A Studay on Perormance of Commercial Banks in India

A STUDY ON “PERFORMANCE OF COMMERCIAL BANKS IN

INDIA”

Dissertation submitted in partial fulfillment of the requirements for the

Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Of

BANGALORE UNIVERSITY

By

CHETAN G KHEMANNAVAR

Reg. No. 11SLCMA034

UNDER THE GUIDANCE

OF

Ms. ANURADHA R

Professor

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT

4th SECTOR H.S.R LAYOUT, BANGALORE-560102.

2012-2013

CERTIFICATE OF ORIGINALITY

This is to certify that the project titled “ Performance of Commercial Banks in India” is

an original work of the student and is being submitted in partial fulfillment for the award

of the Master’s Degree in Business Administration of Bangalore University. The report

has not been submitted earlier either to this University/Institution for fulfillment of the

requirement of a course of study.

SIGNATURE OF GUIDESIGNATURE OF STUDENT

PLACE: PLACE:

DATE: DATE:

SIGNATURE OF PRINCIPAL

PLACE:

DATE:

DECLARATION

I CHETAN G KHEMANNAVAR bearing register number 11SLCMA034

hereby declare that this Dissertation titled “ Performance of Commercial Banks in

India” is an original work carried out by me under the guidance of Ms. ANURADHA R

towards the partial fulfillment of requirements for the MBA programme of the Bangalore

University. This has not been submitted earlier to any other University or Institution for

the award of any degree/ diploma/ certificate.

(Signature of Student)

Date: CHETAN G KHEMANNAVAR

Place: Bangalore. (REG NO: 11SLCMA034)

ACKNOWLEDGEMENT

The successful completion of any task would be incomplete without mentioning the

people who made it possible and whose constant guidance and encouragement secured

us our success. The study being first of its kind.

I heart fully thank my guide Ms. ANURADHA R The Oxford College of Business

Management, who spared their value time and gave me practical suggestions and

guidance throughout this study.

I am thankful to our Head of the Department M R PRATHIBHA for this kind of support and help.

I extend my gratitude to our principal Dr. K. APARNA RAO for this kind of support and help for the study.

I would like to acknowledge with sincere gratitude for the constructive guidance and

encouragement I received from “The Oxford College of Business Management“,

affiliated to Bangalore University throughout the completion of my study.

I again extend my gratitude to all my faculty members for their support throughout the completion of the dissertation.

CHETAN G KHEMANNAVAR

ABSTRACT

The Banking Sector in the developed economies as well as in the emerging market economies may

face unique problems in the absence of well developed credit rating systems. The mechanism of robust

data collection, lack of proper analytical attitude, inappropriate capital assessment methods, non-

transparent systems and other infrastructure related problems can disturb the financial system of a

country Basel Accord for capital adequacy provides a sound framework for addressing increasingly

complex risks faced by banks with an objective to foster a secure and reliable banking sector. Basel

norms have been adopted by Indian commercial banks as per RBI guidelines to build up a more

transparent and risk free financial base. The present study attempts to examine the Indian commercial

banks’ response to implement Basel II framework as per Reserve bank guidelines. An effort has been

made to find out whether the commercial banks in India are ready for the Basel III norms. For this

purpose, annual reports of public and private sector banks operating in India have been analyzed in

detail for the year ended 2011-12. The study has indicated that Indian commercial banks have taken

significant and structural initiatives with regard to risk management to implement the Basel II norms in

their organizational structure. The study also highlighted that almost all the banks under the study have

entered in Memorandum of Understanding (MOU) with credit rating agencies for the purpose of rating

their domestic and overseas exposures.

Tables Of Contents

CHAPTER PARTICULARS PAGE NO.NO

List of TablesList of FiguresList of Abbreviations

01 Introduction 1-131.1 Pre-Independence Period1.2 Post –Independence Pre Reforms1.3 Post Nationalization Period1.4 Role of Commercial Bank in social economic

02 Review of literature 14-232.1 Review of literature2.2 Statement of problem2.3 Scope of the study2.4 Objectives of the study2 Hypotheses

.52.6 Research methodology2.7 Method of data collection2.8 Limitations of the study2.9 Chapter plan

03 Research methodology 24-503.1 Industry profile3.2 Profile of a selected industry3.3 Conceptual framework3.4 Sample design3.5 Tools of analysis

04 Results and discussions 51-82

05 Summary, Findings and suggestions 83-885.

Summary of findings

15.2 Suggestions5.3 Policy implication and scope for further

study5.4 Conclusion

06 References 89

List of Table

Table Descriptions Page NoNo.

4.1 Net Profit 52

4.2 Operating Profit 55

4.3 Interest Earned 58

4.4 Interest Expended 62

4.5 Spread 65

4.6 Establishment Expenses 68

4.7 Total Deposit 71

4.8 Total Advance 74

4.9 Total Volume 77

4.10 Return on Assets 80

List of Graphs

Table Descriptions Page NoNo.

4.1 Net Profit 53

4.2 Operating Profit 56

4.3 Interest Earned 59

4.4 Interest Expended 63

4.5 Spread 66

4.6 Establishment Expenses 69

4.7 Total Deposit 72

4.8 Total Advance 75

4.9 Total Volume 78

4.10 Return on Assets 81

“ Performance of Commercial Banks in India”

INTRODUCTION

It has been around one and a half decade since financial sector reforms were initiated in India. As

banks are the major segment of the financial sector in India, reform measures are primarily

aimed at improving the performance of the banking sector. The importance of banking system in

India is noted by the fact that aggregate deposits stood at 61 percent of Gross Domestic Product

(GDP) and bank credit to government and commercial sector stood at 29 per cent and 38 per cent

of GDP respectively. An efficient banking system has significant positive externalities, as it

increases the efficiency of economic transaction in general. Therefore, one of the important

objectives of financial sector reforms was to improve the efficiency of banking system. In this

backdrop it is essential to study the efficiency levels of Indian commercial banks to understand

the impact of financial sector reforms on its performance.

In this research an attempt has been made to study the performance of commercial banks in

India: A comparative study of different categories of banks. The concept of banking and Indian

banking system have been defined as under:

Banking industry in India, during the course of its evolution and growth, has traversed through

innumerable twists and turns. The industry has emerged victorious against all odds, by the sheer

strength of its teeth. It has braved many challenges, weathered many storms, withstood many

onslaughts and has emerged as one of the dynamic and vibrant industry. The secret of success

lies in its ability to adapt to changes in most admirable manner. Like an oscillating pendulum, the

industry has witnessed extremely opposite and diverse conditions over the years. Whether it is

class banking or mass banking, whether private ownership or public sector status, whether state

The Oxford College Of Business Management, Bangalore Page 1


of administered interest rate regime or state of operational freedom, whether bound by antiquated

manual process or a scenario witnessing unleashing of technological blitzkrieg - the industry has

its own experience to narrate.

Banking is an important segment of the tertiary sector and acts as backbone of economic and

social progress. The banks have played a stellar role in the development of the nation with its

high social content and commitment. The banks render vital services to the masses belonging to

the various sectors of the economy like agriculture, industry whether small scale or large scale.

The banking system is one of the few institutions that impinge on the economy and affect its

performance for better or worse. They act as a development agency and are the source of hope

and aspirations of the masses.

The banking sector continues to be dominant in our financial system. More than 70 per cent of

the financial system's assets are owned by banking sector. Even within banking sector, the public

sector banks own more than 80 per cent of the Commercial Banking assets. Development banks

are also owned by the public sector banks.

Indian Banking System and Policy Change

After independence, the major development in the Indian banking sector was nationalisation of

commercial banks in 1969. In the post nationalisation period there was a rapid expansion of

banks in terms of coverage and also in terms of deposit mobilisation. Policies at that time

ensured credit flows to certain important sectors of the economy. Importantly, the Government

also used banking sector as an instrument to finance its own deficit. While this was facilitated

through high Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), to keep the

borrowing cost of the Government low, the interest rate on bank loan was fixed at lower than



market rates. Along with high CRR and SLR, the operational freedom of the banks was curtailed

with high priority sector lending norms (as high as 40 per cent of the total lending). While some

of these measures were adopted to enhance social welfare, they affected the efficiency of the

banking sector adversely. As some of the priority sector loans were not economically profitable

the Non Performing Assets (NPA) increased from 14 per cent in 1969 to 35.4 per cent in 2012.

Also, due to the expansionary policy pursued by RBI, banks had to open certain number of

branches in the rural areas. Many of these branches were economically not viable due to which

the number of loss making branches increased which whittled away resources of the banking

industry. This affected profitability and the efficiency of banks. Further due to restrictions on the

operations of private and foreign banks the dominance of the public sector banks prevailed

resulting in lack of competition.

In 1991, Indian economy faced a major balance of payment crisis. The foreign exchange

resources had almost disappeared. The fiscal deficit was high and the inflation rate reached

double digits. To overcome this crisis India introduced economic reforms for many areas of the

economy, which included, amongst others, the financial sector reforms.

The financial sector reforms in India began as early as in 1985 with the implementation of the

recommendations of the Committee to Review the Working of the Monetary System. But the real

momentum was given to it in 1992 with the implementation of the recommendations of the

Committee on Financial System (CFS). Almost all of the recommendations of the CFS have been

implemented in a phased manner. In 1998, another committee, viz., the committee on Banking

Sector Reforms (BSR) was constituted. The recommendations of the BSR committee have also

been implemented in a phased manner. Important financial sector reforms introduced after 1992

are as follows:



Reduction in the statutory pre-emption:

This includes reductions in CRR and SLR. At one stage CRR applicable to incremental deposit

was as high as 15% and SLR was 38.5 per cent; thus pre-empting 53.5 per cent of incremental

deposits. These ratios were reduced in a phased manner since 1992. By 2012, SLR was reduced

to 25 per cent and CRR to 4.5 per cent of the total deposit.

Interest rate liberalization:

Before 1991, interest rates, both on deposits and loans were controlled by RBI. But after

liberalization these rates were made market determined in a phased manner. The RBI now

directly controls only the interest rates charged on credit to exports, and also there is a ceiling on

lending rate on small loans (i.e., up to Rs 2 lacs). On the deposit side, except the interest rate paid

on savings deposits, all other interest rates have been deregulated.

Increased autonomy and competition:

Considerable operational autonomy has been provided to the banks by reducing the government's

stake in banks. Competition has been infused by allowing new private sector banks and more

liberal entry of foreign banks (at the end of march 2012, there were 8 new private sector banks,

23 old private sector banks and 42 foreign banks as against 23 foreign banks in 1991).

Regulatory Norms:

These were aimed at reducing the vulnerability of financial institutions in the face of fluctuations

in the economic environment. Important among them is the norm on maintaining a Capital

Adequacy Ratio. Following the CFS report the capital adequacy ratio was fixed at 8 per cent. It

was increased to 9 per cent following the BSR recommendation. Apart from this, various



prudential norms related to income recognition, asset classification, provisioning for bad assets

(NPAs) and assigning risk to various types of assets have been introduced.

These reforms are expected to have an impact on the operations of banks. With reduced statutory

requirements banks will have more funds at their disposal for commercial lending and interest

rate liberalization is expected to bring flexibility and competition into the banking system.

Competition is also infused by opening up banking sector for the private and foreign banks.

Along with these flexibilities, certain regulatory reforms are also introduced, which are meant to

make banks strong enough to face fluctuations in the economy. Overall, these reforms are aimed

at improving the performance of banks. Given this background it is important to examine how

far such reform measures have been successful in their objective of improving the performance

of the commercial banks. While performance of a bank can be measured in various ways, in the

present study we use technical efficiency as a measure of the performance of Indian commercial

banks.

One of the major areas of economy that have received renewed focus in recent times is banking.

This sector has become the foundation of modern economic development and linchpin of

development strategy. Any economy can develop by channelizing economic resources towards

productive investment. Banks are special as they not only deploy large amounts of

uncollateralized public funds in fiduciary capacity, but also leverage such funds through credit

creation. Banking system of India consists of the Central Bank (Reserve Bank of India),

commercial banks (Public Sector Banks, New Private Sector Banks, Old Private Sector Banks,

Foreign banks and Regional Rural Banks), Cooperative Banks and Development Banks

(development finance institutions).



Since the establishment of first bank in pre independent period to till date many catastrophic

changes have taken place in the banking industry. The first bank in India was established in

1786. From 1786 till today, the journey of Indian Banking System can be segregated into three

distinct phases. These phases are:

1 Phase--I Pre-Independence Period (from 1786 to 1947)

2 Phase-II Post-Independence pre reforms (Nationalization of Indian Banks and up to 1991 prior to Indian banking sector reforms).

3 Phase-III Post Nationalization (from 1991to till date)

1.1 Pre-Independence Period

Banking in India originated in the first decade of 18 century The General Bank of India, which

came into existence in 1786. This was followed by Bank of Hindustan. The oldest bank in

existence in India is the State Bank of India being established as "The Bank of Bengal" in

Calcutta in June 1806. Bank of Hindustan and Bengal Bank came into existence immediately

after the establishment of Bank of India. The East India Company established Bank of Bengal

(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it

Presidency Banks. The first fully Indian owned bank was the Allahabad Bank, which was

established in 1865. By the 1900s, the market expanded with the establishment of banks such as

Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai. Between 1906

and 1913 Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of



Mysore were set up. To regulate the issue of bank notes and for keeping reserves to secure

monetary stability in India the Reserve Bank of India Act was passed in 1934.The Reserve Bank

commenced operations on 1935.During the first phase the growth was very slow and banks also

experienced periodic failures between 1913 and 1948. During the same time period public has

lesser confidence in the banking industry. During this time period even though there were 1100

(approximate) small banks were in existence the savings bank facility provided by the Postal

Department was considered comparatively safer. Moreover, funds were largely given to traders.

