1 t Satyanarayana Chary Mf Paper

JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288

Sri Krishna International Research & Educational Consortium http://www.skirec.com

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The Journal of Sri Krishna Research & Educational Consortium

J O U R N A L O N B A N K I N G

F I N A N C I A L S E R V I C E S &

I N S U R A N C E R E S E A R C H

Internationally Indexed & Listed Referred e-Journal

CAMEL RATING SCANNING (CRS) OF

SBI GROUPS

S. SIVA*; P. NATARAJAN**

*Project Fellow UGC – MRP, Department of Commerce,

School of Management, Pondicherry University,

Puducherry.

**Professor of Commerce, Department of Commerce,

School of Management, Pondicherry University,

Puducherry.

ABSTRACT

Indian financial system has passed through second generation reforms by giving

emphasis on individual upgradation, strengthening internal system, attention to

different prudential norms viz capital adequacy, containment of NPA, functional

antennary and systemic improvements towards effecting credit delivery system. It

can be done only through proper supervisory and regulatory mechanism. The

CAMEL Methodology has been developed and practised by the North American

bank regulators to assess the financial and managerial soundness of US

commercial banks. Subsequently Basel committee on banking supervision (BCBS)

has been created in 1974 and they also accept the CAMEL as uniform financial

institution rating system to evaluate and monitor the banks. In India is adapting

the Basel I & II norms in total so has to ensure the better financial standing of

own banks & financial Institutions. This paper empirically tested the applicability

of CAMEL norms and its consequential impact on the performance of SBI

Groups.

KEYWORDS: Capital Adequacy, Asset quality, Liquidity, NPA.

INTRODUCTION

Indian financial system has passed through second generation reforms by giving emphasis on

individual upgradation, strengthening internal system, attention to different prudential norms

viz capital adequacy, containment of NPA, functional antonerry and systemic improvements

towards effecting credit delivery system. It can be done only through proper supervisory and

regulatory mechanism.



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The CAMEL Methodology has been developed and practised by the North American

bank regulators to assess the financial and managerial soundness of US commercial banks.

Subsequently Basel committee on banking supervision (BCBS) has been created in 1974 and

they also accept the CAMEL as uniform financial institution rating system to evaluate and

monitor the banks. In India is adapting the Basel I & II norms in total so has to ensure the

better financial standing of own banks & financial Institutions. This paper empirically tested

the applicability of CAMEL norms and its consequential impact on the performance of SBI

Groups.

ORIGIN AND GROWTH OF SBI

State Bank of India (SBI) is the largest Indian banking and financial services the bank

traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806

of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The

government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank

of India taking a 60% stake, and renamed it as State Bank of India. In 2008, the government

took over the stake held by the Reserve Bank of India.

SBI offers wide a range of banking products through its vast network of branches in

India and overseas. The State Bank Group, with over 16,000 branches, has the largest banking

branch network in India with 130 branches overseas. It has an asset base of $352 billion and

$285 billion in deposits. SBI group has a major market share among Indian commercial banks

of covering 20% in deposits and loans.

The total assets of the Bank increased by 9.23% from Rs.9,64,432.08 crores at the end

of March 2009 to Rs.10,53,413.73 crores as at end March 2010. During the period, the loan

portfolio increased by 16.48% from Rs.5,42,503.20 crores to Rs.6,31,914.15 crores.

Investments increased by 3.56% from Rs.2,75,953.96 crores to Rs.2,85,790.07 crores as at the

end of March 2010.

NEED OF THE STUDY

In emerging financial markets, banking sector assets comprise well over 80 per cent of

total financial sector assets, which much lower in the developed economies. In addition,

deposits as a share of total bank liabilities have declined since 1990 in many developed

countries, while in developing countries public deposits in banks are overwhelmingly

increasing.

The solvency of financial institutions typically is at risk when their assets quality

become impaired, and hence it is important to monitor indicators of the quality of their assets

in terms of overexposure to specific risks, trends in nonperforming loans, and the health and

profitability of bank borrowers. This research paper attempted to evaluate the performance of

State Bank Groups (Eight Banks) in India by a supervisory rating of the bank's overall

condition, commonly referred as CAMEL rating.

OBJECTIVES OF THE STUDY

1. To measure the financial performance of the State Bank Group in India under

CAMEL Rating Scanning (CRS)

2. To suggest for improvement of financial position of the State Bank Groups in India



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HYPOTHESIS OF THE STUDY

1. There is no significant difference in the performance of State bank of India Group

Banks.

