.16
21.08
16.37
26.07
17.45
15.96
20.61
23.37
24.49
18.37
17.84
25.22
18.95
21.89
17.42
16.75
25.76
28.37
22.77
21.77
20.44
25.63
15.85
25.40
19.99
16.55
25.91
28.22
24.16
25.69
10.29
26.63
17.39
17.77
15.11
5.84
18.10
11.02
20.84
12.62
16.07
26.55
20.07
20.16
13.12
7.24
15.99
13.47
14.08
8.67
18.02
23.95
18.57
18.46
14.38
7.78
14.00
18.39
12.18
9.55
12.08
22.25
18.42
20.40
13.57
9.15
11.84
19.94
12.63
8.69
12.05
19.65
16.77
21.10
13.46
8.09
16.50
19.65
14.17
8.87
15.50
16.372
14.007
15.384
16.109
15.066
11.953
10.688
11.584
11.711
12.373
13.525
23.387
18.002
21.997
14.845
10.829
18.227
20.373
17.236
13.140
14.525
17.256
12.46
17.13
18.27
23.90
26.09
20.71
28.17
32.81
25.92
32.27
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
17.41 16.28
14.42 11.81
14.39 11.38
12.77 10.83
13.22 10.49
12.93 11.03
12.57 7.67
10.41 7.40
10.47 7.36
9.21 7.53
Mean Score
22.53 20.38
19.76 17.87
25.32 23.41
12.63 11.31
11.98 8.94
16.98 16.59
21.74 19.56
16.08 10.96
9.72 7.44
12.32 10.65
Mean Score
11.01
7.86
13.41
17.98
38.50
25.37
27.22
30.64
49.10
24.24
So from the above analysis it is clearly observed as a whole that selected PSBs
shows the better performance in three measures out of four measures of management
efficiency as compared to that of the selected Pvt.SBs.
Now the banks are ranked on the basis of average results of different measures have
been taken to examine the earnings capacity of the banks. Since higher the ratio better is the
performance and accordingly 1st rank is assigned to the bank having the highest average
figure followed by 2nd highest one and so on.
It is revealed from the Table 7.21 that highest mean of NIM is found in case of
HDFC Bank which is computed at 3.974. On the basis of this highest average value, the first
rank goes to HDFC Bank. Accordingly second, third, fourth, fifth, sixth, seventh, eighth,
ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth,
295
eighteenth and nineteenth ranks are given to PNB, K.Vys Bank, Federal Bank, SB, J&K
Bank, UBI, OBC, BOB, SBI, CBI, SIB, CB, BOI, AXIS Bank, UCO Bank, ING Vys Bank,
K.Bnk and Indusind Bank respectively for the next consecutive highest mean of NIM. While
the twentieth or last rank goes to ICICI Bank for the lowest mean (1.839) of NIM.
Table 7.21 also depicts that the SIB has achieved the highest mean value (70.227) of
NP Growth during the study period as compared to other ten selected PSBs and nine selected
Pvt.SBs. Accordingly, SIB is given the 1st rank and the 2nd rank is obtained by UCO Bank
having the second highest average value of NP Growth (66.844) and the 3rd, 4th, 5th, 6th, 7th,
8th, 9th ,10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th and 20th rank go to the ICICI Bank,
CBI, Indusind Bank, AXIS Bank, BOI, CB, BOB, HDFC Bank, UBI, Federal Bank, OBC,
PNB, J&K Bank, K.Vys Bank, K.Bnk, SBI, SB and ING Vys Bank respectively for the last
eighteen mean values of NP Growth.
From Table 7.21 it is also observed that amongst the ten selected PSBs and ten
selected Pvt.SBs, the mean of Int.I/TI of CBI is highest which is computed at 89.312 and
accordingly the company occupies 1st rank, followed by SB, OBC, UBI, UCO Bank, PNB,
CB, BOB, BOI, SBI, SIB, ICICI Bank, Indusind Bank, AXIS Bank, HDFC Bank, Federal
Bank, J&K Bank, K.Vys Bank and K.Bnk while the average Int.I/TI in ING Vys Bank is
lowest with negative value (-14.473) and the bank is given the last rank.
Table 7.21 also highlights that on an average, the NII/TI in ICICI Bank is 23.387
which is highest as compared to other selected PSBs and Pvt.SBs and therefore, ICICI Bank
has achieved the first position, leaving the second position to AXIS Bank for the second
highest mean of NII/TI (21.997) and the third, fourth, fifth, sixth, seventh, eighth, ninth,
tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth
and nineteenth rank go to ING Vys Bank, Indusind Bank, HDFC Bank, K.Bnk, SBI, BOI,
BOB, CB, Federal Bank, K.Vys Bank, PNB, SIB, UCO Bank, UBI, OBC, SB and J&K Bank
for the next consecutive highest mean values of NII/TI i.e. 20.373, 18.227, 18.002, 17.236,
16.372, 16.109, 15.384, 15.066, 14.845, 14.525, 14.007, 13.140, 12.373, 11.953, 11.711,
11.584 and 10.829 respectively and the last position goes to CBI for the least average
(10.688) of NII/TI. It is, thus, evident from the analysis that none of the banks selected for
this study showed consistently good performance in all the four measures of earning capacity.
296
Table 7.21
measures of Earning Capacity
Mean
Mean
Rank
NP Growth
NIM
SBI
2.800
10
19.456
PNB
3.424
2
26.272
BOB
2.809
9
35.363
BOI
2.624
14
41.727
CB
2.647
13
36.017
UBI
2.916
7
33.598
CBI
2.786
11
58.203
SB
2.970
5
17.360
OBC
2.853
8
31.028
UCO
2.393
16
66.844
ICICI
1.839
20
59.379
HDFC
3.974
1
35.046
AXIS
2.513
15
45.846
Federal 3.231
4
31.914
J&K
2.935
6
21.919
Indusind 2.169
19
50.968
ING Vys 2.338
17
-14.473
K.Bnk
2.221
18
20.512
SIB
2.683
12
70.227
K.Vys
3.264
3
21.633
[Source: Table 7.17, 7.18, 7.19 and 7.20]
Banks
Rank
18
14
9
7
8
11
4
19
13
2
3
10
6
12
15
5
20
17
1
16
Mean
Int.I/TI
83.628
85.993
84.616
83.891
84.934
88.047
89.312
88.416
88.289
87.627
59.379
35.046
45.846
31.914
21.919
50.968
-14.473
20.512
70.227
21.633
Rank
10
6
8
9
7
4
1
2
3
5
12
15
14
16
17
13
20
19
11
18
Mean
NII/TI
16.372
14.007
15.384
16.109
15.066
11.953
10.688
11.584
11.711
12.373
23.387
18.002
21.997
14.845
10.829
18.227
20.373
17.236
13.140
14.525
Rank
7
13
9
8
10
16
20
18
17
15
1
5
2
11
19
4
3
6
14
12
Now we look at the overall rank or final rank of the selected banks based on different
measures of earning capacity. For assigning final rank, first we add all the ranks occupied by
individual bank in four measures of earning capacity and 1st rank is given to the bank whose
composite rank score is lowest, then the second lowest one and so on.
From Table 7.22 it is seen that HDFC Bank occupies the 1st rank position for the
lowest composite score of 31. But in the cases of PNB and BOB the composite rank total is
same (i.e.35) and their final rank is computed at 2.5 for having the equal composite rank total
of 35. Similarly, CBI and ICICI Bank have occupied the same rank position (i.e. 4.5) having
the equal composite rank score of 36. AXIS Bank is given the 6th rank position having the
composite rank total of 37. It is also observed from the table that in cases of BOI, CB, UBI,
UCO Bank and SIB, the aggregate score is equal (i.e. 38) and for this tie, the final rank is
computed at 9 for each bank. In the cases of OBC and Indusind Bank the composite rank total
297
is same and their final rank is computed at 12.5 each for having the equal composite rank
total of 41. However, the composite rank total of Federal Bank, SB, SBI, K.Vys Bank and
J&K Bank are 43, 44, 45, 49 and 57 respectively, so their final ranks are assigned as 14th,
15th, 16th, 17th and 18th respectively. The last final rank (19.5) is jointly assigned by ING Vys
Bank and K.Bnk having the equal composite rank score of 60. From the above analysis it is
clearly found that out of the four measures of earning capacity, selected PSBs performed
better in three measures as compared to that of the selected Pvt.SBs. So, it can be said that
most of the selected PSBs maintain better performance on overall measures of earning
capacity as compared to that of the selected Pvt.SBs during the study period.
Table 7.22
sector banks under different measures of Earning Capacity
Banks
Nature
SBI
PSB
PNB
PSB
BOB
PSB
BOI
PSB
CB
PSB
UBI
PSB
CBI
PSB
SB
PSB
OBC
PSB
UCO
PSB
ICICI
Pvt.SB
HDFC
Pvt.SB
AXIS
Pvt.SB
Federal
Pvt.SB
J&K
Pvt.SB
Indusind Pvt.SB
ING Vys Pvt.SB
K.Bnk
Pvt.SB
SIB
Pvt.SB
K.Vys
Pvt.SB
NIM
10
2
9
14
13
7
11
5
8
16
20
1
15
4
6
19
17
18
12
3
Rank in mean
NP Growth Int.I/TI
18
10
14
6
9
8
7
9
8
7
11
4
4
1
19
2
13
3
2
5
3
12
10
15
6
14
12
16
15
17
5
13
20
20
17
19
1
11
16
18
298
NII/TI
7
13
9
8
10
16
20
18
17
15
1
5
2
11
19
4
3
6
14
12
Composite
Rank
45
35
35
38
38
38
36
44
41
38
36
31
37
43
57
41
60
60
38
49
Final Rank
16
2.5
2.5
9
9
9
4.5
15
12.5
9
4.5
1
6
14
18
12.5
19.5
19.5
9
17
7.5 Analysis of Liquidity