1.2 Post-Independence Pre -Reforms

Government took major reforms in Indian Banking Sector after independence. In 1948, the

Reserve Bank of India (central bank) was nationalized, and it became an institution owned by the

Government of India. In 1949, the Banking Regulation Act was enacted which empowered the

Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India In 1955, it

nationalized Imperial Bank of India with extensive banking facilities on a large scale especially

in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI

and to handle banking transactions of the Union and State Governments all over the country. On

19th July 1969; major process of nationalization was carried out with the sincere and concerned

efforts of the Prime Minister of India; Mrs. Indira Gandhi. During her regime 14 major

commercial banks in the country were nationalized. Second phase of nationalization Indian

Banking Sector Reform was carried out in 1980 with seven more banks. This step brought

80percent of the banking segment in India under Government ownership. After the

nationalization of banks, the branches of the public sector bank India raised to approximately

800 percent in deposits and advances took a huge jump by 11,000 percent .Banking in the



sunshine of Government ownership gave the public implicit faith and immense confidence about

the sustainability of these institutions. The major aim of nationalization was to give priority to

meet the credit requirement of neglected sectors. This credit facility was supposed to be extended

at considerably low rates. With nationalization there was all-around growth in branch network

deposit, credit disbursement, assets & employment. In this process, profitability & competition

has lost the front seat.

1.3 Post Nationalization Period

Although nationalization of banks helped in the spread of banking to the rural and hitherto

uncovered areas, the monopoly granted to the public sector and lack of competition led to overall

inefficiency and low productivity. By 1991, the country's financial system was saddled with an

inefficient and financially unsound banking sector. Some of the reasons for this were (i) high

reserve requirements, (ii) administered interest rates, (iii) directed credit and (iv) lack of

competition (v) political interference and corruption. As recommended by the Narasimhan

Committee Report (1991) several reform measures were introduced which included reduction of

reserve requirements, de-regulation of interest rates, introduction of prudential norms,

strengthening of bank supervision and improving the competitiveness of the system, particularly

by allowing entry of private sector banks. With a view to adopting the Basel Committee (1988)

framework on capital adequacy norms, the Reserve Bank introduced a risk-weighted asset ratio

system for banks in India as a capital adequacy measure in 1992. Banks were asked to maintain

risk-weighted capital adequacy ratio initially at the lower level of 4 per cent, which was

gradually increased to 9 per cent. Banks were also directed to identify problem loans on their

balance sheets and make provisions for bad loans. The period 1992-97 laid the foundations for



reform in the banking system (Rangarajan, 1998). The second Narasimhan Committee Report

(1998) focused on issues like strengthening of the banking system, upgrading of technology and

human resource development. The report laid emphasis on two aspects of banking regulation,

viz., capital adequacy and asset classification and resolution of NPA-related problems. After

adequate skills are developed, both at the banks and at the supervisory levels, some banks might

be allowed to migrate to the internal rating based (IRB) approach (Reddy 2012). At present,

banks in India are venturing into non-traditional areas and generating income through diversified

activities other than the core banking activities. Strategic mergers and acquisitions were being

explored and implemented. With this, the banking sector is currently on the threshold of an

exciting phase.

In the early 1990s the then Narasimha Rao Government embarked on a policy of liberalizations

and gave licenses to a small number of private banks, which came to be known as New

Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis

Bank), ICICI Bank ,HDFC Bank etc.. This move, along with the rapid growth in the economy of

India, kick started the banking sector in India, which has seen rapid growth with strong

contribution from banking industry.

Commercial Banking in India

The beginning of commercial banking in India was made in the 17th Century when the British

established agency houses in the country but commercial banking in a systematic form was

initiated in the early part of the 19th century when Presidency Banks were established. In 1913,

eighteen such commercial banks were functioning. The Imperial Bank of India was set up in



1920 with the merger of three Presidency Bank. In 1955, this bank was nationalized and renamed

as the State Bank of India.

In 1949, The Banking Regulation Act, 1949, was passed and the Reserve Bank was thus vested

with regulatory power over the commercial banks. In 1950-51, there were nearly 430

commercial banks in India but due to mergers and acquisitions, the number reduced to 256 in

1960-61. In 1969, 14 major commercial banks were nationalized. At present there are 27 such

nationalized banks including the SBI group. In 1995-96, total number of scheduled commercial

banks operating in the country was 271 and number further reduced to 183 in 2011-12.

Commercial banks are the most important constituents of banking system. These are the banks

which do banking business to earn profit. Some have used the term "commercial bank" to refer to

banks which focus mainly on companies. In some English-speaking countries outside North

America, the term "trading bank" was and is used to denote a commercial bank. These banks

raise funds by collecting deposits from businesses and consumers via checkable deposits, savings

deposits, and time (or term) deposits. They make loans to businesses and consumers. They also

buy corporate bonds and government bonds. Their primary liabilities are deposits and primary

assets are loans and bonds. Functions of commercial banks can be divided into three parts

namely, primary functions, secondary functions and social and developmental functions.

1.4 Role of Commercial Banks in Social-Economic Development

The banks have become the foundation of economic and social development of a nation. If any

country wants to increase its rate of capital formation, it is very important to build an efficient

commercial banking system equipped with an adequate coverage so that, apart from mobilizing

savings, it may also be able to foster the banking habits in a society. The commercial banks



create the awareness among the rural and urban people about society's wasteful spending and

provide them enough opportunities to make their investment in more generating assets.

The commercial banks help the agricultural sector in a number of ways. They open a network of

branches in rural areas to provide agricultural credit. They also finance agriculture sector for

modernization and mechanization of farms, for providing irrigation facilities, for high yielding

seeds and fertilizers for insecticides-pesticides, for developing/improving land etc. They also

provide financial assistance for animal husbandry, dairy farming, sheep breeding, poultry

farming and horticulture. The Regional rural banks fulfill the credit requirements of almost all

types of rural people and help in upliftment of rural areas.

Commercial banks play a significant role in economic growth and development of developing

countries like India. Banks lubricate the entire monetary and financial system and ensure smooth

operation. Commercial banks are the nerve-centre of the capital market, industrial and trading

activities of a country. The commercial banks are the most important financial institutions and

play an important role in the economic development of a country.

The monetary policy of the central bank of the country is a very important instrument of

economic policy in a liberalized economy. The monetary policy must be implemented effectively

and efficiently to manage the crucial factors of sound health of economy. The effectiveness of the

monetary policy depends upon the co-operation of commercial banks. It would not be possible to

carry out effective implementation of any monetary policy in the country without the active co-

operation of commercial banks. In fact commercial banks constitute the centre-stage of any

monetary programme of the Government or the Central Bank of the country.



The commercial banks help in developing both internal and external trade of a country. The

banks provide loans to retailers, traders, wholesalers for their inventory and also help in

transferring of goods from one place to another by providing all types of facilities, such as

discounting and accepting bills of exchange, providing overdraft facilities, issuing draft etc.

Another crucial role of banks is to finance exim activities and providing foreign exchange

facilities to importers and exporters of goods. Commercial banks have been facilitating the flow

of foreign receipts and payments. In order to encourage better participation of commercial banks

in the area of finance, some countries have established a system of guarantee and ensure banks

against fluctuations in exchange values and dangers of non-realization of payment due to

commercial or political reasons.

Banks act as bankers for the issue of new capital. They help their customers in marketing of

securities and send the dividends to customer's account directly. They undertake the issue of

credit instruments like letters of credit, the acceptance of bills of exchange and documents, acting

as a referee to the respectability and financial standing of customers and providing specialised

advisory services to the customers. Most of the banks have introduced new technology in their

operations. Among the new services introduced during the last few years, the bank guiro, ATMs,

credit cards and Bancassurance deserve special mention. The bank guiro is a system by which a

bank's customer with many payments to make, instead of drawing a cheque for each item, may

simply instruct his bank to transfer to the bank accounts of his creditors the sum due from him

and he writes one cheque debiting his account with the total amount. By providing these

diversified services banks help in the overall growth of trade and industry to a great extent.



Modern commercial banks have diversified their activities with their entry into new non-

traditional areas of business such as mutual funds, merchant banking, portfolio management,

corporate counselling, project counselling, hire purchase finance equipment leasing, venture

capital and factoring service etc. These new activities by banks and their subsidiaries result in the

development of domestic and international business.

To sum up, the commercial banks are very important instrument of macro-economic policy to

stabilize economy. They have become an omnibus institution in the modern times to which

people of varied interests look for help and success. They give life and sustenance to their

customers and, in turn, get vitality and vigour from them, to become an effective tool of social

transformation and rejuvenation. A succulent and resilient banking system in a country portends

health and vigour whereas a sterile and malevolent system in crippling and strait jacketing of a

country's economy.



REVIEW OF LITERATURE

2.1 Review Of Literature

A large number of studies have been conducted on the topics related to performance of

commercial banks in India: A comparative study of different categories of banks. In this chapter

an attempt has been made to present in brief, a review of literature available on the studies done

so far. The review of past studies has been presented in chronological order to provide a glimpse

of work done in this area.

Buser et al (1981) studied the capitalization ratio

Buser et al (1981) studied the capitalization ratio of banks and argued that banks generally have

an optimal capitalization ratio and need to remain well capitalized when they have a high

franchise value. They confirmed the positive relationship whether we use interest margin or

return on assets as a dependant variable and in all specifications. This indicated that well-

capitalized banks support lower expected bankruptcy costs for themselves and their costumers,

which reduce their cost of capital.

Vashisht (1987) critically evaluated the trends and progress

Vashisht (1987) critically evaluated the trends and progress of commercial banks in India during

the period 1971-1983. The ratio analysis was used to evaluate the performance of commercial

banks with respect to different indicators. He analysed that commercial banks did very well with

respect to branch expansions, deposit mobilization and priority sector advances.



Amandeep (1990) evaluated the profits and profitability

Amandeep (1990) evaluated the profits and profitability of nationalized banks. The study

analysed the factors that influence the profitability of banks and suggested that in order to

improve the banks' profitability, the banks need to focus attention on the management of spread,

burden, establishment expenses, income and deposit composition.

Berg et al (1992) studied the impact of deregulation

Berg et al (1992) studied the impact of deregulation on efficiency of different banking sectors.

They used the stochastic frontier technique to study the impact and the study showed that

financial liberalization has positively affected the efficiency and productivity of commercial

banks and deregulation has significant impact on efficiency.

Molyneux and Thornton (1992) explored thoroughly the determinants of bank profitability

on a set of countries.

They use a sample of 18 European countries during the 1986-1989 period. They found a

significant positive association between the return on equity and the level of interest rates in each

country, bank concentration and government ownership.

Presely (1992) focused on asset and liability management in the banking sector.

The literature concerning the asset and liability management for banks strongly suggests that

risk management issues and its implications must be concentrated by the banking industry. He

concluded from his study that there is a need for greater risk management in relation to more

effective portfolio management, and this requires a greater emphasis upon the nature of risk and



return in bank asset structure, and greater diversification of assets in order to spread and reduce

the bank's risks.

Avkiran (1995) studied the financial performance

Avkiran (1995) studied the financial performance of banks by using combination of financial

ratio analysis, benchmarking, measuring performance against budget and concluded that most of

the banks registered huge difference with respect to performance as compared to the ideal one.

Angbazo (1997) investigated the determinants of bank net interest margins for a sample of

US banks for 1989-2003 period.

The results for the pooled sample documents that default risk, the opportunity cost of non-

interest bearing reserves, leverage and management efficiency are all positively associated with

bank interest spread.

Barajas et al (1999) documented significant effects of financial liberalization on banks'

interest margins.

Although the overall spread has not declined after financial reform, the relevance of the different

factors behind the bank spreads were affected by such measures. Another change linked with the

liberalization process was the increase of the coefficient of loan quality after the liberalization.

Demerguç-Kunt and Huizingha (1999) examined the determinants of bank interest margins and

profitability using a bank level data for 80 countries in the 1988-1995 period.



The set of variables included several factors accounting for bank characteristics, macroeconomic

conditions, taxation, regulations, financial structure and legal indicators. They reported that a

larger ratio of bank assets to GDP and a lower market concentration ratio lead to lower margins

and profits.

Patel (2000) highlighted the problem of bad loans growing level of non-performing assets in the

commercial banks in the post-reformed period. It was observed that it is important for the banks

and supervisory authorities to adopt more effective lending practices. It was also emphasized that

corporate entities should follow more stringent disclosure and transparency practices and

corporate governance principles.

Ben and Goaied (2001) investigated the determinants of the Tunisian banks' performances

during the period 1980-1995.

The study used panel data regression analysis to find the underlying determinants of Tunisian

banking industry performance. They indicated that the best performing banks are those who have

struggled to improve labour and capital productivity, those who have maintained a high level of

deposit accounts relative to their assets and finally, those who have been able to reinforce their

equity.

Abreu and Mendes (2002) investigated the determinants of banks

Abreu and Mendes (2002) investigated the determinants of banks' interest margins and

profitability for some European countries in the last decade. They reported that well capitalized-

banks face lower expected bankruptcy costs and this advantage "translate" into better



profitability. Although with a negative sign in all regressions, the unemployment rate is relevant

in explaining bank profitability. The inflation rate is also relevant.

Guru et al (2002) attempted to identify the determinants of successful deposit banks in order to

provide practical guides for improved profitability performance of these institutions. The study

was based on a sample of seventeen Malaysian commercial banks over the 1986-1995 period.