METHODOLOGY

It is an evaluatory type of research relates with 8 Constituents of

SBI Groups (viz) (State Bank of India, State Bank of Mysore, State Bank of Travancore, State

Bank of Patiala, State Bank of Hyderabad, State Bank of Indore, State Bank of Saurasthra

State Bank of Jiapur). State Bank of India Group has been purposefully taken up to identify

the effectiveness and financial standing of the mammoth public sector bank in the interest of

all stakeholders. This study is based on time series Secondary data for a period of 8 years

2003-10. Secondary data has been collected through RBI Bulletin & CMIE Prowess Package.

Having undertaken CAMEL Rating scanning, the researchers have applied ANOVA and

tested the difference in the performance of study units and prescribed some suggestions.

CAMEL FRAMEWORK

"CAMEL" as acronym CAMEL refers to the five components of a bank's financial

condition Viz., Capital adequacy, Asset quality, Management, Earnings, and Liquidity

characters of a commercial bank. CAMEL is basically a ratio-based model for evaluating the

performance of the banks periodically. Various ratios forming this model have been explained

individually and collectively.

C- CAPITAL ADEQUACY

Capital base of financial institutions facilitates depositors in forming their risk

perception about the institutions. The most widely used indicator of capital adequacy is capital

to risk-weighted assets ratio (CRWA). According to Bank Supervision Regulation Committee

(The Basle Committee) of Bank for International Settlements, a minimum 9 percent CRWA is

required.

Capital adequacy determines how well financial institutions can cope with shocks to

their balance sheets. Thus, it is useful to track capital-adequacy ratios that take into account

the most important financial risks—foreign exchange, credit, and interest rate risks—by

assigning risk weightings to the institution‘s assets

A – ASSET QUALITY

Asset quality determines the healthiness of financial institutions against loss of

value in the assets. The weakening value of assets, being prime source of banking problems,

directly pour into other areas, as losses are eventually written-off against capital, which

ultimately expose the earning capacity of the institution. The asset quality is gauged in

relation to the level and severity of non-performing assets, adequacy of provisions, recoveries,

distribution of assets etc. Popular indicators include nonperforming loans to advances, loan

default to total advances, and recoveries to loan default ratios.



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M – MANAGEMENT EFFICIENCY

Management of financial institution is generally evaluated in terms of capital

adequacy, asset quality, earnings and profitability, liquidity and risk sensitivity ratings. In

addition, performance evaluation includes compliance with set norms, ability to plan and react

to changing circumstances, technical competence, leadership and administrative ability of the

bank.

Sound management is one of the most important factors behind financial institutions‘

performance. Indicators of quality of management, however, are primarily applicable to

individual institutions, and cannot be easily aggregated across the sector.

E –EARNING ABILITY

Earnings and profitability, the prime source of increase in capital base, is related with

regards to interest rate policies and adequacy of provisioning. Further, it also helps to support

present and future operations of the institutions. The single best measure used to earning is the

Return on Assets (ROA), which is net income after taxes to total asset ratio. Good earnings

and profitability of banks reflects the ability to support present and future operations.

Specifically, this determines the capacity to absorb losses, finance its expansion, pay

dividends to its shareholders, and build up an adequate level of capital.

L – LIQUIDITY

An adequate liquidity position refers to a situation, where institution can obtain

sufficient funds, either by increasing liabilities or by converting its assets quickly at a

reasonable cost. It is, therefore, generally assessed in terms of overall assets and liability

management, as mismatching gives rise to liquidity risk. The term liquidity is used in various

ways, all relating to availability of, access to, or convertibility into cash. An institution is said

to have liquidity if it can easily meet its needs for cash either because it has cash on hand or

can otherwise raise or borrow cash.

RATIO TAKEN FOR THE STUDY

C Capital Adequacy ratio,

Capital Adequacy ratio (Tier I)

A Priority sector advances to total advances ,

Secured advances to total advances, Non-performing assets (NPAs)

M Business per employee, Profit per employee,

Return on equity, Return on advances

E Interest Income ratio, Net Interest Margin ratio,

Operating Profit ratio, Return on Assets ratio



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L Cash-deposit ratio,

Credit-deposit ratio

CAPITAL ADEQUACY RATIO OF STATE BANK GROUPS

Maintaining adequate capital fund is the mandatory norms for all the commercial

banks. It helps to impose confidence in the minds of stake holders. The capital adequacy

affects the financial position of the bank. The international banking regulators, BCBS (Basel

Committee for Banking Supervision) have stipulated a minimum Capital Adequacy Ratio

(CAR) of 8 percent. In India, the minimum CAR is stipulated as 9 percent by the Reserve

Bank of India. To assess the capital adequacy of the State Bank parameter under ‗CAMEL‘

framework, viz. (i) Capital Adequacy Ratio, and (ii) Capital Adequacy Ratio–Tier I.