Liquidity refers to the existence of assets in cash or near cash form. It indicates the
ability of the banks to discharge their liabilities as and when they mature. Alternatively, it is
the ability of the banks to convert non-cash assets into cash as and when needed. Lending and
borrowing of money are the main activities of a bank. Public deposit their money in banks for
two reasons safety and interest income. Thus, repayment of deposits along with timely
payment of interest is of crucial importance for a bank. For this bank should always maintain
sufficient liquidity.
For examining liquidity position of the selected banks, following three widely used
ratios have been considered here:
i) Liquid Assets to Demand Deposits [LA/DD] (percentage)
ii) Liquid Assets to Total Deposits [LA/TD] (percentage)
iii) Liquid Assets to Total Assets [LA/TA] (percentage)
7.5.1 Analysis of Liquid Assets to Demand Deposits (percentage)

Liquid asset as a percentage of demand deposits is one of the most important
measures of the liquidity position of a bank. This ratio measures the ability of a bank to meet
the demand for withdrawal of cash from demand deposits in a particular year. It is arrived at
by dividing liquid assets by total demand deposits. Liquid assets include cash in hand,
balances with RBI, balances with banks in India and outside India, money at call on short
notice. Higher this ratio better is the liquidity position of the bank and vice versa. Table 7.23
shows the liquid assets as a percentage of demand deposits of the selected banking companies
for the period 2001-02 to 2010-11.
It is clearly evident from the table that no definite trend is observed in liquid assets
as a percentage of demand deposits for all the selected banking companies during the study
period. The performance of SIB is the best among all the selected banking companies in
terms of liquidity position as measured by liquid assets as a percentage of demand deposits,
followed by Federal Bank, ICICI Bank. So, these are the top three private sector banks
belonging in the same group. Apart from these three top Pvt.SBs, the performance of PNB,
BOB, BOI, CB, CBI, SB, OBC, UCO Bank, Indusind Bank, K.Bnk is also found to be
satisfactory in this regard. But the performance of UBI, HDFC Bank, J&K Bank, ING Vys
Bank, K.Vys Bank is not up to the mark in this regard as their mean liquidity position as
measured by liquid assets as a percentage of demand deposits is very low as compared to the
others.
299
If we consider the consistency of performance of selected banks regarding liquidity

position, it is found that K.Bnk occupies the highest consistency as its CV of liquid assets as
a percentage of demand deposits is found to be 17.33% and the lowest consistency is
observed in case of ICICI Bank as it has the highest CV of liquid assets as a percentage of
demand deposits is 66.51%. If we compare the performance as a whole regarding this ratio
between the selected PSBs and Pvt.SBs, the mean score (120.795) of mean values of liquid
assets as a percentage of demand for selected PSBs is lower as compared to the mean score
(126.242) for selected Pvt.SBs. So it can be said that the selected Pvt.SBs are the better
performers as compared to the selected PSBs in terms of liquidity position as measured by
liquid assets as a percentage of demand deposits. This advocates in favor of the adequate
liquidity position of the selected Pvt.SBs as a whole to meet the demand to banks customers.
300
Table 7.23
Statement showing Liquid Assets to Demand Deposits (%) of selected public and private
sector banks
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
200
-10
2010
-11
Mean
CV%
Banks
SBI
153.45
100.91
86.63
69.46
65.53
63.38
68.75
94.27
70.31
93.66
86.635
31.36
PNB
94.67
81.68
89.09
88.95
148.24
95.02
105.84
113.82
98.97
110.63
102.692
18.43
BOB
141.39
114.28
107.31
134.68
160.58
185.12
190.66
166.68
187.42
215.84
160.397
22.13
BOI
91.82
123.35
146.56
123.42
154.54
185.84
142.05
172.96
196.57
221.15
155.825
24.95
CB
174.84
98.21
138.97
96.78
124.96
131.57
134.89
116.04
106.89
125.34
124.850
18.39
UBI
73.72
77.43
76.90
131.17
106.89
97.72
85.32
121.41
97.21
102.45
97.022
19.91
CBI
130.78
81.95
82.03
114.89
62.83
103.37
128.38
121.15
127.51
99.04
105.192
22.30
SB
94.88
73.31
162.32
61.62
86.53
124.80
109.07
136.84
125.01
111.42
108.581
28.05
OBC
144.43
91.98
115.64
174.96
110.06
118.11
131.59
158.55
142.89
203.12
139.135
23.86
UCO
89.91
101.74
122.19
165.12
83.46
113.54
139.97
148.29
90.68
221.31
127.621
33.45
Mean Score
120.795
ICICI
467.31
175.88
116.69
100.73
102.82
173.66
154.07
138.53
125.41
98.02
165.312
66.51
HDFC
81.94
64.01
41.40
42.09
46.90
45.66
51.39
61.55
80.43
63.86
57.923
25.78
AXIS
152.10
143.62
105.00
73.74
45.69
61.20
62.38
60.50
47.26
57.99
80.949
48.16
Federal
100.78
154.47
184.45
180.69
199.57
190.13
187.48
238.26
148.72
155.80
174.036
21.06
J&K
96.62
72.85
134.02
115.99
75.96
103.87
103.31
114.04
94.31
66.21
97.719
21.80
Indusind
162.94
139.93
253.39
129.23
123.23
151.66
120.87
65.10
59.07
64.17
126.960
45.85
ING Vys
220.23
151.99
87.24
92.02
74.44
84.06
95.66
68.86
73.97
49.37
99.783
50.13
K.Bnk
160.76
136.48
131.74
186.62
136.11
139.36
144.86
126.25
105.81
107.00
137.499
17.33
SIB
315.93
237.82
202.73
146.48
238.39
314.19
220.23
240.78
188.96
205.26
231.077
22.73
K.Vys
170.59
120.91
91.50
83.44
82.26
62.85
77.09
91.81
60.23
70.91
91.160
36.01
Mean Score
126.242
7.5.2 Analysis of Liquid Assets to Total Deposits (percentage)

This ratio measures the liquidity available to the total deposits of a bank. Liquid
assets include cash in hand, balances with RBI, balances with others banks in India and
outside India, money at call on short notice. Total deposits include demand deposits, savings
deposits, term deposits and other deposits. Liquid assets as a percentage of total deposits of
the selected banks for the period 2001-02 to 2010-11 are shown in the Table 7.24.
A look into the table reveals that ICICI Bank shows satisfactory liquidity over the
study period, followed by AXIS Bank and HDFC Bank though definite trend is not observed
in liquid assets as a percentage of total deposits for all the selected banks. But in 2010-11 the
performance of BOB is best among all the selected banks during the study period but the
301
performance is very poor in case of K.Vys Bank because it has the lowest ratio among all the
selected banks in that particular year.
Table 7.24 also reveals the consistency of performance regarding liquidity in terms
of liquid assets as a percentage of total deposits for all the selected banks during the study
period and thus BOI occupies the highest consistency as its CV of the ratio is found to be
11.71% and the lowest consistency is found in case of ICICI Bank as it has the highest CV of
this ratio is 49.90%. If we compare the performance as a whole regarding liquidity measured
by liquid assets as a percentage of total deposits between the selected PSBs and Pvt.SBs, the
mean score (11.466) of mean values of liquid assets as a percentage of total deposits for
selected PSBs is lower as compared to the mean score (12.366) of mean values for selected
Pvt.SBs. So it can be said that the selected Pvt.SBs are the better performers as compared to
that of the selected PSBs. This advocates in favour of the adequate liquidity available to the
total deposits of the selected Pvt.SBs as a whole as compared to that of the selected PSBs.
302
Table 7.24
Statement showing Liquid Assets to Total Deposits (%) of the selected public and
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
Banks
SBI
24.00
15.26
13.67
10.71
11.72
11.93
12.55
14.07
10.72
13.16
13.780
28.11
PNB
9.98
10.65
10.03
10.75
20.71
11.19
11.31
10.21
9.41
9.49
11.374
29.41
BOB
14.48
10.27
9.96
11.38
14.37
14.63
14.67
12.52
14.70
16.35
13.332
16.21
BOI
11.06
10.86
12.05
9.55
12.19
14.52
11.81
11.47
13.59
12.48
11.958
11.71
CB
19.52
10.68
13.93
8.96
10.98
11.50
11.60
8.91
8.38
10.45
11.490
28.31
UBI
12.33
8.71
7.61
10.63
8.62
9.89
9.72
11.52
9.28
9.93
9.825
14.27
CBI
13.56
8.81
9.09
11.61
7.21
10.65
11.64
9.33
11.85
8.52
10.227
18.98
SB
11.01
8.22
15.45
6.63
9.72
12.08
12.25
12.43
10.88
8.82
10.749
23.44
OBC
11.70
8.47
10.09
15.76
11.01
11.73
13.12
12.43
12.14
13.73
12.018
16.61
UCO
10.27
10.01
10.67
13.17
6.13
9.58
10.14
10.83
6.62
11.69
9.911
21.44
Mean Score
11.466
ICICI
39.85
13.47
12.44
12.95
10.32
16.10
15.56
13.72
19.24
15.11
16.878
49.90
HDFC
19.59
14.16
12.03
12.31
12.40
13.25
14.67
12.26
17.89
14.22
14.277
17.94
AXIS
14.25
21.04
27.03
16.64
9.08
11.77
14.27
12.79
10.76
11.31
14.895
36.55
Federal
7.66
8.29
9.58
10.24
10.47
10.72
10.59
10.67
7.55
8.71
9.450
13.57
J&K
15.24
10.36
15.63
14.68
9.74
14.34
15.52
15.98
12.39
7.94
13.184
21.90
Indusind
17.77
13.38
19.38
8.80
9.87
14.71
11.44
8.70
9.75
11.71
12.552
29.71
ING Vys
19.96
13.48
9.59
9.80
8.42
10.32
15.54
9.17
11.70
8.35
11.634
31.96
K.Bnk
9.18
7.67
7.97
12.66
9.21
10.73
9.53
7.18
7.61
7.27
8.901
19.73
SIB
15.55
11.37
9.74
8.26
14.03
15.90
11.23
11.25
8.64
8.30
11.425
25.14
K.Vys
20.55
13.45
10.11
9.82
10.33
8.26
9.45
9.10
6.41
7.18
10.467
38.51
Mean Score
303
12.366
7.5.3 Analysis of Liquid Assets to Total Assets (percentage)