The profitability determinants were divided in two main categories, namely the internal

determinants (liquidity, capital adequacy and expenses management) and the external

determinants (ownership, firm size and external economic conditions). The findings of this study

revealed that efficient expenses management was one of the most significant in explaining high

bank profitability. Among the macro indicators, high interest ratio was associated with low bank

profitability and inflation was found to have a positive effect on bank performance.

Chien and Danw (2004) showed in their study that most previous studies concerning company

performance evaluation focus merely on operational efficiency and operational effectiveness

which might directly influence the survival of a company. By using an innovative two-stage data

envelopment analysis model in their study, the empirical result of this study was that a company

with better efficiency does not always mean that it has better effectiveness.

Elizabeth and Elliot (2004) correlation

Elizabeth and Elliot (2004) studied the correlation between customer service and financial

performance among Australian financial institutions. They applied the coefficient of correlation



and concluded that all financial performance measures as interest margin, ROA, and capital

adequacy are positively correlated with customer service quality scores.

Sensarma (2005) examined the efficiency of scheduled commercial banks for the period

1986-2003.

He employed the technique of stochastic frontier analysis to estimate bank-specific cost and

profit efficiency and concluded that the cost efficiency of the banking industry increased during

the period and profit efficiency underwent a decline.

Tektas and Gunay (2007) discussed the asset and liability management in financial crisis.

They argued that an efficient asset-liability management requires maximizing bank's profit as

well as controlling and lowering various risks, and their study showed how shifts in market

perceptions can create trouble during crisis.

Drehmann et al (2008) studied the integrated impact of correlated credit risk and interest

rate risk on commercial banks in perspective of economic value and capital adequacy.

It was emphasized that by modeling the whole balance sheet of a bank and taking account of the

repricing characteristics of all exposures, we cannot only assess the impact of credit and interest

rate risk on the bank's economic value but also on its future earnings and capital adequacy.

Based on the above literature, we can say that there are some studies about banks in India and in

some other countries also has been done on analyzing the performance by using various

techniques like stochastic frontier analysis and panel data regression analysis. In this study an



attempt has been made to study the performance of commercial banks in India on the basis of

certain indicators such as net profit, operating profit, interest earned, interest expended, spread,

establishment expenses etc.

2.2 STATEMENT OF THE PROBLEM:

The study attempts to evaluate the performance of commercial bank in india for past five year.

2.3 SCOPE OF THE STUDY:

There is ample scope for subsequent studies in this dynamic sector of the economy. The studies

may be taken by studying other variables and furthermore studies may be undertaken to analyze

the impact of new products on the performance of banks. Still more, studies may be conducted

on the qualitative aspects and analysis scaling techniques. On the basis of findings of the study, it

is purposed that micro level studies on the various variables be conducted in order to facilitate

SWOT analysis of each bank.

2.4 Objectives of the study

Following were the objectives of the study:

1. To study the trends in the performance of different categories of the banks on the basis of

selected parameters.

2. To determine the performance of selected banks by asserting their revenue

3. To study the Growth rate of different banks.

4. To study the causes of changes in banks profit during the period.



2.5 Hypothesis :

The broader hypothesis are as under :

1) There is no significant difference in operational efficiency among all the banking groups.

2) There is no significant difference in profitability trends within all the five banking groups.

3) There is no significant difference regarding credit efficiency among all the banking groups.

4) There is no significant difference regarding overall performance of all the banking groups.

2.6 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem.

RESEARCH DESIGN

A research design is purely and simply the framework or plan for a study that guides the

collection and analysis of data. Generally a research design is a blue print of the research that is

to be followed in completing the study.

The study is based on descriptive research type. Descriptive research type is those, which are

concerned with describing the characteristics of a particular individual or of a group, where

we cannot control the variables

It is imperative to decide upon and document a research methodology well in advance to carry

out the research in the most effective and systematic way. This chapter describes the research

methodology adopted to serve the objectives of the study in an effective manner. This chapter

consists of the following sections:



1 Conceptual Framework

2 Sample design

3 Collection of data

4 Tools of analysis

5 Limitations of study

2.7 METHOD OF DATA COLLECTION:.

Secondary source: news papers and magazines / business today and economic times.

Books : futures and options by Edwards and Ma Tata McGraw hill

Swaps: ICFAI publications.

2.8 LIMITATIONS OF THE STUDY

The study has following limitations:

1. The study concentrated only on the analysis of quantitative financial data. The qualitative

aspects of performance of banking industry were not covered by the study.

2. The study was primarily dependent on secondary data. In such a case, limitations of

secondary data were inherent in the study.

3. The accuracy of the research is limited by the knowledge of the researcher.

4. As the study was to be completed in a short time, the time factor acted as a considerable

limit on the scope and extensiveness of the study.



2.9 Chapter Plan :

I) Indian Banking System - An Overview

II) Performance appraisal - a conceptual framework.

III) Research methodology.

IV) Analysis of operational efficiency of Indian banking sector.

V) Analysis of profitability of Indian banking sector.

VI) Analysis of credit efficiency and productivity of Indian banking sector.

VII) Summary, Findings and Suggestions



INDUSTRY PROFILE

Evolution of Commercial Banks in India

3.1 Industry Profile

The commercial banking industry in India started in 1786 with the establishment of the Bank of

Bengal in Calcutta. The Indian Government at the time established three Presidency banks,viz.,

the Bank of Bengal (established in 1809), the Bank of Bombay (established in 1840) andthe

Bank of Madras (established in 1843). In 1921, the three Presidency banks were amalgamated to

form the Imperial Bank of India, which took up the role of a commercial bank,a bankers' bank

and a banker to the Government. The Imperial Bank of India was establishedwith mainly

European shareholders. It was only with the establishment of Reserve Bank ofIndia (RBI) as the

central bank of the country in 1935, that the quasi-central banking role of the Imperial Bank of

India came to an end.

In 1860, the concept of limited liability was introduced in Indian banking, resulting in the

establishment of joint-stock banks. In 1865, the Allahabad Bank was established with purely

Indian shareholders. Punjab National Bank came into being in 1895. Between 1906 and 1913,

other banks like Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian

Bank, and Bank of Mysore were set up. After independence, the Government of India started

taking steps to encourage the spread of banking in India. In order to serve the economy in

general and the rural sector in particular, the All India Rural Credit Survey Committee

recommended the creation of a state-partnered and state-sponsored bank taking over the Imperial

Bank of India and integrating with it, the former state-owned and state-associate banks.

Accordingly, State Bank of India (SBI) was constituted in 1955. Subsequently in 1959, the State



Bank of India (subsidiary bank) Act was passed, enabling the SBI to take over eight former state-

associate banks as its subsidiaries.

To better align the banking system to the needs of planning and economic policy, it was

considered necessary to have social control over banks. In 1969, 14 of the major private sector

banks were nationalized. This was an important milestone in the history of Indian banking. This

was followed by the nationalisation of another six private banks in 1980. With the nationalization

of these banks, the major segment of the banking sector came under the control of the

Government. The nationalisation of banks imparted major impetus to branch expansion in un-

banked rural and semi-urban areas, which in turn resulted in huge deposit mobilization, thereby

giving boost to the overall savings rate of the economy. It also resulted in scaling up of lending

to agriculture and its allied sectors. However, this arrangement also saw some weaknesses like

reduced bank profitability, weak capital bases, and banks getting burdened with large non-

performing assets.

To create a strong and competitive banking system, a number of reform measures were initiated

in early 1990s. The thrust of the reforms was on increasing operational efficiency, strengthening

supervision over banks, creating competitive conditions and developing technological and

institutional infrastructure. These measures led to the improvement in the financial health,

soundness and efficiency of the banking system.

One important feature of the reforms of the 1990s was that the entry of new private sector banks

was permitted. Following this decision, new banks such as ICICI Bank, HDFC Bank, IDBI Bank

and UTI Bank were set up. Commercial banks in India have traditionally focused on meeting the

short-term financial needs of industry, trade and agriculture. However, given the increasing

sophistication and diversification of the Indian economy, the range of services extended by



commercial banks has increased significantly, leading to an overlap with the functions performed

by other financial institutions. Further, the share of long-term financing (in total bank financing)

to meet capital goods and project-financing needs of industry has also increased over the years.

Company profile

ICICI BANK History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,

and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%

through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs

listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-

stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors

in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the

Government of India and representatives of Indian industry. The principal objective was to create

a development financial institution for providing medium-term and long-term project financing

to Indian businesses.

In the 1990s, ICICI transformed its business from a development financial institution offering

only project finance to a diversified financial services group offering a wide variety of products

and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.

In 1999, ICICI become the first Indian company and the first bank or financial institution from

non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging

competitive scenario in the Indian banking industry, and the move towards universal banking, the

managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI



Bank would be the optimal strategic alternative for both entities, and would create the optimal

legal structure for the ICICI group's universal banking strategy. The merger would enhance value

for ICICI shareholders through the merged entity's access to low-cost deposits, greater

opportunities for earning fee-based income and the ability to participate in the payments system

and provide transaction-banking services. The merger would enhance value for ICICI Bank

shareholders through a large capital base and scale of operations, seamless access to ICICI's

strong corporate relationships built up over five decades, entry into new business segments,

higher market share in various business segments, particularly fee-based services, and access to

the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of

ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance

subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited,

with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January

2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of

Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger,

the ICICI group's financing and banking operations, both wholesale and retail, have been

integrated in a single entity

Corporate Profile

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91

billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year

ended March 31, 2011. The Bank has a network of 2,774 branches and about 10,021 ATMs in

India, and has a presence in 19 countries, including India.



ICICI Bank offers a wide range of banking products and financial services to corporate and retail

customers through a variety of delivery channels and through its specialised subsidiaries in the

areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in

United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International

Finance Centre and representative offices in United Arab Emirates, China, South Africa,

Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in

Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock

Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New

York Stock Exchange (NYSE).



AXIS BANK PROFILE

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum

of financial services to customer segments covering Large and Mid-Corporates, SME,

Agriculture and Retail Businesses.

The Bank has a large footprint of 1787 domestic branches (including extension counters) and

10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The Bank

also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai,

DIFC - Dubai and Abu Dhabi.

Axis Bank is one of the first new generation private sector banks to have begun operations in

1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India

(SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India (LIC), General

Insurance Corporation of India (GIC), National Insurance Company Ltd., The New India

Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance

Company Ltd. The shareholding of Unit Trust of India was subsequently transferred to SUUTI,

an entity established in 2003.

With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is ranked 9th

amongst all Indian scheduled banks. Axis Bank has achieved consistent growth and stable asset

quality with a 5 year CAGR (2007-12) of 31% in Total Assets, 30% in Total Deposits, 36% in

Total Advances and 45% in Net Profit.



HDFC Bank Profile

HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited

(HDFC), India's largest housing finance company. It was among the first companies to receive an

'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private

sector. The Bank started operations as a scheduled commercial bank in January 1995 under the

RBI's liberalisation policies.

Times Bank Limited (owned by Bennett, Coleman & Co./The Times Group) was merged with

HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders

of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than

1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000 crore and net advances

of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs.

1,63,000 crore.

Business focus

HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail

Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for

providing working capital finance, trade services, corporate finance, and merchant banking. It

is also providing sophisticated product structures in areas of foreign exchange and derivatives,

money markets and debt trading And Equity research.

http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Merchant_banking

http://en.wikipedia.org/wiki/Corporate_finance

http://en.wikipedia.org/wiki/Working_capital

http://en.wikipedia.org/wiki/Centurion_Bank_of_Punjab

http://en.wikipedia.org/wiki/The_Times_Group

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Wholesale banking services

For customers from ongoleBlue-chip manufacturing companies in the Indian corp to small &

mid-sized corporates and agri-based businesses the Bank provides a wide range of commercial

and transactional banking services, including working capital finance, trade services,

transactional services, cash management, etc. The bank is also a leading provider of the above

services to its corporate customers, mutual funds, stock exchange members and banks.

Retail banking services

HDFC Bank was the first bank in India to launch an International Debit Card in association with

VISA (Visa Electron) and issues the Master Card Maestro debit card as well. The Bank launched

its credit card business in late 2001. By March 2009, the bank had a total card base (debit and

credit cards) of over 13 million. The Bank is also one of the leading players in the “merchant

acquiring” business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards

acceptance at merchant establishments. The Bank is positioned in various net based B2C

opportunities including a wide range of Internet banking services for Fixed Deposits, Loans, Bill

Payments, etc.With Finest of Technology and Best of Man power in Banking Industry HDFC

Bank's retail services have become by and large the best in India and since the contribution to

CASA i.e. total number of current and savings account of more than 50%, HDFC BANK has full

potential to become India's No.1 Private Sector Bank.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives,

Local Currency Money Market & Debt Securities, and Equities. These services are provided


http://en.wikipedia.org/wiki/Visa_Electron


through the bank's Treasury team. To comply with statutory reserve requirements, the bank is

required to hold 25% of its deposits in government securities. The Treasury business is

responsible for managing the returns and market risk on this investment portfolio.

Distribution network

An HDFC Bank Branch

HDFC Bank is headquartered in Mumbai and as of March 31, 2012, the Bank s distribution‟

network was at 2,544 branches and 8,913 ATMs in 1,399 cities as against 1,986 branches and

10000 ATMs in 996 cities as of october,2012.

2007

HDFC Bank has signed an agreement with Tata Pipes to offer credit facilities to farmers across

the country.

Hdfc Bank Ltd has appointed Mr. Pandit Palande as an additional Director of the Bank at the

Board Metting held on 24th April 2007.