TABLE 1 CAPITAL ADEQUACY RATIO

Years/ Bank SBI SBJ SBH SBE SBM SBP SBS SBT

2003 13.5 13.08 14.91 13.09 11.62 13.57 13.68 11.3

2004 13.53 12.93 14.29 12.39 11.53 13.56 14.53 11.36

2005 12.45 12.6 11.74 11.61 12.08 14.21 11.45 11.05

2006 11.88 12.08 12.08 11.4 11.37 13.55 12.03 11.15

2007 12.34 12.89 12.51 11.77 11.47 12.38 12.78 11.68

2008 13.54 12.51 12.35 11.29 11.73 13.56 12.34 13.53

2009 14.25 14.52 11.53 13.46 12.99 12.60 na 14.03

2010 13.39 13.30 14.90 13.53 12.42 13.26 na 13.74

Mean 13.11 12.99 13.04 12.32 11.90 13.34 12.80 12.23

Rank 2 4 3 6 8 1 5 7

Capital Adequacy ratio (Tier I)

2003 8.81 10.52 9.84 9.4 7.23 10.39 11.66 6.8

2004 8.34 9.03 8.42 8.31 7.18 9.87 10.99 6.23

2005 8.04 7.95 7.58 6.67 7.12 11.05 8.68 6.17

2006 9.36 8.5 8.95 7.55 7.44 9.84 9.02 7.24



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2007 8.01 7.79 8.25 6.74 6.62 8.36 8.17 7.55

2008 9.14 6.95 7.24 7.01 6.54 7.31 8.06 7.41

2009 9.38 8.46 7.14 7.91 7.15 6.94 na 8.59

2010 9.45 8.35 8.64 8.58 7.59 8.16 na 9.24

Mean 8.82 8.44 8.26 7.77 7.11 8.99 9.43 7.40

Rank 3 4 5 6 8 2 1 7

Source: Complied from RBI Bulletin and CMIE Prowess

Table 1 exhibits the CAR of State Bank Groups in India over the eight years‘ period

under study. It is observe that the highest average CAR has been that of SBP (State Bank of

Patiala) is 13.34%, and is followed by State Bank of India (SBI) with an average CAR of

13.11%. Least performance by State of Mysore (SBM) is 11.90 %. Further it shows the CAR

(Tier I) of State Bank Groups in India over the eight years under study. It finds that for CAR

(Tier I) the highest average CAR goes to SBT (State Bank of Saurashtra) with 9.43 %, and is

followed by SBP (State Bank of Patiala) is 8.99%. State bank of Mysore having lowest ratio

of 7.11 % in CAR (Tier I) among the State bank groups.

ASSET QUALITY OF STATE BANK GROUPS

Asset quality of commercial banks helps to diagonise the efficieny viability of the

assets held by the banks. It could be measured by parameters like: (i) the ratio of priority

sector advances to total advances, (ii) the ratio of secured advances to total advances, (iii) the

ratio of non-performing assets (NPAs) in the total advances of State bank.

TABLE 2 PRIORITY SECTOR ADVANCE RATIO


2003 25.49 43.16 32.54 43.94 36.46 40.98 40.81 33.6

2004 27.04 43.86 39.51 46.32 36.52 39.39 42.67 37.22

2005 28.59 45.1 39.69 43.69 40.45 44.04 38.96 38.36

2006 30.58 41.3 41.68 42.85 42.45 37.87 41.61 41.1

2007 30.24 41.03 38.99 37.46 36.31 34.58 41.64 39.54

2008 28.61 40.99 32.78 37.93 31.85 31.60 39.55 41.73

2009 26.48 38.80 31.97 34.69 33.22 32.15 NA 39.92

2010 26.99 37.94 33.79 41.88 30.55 38.47 NA 36.64



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Mean 28.00 41.52 36.37 41.10 35.97 37.38 40.87 38.51

