Camel Rating ( Framework) of Four Banks

A

PROJECT REPORT

ON

“CAMEL FRAMEWORK”as a tool of performance evaluation for

banking institutions

Submitted By:

Lovely Ganeriwal (18)

Unnati Modi (31)

Submitted To:

SOM- LALIT INSTITUTE OF MANAGEMENT STUDIES (SLIMS)

AHMEDABAD – 380 009

CAMEL Framework Page 1

CERTIFICATE

This is to certify that Miss Unnati Modi and Lovely Ganeriwal have

completed their project report titled “To study the strength of using

CAMELS framework as a tool of performance evaluation for banking

institutions” under my supervision. To the best of my knowledge and belief

this is their original work and this, wholly or partially, has not been

submitted for any degree of this or any other University.


Date: Prof. Nirali Parikh

Signature - ______________

DECLARATION

We hereby declare that this project work entitled “To study the strength of

using CAMELS framework as a tool of performance evaluation for

banking institutions” is our work, carried out under the guidance of

Professor Nirali Parikh and Mr Shivshankar (Corporation Bank). Our

report neither fully nor partially has ever been submitted for award of any

other degree to either this university or any other university.

LOVELY GANERIWAL

UNNATI MODI


PREFACEWe know that final the project is for the development and enhancement of the knowledge

in particular field. It can never be possible to make a mark in today’s competitive era

only with theoretical knowledge when industries are developing at global level, practical

knowledge of administration and management of business is very important. Hence,

practical study is of great importance to PGDM student

Banking is a highly information intensive activity that relies heavily on information

technology (IT) to acquire, process, and deliver the information to all relevant customers.

Banks used the Internet technology as a strategic weapon to revolutionize the way they

operate, deliver, and compete against each other. Although a complete turnaround in

banking sector performance is not expected till the completion of reforms, signs of

improvement are visible in some indicators under the CAMEL framework. Under this

bank is required to enhance capital adequacy, strengthen asset quality, improve

management, increase earnings and reduce sensitivity to various financial risks.

Amongst these reforms and restructuring the CAMELS Framework has its own

contribution to the way modern banking is looked up on now. The attempt here is to see

how various ratios have been used and interpreted to reveal a bank’s performance and

how this particular model encompasses a wide range of parameters making it a widely

used and accepted model in today’s scenario.

We have undergone our Grand Project at CORPORATION BANK, AHMEDABAD. We

feel great pleasure to present this report work after our training at CORPORATION

BANK that produced to be golden opportunity for us by enriching our knowledge by

comparing our theoretical knowledge with the managerial skill and application. Simple

language has been used throughout the report. Report is illustrated with figure, charts and

diagrams as and when required.


ACKNOWLEDGMENT

Words are the dress of thoughts, appreciating and acknowledging those who

are responsible for successful completion of the project.

Our sincerity gratitude goes to Prof. Nirali Parikh who helped us to work on

this project and provided us all the help, guidance and encouragement to

complete this project.

The encouragement and guidance given by Mr Shivshankar (Corporation

Bank) have made this a personally rewarding experience. We thank him for

his support and inspiration, without which, understanding the intricacies of

the project would have been exponentially difficult.

We are sincerely grateful Som-Lalit Institute Of Business Management who

provided us the opportunity and inspiration needed to prepare this training

report in congenial manner.

WITH SINCERE THANKS,LOVELY GANERIWAL

UNNATI MODI


EXECUTIVE SUMMARYIn today’s scenario, the banking sector is one of the fastest growing sector and a lot of

funds are invested in Banks. Also today’s banking system is becoming more complex.

So, we thought of evaluating the performance of the banks. There are so many models of

evaluating the performance of the banks, but we have chosen the CAMELS Model to

evaluate the performance of the banks. We have read a lot of books and found it the best

model because it measures the performance of the banks from each parameter i.e. Capital,

Assets, Management, Earnings and Liquidity.

After deciding the model, we have decided to take two public bank and two private bank

for comparison. We have collected annual reports of all the banks. And we have

calculated ratios for all the banks and interpreted them.

After that we have given weightage to each parameter of the CAMELS Model.

According to their importance and our understandings, we have allocated weightage to

the each ratios of the each parameter. From the weighted results of each ratio, we got

percentage on the bases of the performance of the bank. On the basis of total derived, we

have given ranking to the banks.

