A Comparative study on the Operational Performance of

A Comparative study on the Operational Performance of Public and

Private Sector Banks in India

Dr. Preetha Chandran, M.Com, M.Phil, Ph.D

Associate Professor,

CMS Business School, Jain, Deemed to be University.

Abstract

The operational performance of the banks has been analyzed using the

financial ratios of the public and private sector banks selected for the study. Ratio is the

relationship expressed in mathematical terms between two figures connected with each

other in some logical manner. Profitability is most commonly used criteria to determine

the efficiency of banks and this can be measured by using different methods following

different concepts. To assess the relative efficiency of the different categories

commercial banks, different ratios of return on total assets and various heads of

expenditures to total assets of public and private sector banks are analyzed.

Key Words: Operational performance, Total Assets, Net return, Gross Profit, Net profit,

Interest,

Introduction

The performance of the Indian economy is one of the strongest drivers for the

banking industry’s growth and vice versa, and the average GDP growth of 8.1 per cent

expected over 2011–16 will facilitate the expansion of the banking sector. The

government policies bringing in monetary stability will also benefit and shield the

industry from global economic or political turmoil. The total assets of any bank mainly

comprises of the loans and advances investments etc., which are expected to generate a

desirable rate of return at a minimum cost and expenditure.

The following indicators have been selected to assess the performance of all the

public and private sector banks and the selected banks during the 10 years period

preceding the date of survey i.e. 2004-05 to 2013-14.

1. Gross profit on Total Assets.

The International journal of analytical and experimental modal analysis

Volume XI, Issue VII, July/2019

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2. Net Return on Total Assets.

3. Interest Income on Total Assets.

4. Interest Expended on Total Assets.

5. Net Interest Income or Margin (Spread) on Total Assets

6. Provisions and Contingencies on Total Assets

7. Operating expenses on Total Assets

8. Capital Adequacy Ratio

Sampling Design

There are 27 public sector banks and 22 private sector banks in India. In each sector,

three banks from the high performing group, three from the average performing group and

three from the low performing group based on their profitability has been selected using

cluster sampling.

From the Public Sector Dena Bank, Uco Bank, Vijaya Bank, Indian Bank, Bank of

India, Canara Bank, Bank of Baroda, Punjab National Bank, State Bank of India and from

the Private Sector, City Union Bank, Lakshmi Vilas Bank, Karnataka Bank, ING Vysya

Bank, KarurVysya Bank, South Indian Bank, Federal Bank, HDFC Bank and Axis Bank are

chosen for the study.



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1. Gross profit on total assets

Gross profit is the overall profit earned by the banks before making provisions for

future contingencies. The overall income deducted by the expenses will be the gross

profit of the bank. Gross profit on total assets is the gross profit of the banks divided by

the total assets of the bank.

2. Net return on total assets

The net profits are realized after making due provision for losses expected in

future. Banks are forced to make provisions for expected loses like NPAs in order to

increase profits. When NPAs are more, more provisions are needed which in turn will

have a negative impact on the net profits. Net return on total assets is the net profit of the

banks divided by the total assets of the bank

3. Interest income on total assets

This ratio measures the income from lending operations as a percentage of total

assets by bank in a year. Interest income includes income on advances, interest on

deposits with RBI. Interest income on total assets is the interest income of the banks

divided by the total assets.

4. Interest expended on total assets

The ratio of interest expended on total assets shows the rate which a bank incurs

expenditure by borrowing funds. Interest expended by bank refers to fund based

expenditure which consists of interest paid on total deposits (time deposit plus saving

plus demand deposit and interest paid on external borrowings (debt). Lesser the ratio,

greater is the profit margin and efficiency of a bank

5. Net Interest Income (Margin) on total assets

Net interest is calculated on the difference between interest earned and interest

expended. Interest earned in surplus of interest expended results in interest margin. In

order to create high interest margin, better strategies are adopted by the banks to extract

high interest income. Net interest income on total assets is the net interest income of the

banks divided by total assets of the banks



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6. Provisions and Contingencies on total assets

As per the regulatory prescriptions by RBI, banks have to make provision for

NPAs. Such provisions are made only from profits. Hence, NPAs again affect the

provisions and contingencies with a bearing on the profitability of banks. Therefore, it

would be prudent for the banks to manage their assets in a way that they always remain

healthy and generate the desired level of profit to meet all such obligations. Provisions

and contingencies on total assets is the provisions and contingencies of the banks divided

by the total assets of the banks

7. Operating expenses as percentage of total assets

This ratio is calculated as a proportion of operating expenses to total assets. In a

bank or a manufacturing firm, controlling overhead costs is a critical part of any

organization. In case of banks, keeping a close watch on overheads would enable salaries,

branch rationalization and technology up gradation account for a major part of operating

expenses for new generation banks. The lower the ratio, the better it is for a bank as it

would help increase its return ratios.

8. Capital Adequacy Ratio (CAR)

It is necessary for a bank to have sufficient capital to absorb operational losses

without infringing upon the depositors’ interest. Therefore, a provision has been made

under Section 11 of the Banking Regulation Act, 1949 to stipulate certain absolute

minimum capital requirement. The capital adequacy ratio reflects the ability of a bank to

deal with probable loan default. The RBI guidelines stipulates bank to maintain a CAR of

minimum 9%. It was arrived at by dividing the Tier-I and Tier-II capital by risk weighted

assets. Tier-I capital includes equity capital and free reserves. Tier-II capital comprises

subordinated debt of 5-7 year tenure. The higher the CAR the stronger the banks financial

position is.