Rank 8 1 6 2 7 5 3 4

Secured Advances ratio

2003 86.46 91.69 88.65 93.68 95.62 89.27 92.89 87.1

2004 83.15 90.03 86.94 88.48 94.74 87.28 87.54 86.67

2005 77.06 87.39 78.54 89.16 91.9 83.56 77.35 83.26

2006 76.74 88.23 80.12 88.61 86.09 84.83 76.15 85.98

2007 75.61 86.01 79.70 89.04 88.40 90.31 74.48 87.04

2008 73.06 82.64 82.92 87.85 86.43 91.42 77.26 84.57

2009 79.01 80.02 81.70 88.88 89.08 93.03 NA 80.25

2010 78.50 79.23 85.46 86.01 87.80 96.73 NA 79.82

Mean 78.70 85.66 83.00 88.96 90.01 89.55 80.94 84.34

Rank 8 4 6 3 1 2 7 5

NPA ratio

2003 4.5 4.13 3.25 2.66 5.19 1.49 3.53 3.06

2004 3.48 1.24 0.65 0 2.96 0 0 1.39

2005 2.65 1.61 0.61 1 0.92 1.23 1.4 1.81

2006 1.87 1.18 0.36 1.83 0.74 0.99 1.16 1.47

2007 1.56 1.09 0.22 1.04 0.45 0.83 0.70 1.08

2008 1.78 0.83 0.16 0.73 0.43 0.60 0.91 0.94

2009 1.79 0.85 0.38 0.89 0.50 0.60 NA 0.58

2010 1.72 0.77 0.55 1.13 1.02 1.04 NA 0.91

Mean 2.42 1.46 0.77 1.16 1.53 0.85 1.28 1.41

Rank 8 6 1 3 7 2 4 5


Table 2 shows the ratio of Priority sector Advances of State Bank Groups in India.

Among the State Bank Groups State of Bank Jaipur (SBJ) secured First Position with 41.52 %



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State Bank of Indore (SBE) has took the second position with 41.10% and State bank of India

(SBI) hold last position by holding 28%. It explains the ratio of secured advance to total

advance by the State Bank Groups from 2003 – 10. State Bank of Mysore (SBM) has highest

average sore secured advance to total advance of 90.01%, followed by State Bank of Patiala

(SBP) of 89.55 %. State Bank of India (SBI) has secured advance to total asset at least with

78.70%.It reveals the ratio of NPA of Banks in India, Banks has lower NPA; there is better

performance in Asset Quality. State of Hyderabad (SBH) has lower rate of NPA at 0.77,

followed by State bank of Patiala (SBP) with 0.85 % from the year 2003 – 2010. SBI has

more NPA 2.42 % when compare to rest of the bank.

MANAGEMENT EFFICIENCY OF STATE BANK GROUPS

Management efficiency of a bank could be measured by parameter like: (i) business

per employee, (ii) Profit per employee (iii) RoE (iv) Return on advances. SBI group‘s

management efficiency has been derived with the help of these ratios and the results are given

in table 3.

TABLE 3 BUSINESS PER EMPLOYEE VALUE

Years SBI SBJ SBH SBE SBM SBP SBS SBT

2003 191 145.64 226.2 220.52 146.49 246.37 167.87 217.68

2004 210.56 169.82 265.86 230.77 162.81 305 193.16 271.78

2005 243.08 220.29 339.74 293.88 203.54 361.15 249.6 346.25

2006 299.23 276.85 414.34 429.32 289.93 493.01 303.94 381.19

2007 357.00 355.89 473.64 476.67 398.00 599.54 343.00 506.13

2008 456.00 445.45 599.08 604.37 495.00 759.82 396.00 558.65

2009 556.00 555.39 839.82 701.53 602.00 910.24 NA 658.00

2010 636.00 627.67 755.62 763.51 672.00 895.21 NA 696.00

Mean 368.61 349.63 489.29 465.07 371.22 571.29 275.60 454.46

Rank 6 7 2 3 5 1 8 4

Profit per Employee

2003 1.47 1.63 2.25 3.06 1.19 2.76 1.25 1.51

2004 1.77 5.52 2.87 3.45 1.82 4 2.4 2.16

2005 2.08 5.98 1.91 2.07 2.16 2.48 0.56 2.21

2006 2.17 1.2 3.26 2.09 2.22 2.66 0.64 2.34



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2007 2.37 2.57 3.92 2.91 2.60 3.24 1.21 2.96