Ranking as per our analysis,

1. Kotak Mahindra Bank

2. Bank of Baroda

3. Corporation Bank

4. Karur Vysya Bank


TABLE OF CONTENT

Chapter Particulars Page no Certificate I Declaration ii Preface iii Acknowledgement iv Executive Summary V

1 INTRODUCTION 1.1 Bank1.2 Origin and Use of Banks1.3 Banking Reforms1.4 Basel II Accord1.5 Camel Rating System1.6 Need for Camel Rating

2 CAMEL FRAMEWORK 2.1 Capital Adequacy2.2 Asset Management2.3 Management Soundness2.4 Earnings & Profitability2.5 Liquidity

3 Introduction of Banks 3.1 Private sector Banks

3.1.1 Karur Vysya Bank3.1.2 Kotak Mahindra Bank

3.2 Public Sector Banks3.2.1 Bank Of Baroda3.2.2 Corporation Bank


4 RESEARCH METHODOLOGY 4.1 Objective of the study

4.1.1 Statement of problem4.1.2 Research type

4.2 Research Method4.2.1 Data Source4.2.2 Contribution of the Study4.2.3 Beneficiaries

4.3 Limitation of the study

5 RATIOS ANALYSIS 5.1 Corporation Bank Ratios5.2 Karur Vysya Bank Ratios5.3 Bank Of Baroda Ratios5.4 Kotak Mahindra Bank Ratios

6 FINDING AND ANALYSIS 6.1 Reasons for weightage6.2 Capital adequency

6.3 Assets Quality

6.4 Management6.5 Earnings6.6 Liquidity

7 Camel Rating 7.1 Table showing rating7.2 Chart Showing comparison Recommendation Conclusion Bibliography Annexure


LIST OF TABLES

TABLE

NO.

PARTICULARS PAGE

NO.

1 Corporation Bank

1.1 Capital Ratios

1.2 Assets Ratios

1.3 Management Ratios

1.4 Earnings Ratios

1.5 Liquidity Ratios

2 Karur Vysya Bank

2.1 Capital Ratios

2.2 Assets Ratios


2.4 Earnings Ratios


3 Bank of Baroda

3.1 Capital Ratios

3.2 Assets Ratios


3.4 Earnings Ratios


4 Kotak Mahindra Bank

4.1 Capital Ratios

4.2 Assets Ratios



4.4 Earnings Ratios


5 Comparison of Capital adequacy ratios

6 Comparison of Asset quality ratios

7 Comparison of Management ratios

8 Comparison of Earnings ratios

9 Comparison of Liquidity ratios

10 Camel Rating


1.1 The Bank

The word bank means an organization where people and business can invest or borrow

money; change it to foreign currency etc. According to Halsbury “A Banker is an

individual, Partnership or Corporation whose sole pre-dominant business is banking, that

is the receipt of money on current or deposit account, and the payment of cheque drawn

and the collection of cheque paid in by a customer.’’

1.2 The Origin and Use of Banks

The Word ‘Bank’ is derived from the Italian word ‘Banko’ signifying a bench, which was

erected in the market-place, where it was customary to exchange money. The Lombard

Jews were the first to practice this exchange business, the first bench having been

established in Italy A.D. 808. Some authorities assert that the Lombard merchants

commenced the business of money-dealing, employing bills of exchange as remittances,

about the beginning of the thirteenth century.

About the middle of the twelfth century it became evident, as the advantage of coined

money was gradually acknowledged, that there must be some controlling power, some

corporation which would undertake to keep the coins that were to bear the royal stamp up

to a certain standard of value; as, independently of the ‘sweating’ which invention may

place to the credit of the ingenuity of the Lombard merchants- all coins will, by wear or

abrasion, become thinner, and consequently less valuable; and it is of the last importance,

not only for the credit of a country, but for the easier regulation of commercial

transactions, that the metallic currency be kept as nearly as possible up to the legal

standard. Much unnecessary trouble and annoyance has been caused formerly by

negligence in this respect.

The gradual merging of the business of a goldsmith into a bank appears to have been the

way in which banking, as we now understand the term, was introduced into England; and


it was not until long after the establishment of banks in other countries-for state purposes,

the regulation of the coinage, etc. that any large or similar institution was introduced into

England. It is only within the last twenty years that printed cheques have been in use in

that establishment. First commercial bank was Bank of Venice which was established in

1157 in Italy.

1.3 THE BANKING REFORMS

In 1991, the Indian economy went through a process of economic liberalization, which

was followed up by the initiation of fundamental reforms in the banking sector in 1992.