The operational performance of the banks has been analyzed as follows:

Section I- Operational performance of all public and private sector banks in India

Section II - Operational efficiency of individual banks selected for the study in

public and private sector banks



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Section I- Operational Performance of all the public and private sector banks in India

The ratios (indicators) which has been used to measure the operational

performance of the banks have been applied for all the public and private sector banks for

which the following hypotheses is framed

Ho - There is no significant difference between all the public and private sector banks in

India with regard to the ratios such as Gross profit on total assets, Net return on

total assets, Interest Income on total assets, Interest Expended on total assets, Net

Interest Income / Margin on total assets, Provisions and Contingencies on total assets,

Operating expenses on total assets and Capital Adequacy Ratio..

The ratios such as Gross profit percentage on total assets, Net return percentage

on total assets, Interest Income as percentage of total assets, Interest Expended as

percentage of total assets, Net Interest Income / Margin as percentage of Total Assets,

Provisions and Contingencies as percentage of Total Assets, Operating expenses as

percentage of total assets and Capital Adequacy Ratio are analyzed to measure the

operational performance.

T-test has been applied to measure the significant difference between the public

and private sector banks with regard to the selected ratios and it is tested at 5% level of

significance.



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Table 1

Operational performance of all the public and private sector banks in India (in percentage)

Variables Gross profit on

total assets

Net return on

total assets

Interest Income

on total assets

Interest expended

on total assets

Net interest

income or

margin on total

assets

Provisions and

contingencies

on total assets

Operating

expenses

on total assets

Capital

Adequacy ratio

Year

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

All

Public

sector

banks

All

Private

sector

banks

2004-05 2.67 2.27 1.12 0.95 7.45 6.99 4.47 4.77 2.98 2.21 1.55 1.32 2.21 2.02 13.2 13.7

2005-06 2.22 1.80 0.87 0.83 6.79 6.14 3.88 3.80 2.92 2.34 1.31 0.97 2.09 2.03 12.9 12.5

2006-07 1.88 1.71 0.82 0.87 6.84 6.16 4.00 3.76 2.85 2.40 1.06 0.84 2.05 2.12 12.2 12.6

2007-08 1.73 1.88 0.83 0.87 6.89 6.86 4.24 4.41 2.65 2.45 0.91 1.02 1.77 2.06 12.4 12.0

2008-09 1.70 2.10 0.88 1.20 8.10 9.60 4.90 5.30 2.15 2.48 0.79 0.96 1.54 2.24 12.5 14.4

2009-10 1.80 2.50 1.00 1.1 8.40 10.12 5.10 5.40 2.10 2.62 0.90 1.20 1.50 2.12 12.3 15.1

2010-11 1.87 2.90 0.97 1.28 7.47 7.84 4.77 5.28 2.30 2.50 0.85 1.42 1.49 2.04 13.3 17.5

2011-12 2.06 2.73 0.96 1.32 7.53 7.46 4.37 4.88 2.78 2.88 1.04 1.12 1.57 1.96 13.1 16.5

2012-13 1.93 2.29 0.82 1.34 8.03 7.95 5.44 5.13 2.59 2.82 1.11 0.95 1.49 1.99 14.1 16.3

2013-14 1.75 2.45 0.73 1.46 7.97 8.37 5.57 5.38 2.40 2.59 1.04 0.99 1.46 2.03 12.4 16.8

Mean 1.96 2.26 0.90 1.12 7.55 7.75 4.67 4.81 2.57 2.53 1.06 1.08 1.72 2.06 12.84 14.74

SE 0.94 0.13 0.36 0.73 0.18 0.42 0.18 0.20 0.10 0.65 0.72 0.06 0.92 0.25 0.19 0.63

T value 1.933 2.744 0.44 0.507 0.357 0.248 3.597 2.885

Sig 0.069 0.013 0.666 0.618 0.725 0.807 0.002 0.01

Source: RBI Yearly data published (2003-4 to 2013-2014)



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From the above table 1 it is clear that there exists a significant difference between

all public and private sector banks in terms of net return on total assets with the

significant value of 0.013, operating expenses on total assets with the significant value of

0.002 and capital adequacy ratio with the significant value of 0.010 at 5% level of

significance and hence the hypothesis is rejected. The private sector banks had a better

net return on total assets compared to the public sector banks. The operating expenses of

the public sector banks were lesser comparatively to the private sector banks. The capital

adequacy ratio which is a key indicator of the financial performance of the banks shows

that the performance of the private sector banks was better compared to the public sector

banks during the period of study.

The other ratios such as the gross profit percentage on total assets, interest income

on total assets, interest expended on total assets, net interest income as percentage of total

assets, Net Interest Income / Margin as percentage of Total Assets were not significantly

different between the all public and all private sector banks during the period of study.

Section II - Operational efficiency of individual banks selected for the study in

public and private sector banks

The operational efficiency of the individual banks are found using ANOVA. It is

important to understand how the individual banks have performed during the study period

hence the following variables are considered.