2008 3.73 2.73 4.35 3.73 3.28 3.70 0.74 3.40

2009 4.74 3.55 4.87 4.44 3.48 4.68 NA 5.00

2010 4.46 3.96 5.58 4.83 4.41 4.45 NA 6.00

Mean 2.85 3.39 3.63 3.32 2.65 3.50 1.13 3.20

Rank 6 3 1 4 7 2 8 5

Return on Equity

2003 19.15 24.56 26.8 40.21 29.63 25.22 15.51 25.66

2004 19.67 29.39 26.99 32.94 34.83 27.39 25.47 29.68

2005 19.43 16.81 15.03 15.73 30.82 15.21 5.27 24.05

2006 17.04 10.73 22.01 14.48 25.62 14.26 6.79 21.02

2007 15.41 19.99 21.72 17.31 24.00 15.52 8.66 22.26

2008 16.75 18.71 21.28 18.77 25.31 15.92 4.75 23.28

2009 17.05 21.46 20.87 19.36 18.47 18.20 NA 30.64

2010 14.80 20.39 22.02 18.07 18.06 16.01 NA 26.88

Mean 17.41 20.26 22.09 22.11 25.84 18.47 11.08 25.43

Rank 7 5 4 3 1 6 8 2

Return on Advance

2003 8.69 10.29 10.05 10.27 10.38 10.13 9.55 9.51

2004 7.62 8.99 8.93 8.57 9.65 8.33 8.46 8.55

2005 7.24 8.73 8.09 8.05 8.7 7.9 7.61 7.79

2006 7.63 8.59 8.15 8.09 8.5 8.03 7.62 7.9

2007 8.29 9.40 9.03 8.78 9.00 8.72 8.35 8.65

2008 9.34 10.14 9.83 10.11 10.16 10.20 9.86 9.84

2009 9.68 10.89 10.57 10.57 10.84 11.25 NA 10.45

2010 8.62 9.58 9.71 9.37 9.87 10.25 NA 9.47



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Mean 8.39 9.58 9.29 9.23 9.64 9.35 8.57 9.02

Rank 8 2 4 5 1 3 7 6


Table 3 shows the values of Business per employee of State Bank groups for period 8

years. It is noted that State bank of Patiala (SBP) comes first with the highest value 571.29

Lakhs. It is followed at a by State Bank of Hyderabad (SBH) 489.29 Lakhs, and State Bank

of Sarursathra (SBS)has got lowest value 275.60. Further it exhibits that Profit per employee

by the State Bank Groups in India. It is observed that State Bank of Hyderabad (SBH) comes

first with an average Profit per employee of Rs. 3.63 lakhs and is distantly followed by State

Bank of Patiala (SBP) with3.50 lakhs. Among the Groups the worst performer is a State bank

of Sarursatha (SBS) with an average value of just Rs. 1.13 lakhs. It shows that Return of

Equity (ROE) for 8 Banks in the State Bank Groups in India. It noted that State Bank of

Mysore (SBM) with a highest average of ROE of 25.84 % got first position and is closely

followed by State Bank of Travancore (SBT) with 25.43% and in the last place State Bank of

Sarursatha (SBS) with 11.08%. In addition shows that Return on Advance ratios of State Bank

Groups in India. It is finds that State Bank of Mysore (SBM) with a ratio 9.64 % and State

Bank of Jaipur (SBJ) with 9.58% by holding first and second position respectively. The

lowest performance is Sate Bank of India (SBI) with 8.39%.

EARNING ABILITY OF STATE BANK GROUPS

To survive in the competitive financial environments, banks have to generate adequate

earnings to meet out all the non operating expense and to maintain adequate spread by

avoiding burden. Earning ability of a commercial bank could be ascertained by computing the

various ratios interest Income ratio, Net Interest Margin ratio, Operating Profit ratio, Return

on Assets. Earning ability of the SBI group is given in the table 4.

TABLE 4 INTEREST INCOME RATIO


2003 8.59 8.56 8.57 9.21 9.56 9.13 8.93 8.92

2004 7.77 8.22 7.8 8.57 8.42 7.84 8.25 8.09

2005 7.47 7.98 7.09 7.41 7.71 7.31 8.12 7.6

2006 7.51 7.72 7.28 7.03 7.5 6.75 7.45 7.57

2007 7.02 7.66 7.50 7.33 7.69 6.91 7.32 7.70

2008 7.60 8.07 7.96 8.27 8.33 8.09 7.75 8.39

2009 7.57 8.71 8.25 8.70 8.83 9.02 NA 8.84

2010 7.04 7.91 7.66 8.00 8.29 8.20 NA 8.05



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Mean 7.57 8.10 7.76 8.07 8.29 7.91 7.97 8.14