The banking reform package was based on the recommendations proposed by the

Narasimham Committee Report (1991) that advocated a move to a more market oriented

banking system, which would operate in an environment of prudential regulation and

transparent accounting. One of the primary motives behind this drive was to introduce an

element of market discipline into the regulatory process that would reinforce the

supervisory effort of the Reserve Bank of India (RBI). Market discipline, especially in

the financial liberalization phase, reinforces regulatory and supervisory efforts and

provides a strong incentive to banks to conduct their business in a prudent and efficient

manner and to maintain adequate capital as a cushion against risk exposures. Recognizing

that the success of economic reforms was contingent on the success of financial sector

reform as well, the government initiated a fundamental banking sector reform package in

1992. Banking sector, the world over, is known for the adoption of multidimensional

strategies from time to time with varying degrees of success. Banks are very important

for the smooth functioning of financial markets as they serve as repositories of vital

financial information and can potentially alleviate the problems created by information

asymmetries. From a central bank’s perspective, such high-quality disclosures help the

early detection of problems faced by banks in the market and reduce the severity of

market disruptions.

Consequently, the RBI as part and parcel of the financial sector deregulation, attempted

to enhance the transparency of the annual reports of Indian banks by, among other things,


introducing stricter income recognition and asset classification rules, enhancing the

capital adequacy norms, and by requiring a number of additional disclosures sought by

investors to make better cash flow and risk assessments.

During the pre-economic reforms period, commercial banks & development financial

institutions were functioning distinctly, the former specializing in short & medium term

financing, while the latter on long term lending & project financing. Commercial banks

were accessing short term low cost funds thru savings investments like current accounts,

savings bank accounts & short duration fixed deposits, besides collection float.

Development Financial Institutions (DFIs) on the other hand, were essentially depending

on budget allocations for long term lending at a concessionary rate of interest. The

scenario has changed radically during the post reforms period, with the resolve of the

government not to fund the DFIs through budget allocations. DFIs like IDBI, IFCI &

ICICI had posted dismal financial results. Infect, their very viability has become a

question mark. Now, they have taken the route of reverse merger with IDBI bank &

ICICI bank thus converting them into the universal banking system.

1.4 BASEL II ACCORD

Bank capital framework sponsored by the world's central banks designed to promote

uniformity, make regulatory capital more risk sensitive, and promote enhanced risk

management among large, internationally active banking organizations. The International

Capital Accord, as it is called, will be fully effective by January 2008 for banks active in

international markets. Other banks can choose to "opt in," or they can continue to follow

the minimum capital guidelines in the original Basel Accord, finalized in 1988. The

revised accord (Basel II) completely overhauls the 1988 Basel Accord and is based on

three mutually supporting concepts, or "pillars," of capital adequacy. The first of these

pillars is an explicitly defined regulatory capital requirement, a minimum capital-to-asset

ratio equal to at least 8% of risk-weighted assets. Second, bank supervisory agencies,

such as the Comptroller of the Currency, have authority to adjust capital levels for


individual banks above the 8% minimum when necessary. The third supporting pillar

calls upon market discipline to supplement reviews by banking agencies.

Basel II is the second of the Basel Accords, which are recommendations on banking laws

and regulations issued by the Basel Committee on Banking Supervision. The purpose of

Basel II, which was initially published in June 2004, is to create an international standard

that banking regulators can use when creating regulations about how much capital banks

need to put aside to guard against the types of financial and operational risks banks face.

Advocates of Basel II believe that such an international standard can help protect the

international financial system from the types of problems that might arise should a major

bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by

setting up rigorous risk and capital management requirements designed to ensure that a

bank holds capital reserves appropriate to the risk the bank exposes itself to through its

lending and investment practices. Generally speaking, these rules mean that the greater

risk to which the bank is exposed, the greater the amount of capital the bank needs to

hold to safeguard its solvency and overall economic stability.

Main Aim:

1. Ensuring that capital allocation is more risk sensitive;

2. Separating operational risk from credit risk, and quantifying both;

3. Attempting to align economic and regulatory capital more closely to reduce the scope

for regulatory arbitrage.

Basel II has largely left unchanged the question of how to actually define bank capital,

which diverges from accounting equity in important respects. The Basel I definition, as

modified up to the present, remains in place.


The Accord in operation

Basel II uses a "three pillars" concept – (1) minimum capital requirements (addressing

risk), (2) supervisory review and (3) market discipline – to promote greater stability in

the financial system.