HDFC Bank Ltd has informed that the Board of Directors of the Bank at its meeting held on

October 12, 2007, has been appointed Mr. Paresh Sukthankar & Mr. Harish Engineer as

Executive Directors on the Board of Directors of the bank. Mr. Sukthankar & Mr. Engineer have

been senior employees of the Bank since 1994 and have held various positions of responsibility.

2009 - HDFC Bank Bags Asiamoney Award for the "Best Domestic Bank" - HDFC Bank offers

electronic payment collection facility to Guruvayoor Devaswom. - HDFC Bank launches

„Meritus Scholarship Programme. - The Asian Banker declares HDFC Bank the Best Retail‟

Bank



2010

With a view to attract long term deposits and prevent premature withdrawal when the interest

rates peak, HDFC, the housing finance major, has decided to pay variable interest rate on

recurring deposits.

HDFC Bank approved the appointment of Mr. C. M. Vasudev, who is a Director of the Bank, as

Non Executive Chairman of the Bank on a part time basis for a period of three years effective

July 06, 2010 in replace of Mr. Jagdish Capoor retires from his services on the same date.

HDFC Bank plan to add 250 new branches to its network over next 2 years. 2011

HDFC Bank looking at 3G services to boost mobile banking share

The Housing Development Finance Corporation Limited (HDFC), one of the largest private

sector banks in India, which had a network of 1,725 branches as at March 2010, opened 275 new

branches in the current fiscal. The bank now has a total network of 2,000 branches spread across

1,000 cities. The bank also acquired Centurion Bank of Punjab in 2008, which adds around 404

branches to its networks.

The Asian Banker magazine has declared that the strongest bank in Asia Pacific region is HDFC

India's private banking major ,HDFC Bank has launched its new credit card offering called

Infinia in direct competition with global credit card major ,American Express(Amex) .The new

HDFC product is exclusively for the bank's high net worth and super rich clients in the country.

2012

The third-largest US lender by assets, Citigroup Inc has sold its complete 9.85 per cent stake in

Housing Development Finance Corporation Ltd (HDFC) for USD 1.9 billion.



PNB bank Profile

Punjab National Bank (PNB) is an Indian financial services company based in New Delhi,

India. PNB is the third largest bank in India by assets. It was founded in 1894 by Lala Lajpat Rai

and is currently the second largest state-owned commercial bank in India ahead of Bank of

Baroda with about 5000 branches across 764 cities. It serves over 37 million customers. The

bank has been ranked 248th biggest bank in the world by the Bankers' Almanac. The bank's total

assets for financial year 2007 was about US$60 billion. PNB has a banking subsidiary in the UK,

as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty,

Dubai, Oslo, and Shanghai.

History

Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act with its

office in Anarkali Bazaar Lahore. The founding board was drawn from different parts of India

professing different faiths and a varied back-ground with, however, the common objective of

providing country with a truly national bank which would further the economic interest of the

country. PNB's founders included several leaders of the Swadeshi movement such as Dyal

Singh Majithia and Lala Harkishan Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C.

Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. [2] [3] Lala Lajpat Rai

was actively associated with the management of the Bank in its early years. The board first met

on 23 May 1894. Ironically, the PNB Website now claims Lala Lajpat Rai to be the founding

father, surpassing Rai Mul Raj and Dyal Singh Majithia. [4] The bank opened for business on 12

April 1895 in Lahore.

http://en.wikipedia.org/wiki/Lahore

http://en.wikipedia.org/wiki/Punjab_National_Bank#cite_note-4

http://en.wikipedia.org/wiki/Lala_Lajpat_Rai



http://en.wikipedia.org/wiki/Dyal_Singh_Majithia



http://en.wikipedia.org/wiki/Swadeshi

http://en.wikipedia.org/wiki/Lahore

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http://en.wikipedia.org/wiki/Bank_of_Baroda



http://en.wikipedia.org/wiki/Lala_Lajpat_Rai

http://en.wikipedia.org/wiki/New_Delhi,_India



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PNB has the distinction of being the first Indian bank to have been started solely with Indian

capital that has survived to the present. (The first entirely Indian bank, Commercial Bank, was

established in 1881 in Faizabad, but failed in 1958.)

PNB has had the privilege of maintaining accounts of national leaders such as Mahatma Gandhi,

Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi, as well as the

account of the famous Jalianwala Bagh Committee.

Timeline

In 1900, PNB established its first branch outside Lahore in Rawalpindi. Branches in Karachi

and Peshawar followed. The next year, PNB absorbed Bhagwan Dass Bank, a scheduled bank

located in Delhi Circle.

In 1947, at the Partition of India and the commencement of Pakistani independence, PNB lost its

premises in Lahore, but continued to operate in Pakistan. Partition forced PNB to close 92 offices

in West Pakistan, 33% of the total number, and which held 40% of the total deposits. PNB still

maintained a few caretaker branches. On 31 March 1947, even before Partition, PNB had

decided to leave Lahore and transfer its registered office to India; it received permission from the

Lahore High Court on 20 June 1947, at which time it established a new head office in Calcutta.

1 1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd.

2 1960: PNB again shifted its head office, this time from Calcutta to Delhi.

3 1961: PNB acquired Universal Bank of India.


http://en.wikipedia.org/wiki/Partition_of_India

http://en.wikipedia.org/wiki/Delhi

http://en.wikipedia.org/wiki/Peshawar

http://en.wikipedia.org/wiki/Karachi

http://en.wikipedia.org/wiki/Rawalpindi

http://en.wikipedia.org/wiki/Jalianwala_Bagh

http://en.wikipedia.org/wiki/Indira_Gandhi

http://en.wikipedia.org/wiki/Lal_Bahadur_Shastri

http://en.wikipedia.org/wiki/Jawahar_Lal_Nehru

http://en.wikipedia.org/wiki/Mahatma_Gandhi

http://en.wikipedia.org/wiki/Faizabad


1 1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon) .

2 September 1965: After the Indo-Pak war the government of Pakistan seized all the offices in Pakistan of Indian banks. PNB also had one or more branches in East Pakistan

(Bangladesh) .

3 1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a rescue.

4 1969: The Government of India (GOI) nationalized PNB and 13 other major commercial banks, on 19 July 1969.

5 1976 or 1978: PNB opened a branch in London.

6 1986 The Reserve Bank of India required PNB to transfer its London branch to State Bank of India after the branch was involved in a fraud scandal.

7 1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition added Hindustan's 142 branches to PNB's network.

8 1993: PNB acquired New Bank of India, which the GOI had nationalized in 1980.

9 1998: PNB set up a representative office in Almaty, Kazakhstan.

In 2003, PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At the time

of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its

shareholders received no payment for their shares. PNB also opened a representative office in

London.

The next year, PNB established a branch in Kabul, Afghanistan and a representative office in

Shanghai. PNB also established an alliance with Everest Bank in Nepal that permits migrants to

transfer funds easily between India and Everest Bank's 12 branches in Nepal. Currently, PNB

owns 20% of Everest Bank.


http://en.wikipedia.org/w/index.php?title=Everest_Bank&action=edit&redlink=1

http://en.wikipedia.org/wiki/Kabul

http://en.wikipedia.org/wiki/Kerala

http://en.wikipedia.org/wiki/Nedungadi_Bank


http://en.wikipedia.org/wiki/State_Bank_of_India



http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Bangladesh

http://en.wikipedia.org/wiki/East_Pakistan

http://en.wikipedia.org/wiki/History_of_the_Kashmir_conflict

http://en.wikipedia.org/wiki/Yangon

http://en.wikipedia.org/wiki/Burma


In 2005 PNB opened a representative office in Dubai.

Two years later, PNB established PNBIL – Punjab National Bank (International) – in the UK,

with two offices, one in London, and one in South Hall. Since then it has opened more branches,

this time in Leicester, Birmingham, Ilford, Wembly, and Wolverhampton. PNB also opened a

branch in Hong Kong.

In January 2009, PNB established a representative office in Oslo, Norway. PNB hopes to

upgrade this to a branch in due course.

In 2010, PNB purchased a small minority stake in Kazakhstan-based JSC Dana Bank. Within the

year PNB increased its ownership and now PNB owns 84% of what has become JSC (SB) PNB.

The subsidiary has branches in Almaty, Astana, Kangandu, and Pavlodar. Danabank was

established on 20 October 1992 in Pavlodar.

Also, in January 2010, PNB established a subsidiary in Bhutan. PNB owns 51% of Druk PNB

Bank, which has branches in Thimpu, Phuentsholing, and Wangdue. Local investors own the

remaining shares. Then on 1 May, PNB opened its branch in Dubai's financial center.

In September 2011, PNB opened a representative office in Sydney, Australia.

In December 2012 it signed an agreement with US based life Insurance company Metlife to

acquire a 30% stake in MetLife's Indian affiliate MetLife India Limited. The company would be

renamed PNB MetLife India Limited and PNB would sell MetLife's products in its branches. [


http://en.wikipedia.org/wiki/Metlife

http://en.wikipedia.org/wiki/Wangdue

http://en.wikipedia.org/wiki/Phuentsholing

http://en.wikipedia.org/wiki/Thimpu

http://en.wikipedia.org/wiki/Bhutan

http://en.wikipedia.org/wiki/Pavlodar

http://en.wikipedia.org/w/index.php?title=Kangandu&action=edit&redlink=1

http://en.wikipedia.org/wiki/Astana





CITI Bank Profile

Citibank one of the major international banks, is the consumer banking arm of financial services

giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First

National City Bank of New York. As of March 2010, Citigroup is the third largest bank holding

company in the United States by total assets, after Bank of America and JPMorgan Chase.

Citibank has retail banking operations in more than 160 countries and territories around the

world. More than half of its 1,400 offices are in the United States, mostly in New York City,

Chicago, Los Angeles, the San Francisco Bay Area, Washington, D.C. and Miami. More

recently, Citibank has expanded its operations in the Boston, Philadelphia, Houston, and

Dallas metropolitan areas.

In addition to the standard banking transactions, Citibank offers insurance, credit cards and

investment products. Their online services division is among the most successful in the field

claiming about 15 million users.

As a result of the global financial crisis of 2008–2009 and huge losses in the value of its

subprime mortgage assets, Citibank was rescued by the U.S. government under plans agreed for

Citigroup. On November 23, 2008, in addition to initial aid of $25 billion, a further $25 billion

was invested in the corporation together with guarantees for risky assets amounting to $306

billion. Since this time, Citibank has repaid its government loans in full.

http://en.wikipedia.org/wiki/Global_financial_crisis_of_2008%E2%80%932009

http://en.wikipedia.org/wiki/Dallas

http://en.wikipedia.org/wiki/Dallas

http://en.wikipedia.org/wiki/Houston

http://en.wikipedia.org/wiki/Philadelphia

http://en.wikipedia.org/wiki/Boston

http://en.wikipedia.org/wiki/Miami

http://en.wikipedia.org/wiki/Washington,_D.C.

http://en.wikipedia.org/wiki/San_Francisco_Bay_Area

http://en.wikipedia.org/wiki/Los_Angeles

http://en.wikipedia.org/wiki/Chicago

http://en.wikipedia.org/wiki/Chicago

http://en.wikipedia.org/wiki/New_York_City

http://en.wikipedia.org/wiki/JPMorgan_Chase

http://en.wikipedia.org/wiki/Bank_of_America

http://en.wikipedia.org/wiki/Banking_in_the_United_States

http://en.wikipedia.org/wiki/Citigroup

http://en.wikipedia.org/wiki/Financial_services



History

The City Bank of New York was founded on June 16, 1812. The first president of the City Bank

was the statesman and retired Colonel, Samuel Osgood, ownership and management of the bank

was taken over by Moses Taylor, a protégé of John Jacob Astor and one of the giants of the

business world in the 19th century. During Taylor's ascendancy, the bank functioned largely as a

treasury and finance center for Taylor's own extensive business empire.

In 1863, the bank joined the U.S.'s new national banking system and became The National City

Bank of New York. By 1868, it was considered one of the largest banks in the United States, and

in 1897, it became the first major U.S. bank to establish a foreign department.

When the Federal Reserve Act allowed it, [6] National City became the first U.S. national bank

to open an overseas banking office when its branch in Buenos Aires, Argentina, was opened in

1914. Many of Citi's present international offices are older; offices in London, Shanghai,

Calcutta, and elsewhere were opened in 1901 and 1902 by the International Banking Corporation

(IBC), a company chartered to conduct banking business outside the U.S., at that time an activity

forbidden to U.S. national banks. In 1918, IBC became a wholly owned subsidiary and was

subsequently merged into the bank. By 1919, the bank had become the first U.S. bank to have $1

billion in assets.

Charles E. Mitchell was elected president in 1921 and in 1929 was made chairman, a position he

held until 1933. Under Mitchell the bank expanded rapidly and by 1930 had 100 branches in 23

countries outside the United States. The policies pursued by the bank under Mitchell's leadership

are seen by historical economists as one of the prime causes of the stock market crash of 1929,

http://en.wikipedia.org/wiki/Charles_E._Mitchell

http://en.wikipedia.org/wiki/Calcutta

http://en.wikipedia.org/wiki/Calcutta

http://en.wikipedia.org/wiki/Buenos_Aires

http://en.wikipedia.org/wiki/Citibank#cite_note-6

http://en.wikipedia.org/wiki/Federal_Reserve_Act

http://en.wikipedia.org/wiki/National_City_Bank_Building



http://en.wikipedia.org/wiki/National_Bank_Act

http://en.wikipedia.org/wiki/John_Jacob_Astor

http://en.wikipedia.org/wiki/Moses_Taylor

http://en.wikipedia.org/wiki/Samuel_Osgood



which led ultimately to the Great Depression. In 1933 a Senate committee, the Pecora

Commission, investigated Mitchell for his part in tens of millions dollars in losses, excessive

pay, and tax avoidance. Senator Carter Glass said of him: "Mitchell more than any 50 men is

responsible for this stock crash.