Another measure of liquidity widely used in research is liquid assets as a percentage
of total assets. This measure of liquidity indicates the percentage of a banks total assets in
liquid form. Higher the percentage better is the liquidity and vice versa. Table 7.25 shows the
percentage of liquid assets of total assets of the selected banks for the period 2001-02 to
2010-11. This table shows that none of the selected banking companies followed any definite
trend in liquid assets as a percentage of total assets during the period under consideration.
BOB among the selected PSBs and AXIS Bank among the selected Pvt.SBs maintain a very
significant and consistent performance of liquidity throughout the study period. Among all
the selected banks, AXIS Bank has occupied the first position as it has the highest mean
value (12.339) of liquid assets as a percentage of total assets followed by J&K Bank (11.589)
and BOB (11.421).
Whereas the consistency of performance regarding liquid assets as a percentage of
total assets is concerned, it is found that BOI occupies the highest consistency as its CV of
liquid assets as a percentage of total assets is found to be 11.90% and the lowest consistency
is observed in case of AXIS Bank as it has the highest CV of liquid assets as a percentage of
total assets is 40.74%. If we compare the performance as a whole based on liquid assets as a
percentage of total assets between the selected PSBs and Pvt.SBs, the mean score (9.803) of
mean values of liquid assets as a percentage of total assets for selected PSBs is higher as
compared to the mean score (9.753) of liquid assets as a percentage of total assets for selected
Pvt.SBs but the difference is not too much diverse. But it can be said that the selected PSBs
are the better performers in liquidity which is measured by liquid assets as a percentage of
total assets as compared to that of the selected Pvt.SBs.
304
Table 7.25
Statement showing Liquid Assets to Total Assets (%) of the selected public and private
sector banks
Years
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Mean
CV%
SBI
18.65
12.02
10.68
8.55
9.02
9.17
9.35
10.83
8.18
10.04
10.649
28.56
PNB
8.78
9.37
8.62
8.78
17.07
9.63
9.46
8.67
7.91
7.85
9.614
27.93
BOB
12.62
8.92
8.54
9.78
11.87
12.77
12.42
10.63
12.74
13.93
11.421
16.09
BOI
9.46
9.13
10.08
7.92
10.19
12.27
9.91
9.65
11.36
10.62
10.061
11.90
CB
17.31
9.38
12.08
7.86
9.65
9.87
9.90
7.58
7.42
9.14
10.020
29.01
UBI
11.06
7.64
6.60
9.08
7.17
8.21
8.14
9.93
8.08
8.52
8.441
15.49
CBI
12.14
7.89
8.02
10.28
6.42
9.48
10.36
8.30
10.52
7.29
9.070
19.50
SB
9.90
7.32
13.93
5.89
8.54
10.64
10.88
11.06
9.16
7.64
9.495
24.25
OBC
10.33
7.43
8.78
13.95
9.38
10.16
11.26
10.86
10.62
11.83
10.459
16.93
UCO
8.79
8.99
9.56
11.93
5.41
8.30
9.02
9.72
5.90 10.39
Mean Score
8.802
9.803
22.09
ICICI
12.28
6.08
6.76
7.71
6.78
10.77
9.52
7.90
10.70
8.39
8.689
23.59
HDFC
14.54
10.42
8.65
8.70
9.41
9.92
11.10
9.55
13.46
10.70
10.643
18.36
AXIS
12.18
18.20
23.45
13.98
7.32
9.44
11.41
10.17
8.42
8.82
12.339
40.74
Federal
6.69
7.44
8.55
9.25
9.07
9.22
8.45
8.85
6.24
7.28
8.103
13.62
J&K
13.39
9.06
13.75
13.01
8.65
12.62
13.55
13.99
10.85
7.03
11.589
21.73
Indusind
14.63
11.62
14.39
7.39
8.40
12.40
9.36
6.97
7.36
8.82
10.135
28.73
ING Vys
15.03
10.68
7.61
8.00
6.70
8.25
12.47
7.16
8.93
6.46
9.130
30.46
K.Bnk
8.28
6.86
7.08
10.96
8.16
9.28
8.38
6.39
6.68
6.27
7.835
18.95
SIB
14.04
10.23
8.71
7.40
12.41
14.25
9.96
9.99
7.78
7.51
10.228
25.08
K.Vys
16.81
11.15
8.41
8.31
8.69
6.97
8.14
8.05
5.62
6.29
Mean Score
8.843
9.753
35.94
Banks
So from the above analysis it is clearly observed as a whole that the selected Pvt.SBs shows
the better performance in two measures out of three measures of earning capacity as
compared to that of the selected PSBs.
Now we rank the banks on the basis of average figures of different measures of
liquidity. For this purpose, the same procedure has been applied as mentioned earlier. Mean
values of different liquidity measures and their respective rank scores are shown in the Table
7.26.
305
It is revealed from the table that highest mean of LA/DD is found in case of SIB
which is computed at 231.077. On the basis of this average value, the first rank goes to SIB.
Accordingly second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth,
thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth and nineteenth ranks are
assigned to Federal Bank, ICICI Bank, BOB, BOI, OBC, K.Bnk, UCO Bank, Indusind Bank,
CB, SB, CBI, PNB, ING Vys Bank, J&K Bank, UBI, K.Vys Bank, SBI and AXIS Bank
respectively for the next consecutive highest mean of LA/DD. While the twentieth or last
rank goes to HDFC Bank for the lowest mean (57.923) of LA/DD.
Table 7.26 also depicts that the ICICI Bank has achieved the highest mean value
(16.878) of LA/TD during the study period as compared to ten selected PSBs and nine
selected Pvt.SBs. Accordingly, ICICI Bank is given the 1st rank and the 2nd rank is obtained
by AXIS Bank having the second highest average value of LA/TD (14.895) and the 3rd, 4th,
5th, 6th, 7th, 8th, 9th ,10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th and 20th rank go to the
HDFC Bank, SBI, BOB, J&K Bank, Indusind Bank, OBC, BOI, ING Vys Bank, CB, SIB,
PNB, SB, K.Vys Bank, CBI, UCO Bank, UBI, Federal Bank and K.Bnk respectively for the
last eighteen consecutive highest mean values of LA/TD.
It is also observed from the table that amongst the ten selected PSBs and ten selected
Pvt.SBs, the mean LA/TA of AXIS Bank is the highest which is computed at 12.339 and the
company occupies 1st rank, followed by J&K, BOB, SBI, HDFC, OBC, SIB, Indusind, BOI,
CB, PNB, SB, ING Vys, CBI, K.Vys, UCO, ICICI, UBI and Federal bank while the K.Bnk
occupies the lowest average (7.835) of LA/TA and the bank is given the last rank.
306
Table 7.26
measures of Liquidity
Mean
Rank
LA/DD
SBI
86.635
18
PNB
102.692
13
BOB
160.397
4
BOI
155.825
5
CB
124.850
10
UBI
97.022
16
CBI
105.192
12
SB
108.581
11
OBC
139.135
6
UCO
127.621
8
ICICI
165.312
3
HDFC
57.923
20
AXIS
80.949
19
Federal
174.036
2
J&K
97.719
15
Indusind
126.960
9
ING Vys
99.783
14
K.Bnk
137.499
7
SIB
231.077
1
K.Vys
91.160
17
Banks
Mean
LA/TD
13.780
11.374
13.332
11.958
11.490
9.825
10.227
10.749
12.018
9.911
16.878
14.277
14.895
9.450
13.184
12.552
11.634
8.901
11.425
10.467
Rank
4
13
5
9
11
18
16
14
8
17
1
3
2
19
6
7
10
20
12
15
Mean
LA/TA
10.649
9.614
11.421
10.061
10.020
8.441
9.070
9.495
10.459
8.802
8.689
10.643
12.339
8.103
11.589
10.135
9.130
7.835
10.228
8.843
Rank
4
11
3
9
10
18
14
12
6
16
17
5
1
19
2
8
13
20
7
15
Now we look at the overall rank or final rank of the selected banks based on the
different measures of liquidity. For assigning final rank, first we add all the ranks occupied
by individual bank under the three measures of liquidity and accordingly 1st rank is assigned
to the bank whose composite score is lowest, then the second lowest one and so on.
It is evident from the Table 7.27 that BOB has achieved the 1st rank position for the
lowest composite score of 12. But in the cases of OBC and SIB the composite rank total is
same (i.e.20) and their final rank is computed at 2.5 for having the equal composite rank total
of 20. However, the composite rank total of ICICI Bank and AXIS Bank are 21 and 22
respectively, so their final ranks are assigned as 4th and 5th respectively. On the other hand,
BOI and J&K Bank have occupied the same final rank position (i.e. 6.5) having the equal
composite rank score of 23 each. For the composite rank total of 24, 26, 28 and 31
respectively the final ranks are given accordingly as 8th, 9th, 10th and 11th to Indusind Bank,
307
SBI, HDFC Bank and CB. It is also observed from the table that incase of PNB, SB and ING
Vys Bank the aggregate score is equal (i.e. 37) and for this tie, the final rank is computed at
13 for each bank. However, the composite rank total of Federal Bank, UCO Bank and CBI
are 40, 41 and 42 respectively, so their final ranks are assigned as 15th, 16th and 17th
respectively. In the cases of K.Bnk and K.Vys Bank the composite rank total is same and
their final rank is computed at 18.5 each for having the equal composite rank total of 47. The
twentieth or last final rank is assigned by UBI having the composite rank score of 52.
From the above analysis it is clearly observed that out of the three measures of
liquidity, selected Pvt.SBs perform better in two measures of liquidity as compared to the
selected PSBs. So, it can be said that as a whole selected Pvt.SBs maintain better
performance on overall liquidity measures as compared to that of the selected PSBs during
the study period.
308
Table 7.27
sector banks based on different measures of Liquidity
Banks
Nature
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
LA/DD
18
13
4
5
10
16
12
11
6
8
3
20
19
2
15
9
14
7
1
17
Rank in mean
LA/TD
4
13
5
9
11
18
16
14
8
17
1
3
2
19
6
7
10
20
12
15
LA/TA
4
11
3
9
10
18
14
12
6
16
17
5
1
19
2
8
13
20
7
15
Composite
Rank
Final Rank
26
37
12
23
31
52
42
37
20
41
21
28
22
40
23
24
37
47
20
47
9
13
1
6.5
11
20
17
13
2.5
16
4
10
5
15
6.5
8
13
18.5
2.5
18.5
7.6 Analysis of Mean Rank and Overall Rank in CAMEL Model