1. Gross profit on Total Assets.

2. Net Return on Total Assets.

3. Interest Income as the Percentage of Total Assets.

4. Interest Expended as the percentage of Total Assets.

5. Net Interest Income or Margin (Spread) as the percentage of Total Assets



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6. Provisions and Contingencies as the percentage of Total Assets

7. Operating expenses as percentage of Total Assets

8. Capital Adequacy Ratio

Gross Profit on Total Assets

The gross profit on total assets of individual public and private sector banks are

analyzed in order to understand the performance of each of the public and private sector

banks selected.

The mean value of gross profit on total assets ratio of the selected public and

private sector banks has been shown in the table 2. The mean difference in the public

sector banks has been tested using ANOVA at 5 % level of significance and the

following hypothesis has been framed.

Ho: “There is no significant difference in the gross profit on total assets ratio among the

selected public banks”



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Table 2

Gross Profit on Total Assets of public and private sector banks (in percentage)

Banks

Public sector banks Private sector banks

Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank

of India

Canara Bank

Bank of Baroda

Punjab

National Bank

SBI Bank

City

Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur

Vysya Bank

South

Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 6.70 3.38 1.6 3.04 4.40 3.2 4.68 4.56 3.1 5.25 5.67 5.66 1.41 3.4 3.6 3.97 0.8 1.14

2005-06 4.78 2.56 1.5 1.71 3.32 2.2 3.51 2.96 2.7 3.48 4.62 4.01 1.26 3.1 3.9 4.03 0.9 0.82

2006-07 3.58 2.00 1.7 1.40 2.21 1.4 2.11 2.16 2.0 2.73 2.54 2.78 1.08 2.5 3.0 2.73 0.7 0.76

2007-08 2.37 2.01 1.3 0.97 1.48 0.9 1.46 2.09 1.8 1.62 2.25 2.39 0.66 1.8 2.4 1.8 0.7 0.57

2008-09 1.50 1.80 0.9 0.70 1.10 0.8 1.1 1.7 1.8 1.1 2.1 2.00 0.50 1.3 1.1 1.4 0.7 0.5

2009-10 1.30 1.40 1.1 0.50 1.10 1.0 0.8 1.1 1.6 1.1 1.7 1.90 0.70 1.2 1.3 1.5 0.9 0.6

2010-11 1.11 1.21 1.4 0.50 1.78 1.0 0.86 1.08 1.9 0.81 3.1 2.03 0.69 1.1 0.8 1.88 0.8 0.73

2011-12 1.19 1.93 1.5 0.61 1.37 0.9 0.88 1.16 2.1 0.77 1.19 2.22 0.40 0.8 0.7 2.23 0.5 0.66

2012-13 1.09 2.26 1.8 1.31 1.53 1.1 1 1.9 2.9 0.67 1.9 1.89 0.32 0.9 0.7 2.15 0.6 0.63

2013-14 1.28 3.59 1.4 2.19 1.94 1.5 1.46 2.81 3.3 0.75 2.6 1.54 0.22 0.6 0.9 2.19 0.6 0.7

Mean 2.49 2.21 1.42 1.29 2.02 1.39 1.79 2.15 2.32 1.83 2.77 2.64 0.72 1.66 1.83 2.39 0.71 0.71

SE 0.17 0.08 0.26 0.10 0.12 0.13 0.14 0.11 0.08 0.05 0.09 0.08 0.13 0.09 0.13 0.07 0.1 0.08

F value 3.688 15.126

Sig 0.001 0.000




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Chart 1

Gross Profit on Total Assets of public and private sector banks (in percentage)



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The above table 2 shows that with the significant value of 0.001 there exists

significant difference in the Gross profit on Total Assets ratio among the individual

public sector banks in India. The Dena bank had the highest Gross Profit on Total Assets

with the mean value of 2.49 followed by SBI with 2.32. The UCO bank recorded the

lowest Gross profit on Total Assets of 0.08 during the study period. The table shows that

with the significant value of 0.000 there exists significant difference in the Gross profit

percentage on Total Assets among the individual private sector banks in India. The

Lakshmi vilas bank with the mean value of 2.77 had the highest Gross Profit on Total

Assets which is followed by Karnataka Bank with mean value of 2.64 and the HDFC

bank and Axis bank recorded the lowest Gross profit on Total Assets with a mean value

of 0.71 during the study period.

Net return on total assets

The mean value of net return on total assets ratio of the selected public and

private sector banks has been highlighted in the table 3. The mean difference has been

tested using ANOVA at 5 % level of significance and the following hypothesis has been

framed.