The Three Pillars of Basel II

The Basel I accord dealt with only parts of each of these pillars. For example: with

respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a simple

manner while market risk was an afterthought; operational risk was not dealt with at all.

The First Pillar

The first pillar deals with maintenance of regulatory capital calculated for three major

components of risk that a bank faces: credit risk, operational risk and market risk. Other

risks are not considered fully quantifiable at this stage. The credit risk component can be

calculated in three different ways of varying degree of sophistication, namely

standardized approach, Foundation IRB and Advanced IRB. IRB stands for "Internal

Rating-Based Approach". For operational risk, there are three different approaches - basic

indicator approach or BIA, standardized approach or TSA, and advanced measurement

approach or AMA. For market risk the preferred approach is VAR (value at risk). As the

Basel 2 recommendations are phased in by the banking industry it will move from

standardized requirements to more refined and specific requirements that have been

developed for each risk category by each individual bank. The upside for banks that do

develop their own bespoke risk measurement systems is that they will be rewarded with

potentially lower risk capital requirements. In future there will be closer links between

the concepts of economic profit and regulatory capital.


Credit Risk can be calculated by using one of three approaches

1. Standardized Approach

2. Foundation IRB (Internal Ratings Based) Approach

3. Advanced IRB Approach

The standardized approach sets out specific risk weights for certain types of credit risk.

The standard risk weight categories are used under Basel 1 and are 0% for short term

government bonds, 20% for exposures to OECD Banks, 50% for residential mortgages

and 100% weighting on commercial loans. A new 150% rating comes in for borrowers

with poor credit ratings. The minimum capital requirement( the percentage of risk

weighted assets to be held as capital) remains at 8%. For those Banks that decide to adopt

the standardized ratings approach they will be forced to rely on the ratings generated by

external agencies. Certain Banks are developing the IRB approach as a result.

The Second Pillar

The second pillar deals with the regulatory response to the first pillar, giving regulators

much improved 'tools' over those available to them under Basel I. It also provides a

framework for dealing with all the other risks a bank may face, such as systemic risk,

pension risk, concentration risk, strategic risk, reputation risk, liquidity risk and legal

risk, which the accord combines under the title of residual risk. It gives banks a power to

review their risk management system.

The Third Pillar

The third pillar greatly increases the disclosures that the bank must make. This is

designed to allow the market to have a better picture of the overall risk position of the

bank and to allow the counterparties of the bank to price and deal appropriately. The new

Basel Accord has its foundation on three mutually reinforcing pillars that allow banks

and bank supervisors to evaluate properly the various risks that banks face and realign

regulatory capital more closely with underlying risks. The first pillar is compatible with


the credit risk, market risk and operational risk. The regulatory capital will be focused on

these three risks. The second pillar gives the bank responsibility to exercise the best ways

to manage the risk specific to that bank. Concurrently, it also casts responsibility on the

supervisors to review and validate banks’ risk measurement models. The third pillar on

market discipline is used to leverage the influence that other market players can bring.

This is aimed at improving the transparency in banks and improves reporting.

1.5 CAMEL RATING SYSTEM

The CAMEL rating system is based upon an evaluation of five critical elements of a

credit union's operations: Capital Adequacy, Asset Quality, Management, Earnings and

Asset/Liability Management. This rating system is designed to take into account and

reflect all significant financial and operational factors examiners assess in their

evaluation of a credit union's performance. Credit unions are rated using a combination of

financial ratios and examiner judgment.

Since the composite CAMEL rating is an indicator of the viability of a credit union, it is

important that examiners rate credit unions based on their performance in absolute terms

rather than against peer averages or predetermined benchmarks. The examiner must use

professional judgment and consider both qualitative and quantitative factors when

analyzing a credit union's performance. Since numbers are often lagging indicators of a

credit union's condition, the examiner must also conduct a qualitative analysis of current

and projected operations when assigning CAMEL ratings.

Although the CAMEL composite rating should normally bear a close relationship to the

component ratings, the examiner should not derive the composite rating solely by

computing an arithmetic average of the component ratings. Following are general

definitions the examiner should use for assigning the credit union's CAMEL composite

rating:


1.6 NEED OF CAMEL RATING SYSTEM IN BANKS

In 1979, the bank regulatory agencies created the Uniform Financial Institutions Rating

System (UFIRS). Under the original UFIRS a bank was assigned ratings based on

performance in five areas: the adequacy of Capital, the quality of Assets, the capability of

Management, the quality and level of Earnings and the adequacy of Liquidity. Bank

supervisors assigned a 1 through 5 rating for each of these components and a composite

rating for the bank. This 1 through 5 composite rating was known primarily by the

acronym CAMEL.