An analysis has been made by computing mean rank and overall rank of the banks
under study. Here mean rank has been computed as the average of final ranks obtained by
each bank on the basis of ratios under different measures of CAMEL Rating Model and then
overall rank has been assigned to the banks based on their mean ranks on the rationale of
assigning highest overall rank based on least mean rank.
Table 7.28 shows mean rank and overall rank of the selected banks as a whole on the
basis of different ratios of five indicators under CAMEL Model. It is clearly evident from the
table that on the basis of mean rank of ten selected PSBs and ten selected Pvt.SBs taken
together, the BOB is given the 1st overall rank position for the lowest mean rank score of 6.6.
Similarly the HDFC Bank is given the 2nd overall rank position for the second lowest mean
rank of 6.8. But in the cases of ICICI Bank and AXIS Bank the mean rank is same (i.e.7.6)
and their overall rank is computed at 3.5 each. However, the 5th, 6th, 7th, 8th, 9th,10th, 11th, 12th,
309
13th, 14th, 15th, 16th, 17th, 18th, 19th and 20th overall rank positions for the next lowest
consecutive values of mean rank scores (i.e. 7.8, 7.9, 8.2, 9.4, 9.9, 10.2, 10.5, 10.7, 10.8, 11,
12, 12.7, 13.8, 14.2, 15.1 and 17.2 respectively) computed on final ranks under different
measures of CAMEL Model are achieved by CB, PNB, OBC, SIB, BOI, K.Vys Bank,
Indusind Bank, SB, Federal Bank, J&K Bank, UBI, SBI, UCO Bank, CBI, ING Vys Bank
and K.Bnk respectively.
Table 7.28
Statement showing analysis of Mean Rank and Overall Rank of selected public and
private sector banks in CAMEL Model
Banks
Nature
Mean
Rank
Overall Rank
SBI
PNB
BOB
BOI
CB
UBI
CBI
SB
OBC
UCO
ICICI
HDFC
AXIS
Federal
J&K
Indusind
ING Vys
K.Bnk
SIB
K.Vys
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
PSB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
Pvt.SB
9.5
6
12
7.5
1
9.5
13
2
14
7.5
17
19
20
5
15.5
11
15.5
18
3.5
3.5
13.5
5
6.5
20
9
15
16.5
6.5
4
18
11.5
1
2
10
3
19
13.5
11.5
16.5
8
15.5
13
11
6.5
9
6.5
20
17
8
18.5
1
3
5
10
12
2
14
18.5
15.5
4
16
2.5
2.5
9
9
9
4.5
15
12.5
9
4.5
1
6
14
18
12.5
19.5
19.5
9
17
9
13
1
6.5
11
20
17
13
2.5
16
4
10
5
15
6.5
8
13
18.5
2.5
18.5
12.7
7.9
6.6
9.9
7.8
12.0
14.2
10.7
8.2
13.8
7.6
6.8
7.6
10.8
11.0
10.5
15.1
17.2
9.4
10.2
16
6
1
9
5
15
18
12
7
17
3.5
2
3.5
13
14
11
19
20
8
10
[Source: Table 7.6, 7.11, 7.16, 7.22 and 7.27]

From overall rank analysis under CAMEL Model it is thus observed that out of
first four rank positions three positions have been occupied by the private sector banks
(HDFC Bank, AXIS Bank and ICICI Bank) under study. Another one top rank position is
occupied by BOB under public sector group. The rest rank positions are jointly shared by the
both groups of banks under study. So this can be highlighted that barring the three private
sector banks and one public sector bank, all other banks of the two groups under study have
performed more or less same during the study period so far CAMEL Model analysis is
concerned.
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CHAPTER- 8
SUMMARY OF THE FINDINGS OF THE STUDY, CONCLUSION AND
SUGGESTION
8.1 Introduction
An attempt has been made in this study to examine the comparative performance of
selected public and private sector banks in India during the period of 2001-02 to 2010-11.
The financial performance has been evaluated under different parameters- deposit
mobilization, loans and advances, investment, NPA, priority sector advances, cost control
efficiency, productivity efficiency, earnings and profitability efficiency. For this purpose ten
leading Indian banks from each of the public and private sector banks have been taken into
consideration. The present chapter seeks to make a summary of the findings of the study and
the conclusion from the findings. The chapter also points out the suggestions for further
study.
Chapter 1 has described the significance or relevance of the study, objectives of the
study, data source, research methodology, limitations and assumptions of the study, plan or
structure of the research study. The main objective of the study is to evaluate the financial
performance of the selected public sector banks and private sector banks during the study
period from 2001-02 to 2010-11. This study is based on top ten selected PSBs and top ten
selected Pvt.SBs in India and all these banking companies have been selected on the basis of
their total income and balance sheet size.
Chapter 2 represents the survey of existing literatures on the comparative financial
performances of the banking companies. Existing literatures survey is subdivided into foreign
study and Indian study according to the years of study.
Chapter 3 highlighs the history of banking in India and the brief profiles of the
selected public and private sector banks. In this chapter brief history of banking in India prior
to 1969, nationalization of Indian banks and their progress after nationalization, reasons for
nationalization of banks, criticism against nationalization of banks, banking sector reforms in
India and growth of new private sector banks, brief history and background of selected PSBs
and Pvt.SBs in India have been discussed.
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8.2 Performance of the Selected Public Sector Banks (PSBs)

Chapter 4 has examined the financial performance of the selected public sector banks
and the performance of the selected PSBs has been judged on the basis of mobilization of
deposits, granting loans and advances, investment of funds, efficiency of NPA management,
social responsibility performance, cost control efficiency, productivity efficiency, earnings
and profitability efficiency.

In case of mobilization of total deposits during the study period, performance of
UCO Bank is found quite satisfactory followed by SB, OBC, UBI and BOI. On the other
hand BOB, PNB, CB, CBI and SBI could not make significant progress in increasing relative
growth rate in deposits. In absolute term the total deposit in the last year of the study period
of SBI is quite significant followed by PNB, BOB, BOI, CB and UBI. A satisfactory
performance is noticed in absolute term of the total deposits in case of CBI, SB, UCO Bank
and OBC. BOB, CB and OBC have reached in the absolute quantum of total deposits during
the study period by about 5 times. However, rest of the selected PSBs increased the absolute
quantum of total deposits during the study by about less than 5 times. It is observed from the
analysis that performance of all the ten selected PSBs was satisfactory in case of mobilizing
of total deposits. It is also observed that estimated trend rate of growth of total deposits over
the time period for all banks advocates in favor of banks efficiency in this regard. Overall
growth in absolute quantum and trend growth rate of selected PSBs taken together showed
notable performance in the year 2008-09 of the study period. It is also important to mention
here that all the PSBs under study show a fluctuating trend of increase in deposit
mobilisation. All the banks should take careful attention in this matter in order to achieve
stable growth of total deposits in future.

For analyzing the growth of loans and advances both in absolute and relative terms,
an attempt has been taken to analyse individually all the banks selected for the present study.
After individual analysis, the performance of selected public sector banks taken together has
also been discussed. The observed results indicate that in absolute term, amount of total loans
and advances for all banks have increased during the study period. Return on loans and
advances ratios also strongly support it. Highest mean score (10.340) of this ratio is observed
in the year 2002 and lowest mean score (7.871) of this ratio is observed in the year 2005.
Ultimate mean value of mean score of this ratio is calculated at 8.981. SB occupies the
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highest rank in this regard followed by UCO Bank, CBI and so on. Non-recovery of loans
and advances leads to NPA formation and highlights the inefficiency of banks in debt
management.

The findings of the study relating to investment of the selected banks indicate that
performance of all banks is quite satisfactory in terms of increasing absolute quantum of total
investments as well as in respect of its growth rate. Investment deposit ratios also strongly
support it. Highest rank in this regard is jointly occupied by SBI and CBI. Highest mean
score (47.260) of IDR is observed in the year 2004 and lowest mean score (28.849) is found
in the last year of the study period, i.e. in the year 2011. Ultimate mean value of mean score
of IDR is calculated at 36.781. It is generally believed that yielding capacity of investment in
different approved securities is less as compared to loans and advances. It is also true that
deployment of funds in terms of loans and advances is beneficial for banks only if banks can
recover loans and advances timely. Otherwise high levels of NPAs adversely affect
profitability, liquidity and solvency of a bank. In this situation it is safe and justified for
public sector banks to invest their funds in different approved securities.

For analyzing the asset quality of the selected banks both gross NPAs and net NPAs
(both in absolute term and in relative term) have been considered. The findings indicate that
none of the selected banks shows efficient performance in the matter of managing its loan
assets. Among them performance of OBC is satisfactory followed by CB, SB, PNB and BOB
in some years improved their performance in this matter. Highest average NPA index (5.834)
is observed in the beginning year of the study period, i.e. in the year 2002 and lowest NPA
index (1.110) is observed in the year 2009 and ultimate mean score of average NPA index is
calculated as 2.722. As the NPAs arises from the non-recovery of interest and principal on
loan assets, by analyzing NPAs it can be said whether the recovery performance of the banks
are satisfactory or not. But in the present era of tough competition with the private and
foreign banks it is ardently needed for the public sector banks to take appropriate strategies to
minimize their NPAs and utilize assets more efficiently. Several steps can be taken to
minimize the NPAs, like compromising with the borrowers, legal steps, rating of loan assets,
constitution of Assets Reconstruction Committee etc. But it can be said that no single policy
or step can reduce the NPA levels because all these banks operate their banking business in
the society under some government regulations. Economic background, cultural and some
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other environmental factors are different in different regions of this country which require
special attention for providing finance on social considerations. So to minimize the NPAs,
Banks should frame strategies keeping in mind all these factors.