Ho: “There is no significant difference in the net return on total assets ratio among the

selected public and private sector banks”



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Table 3

Net return on Total Assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank

of India

Canara Bank

Bank of

Baroda

Punjab

National Bank

SBI Bank

City

Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur

Vysya Bank

South

Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 1.04 0.99 1.71 1.04 1.19 1.35 1.14 1.08 0.90 1.79 1.07 1.26 0.45 2.27 0.91 0.90 1.20 1.15

2005-06 0.25 0.63 1.30 0.93 0.36 1.01 0.71 1.12 0.94 1.33 0.08 1.17 -0.25 1.34 0.09 0.54 1.29 0.89

2006-07 0.27 0.32 0.40 1.06 0.62 1.00 0.73 0.99 0.89 1.37 0.46 1.18 0.05 1.50 0.47 1.09 1.20 0.98

2007-08 0.64 0.42 0.78 1.35 0.79 0.86 0.72 0.95 0.80 1.34 0.30 1.09 0.46 1.40 0.76 1.17 1.30 0.90

2008-09 0.90 0.50 0.64 1.40 1.10 0.87 0.80 1.00 0.93 1.40 0.40 1.20 0.60 1.40 0.89 1.10 1.20 1.00

2009-10 0.90 0.50 0.40 1.50 1.30 0.90 1.00 1.30 0.90 1.30 0.60 1.20 0.60 1.40 1.00 1.30 1.20 1.20

2010-11 0.89 0.74 0.72 1.53 0.63 1.14 1.10 1.32 0.88 1.32 0.29 0.62 0.71 1.53 1.23 1.06 1.33 1.39

2011-12 0.86 0.55 0.64 1.41 0.71 1.20 1.18 1.17 0.71 1.47 0.76 0.65 0.82 1.47 1.47 1.14 1.42 1.40

2012-13 0.92 0.61 0.61 1.24 0.70 0.88 1.12 1.07 0.88 1.53 0.66 0.68 0.97 1.33 1.33 1.28 1.53 1.49

2013-14 0.71 0.31 0.53 0.97 0.61 0.70 0.82 0.99 0.91 1.40 0.52 0.84 1.12 1.18 1.18 1.18 1.68 1.52

Mean 0.74 0.56 0.77 1.24 0.80 0.99 0.93 1.10 0.87 1.43 0.51 0.99 0.55 1.48 0.93 1.08 1.34 1.19

SE 0.09 0.06 0.13 0.07 0.09 0.06 0.06 0.04 0.02 0.05 0.09 0.08 0.13 0.09 0.13 0.07 0.05 0.08

F value 7.183 15.126

Sig 0.000 0.000




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Chart 2

Net return on Total Assets of public sector banks (in percentage)



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The above table 3 shows that with the significant value of 0.000 there exists

significant difference in the net return on total assets ratio among the individual public

sector banks in India. The Indian Bank with 1.4 had recorded the highest net profit on

total assets which is followed by the Punjab National Bank with 1.10 during the study

period. Canara Bank and Bank of Baroda had a better net profit on total assets compared

to SBI. UCO Bank with 0.56 had the lowest net profit on total assets during the period.

In private sector banks with the significant value of 0.000 there exists significant

difference in the net return on Total Assets ratio. The Karur Vysya Bank with 1.482 had

recorded the highest Net Profit on Total Assets which is followed by the City Union

Bank with 1.43 during the study period. Lakshmi Vilas Bank with 0.51 had the lowest

Net profit on Total Assets during the period

Interest Income as the Percentage of Total Assets.

The mean value of Interest Income as the Percentage of Total Assets ratio of the

selected public and private sector banks has been highlighted in the table. The mean

difference has been tested using ANOVA at 5 % level of significance and the following

hypothesis has been framed.

Ho: “There is no significant difference in the Interest Income as the percentage of total

assets ratio among the selected public and private sector banks”



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Table 4

Interest income as the percentage of total assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank

of India

Canara Bank

Bank of aroda

Punjab

National Bank

SBI Bank

City

Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur

Vysya Bank

South

Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 7.83 7.07 8.06 6.81 6.83 7.11 7.22 7.60 7.47 8.65 7.48 8.02 6.99 9.11 7.36 7.89 6.02 6.62

2005-06 7.18 6.50 7.15 6.54 6.35 6.86 6.79 6.70 7.05 8.32 7.36 6.71 6.44 7.49 7.48 7.08 6.02 5.10

2006-07 6.63 7.04 7.33 7.06 6.26 6.56 6.22 6.60 7.28 7.91 6.55 6.81 7.29 7.23 7.03 6.96 6.09 5.81

2007-08 6.74 7.10 6.66 7.63 6.48 6.85 6.44 7.10 6.57 7.46 7.37 7.74 7.27 7.83 7.15 7.24 7.29 6.23

2008-09 6.90 7.20 7.09 7.40 6.90 7.87 6.60 7.20 6.78 8.10 7.80 8.10 6.60 7.78 7.66 7.70 7.60 6.40

2009-10 7.10 7.30 8.40 8.10 7.20 7.80 6.60 7.80 6.60 8.70 7.90 8.40 7.00 8.50 8.30 8.50 8.90 7.30

2010-11 6.96 6.94 7.41 7.61 6.50 7.79 6.00 7.22 7.04 8.28 8.67 7.31 6.59 9.00 7.58 8.41 7.97 6.44

2011-12 7.11 6.96 7.13 7.69 6.19 6.86 6.11 7.13 7.15 8.35 8.01 7.48 6.91 7.86 7.45 7.87 7.19 6.24

2012-13 7.77 8.11 8.34 8.65 7.41 8.25 6.63 7.96 7.98 9.25 9.40 8.54 8.21 8.69 8.88 9.17 8.07 7.70

2013-14 7.84 8.43 8.16 8.53 7.05 8.26 6.43 8.75 7.64 9.53 9.97 9.06 8.87 9.08 8.91 8.68 8.76 7.98