A bank that received a CAMEL of 1 was considered sound in every respect and generally

had component ratings of 1 or 2 while a bank with a CAMEL of 5 exhibited unsafe and

unsound practices or conditions, critically deficient performance and was of the greatest

supervisory concern. While the CAMEL rating normally bore close relation to the five

component ratings, it was not the result of averaging those five grades. Rather,

supervisors consider each institution's specific situation when weighing component

ratings and, more generally, review all relevant factors when assigning ratings.

CAMEL ratings reflect the excellent banking conditions and performance over the last

several years. There is a need for bank employees to have sufficient knowledge of the

rating system, in order to guide the banking growth rate in the positive direction. Lack of

knowledge among employees regarding banking performance indicators affects banks

negatively as these are the basis for any banking action.


2.1 CAPITAL

Capital base of financial institutions facilitates depositors in forming their risk perception

about the institutions. Also, it is the key parameter for financial managers to maintain

adequate levels of capitalization. Moreover, besides absorbing unanticipated shocks, it

signals that the institution will continue to honor its obligations. The most widely used

indicator of capital adequacy is capital to risk-weighted assets ratio (CRWA). According

to Bank Supervision Regulation Committee (The Basle Committee) of Bank for

International Settlements, a minimum 8 percent CRWA is required. Capital adequacy

ultimately determines how well financial institutions can cope with shocks to their

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

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

assigning risk weightings to the institution’s assets.

Capital cushions fluctuations in earnings so that credit unions can continue to operate in

periods of loss or negligible earnings. It also provides a measure of reassurance to the

members that the organization will continue to provide financial services. It serves to

support growth as a free source of funds and provides protection against insolvency.

While meeting statutory capital requirements is a key factor in determining capital

adequacy, the credit union’s operations and risk position may warrant additional capital

beyond the statutory requirements. Maintaining an adequate level of capital is a critical

element.

Determining the adequacy of a credit union's capital begins with a qualitative evaluation

of critical variables that directly bear on the institution's overall financial condition. The

examiner should also consider the interrelationships with the other areas:

Capital level and trend analysis;

Compliance with earnings transfers requirements and risk-based net worth

requirements;

Composition of capital;


Interest and dividend policies and practices;

Adequacy of the Allowance for Loan and Lease Losses account; Quality, type,

liquidity and diversification of assets, with particular reference to classified

assets;

Loan and investment concentrations;

Growth plans;

Ability of management to control and monitor risk, including credit and interest

rate risk;

Earnings: Good historical and current earnings performance enables a credit

union to fund its growth, remain competitive, and maintain a strong capital

position;

Liquidity and funds management;

Economic Environment.

Capital Risk Adequacy Ratio:

CRAR is a ratio of Capital Fund to Risk Weighted Assets. Reserve Bank of India

prescribes Banks to maintain a minimum Capital to risk-weighted Assets Ratio (CRAR)

of 9 % with regard to credit risk, market risk and operational risk on an ongoing basis, as

against 8 % prescribed in Basel documents.

Total capital includes tier-I capital and Tier-II capital. Tier-I capital includes paid up

equity capital, free reserves, intangible assets etc. Tier-II capital includes long term

unsecured loans, loss reserves, hybrid debt capital instruments etc. The higher the CRAR,

the stronger is considered a bank, as it ensures high safety against bankruptcy.

CRAR = Capital/ Total Risk Weighted Credit Exposure


Debt Equity Ratio:

This ratio indicates the degree of leverage of a bank. It indicates how much of the bank

business is financed through debt and how much through equity. This is calculated as the

proportion of total asset liability to net worth. ‘Outside liability’ includes total borrowing,

deposits and other liabilities. ‘Net worth’ includes equity capital and reserve and surplus.

Higher the ratio indicates less protection for the creditors and depositors in the banking

system.

Debt Equity Ratio = Borrowings/ (Share Capital + reserves)

Total Advance to Total Asset Ratio:

This is the ratio of the total advanced to total asset. This ratio indicates banks

aggressiveness in lending which ultimately results in better profitability. Higher ratio of

advances of bank deposits (assets) is preferred to a lower one. Total advances also

include receivables. The value of total assets is excluding the revolution of all the assets.