On December 24, 1927, its headquarters in Buenos Aires, Argentina, were blown up by the

Italian anarchist Severino Di Giovanni, in the frame of the international campaign supporting

Sacco and Vanzetti.

In 1952, James Stillman Rockefeller was elected president and then chairman in 1959, serving

until 1967. Stillman was a direct descendant of the Rockefeller family through the William

Rockefeller (the brother of John D.) branch. In 1960, his second cousin, David Rockefeller,

became president of Chase Manhattan Bank, National City's long-time New York rival for

dominance in the banking industry in the United States.

Citibank footprint

Following its merger with the First National Bank in 1955, the bank changed its name to The

First National City Bank of New York, then shortened it to First National City Bank in 1962.

The company organically entered the leasing and credit card sectors, and its introduction of US

dollar denominated certificates of deposit in London marked the first new negotiable instrument

in the market since 1888. Later to become part of MasterCard, the bank introduced its First

National City Charge Service credit card – popularly known as the "Everything Card" – in 1967.


http://en.wikipedia.org/wiki/First_National_City_Charge_Service



http://en.wikipedia.org/wiki/MasterCard

http://en.wikipedia.org/wiki/Negotiable_instrument

http://en.wikipedia.org/wiki/Certificates_of_deposit

http://en.wikipedia.org/wiki/Chase_Manhattan_Bank

http://en.wikipedia.org/wiki/David_Rockefeller

http://en.wikipedia.org/wiki/John_D._Rockefeller

http://en.wikipedia.org/wiki/William_Rockefeller



http://en.wikipedia.org/wiki/Rockefeller_family

http://en.wikipedia.org/wiki/James_Stillman_Rockefeller

http://en.wikipedia.org/wiki/Sacco_and_Vanzetti

http://en.wikipedia.org/wiki/Sacco_and_Vanzetti

http://en.wikipedia.org/wiki/Severino_Di_Giovanni

http://en.wikipedia.org/wiki/Italian_anarchist

http://en.wikipedia.org/wiki/Italian_anarchist

http://en.wikipedia.org/wiki/Buenos_Aires

http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

http://en.wikipedia.org/wiki/Carter_Glass

http://en.wikipedia.org/wiki/Pecora_Commission



http://en.wikipedia.org/wiki/Great_Depression


In 1976, under the leadership of CEO Walter B. Wriston, First National City Bank (and its

holding company First National City Corporation) was renamed Citibank, N.A. (and Citicorp,

respectively). By that time, the bank had created its own "one-bank holding company" and had

become a wholly owned subsidiary of that company, Citicorp (all shareholders of the bank had

become shareholders of the new corporation, which became the bank's sole owner).

The name change also helped to avoid confusion in Ohio with Cleveland -based National City

Bank, though the two would never have any significant overlapping areas except for Citi credit

cards being issued in the latter National City territory. (In addition, at the time of the name

change to Citicorp, National City of Ohio was mostly a Cleveland-area bank and had not gone on

its acquisition spree that it would later go on in the 1990s and 2000s.) Any possible name

confusion had Citi not changed its name from National City eventually became completely moot

when PNC Financial Services acquired the National City of Ohio in 2008 as a result of the

subprime mortgage crisis.

Automated banking card

Shortly afterward, the bank launched the Citicard, which allowed customers to perform all

transactions without a passbook. Branches also had terminals with simple one-line displays that

allowed customers to get basic account information without a bank teller. When automatic teller

machines were later introduced, customers could use their existing Citi card.


http://en.wikipedia.org/wiki/Automatic_teller_machine



http://en.wikipedia.org/wiki/Bank_teller

http://en.wikipedia.org/wiki/Computer_terminal

http://en.wikipedia.org/wiki/Passbook

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

http://en.wikipedia.org/wiki/PNC_Financial_Services

http://en.wikipedia.org/wiki/National_City_Corp.



http://en.wikipedia.org/wiki/Cleveland

http://en.wikipedia.org/wiki/Ohio

http://en.wikipedia.org/wiki/Holding_company

http://en.wikipedia.org/wiki/Holding_company

http://en.wikipedia.org/wiki/Walter_B._Wriston


SBI Bank Profile

The evolution of State Bank of India can be traced back to the first decade of the 19th century. It

began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was

redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-

stock bank of the British India, established under the sponsorship of the Government of Bengal.

Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras

(established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the

modern banking scenario in India, until when they were amalgamated to form the Imperial Bank

of India, on27 January1921.

An important turning point in the history of State Bank of India is the launch of the first Five

Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in

general and the rural sector of the country, in particular. Until the Plan, the commercial banks of

the country, including the Imperial Bank of India, confined their services to the urban sector.

Moreover, they were not equipped to respond to the growing needs of the economic revival

taking shape in the rural areas of the country. Therefore, in order to serve the economy as a

whole and rural sector in particular, the All India Rural Credit Survey Committee recommended

the formation of a state-partnered and state-sponsored bank.

The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of

India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an

Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI)

was established on 1 July 1955. This resulted in making the State Bank of India more powerful,

because as much as a quarter of the resources of the Indian banking system were controlled



directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in

1959. The Act enabled the State Bank of India to make the eight former State-associated banks

As its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480

offices comprising branches, sub offices and three Local Head Offices, inherited from the

Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to

creditworthy parties, the State Bank of India catered to the needs of the customers, by banking

purposefully. The bank served the heterogeneous financial needs of the planned economic

development.

Branches

The corporate center of SBI is located in Mumbai. In order to cater to different functions, there

are several other establishments in and outside Mumbai, apart from the corporate center. The

bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major

cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater

To its customers throughout india.

ATM Services

SBI provides easy access to money to its customers through more than 8500 ATMs in India. The

Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which

includes the ATMs of State Bank of India as well as the Associate Banks - State Bank of Bikaner

& Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transact money

through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-

Debit cards.



Subsidiaries

The State Bank Group includes a network of eight banking subsidiaries and several non-banking

subsidiaries. Through the establishments, it offers various services including merchant banking

services, fund management, factoring services, primary dealership in government securities,

Credit cards and insurance.

The eight banking subsidiaries are:1 State Bank of Bikaner and Jaipur (SBBJ)

2 State Bank of Hyderabad (SBH)

3 State Bank of India (SBI)

4 State Bank of Indore (SBIR)

5 State Bank of Mysore (SBM)

6 State Bank of Patiala (SBP)

7 State Bank of Saurashtra (SBS)

8 State Bank of Travancore (SBT)

Products and services

Personal Banking1 SBI Term Deposits SBI Loan For Pensioners

2 SBI Recurring Deposits Loan Against Mortgage Of Property

3 SBI Housing Loan Loan Against Shares & Debentures

4 SBI Car Loan Rent Plus Scheme

5 SBI Educational Loan Medi-Plus Scheme



Other Services1 Agriculture/Rural Banking

2 NRI Services

3 ATM Services

4 Demat Services

5 Corporate Banking

6 Internet Banking

7 Mobile Banking

8 International Banking

9 Safe Deposit Locker

10 RBIEFT

11 E-Pay

12 E-Rail

13 SBI Vishwa Yatra Foreign Travel Card

14 Broking Services

15 Gift Cheques

3.3 CONCEPTUAL FRAMEWORK

In this study, 'Performance of commercial banks in India: A comparative study of different

categories of banks', the performance of different categories of banks was analysed on the basis

of certain performance indicators. The following performance indicators were proposed to be

included in this study:



1 Net Profit

2 Operating Profit

3 Interest Earned

4 Interest Expended

5 Spread

6 Establishment Expenses

7 Total Deposits

8 Total Advances

9 Total Volume

10 Return on Assets

Three different categories of banks were chosen from Public sector, Private Sector and Foreign

Banking Sector. In this research, the performance of different categories of banks have been

analysed on the basis of certain performance indicators such as Net Profit, Operating Profit, Total

Deposits, Spread, Total Advances, Return on Assets etc. and in order to compare the banks of

different categories, various statistical tools have been applied viz., Trend Analysis, Compounded

Annual Growth rate, Arithmetic, Standard Deviation and Coefficient of Variation .

3.4 SAMPLE DESIGN

The sample for the study consisted of total of six banks from three different categories of banks

called strata's viz., Public Sector, Private Sector and Foreign Banking Sector and each bank was

the unit of population. The population for the study comprised of all the commercial banks from

public sector, private sector and foreign banking sector. The public sector banks comprised of 20

nationalised banks and 8 banks of the State Bank Group. The private sector banks consisted of



21 old private banks and new 9 private sector banks. The foreign banking sector comprised of 33

foreign banks. Thus, the total of 91 banks was there in population for the study. The sampling

technique used was stratified random sampling. The selected banks were - ICICI Bank, AXIS

Bank, HDFC Bank, State Bank of India, Punjab National Bank and CITI Bank.

COLLECTION OF DATA

The entire structure of data for the study rests solely on secondary sources of information. The

study was carried out for the period from 2004-05 to 2010-11. Data relating to performance

indicators i.e. Net Profit, Operating Profit, Interest Earned, Interest Expended, Establishment

Expenses, Spread etc. of banks under study has taken from Bank Quest, Credit Information

Review, IBA Bulletins, Annual Reports of the banks and websites such as Moneycontrol.com,

Money.rediff.com and websites of the banks. Only those banks were selected for the purpose of

the study for which data for completed 12 months from 2003-04 to 2010-11 was available. The

raw data in the form of various for the sample banks was first recorded in a master table and then

subsequent statistical tools for the analysis were applied.

3.5 TOOLS OF ANALYSIS

Analysis and interpretation of performance indicators was done to compare the different

categories of banks selected, which in turn helped in studying the performance of the commercial

banks taken under the study. To compare the different categories of banks on the basis of various

performance indicators such as net profit, interest earned, establishment expenses, total advances

etc. various statistical tools have been applied viz., Trend Analysis, Arithmetic, Standard



Deviation, Coefficient of Variation, and Compounded Annual Growth rate . Following were the

tools used to analyse the secondary data.

3.5.1 TREND ANALYSIS

Trend Analysis is one quantitative method use to determine patterns in data collected over time.

It is also used to detect patterns of change in statistical information over regular intervals of time.

Trend represents the long term direction of the time series. The method of Least Squares has

been used to figure out the trend. It is a mathematical method and used to fit a straight line trend.

The straight line trend is represented by the equation

where:

Yc is the estimated value of the dependent variable X

is the independent variable (time in trend analysis) a is

the Y-intercept (the value of Y when X=0)

b is the slope of the trend line

a and b can be calculated as:

la= ∑ Y

N

∑ XYb = ∑ X2

The O

xford

College Of Business Management, Bangalore Page 48


where:

N represents the number of years (months or any other period) for which data are given.

3.5.2 ARITHMETIC MEAN

The Arithmetic Mean is an average. The formula for arithmetic mean is:

A.M. (X ) = X1 +

X2 + X3 + ……………………… + Xn =∑ Xi/n

i=1

Ν

3.4.3 STANDARD DEVIATION

The Standard Deviation is an absolute measure of dispersion that expresses variation in the same

units as the original data. The formula for standard deviation is:

S.D. = √ (Xi - X )2 / (n-1)

3.5.4 COEFFICIENT OF VARIATION

The Coefficient of Variation is one relative measure of dispersion. It relates the standard

deviation and the mean by expressing the standard deviation as a percentage of the mean. The

unit of measure, then, is "percent" rather than the same units as the original data. The formula for

coefficient of variation is:

Coefficient of =

σ

Variation (C.V.) X



3.5.5 COMPUNDED ANNUAL GROWTH RATE

The Compounded Annual Growth Rate of the performance indicators such as Establishment

Expenses, Spread, etc. can be calculated for a period of six years i.e. 2004-05 to 2010-11. The

formula for calculating compounded annual growth rate (CAGR) is:

CAGR = [(Final Value / Initial Value)1/n - 1] x 100



RESULTS AND DISCUSSIONS

To meet the first objective of the research, trend analysis of the banks under consideration has

been determined by using method of least square. The trend graphs have been plotted of each

performance indicator. To determine the second objective, the various statistical tools have

applied to compare the performance of the banks under consideration, such as Arithmetic Mean,

Standard Deviation, Coefficient of Variation, Compounded Annual Growth Rate and test of

Significance. Following is the comparison of the banks on the basis of various performance

indicators.



4.1 NET PROFIT

Table 4.1: Net Profit of the Commercial Banks

(Rs. crores)

Years

Banks Mar' Mar' Mar' Mar' Mar' Mar' C.V.