Mean 7.21 7.27 7.57 7.60 6.72 7.42 6.50 7.41 7.16 8.46 8.05 7.82 7.22 8.26 7.78 7.95 7.39 6.58

SE 0.14 0.18 0.19 0.22 0.13 0.20 0.11 0.20 0.14 0.61 1.03 0.76 0.77 0.70 0.68 0.73 1.08 0.87

F value 4.623 4.988

Sig 0.000 0.000




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Chart 3

Interest income on total assets of public and private sector banks (in percentage)



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The above table shows that with the significant value as 0.000 there is a

significant difference between the individual public sector banks when their Interest

Income on Total assets was studied. Among the banks selected for the study the highest

interest income was earned by the Indian Bank with 7.60 which is followed by Vijaya

bank with 7.57 and Canara Bank with 7.42. However Bank of Baroda with 6.50 had

recorded the least interest income on total assets during the study period.

In case of private sector banks with the significant value of 0.000, there exist

significant difference among the individual private sector banks with regard to interest

income on total assets. Among the banks selected for the study the highest interest

income was earned by the City Union Bank with 8.46 which is followed by Karur Vysya

bank with 8.26 and Lakshmi Vilas Bank with 8.05. However Axis Bank with 6.58 had

recorded the least interest income on total assets during the study period.

Interest Expended on Total Assets.

The mean value of Interest Expended on Total Assets ratio of the selected public

and private sector banks has been highlighted in the table. The mean difference in the has

been tested using ANOVA at 5 % level of significance and the following hypothesis has

been framed.

Ho: “There is no significant difference in the Interest Expended on Total Assets Ratio

among the selected public and private sector banks”



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Table 5

Interest Expended on Total Assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank of

India

Canara Bank

Bank of

Baroda

Punjab National

Bank

SBI Bank

City Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur Vysya Bank

South Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 5.16 4.34 4.58 3.96 4.24 5.39 4.20 4.06 4.73 5.64 5.30 6.00 5.14 5.61 5.19 5.10 3.92 4.23

2005-06 4.32 3.92 3.78 3.57 4.00 4.35 3.65 3.53 4.02 5.14 4.73 4.18 4.12 4.93 4.77 4.09 2.86 3.16

2006-07 3.91 4.51 4.25 3.89 3.92 4.01 3.42 3.39 4.13 4.52 4.40 4.36 4.42 4.24 4.17 4.05 2.56 3.64

2007-08 4.02 4.84 4.13 4.30 4.05 3.86 3.79 3.71 3.92 4.34 5.13 5.16 4.46 4.08 4.46 4.32 2.62 4.09

2008-09 4.70 5.60 5.44 4.50 4.50 4.42 4.40 4.40 4.43 5.40 5.90 5.70 4.60 4.70 5.35 5.10 3.48 4.00

2009-10 4.90 5.80 6.60 5.00 4.80 5.60 4.40 5.00 4.40 6.10 6.10 6.30 5.00 6.07 5.70 5.10 4.86 4.08

2010-11 5.05 5.24 5.34 4.49 4.41 4.94 3.87 4.36 4.49 5.87 6.30 6.32 4.14 5.44 5.36 5.18 3.50 3.67

2011-12 4.62 4.61 4.75 4.37 3.97 4.53 3.65 4.01 3.99 5.47 5.26 5.55 4.33 5.14 5.04 4.48 3.38 3.54

2012-13 5.37 5.94 6.35 5.52 5.24 6.19 4.33 5.03 4.73 6.52 7.10 6.52 5.64 6.29 6.35 5.95 4.44 4.89

2013-14 5.74 6.13 6.46 5.75 5.06 6.35 4.36 5.65 4.81 6.81 7.75 6.89 6.06 6.60 6.33 5.90 4.81 5.14

Mean 4.78 5.09 5.17 4.54 4.42 4.96 4.01 4.31 4.37 5.58 5.80 5.70 4.79 5.31 5.27 4.93 3.64 4.04

SE 0.18 0.24 0.33 0.22 0.15 0.28 0.12 0.23 0.11 0.25 0.33 0.29 0.21 0.27 0.23 0.22 0.27 0.19

F value 3.304 8.64

Sig 0.003 0.000




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Chart 4

Interest Expended on Total Assets of public and private sector banks (in percentage)



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From the table 5 with the significant value of 0.003 there exists significant

difference among the selected public sector banks with regard to interest expended on

total assets ratio. It is evident that the Vijaya Bank’s Interest expense on total asset with

5. 17 was the highest among all the public sector banks. Bank of Baroda with 4.01 had

recorded the least interest expense on total assets.

In case of private sector banks with the significant value of 0.000, there exists

significant difference among the individual private sector banks with regard to Interest

expended on total assets. It is evident that in private sector banks, the Laksmi Vilas

Bank’s interest expense on total asset with the value of 5.80 was the highest among all

the private sector banks. HDFC Bank with 3.64 followed by Axis Bank with 4.04 had

recorded the least interest expense on total assets. By comparing the interest earned and

the interest expended by the banks it is clearly evident that the banks which earned higher

interest income, expended more income during the period of study.