For measuring the cost minimizing efficiency four relevant ratios have been
considered and analysis has been made on the basis of selected cost efficiency ratios over the
study period. It is observed from the study that the performance of the selected PSBs in
managing cost items was satisfactory for the last half of the study period as compared to the
first half of the study. Lowest average cost efficiency index (2.207) is observed in the year
2010 and highest average cost efficiency index (4.873) is found in the year 2006. Ultimate
mean score of the average CEI is calculated at 3.197. Another important factor is that the
existence of a very high degree of inconsistency associated with the management of cost
which is evident by the CV values of the selected cost items clearly point out the need for
adopting sound policies by the banks.
In order to examine the productivity efficiency of the selected banks, three important
ratios have been considered and analyzed. After individual analysis, the performance of
selected public sector banks taken together has also been discussed. It has been observed
from the study that a steady growth of productivity is found through average productivity
index during the study period. Lowest average productivity index (66.399) is observed in the
beginning year, i.e. in the year 2002 and highest average productivity index (363.024) is
found in the last year of the study, i.e. 2011. Ultimate mean score of the average PI is
calculated at 175.699. The existence of high degree of consistency in the performance of
productivity management of selected PSBs as a whole clearly evident that stable management
policies have been adopted by the banks to increase the productivity in this competitive
environment.
For measuring earnings and profitability efficiency four widely used measures of
profitability ratios have been considered. It has been observed that the banks could not
maintain a steady growth of profit over the years, though the quantum of profit was not
negligible. In respect of earnings and profitability indices highest EPI (6.266) is observed in
the year 2002 and lowest EPI (4.758) is found in the year 2010. As a whole in terms of
profitability the selected PSBs perform better in the first half of the study period as compared
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to the last half of the study period. The ultimate mean of earnings and profitability index is
calculated at 5.256.
All the ratios taken together under cost efficiency, productivity efficiency and
profitability efficiency a comprehensive rank analysis has been made and accordingly final
highest rank is occupied by UBI, followed by OBC, SBI, CB, BOB & BOI, SB, PNB, UCO
Bank and CBI.

For measuring social responsibility of the banks two important ratios have been
used, namely, priority sector advances as a percentage of total advances and ratio of wage
bills as a percentage of total income. To measure the social responsibility of the selected
PSBs as a whole, Social Responsibility Index (SRI) has been computed based on the
combination of year-wise average value of priority sector advances ratio and wage bill to
total income ratio. This is the most important aspect to analyze the performance of the
selected banking companies on the basis of their direct and indirect contribution to the society
for socio-economic growth. Highest contribution to the society is observed in case of PNB
and CBI (jointly) followed by SB, UCO Bank, UBI and so on. Highest average social
responsibility index (27.150) is observed in the year 2005 and lowest average SRI (20.575) is
found in the year 2009. As a whole in terms of social responsibility the selected PSBs
perform better in the first half of the study period as compared to the second half of the study
period. The ultimate mean of social responsibility index is calculated at 23.822.
8.3 Performance of the Selected Private Sector Banks (Pvt.SBs)

In Chapter 5 the performance of selected private sector banks under study has been
judged using the same financial indicators as we have been used in case of public sector
banks in Chapter 4. The findings of the study are summarized below:

It has been observed from the analysis that the quantum of total deposits in absolute
term increased significantly over the study period for all the selected private sector banks
except ICICI Bank under the study period. In terms of relative growth of total deposits, the
performance of AXIS Bank was found to be satisfactory followed by HDFC Bank, ICICI
Bank, K.Vys Bank, SIB, Federal Bank, Indusind Bank, ING Vys Bank, K.Bnk and J&K
Bank. Overall growth in absolute quantum and trend rate of growth of selected Pvt.SBs taken
together, notable performance is found in the year 2005-06 of the study period. Analysis of
percentage increase of total deposits over the previous year reveals fluctuating trend for
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almost all the banks. This needs due care especially in this tough competitive environment.
The observed growth rate of the total deposits for Indusind, ING Vys Bank, K.Bnk and J&K
Bank was not up to the mark. If they can maintain the growth rates in future this will lead
them to highly satisfactory position in the Indian banking sector in terms of resource base.

The analysis of total loans and advances of the selected Pvt.SBs both in absolute and
relative terms indicates that AXIS Bank, HDFC Bank, Federal Bank, K.Vys Bank and SIB
performed well during the study period. But in case of rest of the selected private sector
banks the performance was not up to the mark. Increase in absolute quantum of total loans
and advances do not necessarily mean satisfactory level of performance because of the
existence of NPAs. So the performance of the banks can be better understood from the
analysis of loan assets quality of the banks.

From the analysis of quantum of total investments and percentage increase/
(decrease) over the previous year it is observed that AXIS Bank performed better followed by
HDFC Bank, Indusind Bank, K.Vys Bank, ICICI Bank and Federal Bank. On the other hand
ING Vys Bank, SIB, K.Bnk and J&K Bank could not improve their performance significantly
in terms of growth of total investment. Overall exponential growth rate and investmentdeposit ratio computed for each bank also strongly support it.

From the analysis of gross and net NPAs in both absolute and in relative terms and
different selected NPA ratios some improvement is noticed for all the banks during the study
period. Among the selected banks, satisfactory performance is noticed in the matter of
managing loan assets in case of HDFC Bank, AXIS Bank and J&K Bank. ING Vys Bank,
K.Vys Bank and ICICI Bank showed average performance in this matter and poor
performance is found in cases of Indusind Bank, Federal Bank, SIB and K.Bnk. Since all the
private sector banks are operating in a tough competitive environment, poor recovery of loans
and investment of loans would greatly affect the financial stability. To attain the international
standard of NPAs, all the banks should take effective strategy to reduce the level of NPAs
after taking into consideration the environmental and economic factors of different regions of
this country.
316

For measuring the cost minimizing efficiency four relevant ratios have been
considered and analysis has been made on the basis of selected cost efficiency ratios over the
study period. It is observed from the study that the performance of the selected Pvt.SBs in
managing cost items was satisfactory for the first half of the study period as compared to the
last half of the study. Lowest average cost efficiency index (2.607) is observed in the year
2005 and highest average cost efficiency index (3.976) is found in the year 2009. Ultimate
mean score of the average CEI is calculated at 3.187. It is observed from the study that
average performance of all the selected Pvt.SBs was satisfactory but more specifically ICICI
Bank, AXIS Bank and HDFC Bank performed well throughout the study period. On the other
hand performance of the rest of the selected banks was not up to the mark in this regard.
Another important factor is that the existence of a very high degree of inconsistency
associated with the management of cost which is evident by the CV values of the selected
cost items clearly point out the need for adopting sound policies by the banks.
In case of productivity as measured by the selected productivity ratios, the findings
of the study indicate that on an average all the banks selected for this purpose performed well
over the study periods. After individual analysis, the performance of selected public sector
banks taken together has also been discussed. It has been observed from the study that almost
a steady growth of productivity is found through average productivity index during the study
period. Lowest average productivity index (171.685) is observed in the beginning year, i.e. in
the year 2002 and highest average productivity index (292.224) is found in the last year of the
study, i.e. in the year 2011. Ultimate mean score of the average PI is calculated at 224.576.
The performance of ICICI Bank, AXIS Bank and Federal Bank performed well throughout
the study period in terms of high productivity efficiency as compared to rest of the selected
Pvt.SBs. The existence of high degree of consistency in the performance of productivity
management of selected Pvt.SBs as a whole clearly evident that stable management policies
have been adopted by the banks to increase the productivity in this competitive environment
and in most of the years the selected banks were efficient in the matter of utilising its
resources.
For measuring earnings and profitability efficiency four widely used measures of
profitability ratios have been considered. It has been observed that the banks could maintain
relatively a steady growth of profit as compared to the selected PSBs as a whole over the
317
years. In respect of earnings and profitability indices highest EPI (6.093) is observed in the
year 2002 and lowest EPI (4.852) is found in the year 2005. As a whole in terms of
profitability the selected Pvt.SBs perform better in the last half of the study period as
compared to the first half of the study period. The ultimate mean of earnings and profitability
index is calculated at 5.383. Among the selected Pvt.SBs, HDFC Bank, Federal Bank and
K.Bnk performed better as compared to rest of the selected Pvt.SBs in terms of overall
profitability. But no definite trend is observed for all, which is very necessary in the days of
tough competitive environment.
All the ratios taken together under cost efficiency, productivity efficiency and
profitability efficiency a comprehensive rank analysis has been made and accordingly final
highest rank is occupied by AXIS Bank, Federal Bank and K.Vys Bank (jointly), followed by
HDFC Bank, J&K Bank, ICICI Bank, K.Bnk, Indusind Bank, SIB and ING Vys Bank.
From the observation it can be concluded that in comparison to the overall earnings
and profitability efficiency between selected PSBs as a whole and selected Pvt.SBs as a
whole, the performance of PvtSBs are better.
Considering the overall productivity efficiency between selected PSBs as a whole
and selected Pvt.SBs as a whole, the performance of PvtSBs are found better as compared to
selected PSBs as a whole.
In terms of overall cost minimizing efficiency between selected PSBs as a whole and
selected Pvt.SBs as a whole, the performance of PvtSBs are found marginally better as
compared to selected PSBs as a whole.