C.G.R

Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 258 1206 1637 2005 2540 3110 1792.67 918.57 51.24 51.55

%

change 367.4435.74 22.48 26.68

22.44

AXIS

Bank 134 193 271 324 485 659 344.33 178.76 51.92 30.48

%

change 44.0340.41 19.56 49.69

35.88

HDFC

Bank 297 438 602 853 1116 1382 781.33 379.16 48.53 29.27

%

change 47.4737.44 41.69 30.83

23.84

SBI 2432 3105 4379 4304 4406 4541 3861.17 799.75 20.71 10.99

%

change 27.6741.03 -1.71 2.37 3.06

PNB 562 842 1108 1410 1439 1540 1150.17 352.51 30.65 18.33

%

change 49.8231.59 27.26 2.06 7.02

CITI

Bank 325 391 572 600 706 900 582.33 191.25 32.84 18.54

%

change 20.3146.29 4.90 17.67

27.48



Trend Graph of Net Profit

6000

5000

Value in crores4000

3000

2000

1000

0

Mar' 07 Mar' 08 Mar' 09 Mar' 10 Mar' 11Mar' 12

No. of Years

ICICI Bank AXIS Bank HDFC Bank SBI PNB CITI Bank

Fig. 4.1 Trend Growth in Net Profit

Source: Company websites and journals

Net Profit is one of the most driving and motivating force for every business concern. Profits

must be earned to: a) pay the dues to stakeholders, b) expand or diversify the business. Table 4.1

showed Net Profit for all the commercial banks taken under study through 2007-08 to 2011-12

and provided that the maximum average net profit amounting to Rs.3,861.17 crores was earned

by State Bank of India followed by ICICI Bank and Punjab National Bank was amounting to

Rs.1,792.67 crores and Rs.1,150.17 crores, respectively. The minimum average net profit

amounting to Rs.344.33 crores was earned by the AXIS bank followed by the CITI Bank and

HDFC Bank amounting to Rs.582.33 crores and Rs.781.33 crores, respectively. The maximum

standard deviation of net profit was noticed in ICICI Bank followed by State Bank of India and

HDFC Bank. The major reason behind high standard deviation of ICICI Bank was of steep

increase in the net profit from the 2007-08 to 2010-11. The minimum standard deviation was of



CITI Bank. The coefficient of variation revealed the consistency and it was maximum in the case

of AXIS Bank (51.92%) followed by the ICICI Bank (51.24%) and HDFC Bank (48.53%),

respectively. The least coefficient of variation was noticed in the State Bank of India (20.71%)

and it also showed the maximum consistency. The laudable compounded annual growth rate of

net profit has been attained by ICICI Bank (51.52%0 followed by AXIS Bank (30.48%) and

HDFC Bank (29.27%), respectively and the minimum growth rate has been noticed by State

Bank of India (10.99%). The reason for high growth rate of ICICI Bank was due to sharp

increase of 968 per cent in interest earned during the period of the study and moreover, the bank

is gaining market share in private banking, retail banking, credit cards and most of the other

verticals in which it is present whereas, there was only 32.47 per cent increase in interest earned

of State Bank of India during the period of the study. The t-values in the table 4.2.1 revealed that

there was no significant difference between the performances of all the banks taken under study

and the banking industry on account of various indicators.

In figure 4.1, the growth in percent of trend showed that all the banks performances increased

and decreased over the time period of the study and the maximum fluctuations was recorded in

case of ICICI Bank. In the year 2007-08 highest growth in percent of trend was recorded by the

HDFC bank (128.57%) followed by the AXIS Bank (150.56%) and CITI Bank (105.01%),

respectively and the least was recorded by ICICI Bank (55.72%) but it has shown the highest

growth in the next year i.e. 2004-05 and this was due to sharp increase of 335 per cent in interest

earned in the year 2008-09. In the year 2010-11, each bank has shown similar growth in percent

of trend and it also showed the maximum increased and decreased over the period of the study.



4.2 OPERATING PROFIT

Table 4.2: Operating Profit of the Commercial Banks

(Rs. Crores)

Years

BanksMar' Mar' Mar' Mar' Mar' Mar' C.V.

C.G.R

Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 545 1250 1988 3077 3949 4749 2593.00 1476.7856.95 52.25

%

change 129.3659.04

54.78 28.34 20.26

AXIS

Bank 407 319 435 562 867 1166 626.00 297.9047.59 27.55

%

change -21.6236.36

29.20 54.27 34.49

HDFC

Bank 545 623 839 1153 1587 2628 1229.17 716.2858.27 36.88

%

change 14.3134.67

37.43 37.64 65.60

SBI6045 5188 5860 9786 11151 10249 8046.50 2396.96

29.79 16.84

%

change -14.1812.95

67.00 13.95 -8.09

PNB1474 1540 1997 2603 2881 2932 2237.83 599.62

26.79 17.29

%

change 4.4829.68

30.35 10.68 1.77

CITI

Bank 853 868 1233 1172 1577 2180 1313.83 457.7634.84 20.17

%

change 1.7642.05 -4.95 34.56 38.24



Trend Graph of Operating Profit

12000

10000

Value in 8000crores

6000

4000

2000

0

Mar' 07Mar' 08 Mar' 09

Mar' 10 Mar' 11

Mar' 12

No. of Years



Fig. 4.2 Trend Growth in Operating Profit

Every economic identity should generate sufficient profits from its primary operations. The

operating profit refers to the pure profit of the firm generated by the operations of the firm. It is

calculated by total income less total expenditure.

Table 4.2 showed Operating Profit for all the commercial banks taken under study through 2007-

08 to 2011-12 and provided that the maximum average net profit amounting to Rs.8,046.50

crores was earned by State Bank of India followed by ICICI Bank and Punjab National Bank was

amounting to Rs.2,593 crores and Rs.2,237.83 crores, respectively. The minimum average net

profit amounting to Rs.626 crores was earned by the AXIS bank followed by the HDFC Bank

and CITI Bank amounting to Rs.1,229.17 crores and Rs.1,313.83 crores, respectively. The

maximum standard deviation of operating profit was noticed in State Bank of India followed by



ICICI Bank and HDFC Bank. The reason behind high standard deviation of State Bank of India

was because of lot many variations in the operating expenses occurred during the period of study.

The minimum standard deviation was of AXIS Bank. The coefficient of variation revealed the

risk and it was maximum in case of HDFC Bank (58.27%) followed by the ICICI Bank (56.95%)

and AXIS Bank (48.53%), respectively. The least coefficient of variation was noticed in the

Punjab National Bank (26.79%) and it also showed the maximum consistency. The laudable

compounded annual growth rate of operating profit has been attained by ICICI Bank (43.55%)

followed by HDFC Bank (30.05%) and AXIS Bank (19.22%), respectively and the minimum

growth rate has been noticed by State Bank of India (9.22%). The highest growth in ICICI Bank

was due to combined effect of rise in provisions and contingencies and net profit that increased

from Rs.43.95 crores to Rs.1,638.68 crores and Rs.1,206.16 crores to Rs.3,110.22 crores,

respectively. The t-values in the table 4.2 revealed that there was no significant difference

between the performances of all the banks except AXIS Bank and the banking industry on

account of various indicators. AXIS Bank only showed the significant difference.

In figure 4.2, the growth in percent of trend showed that all the banks performances increased

and decreased over the time period of the study and State Bank of India has increased and

decreased very quickly as compared to rest of the banks under consideration, this was due to

huge fluctuation in the provisions and contingencies through out the period of the study.



4.3 INTEREST EARNED

Table 4.3: Interest Earned of the Commercial Banks

(Rs. Crores)

Years

Banks Mar' Mar' Mar' Mar' Mar' Mar' C.V.C.G.R

Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 2152 9368 8894 9410 13784 22994 11100.33 6317.44 56.91 45.23

%

change 335.32 -5.06 5.80 46.48 66.82

AXIS

Bank 1179 1465 1586 1924 2888 4560 2267.00 1158.44 51.10 29.29

%

change 24.26 8.26 21.31 50.10 57.89

HDFC

Bank 1703 2023 2549 3093 4475 6889 3455.33 1775.05 51.37 31.42

%

change 18.79 26.00 21.34 44.68 53.94

SBI 29810 31087 30460 32428 35795 39491 33178.50 3424.63 10.32 5.55

%

change 4.28 -2.02 6.46 10.38 10.33

PNB 6648 7485 7779 8460 9584 11537 8582.17 1598.93 18.63 10.78

%

change 12.59 3.93 8.75 13.29 20.38

CITI

Bank 1910 1979 2280 2203 3064 4384 2636.67 867.14 32.89 16.78

%

change 3.61 15.21 -3.38 39.08 43.08



Trend Graph of Interest Earned

40000

35000

Value in 30000

crores 25000

20000

15000

10000

5000

0


No. of Years



Fig. 4.3 Trend Growth in Interest Earned

The major chunk of a banks income flows in from interest earned which comprises the‟

following as per schedule 13 of Banking Regulation Act 1949, a) Interest/discount on

advances/bills, b) Income on investments, c) Interest on balances with Reserve Bank of India and

others. All banks intend to maximum the interest income by improving credit deposit ratio and

extending long-term loans especially in the deregulated environment when the interest rate

witnessed a declining trend.

Table 4.3 represented the position as regards interest earned and provided that the

maximum average interest earned amounting to Rs.33,178.50 crores was earned by State Bank of

India followed by ICICI Bank and Punjab National Bank was amounting to Rs.11,100.33 crores

and Rs.8,582.17 crores, respectively. The minimum average interest earned amounting to



Rs.2267 crores was earned by the AXIS bank followed by the CITI Bank and HDFC Bank

amounting to Rs.2,636.67 crores and Rs.3,455.33 crores, respectively. The maximum standard

deviation of Interest Earned was noticed in State Bank of India followed by ICICI Bank and

HDFC Bank. The minimum standard deviation was noticed by AXIS Bank. The coefficient of

variation revealed the risk and it was maximum in case of ICICI Bank (56.91%) followed by the

HDFC Bank (51.37%) and AXIS Bank (51.10%), respectively. The least coefficient of variation

was noticed in State Bank of India i.e. 10.32 per cent, and it was the highest consistent performer

because it manages all aspects of its business much better than other banks do. The compounded

annual growth rate revealed that splendid performance was recorded by ICICI Bank (48.53%)

followed by HDFC Bank (26.29%) and AXIS Bank (25.34%), respectively and the minimum

growth rate has been noticed by State Bank of India i.e. 4.81 per cent. The reason for high

growth rate of ICICI Bank was due to sharp increase of 316 per cent in advances during the

period of the study whereas, there is only 179 per cent increased in advances of State Bank of

India during the period of the study. The t-values in the table 4.3 revealed that only AXIS Bank

and CITI Bank were having significant difference between their performances and the banking

industry on account of various indicators. Rest of the banks under consideration showed no

significant difference.

In figure 4.3, the growth in percent of trend has shown that all the banks, under consideration,

performances increased and decreased over the period of the study and out of these, ICICI Bank

has shown the maximum fluctuations over the time period. As in the year 2003-04, the highest

growth rate was recorded in case of HDFC Bank (164.14%) followed by AXIS Bank (161.62%)

and CITI Bank (125.16%), respectively. The least growth was recorded by ICICI Bank (80.49%)

whereas, in 2004-05, the highest growth was recorded by ICICI Bank (154.98%) much higher



than the other banks taken under study and this was due to tremendous increase of 335 per cent

in interest earned in the year 2007-08. From period 2008-09 to 2011-12, ICICI Bank, HDFC

Bank, AXIS Bank and CITI Bank were all showing the similar fashion in growth of percent of

trend whereas State Bank of India and Punjab National Bank were showing the similar fashion in

growth of percent of trend.



4.4 INTEREST EXPENDED

Table 4.4: Interest expended of the Commercial Banks

(Rs. Crores)

Years


Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 1559 7944 7015 6571 9597 16358 8174.00 4410.72 53.96 41.93

%

change 409.56 -11.69 -6.33 46.05 70.45

AXIS

Bank 980 1142 1021 1193 1810 2993 1523.17 712.29 46.76 22.56

%

change 16.53-10.60 16.85 51.72 65.36

HDFC

Bank 1074 1192 1211 1315 1929 3179 1650.00 737.36 44.69 21.97

%

change 10.99 1.59 8.59 46.69 64.80

SBI 20729 21109 19274 18483 20159 23437 20531.83 1566.89 7.63 1.25

%

change 1.83 -8.69 -4.10 9.07 16.26

PNB 4353 4361 4155 4453 4917 6023 4710.33 631.16 13.40 6.04

%

change 0.18 -4.72 7.17 10.42 22.49

CITI

Bank 1103 1030 924 752 1006 1696 1085.17 294.31 27.12 5.51

%

change -6.62-10.29

-18.61 33.78 68.59



Trend graph of Interest Expended

25000

20000

Value in crores

15000

10000

5000

0


No. of Years



Fig. 4.4 Trend Growth in Interest Expended

Among the expenses incurred by a bank, interest expended the leading amount of expenses. As

per schedule 15 of Banking Regulation Act 1949, the interest expended comprises of a) Interest

on deposits, b) Interest on Reserve Bank of India/Inter Bank Borrowings and others

The study of interest expended as presented in table 4.4 revealed that amount of average interest

expended to the tune of Rs.20,531.83 was maximum in case of State Bank of India followed by

ICICI Bank, Rs.8,174 crores, and Punjab National Bank, Rs.4,710.33 crores, respectively and

minimum has been noticed in case of CITI Bank Rs.1,085.17 crores. The maximum standard

deviation of interest expended was noticed in ICICI Bank followed by State Bank of India and

HDFC Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of

variation of 53.96 per cent is highest in case of ICICI Bank followed by the AXIS Bank



(46.76%) and HDFC Bank (44.69%), respectively. The least coefficient of variation was noticed

in State Bank of India i.e. 7.63 per cent, and it was a more consistent performer as it manages all

aspects of its business much better than other banks do. The compounded annual growth rate

revealed that splendid performance was recorded by ICICI Bank (48.08%) followed by AXIS

Bank (20.50%) and HDFC Bank (19.87%), respectively and the minimum growth rate has been

noticed by State Bank of India i.e. 2.07 per cent. The t-values in the table 4.4 depicted that half

of the banks namely, AXIS Bank, State Bank of India and CITI Bank were having significant

difference between their performances and the banking industry on account of various indicators,

and remaining half of the banks under consideration, namely, ICICI Bank, HDFC Bank and

Punjab National Bank showed no significant difference.


performances increased and decreased over the period of the study and out of these, ICICI Bank

has shown the maximum fluctuations over the time period. As in the year 2007-08, the highest

growth rate was recorded by ICICI Bank (165.17%) much higher than the other banks taken

under study and this was due to tremendous increase of 409.55 per cent in interest expended in

the year 2007-08. From period 2008-09 to 2011-12, ICICI Bank, HDFC Bank, AXIS Bank and

CITI Bank were all showing the similar fashion in growth of percent of trend whereas State Bank

of India and Punjab National Bank were showing the similar fashion in growth of percent of

trend.