Net Interest Income or Margin (Spread) as the percentage of Total Assets

The mean value of Net Interest Income or Margin (Spread) as the percentage of

total assets ratio of the selected public and private sector banks has been highlighted in

the table. The mean difference in the public sector banks has been tested using ANOVA

at 5 % level of significance and the following hypothesis has been framed.

Ho: “There is no significant difference in the Net Interest Income or Margin (Spread) on

total assets ratio among the selected public and private sector banks”



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Table 6

Net Interest Income or Margin (Spread) on Total Assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank of

India

Canara Bank

Bank of

Baroda

Punjab National

Bank

SBI Bank

City Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur Vysya Bank

South Indian Bank

Federal Bank

HDFC Bank

Axis Bank

Year

2004-05 2.98 2.21 2.67 2.73 3.48 2.85 2.59 2.76 3.02 3.54 2.74 3.02 2.18 2.02 1.85 4.18 2.17 2.79

2005-06 2.92 2.34 2.86 2.58 3.36 2.97 2.36 2.86 3.15 3.17 3.03 3.17 2.63 2.53 2.32 3.26 2.71 2.99

2006-07 2.85 2.40 2.72 2.53 3.08 3.17 2.34 2.70 2.80 3.21 3.16 3.39 2.14 2.45 2.87 3.14 2.86 2.91

2007-08 2.65 2.45 2.72 2.26 2.53 3.33 2.43 2.43 2.64 3.40 2.66 3.12 2.23 2.59 2.81 3.13 2.69 2.92

2008-09 2.15 2.48 2.20 1.70 1.50 2.90 2.40 1.96 2.20 2.80 2.36 2.70 1.90 2.40 2.00 2.53 2.20 2.70

2009-10 2.10 2.62 2.20 1.50 1.80 3.10 2.40 2.10 2.30 2.80 2.20 2.60 1.80 2.10 2.00 2.40 2.60 3.40

2010-11 2.30 2.50 1.91 1.69 2.06 3.12 2.09 2.35 2.13 2.86 2.35 2.41 2.38 0.99 2.45 2.89 2.23 3.23

2011-12 2.78 2.88 2.49 2.35 2.37 3.32 2.22 2.60 2.46 3.12 2.86 2.88 2.74 1.93 2.58 3.06 2.41 3.39

2012-13 2.59 2.82 2.40 2.16 1.99 3.12 2.16 2.06 2.31 2.93 3.24 2.72 2.30 2.02 2.57 3.08 2.53 3.22

2013-14 2.40 2.59 2.10 2.31 1.69 2.78 1.99 1.91 2.07 3.10 2.83 2.72 2.22 2.18 2.81 2.48 2.57 2.78

Mean 2.57 2.53 2.43 2.18 2.39 3.07 2.30 2.37 2.51 3.09 2.74 2.87 2.25 2.12 2.43 3.02 2.50 3.03

SE 0.18 0.24 0.33 0.22 0.15 0.28 0.12 0.23 0.11 0.79 1.05 0.90 0.66 0.85 0.72 0.68 0.85 0.61

F value 3.304 8.64

Sig 0.003 0.000




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Chart 5

Net Interest Income or Margin (Spread) on Total Assets of public and private sector banks (in percentage)



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From the table 6 it is evident that with the significant value of 0.003 there exists

significant difference among the selected public sector banks with regard to Net Interest

Income or Margin (Spread) as the percentage of Total Assets. Net Interest income or

Margin is the difference between the interest earned and the interest expended by the

banks during a period. The Margin for the Canara bank was the highest with 3.07 and the

least of all the banks was Indian Bank with the mean value of 2.18

With the significant value of 0.000 there exists significant difference among the

selected private sector banks with regard to Net Interest Income or Margin (Spread) as

the percentage of Total Assets. The Margin for the City Union bank with mean value of

5.79 was the highest and the least of all the banks was Karur Vysya Bank with the mean

value of 2.12

Provisions and Contingencies as the percentage of total assets

The mean value of provisions and contingencies as the percentage of total assets

of the selected public and private sector banks has been highlighted in the table. The

mean difference in the public sector banks has been tested using ANOVA at 5 % level of

significance and the following hypothesis has been framed.

Ho: “There is no significant difference in the Provisions and Contingencies on Total

Assets Ratio among the selected public and private sector banks”



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Table 7

Provisions and Contingencies as the percentage of Total Assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank

of India

Canara Bank

Bank

of Baroda

Punjab

National Bank

SBI Bank

City

Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur

vysya Bank

South

Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 2.17 0.83 1.89 1.01 1.45 1.53 1.78 1.97 1.44 1.90 1.20 1.86 1.53 0.75 1.70 1.99 1.18 1.74

2005-06 1.34 0.90 1.43 1.25 1.18 1.34 1.73 0.79 1.45 1.01 1.27 1.55 0.89 1.19 1.73 1.84 1.32 0.61

2006-07 1.99 0.91 1.61 0.82 0.89 0.91 0.96 1.02 1.40 1.28 0.35 1.02 0.55 1.04 0.97 1.10 1.51 1.02

2007-08 1.38 0.84 0.86 1.07 0.90 0.90 0.97 1.04 0.96 1.11 0.96 1.11 0.73 1.03 1.08 1.28 1.56 0.96