For measuring social responsibility of the banks two important ratios have been
used, namely, priority sector advances as a percentage of total advances and ratio of wage
bills as a percentage of total income. To measure the social responsibility of the selected
Pvt.SBs as a whole, Social Responsibility Index (SRI) has been computed based on the
combination of year-wise average value of priority sector advances ratio and wage bill to
total income ratio. This is the most important aspect to analyze the performance of the
selected banking companies on the basis of their direct and indirect contribution to the society
for socio-economic growth. Highest contribution to the society is observed in case of ING
Vys Bank followed by Federal Bank, K.Bnk, SIB and K.Vys Bank (jointly), J&K Bank, AXIS
Bank, HDFC Bank and Indusind Bank (jointly) and ICICI Bank. Highest average social
responsibility index (21.996) is observed in the year 2011 and lowest average SRI (15.547) is
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found in the year 2002. As a whole in terms of social responsibility the selected Pvt.SBs
perform better in the second half of the study period as compared to the first half of the study
period. The ultimate mean of social responsibility index is calculated at 19.868.
In comparison to the overall contribution to the society between the selected PSBs
as a whole and the selected Pvt.SBs as a whole, the poor performance is observed in case of
PvtSBs as compared to selected PSBs as a whole. This is the main cause of higher NPA
levels in public sector banks as compared to the private sector banks.
8.4 Comparative Analysis using Statistical Tools

Chapter 6 examines the comparative performance of selected public sector and
private sector banks using statistical tools. Firstly analysis has been made to find out the
degree of association or relationship between the average values of earnings and profitability
efficiency indices (i.e. EPI) and other selected average efficiency measures (i.e. CEI, PI,
NPAI and SRI) of the different selected public and private sector banks individually and as a
whole during the study period from 2001-02 to 2010-11, for which correlation analysis has
been applied taking into account their magnitudes by Pearsons simple correlation coefficient,
for ranking of their magnitudes by Spearmans rank correlation coefficient and for
highlighting the nature of their associated changes Kendalls correlation coefficients. In order
to examine whether the computed values of correlation coefficients between the earnings and
profitability indices and other efficiency parameter indices are statistically significant or not,
t-test has been used. Table 6.1(A) to Table 6.5(B) highlights pictures of EPI, CEI, PI, NPAI
and SRI of selected PSBs and Pvt.SBs under study over the period from 2001-02 to 2010-11
and also shows the bank wise average performance in terms of the different indices so
computed. Highest performance in terms of profitability is observed in case of OBC and
K.Vys Bank under PSBs and Pvt.SBs respectively as they occupy the highest average EPI
during the study period. If we compare the overall performance in terms of EPI is concerned,
then it can be said that selected PvtSBs as a whole are the better performers as they have the
highest ultimate average EPI as compared to that of the selected PSBs as a whole. Best
performance in terms of cost minimizing efficiency is concerned is observed in case of OBC
and ICICI Bank under PSBs and Pvt.SBs respectively as they occupy the lowest average CEI
of the study period. If we compare the overall performance in terms of CEI is concerned, then
it can be said that selected PvtSBs as a whole are the better performers as they have the
lowest ultimate average CEI as compared to that of the selected PSBs as a whole. Highest
performance in terms of productivity efficiency is concerned table clearly shows that OBC
319
under PSBs and Indusind Bank under Pvt.SBs occupy the best position as they have the
highest average PI during the study period. If we compare the overall performance in terms of
PI is concerned, then it can be said that selected PvtSBs as a whole are the better performers
as they have the highest ultimate average PI as compared to that of the selected PSBs as a
whole. Satisfactory performance is observed in terms of controlling NPAs of the bank from
the table that lowest average NPA is found in case of CB under PSBs and in case of HDFC
Bank under Pvt.SBs. If we compare the overall performance in terms of NPAI is concerned,
then it can be said that selected PvtSBs as a whole are the better performers as they have the
lowest ultimate average NPAI as compared to that of the selected PSBs as a whole. Highest
social responsibility performance is found in case of PNB under PSBs and ING Vys Bank
under Pvt.SBs as they have the highest average SRI during the study period. If we compare
the overall performance in terms of SRI is concerned, then it can be said that selected PSBs
as a whole are the better performers as they have the highest ultimate average SRI as
compared to that of the selected Pvt.SBs as a whole.
Table 6.6(A) and Table 6.6(B) show the correlation coefficients between the
efficiency measure of earnings and profitability (EPI) and the measures of other efficiency
indicators (PI, CEI, NPAI and SRI) indicating their nature of relationship or their nature of
association of the ten selected public sector banks (PSBs) and ten selected private sector
banks (Pvt.SBs) in India during the study period 2001-02 to 2010-11.
Table 6.6(A) clearly suggests that in the cases of all the selected PSBs in India, the
efficiency of earnings and profitability (EPI) is not at all influenced by the efficiency of
productive management (PI) during the study period, rather in few cases the productivity
efficiency of management made highly negative influence on the profitability efficiency of
the selected PSBs during the period under study. It is also observed that except ICICI Bank,
all of the selected Pvt.SBs are least influenced by the management of productivity in order to
increase the capacity of earnings and profitability during the period under study while in case
of Indusind bank, the influence of productivity management (PI) on the overall profitability
has not been so satisfactory despite having positive Pearson correlation coefficient (i.e.
0.007) during the study period.
Table 6.6(A) also reveals that there exists a considerable impact of the cost control
management (CEI) to influence the earnings and profitability (EPI) efficiency made by the
selected nine PSBs (other than CB) during the study period while in case of CB, there exists a
very low degree and negative association between EPI and CEI. The study also concluded
that in the case of HDFC Bank, Federal Bank, J&K Bank and K.Bnk; there exists a highly
320
significant and favorable influence of the cost control management (CEI) on the earnings and
profitability while AXIS Bank and ING Vys Bank are least influenced by the management of
cost control in order to increase the capacity of profitability. The table also reveals that the
management of cost control in case of ICICI Bank, Indusind Bank, SIB and K.Vys Bank did
not have influence on the earnings & profitability during the period under study.
The correlation coefficient values between the EPI and NPAI as shown in the Table
6.6(B) suggest that the most of the selected PSBs in India under study have achieved higher
efficiency in profitability at the cost of increasing NPAs. It is thus revealed that the PSBs in
India under study have significantly failed to achieve efficiency in NPA management.
Among the selected PSBs, CBI, SB and UCO Bank are found least efficient in managing
NPAs since they possess the highest positive values of correlation coefficients between EPI
and NPAI during the study period. The study also suggests that most of the selected Pvt.SBs
are found capable of managing NPA and are competent in this respect despite having positive
correlation. In comparison to the performance of NPA by PSBs, the Pvt.SBs are found more
able to manage NPA while increasing their earning efficiency.
It can be said from Table 6.6(B) that there exists a moderate impact of social
responsibility efficiency (SRI) on the earnings and profitability (EPI) efficiency made by the
selected nine PSBs (other than CBI) during the study period. The positive correlations
existing between EPI and SRI suggest that the PSBs as a whole during the study period have
been moderately influenced to perform their social obligation at par with the increase of their
earning efficiency. This is really a good sign and a matter of great achievement in the social
sphere. But the result also highlights that the selected Pvt.SBs have not showing their
tendency to serve the society and have been busy to earn profits disregarding the social
responsibility performance. The Pvt.SBs do not maintain social obligations as a part of their
normal course of business operation as compared to that of the PSBs in India.
Table 6.8(A) and Table 6.8(B) show the degree of association or relationship
between the measure of earnings and profitability (EPI) and other efficiency parameters (PI,
CEI, NPAI and SRI) of the selected PSBs as a whole and selected Pvt.SBs as a whole
respectively during the study period 2001-02 to 2011-11 in India. The study concludes that
the degree of association between the profitability measures and other efficiency measures
(i.e. productivity, cost control, non-performing assets and social responsibility measures) of
the selected PSBs in India as a whole has not been so satisfactory despite having positive
correlation as compared to that of the selected Pvt.SBs in India as a whole during the study
period.
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In Table 6.9, an attempt has been made to judge the joint influence of the selected
measures relating to productivity, cost control, NPA and social responsibility on earnings and
profitability of the selected PSBs and Pvt.SBs as a whole, of the selected ten public sector
banks and ten private sector banks in India under study, also to test whether the multiple
correlation coefficient (R) is statistically significant or not, F test has been used. In addition
to this, to judge the effectiveness or the reliability of this relationship the multiple coefficient
of determination (denoted by R2) has been used and it is defined as the ratio of explained
variation to the total variation of the dependent variable (EPI). From the analysis it may be
stated that the contribution made by the four indicators of efficiency measures for improving
the earnings and profitability of the selected PSBs as a whole in India is 97.6% during the
study period and in case of selected Pvt.SBs in India as a whole it was 86%. Thus it may be
concluded that as a whole selected PSBs are the better performer as compared to that of the
selected Pvt.SBs in India as a whole during the study period.
Table 6.10 highlights an overview of the analysis of multiple correlation between
earnings and profitability and other efficiency measures of the ten selected PSBs and ten
selected Pvt.SBs in India showing the multiple correlation coefficients of EPI on PI, CEI,
NPAI & SRI for the study period from 2001-02 to 2010-11. The multiple coefficient of
determination (R2) of the ten selected PSBs and ten selected Pvt.SBs in India are also shown
in Table 6.10.
Out of 10 positive coefficients of multiple correlation of the ten selected banking
companies under PSBs, 7 coefficients (in case of SBI, BOB, BOI, UBI, CBI, SB and UCO
Bank) are found to be statistically significant at 1% level and 2 coefficients (in case of PNB
and CB) are found to be statistically significant at 5% level which implies that joint influence
of the management of productivity, cost control, NPA and social responsibility on the overall
earnings and profitability is highly commendable in the cases of these 7 PSBs (SBI, BOB,
BOI, UBI, CBI, SB and UCO Bank) while in case of 2 PSBs (PNB and CB), there exists a
moderate impact and in case of rest 1 of PSBs (OBC), there exists an unfavorable impact of
the different efficiency measures on the overall earnings and profitability during the study
period.
The joint influence of the management of productivity, cost control, NPA and social
responsibility on the overall earnings and profitability is notable in the cases of 7 Pvt.SBs out
of 10 Pvt.SBs during the study period while in cases of Indusind Bank, SIB and K.Vys Bank,
the multiple correlation coefficients are found to be statistically insignificant. The study also
reveals that in case of HDFC Bank, 97.2% of the variation in the measurement of earnings
322
and profitability (EPI) is explained jointly by the variation in the management of productivity
(PI), management of cost control (CEI), management of NPA (NPAI) and the management of
social responsibility (SRI) during the study period while in case of Indusind bank, the
variation in the EPI due to variation of the management efficiency of other selected measures
is 63.7%.
In order to assess the joint influence of four selected efficiency measures on
overall earnings and profitability of the ten selected PSBs and ten selected Pvt.SBs as a whole
in India under study, multiple regression analysis has been applied that shown in Table 6.11.
While fitting the regression equation, EPI has been taken as the dependent variable and PI,
CEI, NPAI and SRI have been considered as the independent variables. The multiple
regression equation which has been fitted in this study is: EPI = b0 + b1.PI + b2.CEI +
b3.NPAI + b4.SRI where b0 is the constant, b1, b2, b3 and b4 are the respective partial
regression coefficients. In order to examine whether the partial regression coefficients are
statistically significant or not, t test has been used. The study reveals (from Table 6.11) that in
one case out of 2 partial regression coefficients of PI is found to be positive and also
statically significant under selected Pvt.SBs as a whole in India during the study period. This
table also shows that all of 2 positive coefficients of CEI are found to be statistically
insignificant. On the other hand it is clear from the table that out of 2 positive partial
regression coefficients of NPAI 1 coefficient is found to be positive and statistically
significant at 1% level under PSBs and another coefficient of NPAI under Pvt.SBs is found to
be positive and statistically insignificant. Out of 2 negative partial coefficients of SRI, 1
coefficient under PSBs is found to be statistically significant at 5% level and rest 1
coefficient under Pvt.SBs is found to be statistically insignificant.
From Table 6.12 it is seen that the partial regression coefficients of PI are positive
in 7 cases out of 20 cases and in the remaining 13 cases, the coefficients are negative of
which in 2 cases (i.e. SB under PSBs and HDFC Bank under Pvt.SBs), the coefficients are
found to be statistically significant. Of the 7 positive coefficients, in 1 case (i.e. ICICI Bank
under Pvt.SBs), the highly positive effects of productivity management on overall
profitability is found to be statistically significant.
It is also observed from Table 6.12 that in 16 cases out of 20 cases, partial
regression coefficients of CEI are found to be positive of which in 5 cases (i.e. SBI and BOB
under PSBs and HDFC Bank, Federal Bank and K.Bnk under Pvt.SBs), the coefficients are
found statistically significant. In the remaining 4 cases the coefficients are found to be
negative and statistically insignificant.
323
Table 6.12 also shows that out of 20 partial regression coefficients of NPAI, in 15
cases, the coefficients are observed positive of which in 5 cases (i.e. SBI, PNB, UBI, CBI and
UCO Bank under PSBs), the coefficients are found statistically significant. While in the
remaining 5 cases, the coefficients are found negative and statistically insignificant.
The study reveals from the Table 6.12 that out of 20 partial regression coefficients
of SRI are found to be positive and insignificant in 6 cases. However in the remaining 14
cases, the coefficients are found to be negative of which in 6 cases (i.e. BOI, CB, UBI and SB
under PSBs and HDFC Bank and AXIS Bank under Pvt.SBs), the coefficients are found
statistically significant.
An attempt has been taken to find out the degree of association between SRI and
NPAI of the selected PSBs and selected Pvt.SBs as a whole in Table 6.13 under different
methods. The results of the analysis reveal that there is a positive association between the
social responsibility performance and increase in NPAs so far as the selected PSBs in India
are concerned. It corroborates the fact that the selected PSBs in India have to face much of
NPAs in consideration of their social responsibility performance. From social viewpoint it is
to be highly admired though the same is not favourable to bank management as it
significantly affects the overall financial performance of the banks. It is also to be noted that
so as the social responsibility performance and NPAs forming are concerned, the selected
PSBs in India have made commendable performance in comparison to that of the Pvt.SBs in
India under study if viewed through the lens of the society.
The measurement of correlation coefficients between SRI & NPAI of the ten
selected PSBs and ten selected Pvt.SBs in India during the study period from 2001-02 to
2010-11 have been shown in Table 6.14. The study suggests that in most of the cases of
selected PSBs in India, the social responsibility and NPA level of the banks are positively
associated. That means higher the social responsibility higher is the NPA level and viceversa. In some cases i.e. in cases of OBC and UCO Bank, contribution to the society as social
responsibility highly influences the NPA level of the bank. On the other hand NPA level is
moderately influenced by SRI in some cases, i.e. in cases of PNB, UBI, CBI and SB. Only in
two cases i.e. in cases of SBI and CB negative association is observed between SRI and
NPAI. This indicates that more contribution to the society boost up the NPA level or
adversely affects the NPA level. This result also indicates that NPA management of the
selected PSBs in India shows poor performance to reduce the NPA level and at the same time
it shows their higher contribution to the society as a matter of their social responsibility
performance.
324
The study suggests that in most of the cases of selected Pvt.SBs social responsibility
index (SRI) are formed adversely or negatively associated with NPA level. The results of the
analysis highlights that the selected Pvt.SBs in India did not have performance towards social
responsibility performance and there is no relationship between the increase of NPAs and
social responsibility performance. It thus suggests that the in the case of selected Pvt.SBs,
NPAs have increased in the normal course of banking business during the study period. The
selected Pvt.SBs in India under study are found reluctant to social responsibility performance
and have given much preference to control the level of NPAs.
It can be concluded that as a whole the selected PSBs in India have shown their
greater interests towards social responsibility performance and contributed significantly for
the overall socio-economic development of the country by providing loans and advances to
different priority sectors including liberal advances to rural and urban areas disregarding the
emergence of NPAs. It is very crucial and highly significant for the country like India where
the vast majority of the population lives in rural and urban areas and they require financial
help from banks for their sustenance. The PSBs in India have come formed to help the
common people and business entities to go ahead with financial supports. Whereas it is
observed that the selected Pvt.SBs banks have been busy with banking operations with strict
approach not to increase NPAs and accordingly they have shown their much reluctance to
social responsibility performance.
Whether the two samples (selected PSBs and selected Pvt.SBs) come from identical
populations (or that the two populations have the same mean) or not, analysis of rank sum
tests i.e. Wilcoxon-Mann-Whitney or U-test has been applied. After analysing from the Table
6.15 and Table 6.16, it can be concluded that the two samples i.e. selected PSBs and Pvt.SBs
in India have come from the population with the same mean during the period under study
2001-02 to 2010-11 and it is significant at 10% level.
It can be concluded from the analysis that in most of the cases the selected private
sector banking companies are better performers than the banks under public sector group
because there is a close and significant association or relationship between profitability and
different aspect of management efficiency under private sector banking group than public
sector banking companies during the period under study.
325
8.5 Comparative analysis using CAMEL model