4.5 SPREAD

Table 4.5: Spread of the Commercial Banks

(Rs. Crores)

Years

BanksMar' Mar' Mar' Mar' Mar' Mar' C.V.

C.G.R

Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 593 1424 1879 2839 4187 6635 2926.17 2006.22 68.56 56.71

%

change 140.13 31.95 51.09 47.48 58.47

AXIS

Bank 199 322 565 732 1078 1567 743.83 464.79 62.49 50.05

%

change 61.81 75.47 29.56 47.27 45.36

HDFC

Bank 629 831 1338 1778 2546 3710 1805.33 1058.98 58.66 42.99

%

change 32.11 61.01 32.88 43.19 45.72

SBI 9531 9977 11186 13944 15635 16054 12721.17 2619.09 20.59 12.67

%

change 4.68 12.12 24.66 12.13 2.68

PNB 2295 3124 3625 4006 4667 5515 3872.00 1037.37 26.79 17.65

%

change 36.12 16.04 10.51 16.50 18.17

CITI

Bank 807 950 1356 1451 2058 2688 1551.67 647.12 41.70 27.09

%

change 17.72 42.74 7.01 41.83 30.61



Trend Graph of Spread

18000

16000

14000

Value in crores12000

10000

8000

6000

4000

2000

0


No. of Years



Fig. 4.5 Trend Growth in Spread

Spread Management focuses on maintaining an adequate spread (gap) between interest earned

and interest expended to ensure an acceptable profit margin regardless of interest rate

fluctuations. Mathematically, spread can be expressed as:

Spread = Interest earned – Interest expended

The analysis of data contained in table 4.5 indicated that the mean spread of Rs.12,721.17 crores

was again highest in case of State Bank of India followed by Punjab National Bank, Rs.3,872

crores, and ICICI Bank, Rs.2,926.17 crores, respectively and lowest has been noticed in case of

AXIS Bank Rs.743.83 crores. The maximum standard deviation of spread was noticed in State

Bank of India followed by ICICI Bank and HDFC Bank. The minimum standard deviation was

noticed by AXIS Bank. The coefficient of variation of 68.56 per cent was highest in case of



ICICI Bank followed by the AXIS Bank (62.49%) and HDFC Bank (58.66%), respectively. The

least coefficient of variation was noticed in case of State Bank of India (20.59%), and it was a

more consistent performer. It manages all aspects of its business much better than other banks

do. The analysis of compounded annual growth rate reveals that ICICI Bank was leading by

recording a growth rate of 49.67 per cent followed by AXIS Bank (41.15%) and HDFC Bank

(34.50%0, respectively and the minimum growth rate has been noticed by State Bank of India

i.e. 9.10 per cent.

The t-values in the table 4.5 revealed that only AXIS Bank was having significant difference

between their performances and the banking industry on account of various indicators, and rest

of the banks showed no significant difference.


performances increased and decreased over the period of the study and this increase or decrease

was not huge in all the banks over the time period taken under study. During the period 2007-08,

the highest growth of 546.54 per cent was recorded by ICICI Bank followed by AXIS Bank

(244.17%) and HDFC Bank (206.23%), respectively. The minimum growth of 97.06 per cent

was recorded by Punjab National Bank. The reason for the maximum growth of ICICI Bank was

because of huge percentage increase in spread of 140.13% during 2007-08. In the years from

2007-08 to 2011-12, all the banks taken under study showed similar growth in percent of trend.



4.6 ESTABLISHMENT EXPENSES

Table 4.6: Establishment Expenses of the Commercial Banks

(Rs. Crores)

Years


Mean S.D.

07 08 09 10 11 12(in %)

(in %)

ICICI

Bank 147 403 546 737 1082 1616 755.17 480.5963.64 54.61

%

change 174.1535.48

34.98 46.81

49.35

AXIS

Bank 51 85 121 177 240 381 175.83 110.3462.75 47.27

%

change 66.6742.35

46.28 35.59

58.75

HDFC

Bank 109 152 204 276 487 777 334.17 232.2669.50 47.55

%

change 39.4534.21

35.29 76.45

59.55

SBI5153 5688 6447 6907 8123 7932 6708.33 1085.25

16.18 9.87

%

change 10.3813.34 7.14 17.61 -2.35

PNB1316 1476 1654 2121 2115 2352 1839.00 378.24

20.57 12.85

%

change 12.1612.06

28.23 -0.28 11.21

CITI

Bank 163 189 252 244 294 376 253.00 69.6327.52 16.93

%

change 15.9533.33 -3.17 20.49

27.89



Trend Graph of Establishment Expenses

9000

8000

7000

Value in600

0crores 500

0400

0300

0200

0100

0

0

Mar' 07 Mar' 08 Mar' 09Mar' 10 Mar' 11

Mar' 12

No. of Years

ICICI Bank AXIS BankHDFC Bank SBI PNB

CITI Bank


Fig. 4.6 Trend Growth in Establishment Expenses

In banking parlance, establishment expenses refer to the amount expended on employees in the

form of salaries and provisions (contribution to gratuities funds, provident funds and pension

funds etc. Establishment cost is inseparable part of any banking organization.

The analysis of data contained in table 4.6 indicated that the mean establishment expenses of

Rs.6,708.33 crores was again highest in case of State Bank of India followed by Punjab National

Bank, Rs.1,839 crores, and ICICI Bank, Rs.755.17 crores, respectively and lowest has been

noticed in case of AXIS Bank Rs.175.83 crores. The maximum standard deviation of

establishment expenses was noticed in State Bank of India followed by ICICI Bank and Punjab

National Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of

variation of 69.50 per cent is highest in case of HDFC Bank followed by the ICICI Bank

(63.64%) and AXIS Bank (62.75%), respectively. The least coefficient of variation was noticed



in case of State Bank of India (16.18%), and it also showed the maximum consistency. The

analysis of compounded annual growth rate revealed that ICICI Bank was leading by recording a

growth rate of 49.23 per cent followed by AXIS Bank (39.91%) and HDFC Bank (38.82%),

respectively and the minimum growth rate has been noticed by State Bank of India i.e. 7.47 per

cent. As we have seen in the table 4.6 that the average establishment expense was maximum in

case of public sector banks i.e. State Bank of India and Punjab National Bank but the

compounded annual growth rate of public sector was much less than that of private sector i.e.

ICICI Bank, AXIS Bank and HDFC Bank and foreign banking sector i.e. CITI Bank. This

happened because of private banks are employing personnel with professional skill and

experience in large number whereas, in public sector they are about to overstaffed. The t-values

in the table 4.6 revealed that AXIS Bank and CITI Bank were having significant difference

between their performances and the banking industry on account of various indicators, and rest

of the banks showed no significant difference.


performances increased and decreased over the period of the study and this increase and decrease

was very minute in all the banks over the time period taken under study. In the year 2005-06

highest growth in percent of trend was recorded by the HDFC bank (573.68%) followed by the

AXIS Bank (242.86%) and ICICI Bank (210%), respectively and the least was recorded by State

Bank of India (99.85%). From the year 2007-08 to 2011-12, public sector banks and foreign

banking sector showed similar trend and all the private sector banks showed similar trend.



4.7 TOTAL DEPOSITS

Table 4.7: Total Deposits of the Commercial Banks

(Rs. Crores)

Years

C.V.

Banks Mar' Mar' Mar' Mar' Mar' Mar'C.G.R

Mean S.D. (in

07 08 09 10 11 12(in %)

%)

ICICI

Bank 3208548169 68108 99819

165083

230510

107295.67

69839.49

65.09 48.92

%change 50.13 41.39 46.56 65.38 39.63

AXIS

Bank 1228716964 20954 31712 40113 58785 30135.83

15807.10

52.45 36.24

%change 38.06 23.52 51.34 26.49 46.55

HDFC

Bank 1765422376 30408 36354 55797 68298 38481.17

18035.75

46.87 31.87

%change 26.75 35.90 19.55 53.48 22.40

SBI 270560

3E+05

318618

367047

380046

435521

344652.50

55578.63

16.13

9.79

%change 9.45 7.60 15.20 3.54 14.60

PNB 64123 75813 87916

103167

119685

139859 98427.17

25786.36

26.20

16.78

%change 18.23 15.96 17.35 16.01 16.86

CITI

Bank 1524217743 20465 21484 27912 37875 23453.50 7535.54

32.13 18.56

%change 16.41 15.34 4.98 29.92 35.69

The Oxford College Of Business Management, BangalorePage 71


Trend Graph of Total Deposits

450000

400000

350000

Value in 300000crores

250000

200000

150000

100000

50000

0

Mar' 07Mar' 08

Mar' 09 Mar' 10 Mar' 11

Mar' 12

No. of Years



Fig. 4.7 Trend Growth in Total Deposits

Acceptance of deposits is the primary activity of banking system. More and more deposits

should be mobilized at cheaper rates of interest to enhance advances. The various types of

deposits mobilized by banks are: a) term deposits, b) saving fund deposits, c) current deposits, d)

recurring deposits, e) miscellaneous deposits.

The analysis of data contained in table 4.7 indicated that the mean total deposits of

Rs.3,44,652.50 crores was again highest in case of State Bank of India followed by, ICICI Bank

Rs.1,07,295.67 crores, and Punjab National Bank, Rs.98,427.17 crores, respectively and lowest

has been noticed in case of CITI Bank i.e. Rs.23,453.50 crores. The maximum standard deviation

of total deposits was noticed in ICICI Bank followed by State Bank of India and Punjab National

Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of variation

of 65.09 per cent was highest in case of ICICI Bank followed by the AXIS Bank (52.45%) and



HDFC Bank (46.87%), respectively. The least coefficient of variation was noticed in case of

State Bank of India (16.13%), and it also showed the maximum consistency. The analysis of

compounded annual growth rate revealed that ICICI Bank was leading by recording a growth

rate of 39 per cent followed by AXIS Bank (29.88%) and HDFC Bank (25.35%), respectively

and the minimum growth rate has been noticed by State Bank of India i.e. 8.27 per cent. ICICI

Bank was showing highest growth rate because it was focusing on growth, taking on slightly

more risk than other banks. The t-values in the table 4.7 revealed that only CITI Bank was

having significant difference between their performances and the banking industry on account of

various indicators, and rest of the banks under consideration showed no significant difference.


performances increased and decreased over the period of the study and this increase and decrease

was not huge in all the banks over the time period taken under study. In the year 2006-07 highest

growth in percent of trend was recorded by the ICICI bank (352.16%) followed by the AXIS

Bank (157.51%) and HDFC Bank (137.83%) respectively and the least was recorded by State

Bank of India (102.37%). The reason for huge growth in percent of trend of ICICI Bank in the

year 2003-04 was because of huge growth 617.43 per cent of total deposits during the period of

study. From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and

Punjab National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e.

ICICI Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.



4.8 TOTAL ADVANCES

Table 4.8: Total Advances of the Commercial Banks

(Rs. Crores)

Years

C.V.


Mean S.D. (in

07 08 09 10 11 12(in %)

%)

ICICI

Bank 4703553279 62095 91405

146163

195865 99307.00

54493.19

54.87 35.16

%change 13.28 16.55 47.20 59.91 34.00

AXIS

Bank 5352 7180 9363 15603 22314 36876 16114.6710885.58

67.55 47.33

%change 34.16 30.40 66.65 43.01 65.26

HDFC

Bank 681411755 17744 25566 35061 46945 23980.83

13758.06

57.37 46.21

%change 72.51 50.95 44.08 37.14 33.90

SBI 120806

1E+05

157933

202374

261641

337336

202974.67

75860.31

37.37

23.22

%change 14.03 14.65 28.14 29.29 28.93

PNB 34369 40228 47224

6041274627

9659658909.33

21437.33

36.39

23.07

%change 17.05 17.39 27.93 23.53 29.44

CITI

Bank 1138512629 15259 18111 24455 32861 19116.67 7474.02

39.10 23.74

%change 10.93 20.83 18.69 35.03 34.37



Trend Graph of Total Advances

350000

300000

250000Value in crores

200000

150000

100000

50000

0

Mar' 07Mar' 08 Mar' 09 Mar' 10 Mar' 11

Mar' 12

No. of Years



Fig. 4.8 Trend Growth in Total Advances

Advances are the major product of banking system. The advances must gain momentum if the

banks are to improve its operating performance. A bank sanctions advances in various forms like:

a) bank overdrafts, b) cash credits, c) discounting of bills, d) term loans and others.