Rank 8 3 7 4 1 6 5 2

Net Interest Margin ratio

2003 2.76 3.28 3.1 3.43 3.56 4.09 3.16 2.94

2004 2.85 3.74 2.96 3.71 3.62 3.41 3.41 3.18

2005 3.21 3.98 2.94 3.35 3.59 3.34 3.64 3.39

2006 3.28 3.9 2.9 2.88 3.41 2.73 3.03 3.15

2007 2.84 3.03 2.74 2.36 2.96 2.27 2.36 2.84

2008 2.64 2.48 2.01 2.13 2.54 1.67 1.81 2.34

2009 2.48 2.52 2.12 2.35 2.28 1.75 NA 2.75

2010 2.35 2.41 2.25 2.36 2.88 2.11 NA 2.57

Mean 2.80 3.17 2.63 2.82 3.11 2.67 2.90 2.90

Rank 6 1 8 5 2 7 3.5 3.5

Operating Profit ratio

2003 2.15 2.62 3.14 3.93 3.25 3.83 2.83 2.56

2004 2.44 3.56 3.57 4.36 3.39 4.17 3.82 3.26

2005 2.53 3.34 2.18 2.35 2.98 2.92 2.64 3.03

2006 2.37 2.33 2.3 2.23 2.44 2.01 1.94 2.22

2007 1.89 2.19 2.24 1.72 2.04 1.78 1.41 2.03

2008 2.04 1.75 1.79 1.68 1.89 1.46 0.88 1.73

2009 2.13 2.04 1.88 2.00 1.78 1.50 NA 2.27

2010 1.82 1.80 2.08 1.97 2.18 1.80 NA 1.94

Mean 2.17 2.45 2.40 2.53 2.49 2.43 2.25 2.38

Rank 8 3 5 1 2 4 7 6

Return on Assets

2003 0.86 1.13 1.15 1.76 1.02 1.51 0.85 0.9



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2004 0.94 1.49 1.25 1.73 1.28 1.6 1.38 1.02

2005 0.99 0.88 0.72 0.79 1.25 0.91 0.27 0.86

2006 0.89 0.53 1.13 0.76 1.23 0.73 0.31 0.86

2007 0.84 1.00 1.14 0.87 1.10 0.77 0.46 0.86

2008 1.01 0.87 1.00 0.88 1.08 0.83 0.28 0.89

2009 1.04 0.92 0.91 0.88 0.91 0.83 NA 1.30

2010 0.88 0.93 1.03 0.91 1.06 0.79 NA 1.26

Mean 0.93 0.97 1.04 1.07 1.12 1.00 0.59 0.99

Rank 7 6 3 2 1 4 8 5


Table 4 explains the ratio of interest Income to Total Assets of State Bank Groups in

India. State bank of Mysore (SBM) with an average ratio of 8.29% come first position;

followed State bank of Travancore (SBT) with 8.14%. State Bank of India (SBI) has the

lowest average ratio of Interest Income with 7.57%. It exhibits the ratios of Net Interest

Margin to the 8 Banks in the State Banks Groups. It observes that State bank of Jaipur (SBJ)

with ratio of 3.17 % and State Bank of Mysore (SBM) with 3.11 holding first and second

position respectively. The lowest performance is State of Hyderabad (SBH) with 2.63%. It

shows that ratios of operating profits to total assets of State Bank groups in India for period of

8 years (2003-2010). It is noted that State Bank of Indore (SBE) with highest average score of

2.53% comes first, while State of Bank of India (SBI) with lowest average score of 2.18 % in

last rank among the 8 banks. It reveals that Return on Asset (ROA), It shows that State Bank

of Mysore (SOM) with the highest average ratio of 1.12% has got first position, followed by

State bank of Indore (SBE) with average ratio of 1.07 % and State Bank of Sarursatha (SBS)

hold last position with 0.59 %

LIQUIDITY OF STATE BANK GROUPS

An adequate liquidity position refers to a situation, where institution can obtain

sufficient funds, either by increasing liabilities or by converting its assets quickly at a

reasonable cost. Liquidity of the Banks is measured by the ratios like (i) Cash-deposit ratio (ii)