Chapter 7 examines the comparative performance of selected PSBs and Pvt.SBs
using CAMEL technique. In order to examine the overall efficiency of selected public sector
and private sector banks using CAMEL technique, first appropriate ratios for parameters over
the years have been computed and then ranked them on the basis of simple average over the
study period for each parameter. Then the composite score of each bank for each parameter
has been computed by taking an average of the individual ranks achieved by the banks for
each ratio in a single parameter and final rank has been prepared.
Capital Adequacy: Capital adequacy analysis reflects the overall financial conditions of the
banks and also the ability of the management to meet the need for additional capital. For
analyzing capital adequacy four important ratios have been computed and analysed.
In overall capital adequacy, the CB (under PSBs) is given the 1st rank position,
followed by SB (under PSBs), SIB and K.Vys (jointly) under Pvt.SBs, Federal, PNB, BOI
and UCO Bank (jointly) under PSBs, SBI and UBI (jointly) under PSBs, Indusind Bank,
BOB, CBI, OBC, J&K Bank and ING Vys Bank (jointly) under Pvt.SBs, ICICI Bank, K.Bnk,
HDFC Bank and AXIS Bank.
From the analysis it is observed that out of four measures of capital adequacy,
selected PSBs as a whole performed better in three measures as compared to that of the
selected Pvt.SBs during the study period (selected PSBs performed better in three parameters
of Capital Adequacy Analysis viz. Debt-Equity Ratio, Advances to Assets Ratio and Govt.
Securities to Total Investment Ratio than the private sector banks under study).
Asset Quality: Asset quality is another important parameter to assess the financial
performance of selected PSBs and Pvt.SBs under study. The quality of assets is very
important to gauge the strength of any banking company. In this study the quality of assets
has been examined with the help three important ratios.
It has been observed from the analysis that new private sector banks occupied first
three positions in case of asset quality. HDFC Bank ranked 1st position followed by AXIS
Bank (2nd) and J&K Bank (3rd). Among the PSBs, OBC occupied 4th position, followed by
PNB (5th), both BOB and SB (jointly 6th position). BOI under PSBs occupied last position
(20th rank) in asset quality.
It is evident from the study that none of the banks selected for this study showed
consistently good performance in all the three measures of asset quality except new private
sector banks, specifically HDFC Bank and AXIS Bank showed very remarkable performance
326
in respect of quality of assets. For other selected banks, the performance was not up to the
mark.
It is evident from the other measures of asset quality also that new private sector
banks are more cautious about the quality of their assets than the other banks selected for this
study. Indeed, the public sector banks operated their banking service in a regulated
environment prior to banking sector reforms. At that time much more important was given by
them to the economic well-being of weaker section, agricultural sectors etc. It is generally
said that advances to priority sector was one of the important causes of overdue. In the
deregulated environment the banks tried to reduce the overdue and made notable
improvement. But still the quantum of NPAs (both in absolute and relative terms) is
significantly higher than that of new private sector banks and as per international standard.
Management Efficiency: Management is most important ingredient that ensures the sound
functioning of banks. With increased competition in the Indian banking sector, efficiency and
effectiveness have become the rule as banks constantly strive to improve the productivity of
their employees. In order to satisfy customers, banks maintained extended working hours,
flexible time schedules, outsourcing marketing etc. Another significant development has been
made in the operation of banks by using technology. Internet banking is a common
phenomenon in Indian banks. Banks are now moving from traditional banking to universal
banking. In this changing scenario the task of management is very challenging. For
measuring the efficiency and effectiveness of the selected banks important three ratios have
been used for analysis.
The findings of the study indicate that private sector banks occupied top five
positions under management efficiency measures. ICICI Bank occupied 1st position followed
by Indusind (2nd position), HDFC Bank (3rd position), K.vys Bank (4th position) and AXIS
Bank (5th position). Management performance of CBI under PSBs is found to be poor among
the selected banking companies and occupied the last position.
From the analysis, it is evident that in all the three measures of management
efficiency the selected Pvt.SBs specifically new private sector banks perform better as
compared to that of the selected PSBs as a whole during the study period.
Earnings Capacity: Earning capacity is another important parameter for judging the
operational performance of a bank. Total income of a bank is divided into two parts- income
from core activities (i.e. income from lending operations) and income generated by non-core
activities like investments, treasury operations, corporate advisory services etc. To measure
327
the earning capacity of the selected PSBs and Pvt.SBs important four widely used ratios have
been computed and analyzed.
In earning quality HDFC Bank ranked 1st position followed by both PNB and BOB
(jointly 2nd position), both CBI and ICICI Bank (3rd position). On the other hand both ING
Vys Bank and K.Bnk under Pvt.SBs jointly occupied last position. The result shows that no
definite conclusion can be drawn regarding earning quality and a mixed result is observed.
But it is clearly found that out of the four measures of earning capacity, selected PSBs
performed better in three measures as compared to that of the selected Pvt.SBs. So, it can be
said that most of the selected PSBs maintain better performance on overall measures of
earning capacity as compared to that of the selected Pvt.SBs during the study period.
Liquidity: Liquidity refers to the existence of assets in cash or near cash form. It indicates
the ability of the banks to discharge their liabilities as and when they mature. Alternatively, it
is the ability of the banks to convert non-cash assets into cash as and when needed. Lending
and borrowing of money are the main activities of a bank. Public deposit their money in
banks for two reasons safety and interest income. Thus, repayment of deposits along with
timely payment of interest is of crucial importance for a bank. For this bank should always
maintain sufficient liquidity. For examining liquidity position of the selected banks, three
widely used ratios have been considered and analysed.
st
It has been observed from the analysis that BOB occupied 1 rank position followed
by OBC and SIB (jointly 2nd position) and UBI under PSBs has occupied last position in
liquidity. From the analysis it is clearly observed that out of the three measures of liquidity,
selected Pvt.SBs perform better in two measures of liquidity as compared to the selected
PSBs. So, it can be said that as a whole selected Pvt.SBs maintain better performance on
overall liquidity measures as compared to that of the selected PSBs as a whole during the
study period.
Overall Rank: From overall rank analysis under CAMEL Model it is thus observed that out
of first four rank positions three positions have been occupied by the private sector banks
(HDFC Bank, AXIS Bank and ICICI Bank) under study. Another one top rank position is
occupied by BOB under public sector group. The rest rank positions are jointly shared by the
both groups of banks under study. So this can be highlighted that barring the three private
sector banks and one public sector bank, all other banks of the two groups under study have
performed more or less same during the study period so far CAMEL model analysis is
concerned.
328
8.6 Conclusion
In an attempt to evaluate comparative financial performance of twenty leading
Indian commercial banks, ten each from public sector and private sector, the present study
has employed different parameters of study. Performance of each bank has been analysed in
details in terms of deposit mobilisation, loans and advances, investment position, nonperforming assets, social responsibility efficiency, cost minimising efficiency, productivity
efficiency, earnings and profitability efficiency. Lastly, comparative performance has been
done using different relevant statistical tools and also by using CAMEL Rating Method.
Major operational changes have come in the banking sector after the financial
sector reforms. Some new banks have entered into this sector with some innovative thinking
to cope up with the competitive environment. These new private sector banks are more
technology savvy and more concerned about the changing needs of customers. Public sector
banks and old private sector banks were in the banking service under controlled economy for
a long period of time. The success of any firm including banks depends on internal strength
and how it adjusts with the external changes. Practically it is very difficult to keep pace with
the changing environment without having the exposure to the latest technological
developments in bank functioning.
In the present study we have examined the performance of the selected banks for the
period 2001-02 to 2010-11. It has been observed from the study that new private sector banks
performed well as compared to selected public sector banks and old private sector banks from
the bankers point of view but from the social point of view public sector banks are found the
better performers as compared to others.
The study also reveals that there is a phenomenal development in both the selected
public and private sector banks during the study period. There are some factors responsible
for the decrease in profits in banks especially private sector banks due to their sheer
dependence on interest income, escalating operating cost, growing incidence of financial
disintermediation, emphasis on social goals, rapid branch expansion particularly in the
unbanked and under-banked areas.
In this highly competitive global environment it is imperative for the banks to show
outstanding performance in various parameters. In conclusion it can be said that though there
is a magnificent development in both Public and Private sector banks in India after the
banking sector reforms yet the public sector banks are still lagging behind. It may be advised
that the PSBs in India should be more efficient in their overall asset management policy,
329
employee performance, cost control and should have more customer-friendly banking
operations to keep pace with the challenging performance of the private sector banks in India
as well as to compete with the global players.
The RBI and the Central Government of India have undertaken several reform
measures to make the Indian banks competitively strong and economically viable. It has been
also observed from the present study that the performance of all the selected banks improved
in the later part of the study period. It can be said that Indian banks are gradually
strengthening their financial performance despite working in a very tough competitive
environment. For accelerating the pace of socio-economic growth process, Indian Banking
Industry should come forward wholeheartedly to offer extensive financial help to different
small sector and unorganised sectors of the economy specially in the remote and the
hinterlands of India where still after the 65th years of independence, a vast majority of the
people do not have the opportunity to manage a square meal for their livelihood for want of
requisite finance and other help. As a part of their social responsibility performance, the
banks in general should be more active, straight forward in their approach to provide finance
in a hassle-free manner to reach the highly needy person or entity to survive and grow
keeping in view the financial as well as social inclusion mission of the country. Social
development in its truest sense will not be achieved unless the drive for socio-economic
development touches all and everyone in the society. For the coming days to be more
prosperous and self-reliant, the role of the banking sector is of great significance.
However, for the sake of profound study of banking performance in India further
research may be undertaken on a more specific way. In commensurate with the needs and
aspirations of the society, all banks whether in public sector and private sector should come
forward with a strategic role to serve the society so as to alleviate poverty and inequality of
income distribution as far as possible by providing loans and advances to different sectors
with special emphasis on priority and weaker sectors to help develop India as the leading
nation of the world.
330
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PERFORMACE EVALUATION OF SELECTED BANKING