The analysis of data contained in table 4.8 indicated that the mean total deposits of

Rs.2,02,974.67 crores was recorded highest in case of State Bank of India followed by, ICICI

Bank Rs.99,307 crores, and Punjab National Bank, Rs.58,909.33 crores, respectively and lowest

has been noticed in case of AXIS Bank i.e. Rs.16,114.67 crores. The maximum standard

deviation of total deposits was noticed in State Bank of India followed by ICICI Bank and

Punjab National Bank. The minimum standard deviation was noticed by CITI Bank. The



coefficient of variation of 67.55 per cent was highest in case of AXIS Bank followed by the

HDFC Bank (57.37%) and ICICI Bank (54.87%), respectively. The least coefficient of variation

was noticed in case of Punjab National Bank (36.39%), and it also showed the maximum

consistency. The analysis of compounded annual growth rate revealed that AXIS Bank and

HDFC Bank are leading by recording a growth rate of 38.03 per cent followed by ICICI Bank

(26.90%) and CITI Bank (19.37%), respectively and the minimum growth rate has been noticed

by State Bank of India i.e. 18.71 per cent. ICICI Bank was showing highest growth rate because

it was focusing on growth, taking on slightly more risk than other banks. The t-values in the table

4.8 revealed that only CITI Bank was having significant difference between their performances

and the banking industry on account of various indicators, and rest of the banks under

consideration showed no significant difference.


performances increased and decreased over the period of the study and the fluctuations were very

minute in all the banks over the time period taken under study. In the year 2003-04 highest

growth in percent of trend was recorded by the AXIS Bank (458.42%) followed by the ICICI

Bank (194.71%) and HDFC Bank (166.36%), respectively and the least was recorded by Punjab

National Bank i.e. 121.14 per cent. The reason for huge growth in percent of trend of AXIS Bank

in the year 2007-08 was because of huge growth 589.01% of total advances during the period of

study. From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and

Punjab National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e.

ICICI Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.



4.9 TOTAL VOLUME

Table 4.9: Total Volume of the Commercial Banks

(Rs. Crores)

Years

C.V.


Mean S.D. (in

07 08 09 10 11 12(in %)

%)

ICICI

Bank 791201E+05

130204

191224

311246

426375

206602.83

124252.90

60.14

41.58

%change 28.22 28.35 46.86 62.77 36.99

AXIS

Bank 1763924144 30317 47315 62427 95662 46250.67 26663.02

57.65

39.88

%change 36.88 25.57 56.07 31.94 53.24

HDFC

Bank 2446834130 48152 61920 90857

115242 62461.50 31736.73

50.81

36.68

%change 39.49 41.08 28.59 46.73 26.84

SBI 391366

4E+05

476552

569422

641687

772857

547627.50

130676.55

23.86

14.55

%change 10.86 9.83 19.49 12.69 20.44

PNB98942

1E+05

135140

153838

160739

185048

141624.67 28631.26

20.22

12.87

%change 17.28 16.46 13.84 4.49 15.12

CITI

Bank 2662730372 35724 39595 52367 70736 42570.17 14988.85

35.21

20.56

%change 14.06 17.62 10.84 32.26 35.08



Trend Graph of Total Volume

800000

700000

600000

Value in crores500000

400000

300000

200000

100000

0


No. of Years



Fig. 4.9 Trend Growth in Total Volume

Total Volume of the business refers to the sum total deposits and advances. Mathematically,

Volume of Business = Deposits + Advances. It is said high volume of business leads to reduced

cost per unit and improves profit. Those banks are efficient which create more advances from a

given volume of deposits.

The analysis of data contained in table 4.9 indicated that the mean total volume of

Rs.5,47,627.50 crores was recorded highest in case of State Bank of India followed by, ICICI

Bank Rs.20,602.83 crores, and Punjab National Bank, Rs.1,41,624.67 crores, respectively and

lowest has been noticed in case of CITI Bank i.e. Rs.42,570.17 crores. The maximum standard

deviation of total deposits was noticed in State Bank of India followed by ICICI Bank and HDFC



Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of variation

of 60.14% is highest in case of ICICI Bank followed by the AXIS Bank, 57.65%, and HDFC

Bank, 50.81%, respectively. The least coefficient of variation was noticed in case of Punjab

National Bank, 20.22%, and it also showed the maximum consistency. The analysis of

compounded annual growth rate reveals that AXIS Bank was leading by recording a growth rate

of 32.62% followed by ICICI Bank, 32.48%, and HDFC Bank, 29.54%, respectively and the

minimum growth rate has been noticed by Punjab National Bank i.e. 11.02%. The t-values in the

table 4.9 revealed that only CITI Bank was having significant difference between their

performances and the banking industry on account of various indicators, and rest of the banks

under consideration showed no significant difference.


performances increased and decreased over the period of the study and the fluctuations were very

minute in all the banks over the time period taken under study. In the year 2003-04 highest

growth in percent of trend was recorded by the ICICI Bank i.e. 237.83%, followed by the AXIS

Bank and HDFC Bank, 196.68% and 144.74% respectively and the least was recorded by Punjab

National Bank i.e. 98.98%. The reason for huge growth in percent of trend of ICICI Bank in the

year 2005-06 was because of huge growth 438.89% of total advances during the period of study.

From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and Punjab

National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e. ICICI

Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.



4.10 RETURN ON ASSETS

Table 4.10: Return on Assets of the Commercial Banks

(Rs. Crores)

Years

C.V.

BanksMar' Mar'

Mar'

Mar' Mar' Mar'

C.G.R

Mean S.D. (in

07 08 09 10 11 12(in %)

%)

ICICI

Bank 0.25 1.13 1.31 1.19 1.02 0.91 0.97 0.3435.63

18.89

%change

352.00

15.93 -9.16

-14.29

-10.78

AXIS

Bank 0.93 0.98 1.12 0.86 0.97 0.89 0.96 0.08 8.72 -1.46

%

change 5.38

14.29

-23.21 12.79 -8.25

HDFC

Bank 1.24 1.44 1.42 1.66 1.52 1.52 1.47 0.13 8.68 3.89

%change 16.13

-1.39

16.90 -8.43 0.00

SBI0.7 0.83 1.07 0.94 0.89 0.81 0.87 0.11

13.17 2.34

%

change 18.57

28.92

-12.15 -5.32 -8.99

PNB0.77 0.97 1.08 1.12 0.99 0.95 0.98 0.11

11.39 3.34

%change 25.97

11.34 3.70

-11.61 -4.04

CITI

Bank 1.51 2.88 3.55 2.84 3.07 1.86 2.62 0.7126.97 -1.57

%

change 90.73

23.26

-20.00 8.10

-39.41



Trend Graph of Return on Assets

3

2.5

Value2in crores

1.5

1

0.5

0


No. of Years



Fig. 4.10 Trend Growth in Return on Assets

Return on Assets measures the relationship between the net profits and assets. It is defines as the

ratio of net profit after tax to total assets. It shows the efficiency with which banks deploy their

assets.

In the table 4.10, the mean analysis showed that the maximum return of 2.72% is recorded by CITI

Bank followed by HDFC Bank and Punjab National Bank, 1.47% and 0.98% respectively. The

maximum standard deviation was again recorded highest by CITI Bank followed by ICICI Bank and

HDFC Bank, respectively. The minimum was recorded by the AXIS Bank. The reason for showing

maximum mean return by CITI Bank was due to the bank s strategy of expanding its portfolio of‟

services has paid off handsomely. The coefficient of variation was maximum shown by ICICI Bank

which revealed that there was more risk involved and the minimum return was



noticed by HDFC Bank and it also showed that it was more consistent. The reason for the highest

coefficient of variation in ICICI Bank was because from the year 2005-06 to 2008-09, the return

kept on increasing, then started decreasing from 2009-10 to 2011-12 and this is due to percentage

increase in total assets was more than the percentage increase in net profit in the later years of the

study. The maximum compounded annual growth rate is in case of ICICI Bank i.e. 24.08%

followed by Punjab National Bank and CITI Bank, 3.57% and 3.54% whereas AXIS Bank

recorded the least with negative growth rate, -0.73%,. The reason for this was that percentage

increase in total assets is much more than the percentage increase in net profit during the period

of the study. The t-values in the table 4.10 revealed that only ICICI Bank and CITI Bank are

having no significant difference between their performances and the banking industry on account

of various indicators, and rest of the banks under consideration showed significant difference.

In figure 4.10, the growth in percent of trend has shown that all the banks, taken under study,

performances has increased and decreased over the period of the study and there were huge

fluctuations in all the banks over the time period taken under study. The maximum fluctuation

was recorded by CITI Bank and these fluctuations were all because of the change in percentage

of net profits is different from that of change in total assets in each time period.



SUMMARY OF FINDINGS, CONCLUSION AND SUGGESTION

SUMMARY

The research project „Performance of Commercial Banks in India: A comparative study of

different categories of banks was undertaken with the following objectives:‟

1. To study the trends in the performance of different categories of the banks on the basis of

selected parameters.

2. To compare the performance of different categories of the banks.

The performance of different categories of banks was analysed on the basis of certain

performance indicators such as Net profit, Operating profit, Interest expended, Spread, Return on

Assets etc. The study was carried out for six years period from 2007-08 to 2011-12. Only those

banks were chosen for which completed data of 12 months for the study period was available.

The selected banks were – ICICI Bank, AXIS Bank, HDFC Bank, State Bank of India, Punjab

National Bank and CITI Bank. To achieve the first objective, the growth of percent of trend has

been done by applying the method of least square and to achieve second objective, various

statistical tools have been applied such as Coefficient of Variation and Compounded Annual

Growth Rate.



5.1 Findings of the study

1. The maximum average net profit is captured by State Bank of India followed by the ICICI

Bank and Punjab National Bank whereas, in case of compounded annual growth rate, ICICI

Bank recorded the highest value followed by AXIS Bank and HDFC Bank and the high

growth rate of ICICI Bank was due to sharp increase of 968 per cent in interest earned during

the period of the study and moreover, the bank is gaining market share in private banking,

retail banking, credit cards and most of the other verticals in which it is present. All the banks

showed insignificant difference.

2. The maximum average operating profit was recorded by State Bank of India and the

minimum was recorded by AXIS Bank. In case of compounded annual growth rate, the major

chunk was captured by ICICI Bank followed by HDFC Bank and AXIS Bank. This means

net profits in public sector banks have arisen on account of recovery of „provisions and

Contingencies . ‟

3. The interest earned growth rate was maximum in case of ICICI Bank followed by HDFC

bank and AXIS bank and the minimum was recorded by State Bank of India. This high

growth rate of ICICI Bank was all due to maximum increase in advances during the period of

the study than other banks. Only AXIS Bank and CITI Bank were having significant

difference between their performances and the banking industry on account of various

indicators.

4. The interest expended was also increased at fastest rate in private banks viz.; ICICI Bank,

AXIS Bank and HDFC Bank because the growth rate in deposits was highest in private

sector banks as compared to public sector banks and foreign banking sector. AXIS Bank,



State Bank of India and CITI Bank were having significant difference between their

performances and the banking industry on account of various indicators.

5. Establishment expenses being major item of expenses has grown at a lesser rate in public

sector banks than in public sector banks and foreign banking sector and this is because

private banks are employing personnel with professional skill and experience in large number

whereas, in public sector they are about to overstaffed. AXIS Bank and CITI Bank were

having significant difference between their performances and the banking industry on

account of various indicators, and rest of the banks showed no significant difference

6. As regards total deposits, though State Bank of India because of its vast network, was leading

in total deposits but the growth rate analysis revealed that ICICI Bank topped the chart

followed by AXIS Bank and HDFC Bank whereas, least growth has been recorded in case of

State Bank of India. The reason for high growth in ICICI Bank was due to its prima facie

focus on growth, taking on slightly more risk than other banks and same was the case with

total advances.

7. The maximum average return on assets has been noticed in CITI bank. The reason for

showing maximum mean return by CITI Bank was that the bank s strategy of expanding its‟

portfolio of services has paid off handsomely and moreover, bank is investing huge in

computers and infrastructure. ICICI Bank and CITI Bank showed insignificant difference.



5.2 SUGGESTIONS

1. As the growth in total deposits, total advances and total volume was very low in case of

public sector banks viz.; State Bank of India and Punjab National Bank, it is recommended

that public sector banks should adopt more aggressive policies and practices the policies and

practices of private sector banks.

2. The growth rate of public sector banks viz.; State Bank of India and Punjab National Bank

were the lowest in every performance indicator taken under consideration. It is recommended

that these banks must go for higher disposable incomes, higher consumption and they must

have greater appetite for risk.

3. Banks that are able to innovate to keep up with emerging market trends are likely to be more

successful and will establish long-term leadership positions. So every bank must do this.

4. To attain higher growth, the banks must focus on every segment especially, rural, retail and

agriculture credit areas because there are ample of opportunities lying for one s growth. ‟



5.3 Scope for further study

There is ample scope for subsequent studies in this dynamic sector of the economy. The studies

may be taken by studying other variables and furthermore studies may be undertaken to analyze

the impact of new products on the performance of banks. Still more, studies may be conducted

on the qualitative aspects and analysis scaling techniques. On the basis of findings of the study, it

is purposed that micro level studies on the various variables be conducted in order to facilitate

SWOT analysis of each bank.

Policy Implications

1 Public sector banks focus more on public interest policies, in this process the performance may not be as competitive as private bank. Hence as a policy initiative both

public and private bank must take-off a public interest policies, so that competition will

be healthy.

2 The latest policy decision of having all women commercial bank is welcome sign to upplitment of Indian women.



5.4 CONCLUSION

The maximum average operating profit was recorded by State Bank of India and the minimum

was recorded by AXIS Bank. In case of compounded annual growth rate, the major chunk was

captured by ICICI Bank followed by HDFC Bank and AXIS Bank. This means net profits in

public sector banks have arisen on account of recovery of „provisions and Contingencies .‟

The interest earned growth rate was maximum in case of ICICI Bank followed by HDFC bank

and AXIS bank and the minimum was recorded by State Bank of India. This high growth rate of

ICICI Bank was all due to maximum increase in advances during the period of the study than

other banks. Only AXIS Bank and CITI Bank were having significant difference between their

performances and the banking industry on account of various indicators.

There are many activities performed at commercial department of which Accounting and

banking process is a part but it is very essential to maintain it properly.



REFERENCES

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A Studay on Perormance of Commercial Banks in India