Credit-deposit ratio



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TABLE 5 CASH DEPOSIT RATIO


2003 4.3 6.64 8.87 6.76 5.16 6.58 6.35 5.2

2004 5.98 8.06 7.5 5.3 6.41 4.84 6.88 4.86

2005 4.58 4.86 4.81 4.1 6.93 6.3 6.76 8.55

2006 5.7 7.52 6.69 6.88 4.56 4.47 5.97 4.76

2007 6.68 12.83 6.92 6.71 9.52 5.66 7.02 7.95

2008 9.59 11.46 11.07 6.80 9.69 8.84 11.22 9.26

2009 7.49 9.17 8.69 6.18 5.27 6.20 NA 5.54

2010 7.62 8.03 7.00 5.70 7.11 6.17 NA 6.82

Mean 6.49 8.57 7.69 6.05 6.83 6.13 7.37 6.62

Rank 6 1 2 8 4 7 3 5

Credit Deposit ratio

2003 46.52 51.18 46.91 56.23 58.37 60.14 51.36 57.58

2004 49.57 54.96 48.7 61.49 56.9 58.23 49.09 56.45

2005 55.14 63.08 53.92 65.48 64.64 57.97 53.23 61.53

2006 68.84 73.27 61.32 71.28 71.81 65.66 61 72.57

2007 77.46 72.07 67.73 76.85 74.77 73.42 70.11 79.49

2008 77.55 73.52 71.54 73.79 76.57 74.94 75.71 79.59

2009 73.11 76.10 69.94 76.28 77.82 72.64 NA 77.55

2010 78.58 76.47 72.69 77.31 75.97 71.80 NA 75.59

Mean 65.85 67.58 61.59 69.84 69.61 66.85 60.08 70.04

Rank 6 4 7 2 3 5 8 1


Table 5 explains the Cash deposit ratio of State bank Groups in India. It is noted the

State Bank of Jaipur (SBJ) with highest ratio of 8.57 % distantly followed by State Bank of

Hyderabad (SBH) with 7.69%. The worst performance by State bank of Indore (SBE) with

6.05%.It defines that Credit deposit ratio of State bank Groups in India from the year 2003 –



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2010. It is finds that State Bank of Travancore (SBT) with highest average score of 70.04%

comes first, while State of Bank of Sarursatha (SBS) with lowest average score of 60.08 % in

last rank among the 8 banks.

OVERALL CAMEL RATING OF SBI GROUPS

Having diagnosed the character wise performance of SBI group overall assessment of

performance of all 8 SBI commercial banked were done and ranked as given in the table 6.

TABLE 6 OVERALL CAMEL RATING OF SBI GROUPS

Ratio‘s/ Banks SBI SBJ SBH SBE SBM SBP SBS SBT

Capital Adequacy

CAR 2 4 3 6 8 1 5 7

CAR Tier - I 3 4 5 6 8 2 1 7

Mean 2.5 4 4 6 8 1.5 3 7

Rank 2 4.5 4.5 6 8 1 3 7

Asset Quality

Priority sector advances 8 1 6 2 7 5 3 4

Secured advances 8 4 6 3 1 2 7 5

Net NPA 8 6 1 3 7 2 4 5

Mean 8 3.7 4.3 2.67 5 3 4.7 4.7

Rank 8 3 4 1 7 2 5.5 5.5

Management Efficiency

Business per employee 6 7 2 3 5 1 8 4

Profit per employee 6 3 1 4 7 2 8 5

R O E 7 5 4 3 1 6 8 2

R O Advance 8 2 4 5 1 3 7 6

Mean 6.75 4.25 2.75 3.75 3.5 3 7.75 4.25

Rank 7 5.5 1 4 3 2 8 5.5

Earning Ability



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Interest Income 8 3 7 4 1 6 5 2

Net Interest Margin 6 1 8 5 2 7 3.5 3.5

Operational profit 8 3 5 1 2 4 7 6

R O A 7 6 3 2 1 4 8 5

Mean 7.25 3.25 5.75 3 1.5 5.25 5.88 4.13

Rank 8 3 6 2 1 5 7 4

Liquidity

Cash-deposit 6 1 2 8 4 7 3 5

Credit deposit 6 4 7 2 3 5 8 1

Mean 6 2.5 4.5 5 3.5 6 5.5 3

Rank 7.5 1 4 5 3 7.5 6 2

Overall CAMEL Mean 6.1 3.53 4.27 4.08 4.3 3.75 5.36 4.61

Overall CAMEL Ranking 8 1 4 3 5 2 7 6

Overall CAMEL Grade P E G G G G M M

Source: Calculated and Complied by author from the Table 1 to 5

Table 6 explains the Group Ranking of the State Bank Groups in India from the year

(2003-2010). It is observed that under the Capital Adequacy State Bank of Patiala (SBP)

Come first position, followed by State Bank of India (SBI) while State Bank of Mysore got

last position. Under the Asset Quality, State Bank of Indore (SBE) holds the first while State

bank of India holds the last. It is noted that first rank taken by State Bank of Hyderabad

(SBH) final rank taken by State Bank of Sarursatha (SBS) under the Management aspects.