2008-09 0.80 0.60 0.53 0.90 0.90 0.77 0.80 1.00 0.88 1.10 1.00 0.80 0.60 0.68 0.70 1.30 1.63 1.10

2009-10 0.60 0.60 1.00 1.20 1.10 0.90 0.90 1.10 0.90 1.10 0.70 0.90 0.70 1.10 0.80 2.00 1.60 1.30

2010-11 0.57 0.50 0.78 1.18 1.08 0.77 0.67 1.15 0.87 0.89 1.29 0.35 1.18 0.58 0.69 1.83 1.56 1.51

2011-12 0.86 1.09 0.64 1.30 0.82 0.62 0.76 1.22 1.39 1.00 1.30 0.48 0.81 0.65 0.71 1.63 1.37 1.25

2012-13 0.83 0.94 0.68 1.21 1.04 0.71 0.80 1.25 1.49 0.80 0.79 0.73 0.66 0.60 0.62 1.20 1.12 1.12

2013-14 0.82 1.38 0.48 0.91 1.04 0.73 0.83 1.29 1.08 0.88 0.90 0.69 0.69 0.64 0.70 0.87 1.17 1.21

Mean 1.14 0.86 0.99 1.09 1.04 0.92 1.02 1.18 1.19 1.11 0.98 0.95 0.83 0.83 0.97 1.50 1.40 1.18

SE 0.10 0.13 0.22 0.01 0.57 0.11 0.12 0.08 0.11 0.09 0.09 0.15 0.12 0.16 0.07 0.08 0.11 0.99

F value 7.543 21.067

Sig 0.000 0.000




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Chart 6

Provisions and Contingencies as the percentage of Total Assets of public and private sector banks (in percentage)



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As per table 7 with the significant value of 0.000 there exists significant

difference among the selected public sector banks with regard to provisions and

contingencies as percentage of Total assets. The provisions and contingencies as

percentage of Total assets of SBI bank was 1.19 followed by the Punjab National Bank

with 1.18 as the mean value UCO bank with the mean value of 0.86 had the least

provisions and contingencies of the public sector banks chosen for the study.


selected private sector banks with regard to provisions and contingencies as percentage of

Total assets. The provisions and contingencies on Total assets of Federal Bank with 1.50

was the highest followed by HDFC bank with the mean value of 1.40. ING Vysya and

Karur vysya bank with the mean value of 0.83 had the least provisions and contingencies

of the private sector banks chosen for the study.

Operating expenses as percentage of total assets

The mean value of Operating expenses as percentage of total assets ratio of the

selected public and private sector banks has been highlighted in the table. The mean

difference has been tested using ANOVA at 5 % level of significance and the following

hypothesis has been framed.

Ho: “There is no significant difference in the Operating expenses of Total Assets ratio

among the selected public and private sector banks”



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Table 8

Operating of Total Assets of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank of

India

Canara Bank

Bank of

Baroda

Punjab National

Bank

SBI Bank

City Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur Vysya Bank

South Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 2.25 2.33 2.07 2.71 2.06 1.91 2.12 2.32 2.27 1.41 2.19 1.46 2.61 2.21 2.09 1.87 1.91 1.74

2005-06 2.56 1.99 1.84 2.08 2.03 1.91 2.09 2.60 2.19 1.79 2.23 1.58 2.47 2.16 1.97 1.87 2.11 1.54

2006-07 2.11 1.90 1.98 2.27 1.88 1.77 2.10 2.08 2.37 1.70 2.04 1.37 3.09 1.94 2.09 1.77 2.30 1.64

2007-08 1.94 1.59 1.54 2.22 1.84 1.55 1.78 2.05 2.09 1.68 1.75 1.46 2.63 1.74 1.60 1.62 2.65 1.66

2008-09 1.70 1.50 1.25 2.00 1.50 1.55 1.70 1.80 1.75 1.50 1.80 1.60 2.40 1.48 1.45 1.40 2.81 2.00

2009-10 1.60 1.30 1.50 1.70 1.40 1.40 1.60 1.70 1.60 1.50 1.80 1.50 2.40 1.50 1.60 1.50 3.00 1.90

2010-11 1.47 1.15 1.93 1.71 1.33 1.31 1.37 1.61 1.93 1.43 1.78 1.43 2.39 1.59 1.43 1.55 2.67 2.05

2011-12 1.52 1.27 1.88 1.58 1.44 1.31 1.29 1.68 1.88 1.48 1.72 1.73 2.63 1.53 1.41 1.62 2.58 1.97

2012-13 1.32 1.14 1.95 1.55 1.28 1.25 1.14 1.53 1.95 1.52 1.82 1.53 2.36 1.44 1.53 1.62 2.54 2.10

2013-14 1.15 1.10 1.87 1.69 1.18 1.25 1.07 1.71 1.87 1.63 1.91 1.60 2.32 1.63 1.54 1.66 2.81 2.03

Mean 1.76 1.53 1.78 1.95 1.59 1.52 1.63 1.91 1.99 1.56 1.90 1.53 2.53 1.72 1.67 1.65 2.54 1.86

SE 1.40 0.13 0.08 0.12 0.10 0.08 0.13 0.11 0.76 0.04 0.59 0.03 0.07 0.09 0.09 0.05 0.11 0.63

F value 2.727 30.387

Sig 0.010 0.000




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Chart 7

Operating expenses as percentage of Total Assets of public and private sector banks (in percentage)