Total Advance to Total Asset Ratio = Total Advances/ Total Asset

Government Securities to Total Investments:

The percentage of investment in government securities to total investment is a very

important indicator, which shows the risk taking ability of the bank. It indicates a bank’s

strategy as being high profit high risk or low profit low risk. It also gives a view as to the

availability of alternative investment opportunities. Government securities are generally

considered as the most safe debt instrument, which, as a result, carries the lowest return.

Since government securities are risk free, the higher the government security to

investment ratio, the lower the risk involved in a bank’s investments.

Government Securities to Total Investments = Government Securities/ Total

Investment


2.2 ASSET QUALITY

Asset quality determines the robustness of financial institutions against loss of value in

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

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

ultimately jeopardizes the earning capacity of the institution. With this backdrop, the

asset quality is gauged in relation to the level and severity of non-performing assets,

adequacy of provisions, recoveries, distribution of assets etc. Popular indicators include

nonperforming loans to advances, loan default to total advances, and recoveries to loan

default ratios.

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

impaired, so it is important to monitor indicators of the quality of their assets in terms of

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

profitability of bank borrowers— especially the corporate sector. Share of bank assets in

the aggregate financial sector assets: In most emerging markets, banking sector assets

comprise well over 80 per cent of total financial sector assets, whereas these figures are

much lower in the developed economies. Furthermore, deposits as a share of total bank

liabilities have declined since 1990 in many developed countries, while in developing

countries public deposits continue to be dominant in banks. In India, the share of banking

assets in total financial sector assets is around 75 per cent, as of end-March 2008.

There is, no doubt, merit in recognizing the importance of diversification in the

institutional and instrument-specific aspects of financial intermediation in the interests of

wider choice, competition and stability. However, the dominant role of banks in financial

intermediation in emerging economies and particularly in India will continue in the

medium-term; and the banks will continue to be “special” for a long time. In this regard,

it is useful to emphasise the dominance of banks in the developing countries in promoting

non-bank financial intermediaries and services including in development of debt-markets.

Even where role of banks is apparently diminishing in emerging markets, substantively,

they continue to play a leading role in non-banking financing activities, including the


development of financial markets. One of the indicators for asset quality is the ratio of

non-performing loans to total loans (GNPA). The gross non-performing loans to gross

advances ratio is more indicative of the quality of credit decisions made by bankers.

Higher GNPA is indicative of poor credit decision-making.

NPA: Non-Performing Assets

Advances are classified into performing and non-performing advances (NPAs) as per

RBI guidelines. NPAs are further classified into sub-standard, doubtful and loss assets

based on the criteria stipulated by RBI. An asset, including a leased asset, becomes

nonperforming\ when it ceases to generate income for the Bank.

An NPA is a loan or an advance where:

1. Interest and/or installment of principal remains overdue for a period of more than

90 days in respect of a term loan.

2. The account remains "out-of-order'' in respect of an Overdraft or Cash Credit

(OD/CC).

3. The bill remains overdue for a period of more than 90 days in case of bills

purchased and discounted.

4. A loan granted for short duration crops will be treated as an NPA if the

installments of principal or interest thereon remain overdue for two crop seasons.

5. A loan granted for long duration crops will be treated as an NPA if the

instalments of principal or interest thereon remain overdue for one crop season

The Bank classifies an account as an NPA only if the interest imposed during any quarter

is not fully repaid within 90 days from the end of the relevant quarter. This is a key to the

stability of the banking sector. There should be no hesitation in stating that Indian banks

have done a remarkable job in containment of non-performing loans (NPL) considering

the overhang issues and overall difficult environment. For 2008, the net NPL ratio for the

Indian scheduled commercial banks at 2.9 per cent is ample testimony to the impressive

efforts being made by our banking system. In fact, recovery management is also linked to


the banks’ interest margins. The cost and recovery management supported by enabling

legal framework hold the key to future health and competitiveness of the Indian banks.

No doubt, improving recovery-management in India is an area requiring expeditious and

effective actions in legal, institutional and judicial processes.