State bank of Mysore (SBM) have best rank in the Earning capability while State Bank of

India (SBI) took the worst position. Under the Liquidity State bank of Jaipur (SBJ) has Best

position and worst Position taken both the State Bank of India (SBI) and State Bank of Patiala

(SBP). Based on the overall ranking score (Mean = 4.50; Std = 0.851) the researcher classified

score into 4 Grade namely, Excellent (E), Good (G), Moderate (M), and Poor (P).

Performances of the Banks are indicated by the Grade in the above table.

PERFORMANCE OF VARIANCE

In order to determine difference among the ratios of CAMEL of State Banks groups,

one way ANOVA has been used. To ensure the application of one-way ANOVA

independence of sample, Normality, Homogeneity of population were duly considered and the

results were derived accordingly.



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TABLE 7: TESTS OF NORMALITY

Shapiro-Wilk

Statistic df Sig.

SBI .851 5 .199

SBJ .947 5 .719

SBH .966 5 .852

SBE .929 5 .587

SBM .941 5 .672

SBP .925 5 .563

SBS .987 5 .967

SBT .902 5 .419

The table 7 reveals that, Shapiro Wilk Test assess whether there is a significant of

normality in population distribution for each of the eight groups, the null hypothesis states that

the population distribution is normal. Since the P – Values are greater than .05; the null

hypothesis of ―population distribution is normal‖ could be accepted.

TABLE 8: TEST OF HOMOGENEITY OF VARIANCES

Levene Statistic df1 df2 Sig.

.936 7 32 .493

The table 8 denotes that, Levene‘s test of Homogeneity of variances assesses whether

the population variance for the ratios are significantly different from the each other. The null

hypothesis states that the population variances are equal. Since P-Value is greater than .05

support the null hypothesis.

TABLE 9: ANOVA RESULTS OF RATIOS OF STATE BANK GROUPS

Sum of

Squares df Mean Square F Sig.

Between Groups 45.687 7 6.527 2.31 .000

Within Groups 90.233 32 2.820

Total 135.920 39



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The table 9 observes the significant difference in ratios of CAMEL among the State

Bank Groups in India. The test statistics (F- Value) equal 2.31 with a corresponding P – Value

of .000. Hence, reject the null hypothesis & state that there is significant difference in ratios of

CAMEL among the State Bank Groups in India. The difference in the performance may be

due to age of the bank, investment size, no. of. branches, no. of employees etc.

CONCLUSION

The study observed that there is significant difference in ratio‘s in CAMEL among the

State Bank Groups in India. In this part all parameters (C, A, M, E, L) are ranked together and

final ranking (CAMEL Rating) was computed. The study reveals that State Bank of Jaipur

(SBJ) comes First rank having excellent performance followed by State bank of Patiala (SBP).

Whereas the State Bank of India (SBI) has secured last rank in terms of performance. It has to

improve its Asset quality, Management efficiency, Liquidity position. In the same line, the

State bank of Sarursatha should take necessary steps to increase the Management efficiency,

earning capacity; State bank of Travancore has to increases its CAR, & Earning. State bank of

Patiala need improvement in Earning & Liquidity management State bank of Mysore need to

improve its CAR & Assets quality. State bank of Indore must increase its CAR; State bank of

Hyderabad has to concentrate on increase Earning; thus annual CAMEL scanning helps the

commercial bank to diagnose its financial health and alert the bank to take preventive steps for

its sustainability.

REFERENCES

1. Annual reports of State Bank of India (2009-2010)

2. Amandeep, (1983), Profits and Profitability in Commercial Banks, Deep and Deep

Publications Pvt. Ltd., Rajouri Gardens, New Delhi – 110 027.

3. Angadi and Devraj, (1983), ―Profitability and Productivity of Banks in India‖,

Economic and Political Weekly, Vol. 18 (Nov. 26).

4. Banerjee, A. and Singh, S. K (Ed.), Banking and Financial Sector Reforms in India,

Deep & Deep Publications Pvt. Ltd., New Delhi, 2002.

5. CMIE Prowess packages

6. Goldsmith, R. W., Financial Structure and Development, New Haven: Yale University

Press, First Edition, 1969.

7. Reserve Bank of India (RBI), Trend and Progress of Banking in India,

8. Uppal, R. K. and Pooja, Transformation in Indian Banks, Sarup Book Publishers Pvt.

Ltd., New Delhi– 2, 2009.

9. Uppal, R. K, Indian Banking Industry and Information Technology, New Century

Publications, New Delhi – 2, 2006.

10. Official Website of the Reserve Bank of India, www.rbi.org.in

http://www.rbi.org.in/

Documents

1 t Satyanarayana Chary Mf Paper