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As per table 8 with the significant value of 0.010 there exists significant

difference among the selected public sector banks with regard to Operating expenses on

total assets. Table 8 shows that the operating expense of State Bank of India with 1.99

was highest followed by the Punjab National Bank with 1.90 and the least operating

expenses was incurred by the UCO Bank with 1.52 during the period of study


selected private sector banks with regard to operating expenses on total assets. The

operating expense of HDFC with 2.54 was highest followed by the ING Vysya Bank

with 2.53 and the least operating expenses was incurred by the City Union Bank with

1.56 during the period of study

Capital Adequacy ratio

The mean value of capital adequacy ratio of the selected public and private sector

banks has been highlighted in the table. The mean difference in the public sector banks

has been tested using ANOVA at 5 % level of significance and the following hypothesis

has been framed.

Ho: “There is no significant difference in the Capital adequacy ratio among the selected

public and private sector banks”



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Table 9

Capital adequacy ratio of public and private sector banks (in percentage)

Banks


Dena Bank

UCO Bank

Vijaya Bank

Indian Bank

Bank of

India

Canara Bank

Bank of

aroda

Punjab National

Bank

SBI Bank

City Union Bank

Lakshmi Vilas

Karnataka Bank

ING VYSYA

Karur Vysya Bank

South Indian Bank

Federal Bank

HDFC Bank

Axis Bank

2004-05 9.48 11.88 14.1 12.82 13.01 12.7 13.91 13.1 13.5 13.36 13.79 13.03 11.05 17.1 11.3 11.48 11.7 11.21

2005-06 11.91 11.26 12.9 14.14 11.52 12.8 12.61 14.78 12.5 12.18 11.32 14.16 9.09 16.1 9.9 11.27 12.2 12.66

2006-07 10.62 11.12 11.9 13.19 10.75 11.2 13.65 11.95 11.9 12.33 10.79 11.78 10.67 14.8 13.0 13.75 11.4 11.08

2007-08 11.52 11.56 11.2 14.14 11.58 13.5 11.8 12.29 12.3 12.58 12.43 11.03 10.56 14.5 11.1 13.43 13.1 11.57

2008-09 11.10 11.00 11.2 12.70 12.00 13.3 12.9 13.5 12.6 12.5 12.7 12.20 10.20 12.6 13.8 22.5 13.6 20.1

2009-10 10.07 11.90 13.2 13.30 13.00 14.1 14.1 14 14.3 12.5 10.1 13.50 11.70 14.9 14.8 20.1 15.7 13.7

2010-11 12.77 13.21 13.2 13.28 12.94 13.4 14.36 14.16 13.4 13.46 14.82 12.37 14.91 14.5 15.4 18.36 17.4 15.8

2011-12 13.41 13.71 13.9 13.56 12.17 15.4 14.52 12.42 12.0 12.75 13.19 13.33 12.75 14.4 14.0 16.79 16.2 12.65

2012-13 11.51 12.35 13.1 13.47 11.95 13.8 14.67 12.63 13.9 12.57 13.1 12.84 14.00 14.3 14.0 16.64 16.5 13.66

2013-14 11.03 14.45 11.3 13.08 11.02 12.4 13.3 12.72 12.9 13.98 12.32 13.22 13.24 14.4 13.9 14.73 16.8 17

Mean 11.34 12.24 12.60 13.37 11.99 13.26 13.58 13.16 12.93 12.82 12.46 12.75 11.82 14.76 13.12 15.91 14.46 13.94

SE 0.37 0.37 0.35 0.15 0.26 0.35 0.29 0.29 0.26 0.18 0.45 0.29 0.58 0.37 0.56 1.16 0.73 0.92

F value 5.76 3.978

Sig 0.000 0.001




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Chart 8

Capital adequacy ratio of public and private sector banks (in percentage)



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Capital Adequacy ratio reveals the financial performance of the banks, higher the

ratio better is the performance of the banks. Table 9 states that with the significant value

of 0.000 there exists significant difference among the selected public sector banks with

regard to capital adequacy ratio. The Bank of Baroda with 13.58 had the highest capital

adequacy ratio followed by the Punjab National Bank with 13.16 and the Dena Bank with

11.34 had the lowest Capital Adequacy ratio during the study period.


selected private sector banks with regard to capital adequacy ratio. The Federal Bank

with 15.91 had the highest capital adequacy ratio followed by KarurVysya Bank with

14.76 and HDFC Bank with 14.46. ING Vysya Bank with 11.82 had the lowest Capital

Adequacy ratio during the study period.

Conclusion and Scope for further research

The private sector banks had a better net return on total assets compared to the

public sector banks. The operating expenses of the public sector banks were lesser

compared to the private sector banks. The capital adequacy ratio which is the key

indicator of the financial performance of the banks shows that the performance of the

private sector banks was better compared to the public sector banks during the period of

study.

The secondary data limitations of this study provides research scope for future

researches. The current study is confined to operational performance of public and

private sector banks in India, there are wider scope for further researches where the study

can include foreign and co-operative banks as well.



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Documents

A Comparative study on the Operational Performance of