Asset quality is rated in relation to:

The quality of loan underwriting, policies, procedures and practices;

The level, distribution and severity of classified assets;

The level and composition of nonaccrual and restructured assets;

The ability of management to properly administer its assets, including the timely

identification and collection of problem assets;

The existence of significant growth trends indicating erosion or improvement in

asset quality;

The existence of high loan concentrations that present undue risk to the credit

union;

The appropriateness of investment policies and practices;

The investment risk factors when compared to capital and earnings structure; and

the effect of fair (market) value of investments vs. book value of investments

Total Loans/Total Shares

Total Loans/Total Assets

Fair (Market) Value / Book value


Gross NPA ratio:

This ratio is used to check whether the bank's gross NPAs are increasing quarter on

quarter or year on year. If it is, indicating that the bank is adding a fresh stock of bad

loans. It would mean the bank is either not exercising enough caution when offering

loans or is too lax in terms of following up with borrowers on timely repayments.

Net NPA ratio:

Net NPAs reflect the performance of banks. A high level of NPAs suggests high

probability of a large number of credit defaults that affect the profitability and net-worth

of banks and also wear down the value of the asset.

Loans and advances usually represent the largest asset of most of the banks. It monitors

the quality of the bank loan portfolio. The higher the ratio, the higher the credits risk.


2.3 MANAGEMENT

Management of financial institution is generally evaluated in terms of capital adequacy,

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

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

changing circumstances, technical competence, leadership and administrative ability. In

effect, management rating is just an amalgam of performance in the above-mentioned

areas. Sound management is one of the most important factors behind financial

institutions’ performance. Indicators of quality of management, however, are primarily

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

Furthermore, given the qualitative nature of management, it is difficult to judge its

soundness just by looking at financial accounts of the bank.

Management is the most forward-looking indicator of condition and a key determinant of

whether a credit union is able to correctly diagnose and respond to financial stress. The

management component provides examiners with objective, and not purely subjective,

indicators. An assessment of management is not solely dependent on the current financial

condition of the credit union and will not be an average of the other component ratings.

Total Advance to Total Deposit Ratio:

This ratio measures the efficiency and ability of the banks management in converting

theVdeposits available with the banks (excluding other funds like equity capital, etc.) into

high earning advances. Total deposits include demand deposits, saving deposits, term

deposit and deposit of other bank. Total advances also include the receivables.

Total Advance/ Total Deposit


Business per Employee:

Revenue per employee is a measure of how efficiently a particular bank is utilizing its

employees. Ideally, a bank wants the highest business per employee possible, as it

denotes higher productivity. In general, rising revenue per employee is a positive sign

that suggests the bank is finding ways to squeeze more sales/revenues out of each of its

employee.

Total Income/ No. of Employees

Profit per Employee:

This ratio shows the surplus earned per employee. It is arrived at by dividing profit after

tax earned by the bank by the total number of employee. The higher the ratio shows good

efficiency of the management.

Profit after Tax/ No. of Employees


2.4 EARNINGS

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

regards to interest rate policies and adequacy of provisioning. In addition, it also helps to

support present and future operations of the institutions. The single best indicator used to

gauge earning is the Return on Assets (ROA), which is net income after taxes to total

asset ratio.

Strong earnings and profitability profile of banks reflects the ability to support present

and future operations. More specifically, this determines the capacity to absorb losses,

finance its expansion, pay dividends to its shareholders, and build up an adequate level of

capital. Being front line of defense against erosion of capital base from losses, the need

for high earnings and profitability can hardly be overemphasized. Although different

indicators are used to serve the purpose, the best and most widely used indicator is Return

on Assets (ROA). However, for in-depth analysis, another indicator Net Interest Margins

(NIM) is also used. Chronically unprofitable financial institutions risk insolvency.

Compared with most other indicators, trends in profitability can be more difficult to

interpret—for instance, unusually high profitability can reflect excessive risk taking.

Return on Assets (ROA):

An indicator of how profitable a company is relative to its total assets. ROA gives an idea

as to how efficient management is at using its assets to generate earnings. Calculated by

dividing a company's annual earnings by its total assets, ROA is displayed as a

percentage. Sometimes this is referred to as "return on investment".