COMPANIES IN INDIA: A STUDY

A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN

JAYANTA KUMAR NANDI

Under the Supervision of

social responsibility performance, cost control efficiency, productivity efficiency, earnings

The University of Burdwan

Jayanta Kumar Nandi

Burdwan, Pin 713104

Title of the Chart

5.1Final Ranks of Selected Pvt.SBs based on total of Ultimate Ranks

Statement showing Total Deposits, Loans & Advances and

the period 2001-02 to 2010-11

Responsibility Indicators during the period 2001-02 to 2010-11

Investments and their Annual Growth Rates of K.Bnk during the

Statement showing Priority Sector Advances to Total Advances

Profit per Employee (in ` Lakh) of Selected Pvt.SBs in India

Analysis of Productivity Indices (PI) of the selected Pvt.SBs in

Analysis of Multiple Regression of EPI on PI, CEI, NPAI and

Statement showing Profit per employee (` in lakh) of the

CHAPTER-1: GENERAL INTRODUCTION

1.2 Significance or relevance of this study

1.3 Objectives of the study

1.4 Hypothesis of the study

1.5 Data source

1.6 Research Methodology

1.7 Limitations and Assumptions of the study

1.8 Plan or structure of the Study

CHAPTER- 2: REVIEW OF LITERATURE

2.1 Foreign Studies

2.2 Indian Studies

CHAPTER-3: HISTORY OF BANKING IN INDIA AND BRIEF

3.1 Brief history of banking in India prior to 1969

3.2 Nationalization of Indian banks and their progress after nationalization

3.3 Reasons for Nationalization of Banks

3.4 Criticisms against nationalization of banks

3.6 Brief Profiles of Selected Public Sector Banks (PSBs) in India

3.6.1 History and Background of State Bank of India (SBI)

3.6.2 History and Background of Punjab National Bank (PNB)

3.6.3 History and Background of Bank of Baroda (BOB)

3.6.4 History and Background of Bank of India (BOI)

3.6.5 History and Background of Canara Bank (CB)

3.6.6 History and Background of Union Bank of India (UBI)

3.6.7 History and Background of Central Bank of India (CBI)

3.6.8 History and Background of Syndicate Bank (SB)

3.6.9 History and Background of Oriental Bank of Commerce (OBC)

3.6.10 History and Background of UCO Bank (UCO)

3.7 Brief Profiles of Selected Private Sector Banks (Pvt.SBs) in India

3.7.1 History and Background of ICICI bank (ICICI)

3.7.2 History and Background of HDFC bank (HDFC)

3.7.3 History and Background of Axis Bank (AXIS)

3.7.4 History and Background of Federal Bank (Federal)

3.7.5 History and Background of Jammu and Kashmir Bank (J&K)

3.7.6 History and Background of Indusind Bank (Indusind)

3.7.7 History and Background of ING vysya bank (ING Vys)

3.7.8 History and Background of Karnataka Bank (K.Bnk)

3.7.9 History and Background of South India Bank (SIB)

3.7.10 History and Background of Karur Vysya Bank (K.Vys)

CHAPTER-4: PERFORMANCE EVALUATION OF SELECTED PUBLIC

4.2.2 Analysis of Total Deposits, Loans & Advances and Investments of

4.2.5 Analysis of Total Deposits, Loans & Advances and Investments of

4.2.6 Analysis of Total Deposits, Loans & Advances and Investments of

4.2.7 Analysis of Total Deposits, Loans & Advances and Investments of