The continued viability of a credit union depends on its ability to earn an appropriate

return on its assets. It enables a credit union to fund expansion, remain competitive, and

replenish and/or increase capital. In evaluating and rating earnings, it is not enough to

review past and present performance. Future performance is of equal or greater value,

including performance under various economic conditions. Examiners should evaluate

"core" earnings: that is the long-run earnings ability of a credit union discounting


temporary fluctuations in income and one-time items. A review for the reasonableness of

the credit union's budget and underlying assumptions is appropriate for this purpose. Key

factors to consider when assessing the credit union's earnings are:

Level, growth trends, and stability of earnings, particularly return on average

assets;

Quality and composition of earnings;

Adequacy of valuation allowances and their effect on earnings;

Future earnings prospects under a variety of economic conditions;

Net interest margin;

Net non-operating income and losses and their effect on earnings;

Quality and composition of assets;

Net worth level;

Sufficiency of earnings for necessary capital formation

Operating Profit by Average Working Fund:

This ratio indicates how much a bank can earn from its operations net of the operating

expenses for every rupee spent on working funds. Average working funds are the

total resources (total assets or total liabilities) employed by a bank. It is daily average

of total assets/ liabilities during a year. The higher the ratio, the better it is. This ratio

determines the operating profits generated out of working fund employed. The better

utilization of the funds will result in higher operating profits. Thus, this ratio will

indicate how a bank has employed its working funds in generating profits.

Operating Profit/ Average Working Fund


Net Profit to Average Asset:

Net profit to average asset indicates the efficiency of the banks in utilizing their assets

in generating profits. A higher ratio indicates the better income generating capacity of

the assets and better efficiency of management. It is arrived at by dividing the net

profit by average assets, which is the average of total assets in the current year and

previous year.

Thus, this ratio measures the return on assets employed. Higher ratio indicates better

earning potential in the future.

Net Profit/ Average Asset

Interest Income to Total Income:

Interest income is a basic source of revenue for banks. The interest income total

income indicates the ability of the bank in generating income from its lending. In

other words, this ratio measures the income from lending operations as a percentage

of the total income generated by the bank in a year. Interest income includes income

on advances, interest on deposits with the RBI, and dividend income.

Interest Income/ Total Income

Other Income to Total Income:

Fee based income account for a major portion of the bank’s other income. The bank

generates higher fee income through innovative products and adapting the technology

for sustained service levels. The higher ratio indicates increasing proportion of fee-

based income. The ratio is also influenced by gains on government securities, which

fluctuates depending on interest rate movement in the economy.

Other Income/ Total Income


2.5 LIQUIDITY

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

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

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

management, as mismatching gives rise to liquidity risk. Efficient fund management

refers to a situation where a spread between rate sensitive assets (RSA) and rate sensitive

liabilities (RSL) is maintained. The most commonly used tool to evaluate interest rate

exposure is the Gap between RSA and RSL, while liquidity is gauged by liquid to total

asset ratio.

Initially solvent financial institutions may be driven toward closure by poor management

of short-term liquidity. Indicators should cover funding sources and capture large

maturity mismatches

The “L” of CAMEL represents the concept of Asset/Liability Management - the

identification, monitoring and control of:

Interest rate risk sensitivity and exposure

Liquidity risk and control

Technical competence in asset/liability management techniques

Cash maintained by the banks and balances with central bank, to total asset ratio (LQD)

is an indicator of bank's liquidity. In general, banks with a larger volume of liquid assets

are perceived safe, since these assets would allow banks to meet unexpected withdrawals.


Liquidity Asset to Total Asset:

Liquidity for a bank means the ability to meet its financial obligations as they come due.

Bank lending finances investments in relatively illiquid assets, but it fund its loans with

mostly short term liabilities. Thus one of the main challenges to a bank is ensuring its

own liquidity under all reasonable conditions. Liquid assets include cash in hand, balance

with the RBI, balance with other banks (both in India and abroad), and money at call and

short notice. Total asset include the revaluations of all the assets. The proportion of liquid

asset to total asset indicates the overall liquidity position of the bank.

Liquidity Asset/ Total Asset

Government Securities to Total Asset:

Government Securities are the most liquid and safe investments. This ratio measures the

government securities as a proportion of total assets. Banks invest in government

securities primarily to meet their SLR requirements, which are around 25% of net

demand and time liabilities. This ratio measures the risk involved in the assets hand by a

bank

Government Securities/ Total Asset

Approved Securities to Total Asset:

Approved securities include securities other than government securities. This ratio

measures the Approved Securities as a proportion of Total Assets. Banks invest in

approved securities primarily after meeting their SLR requirements, which are around

25% of net demand and time liabilities. This ratio measures the risk involved in the assets

hand by a bank.

Approved Securities/ Total Asset


Liquidity Asset to Demand Deposit:

This ratio measures the ability of a bank to meet the demand from deposits in a particular

year. Demand deposits offer high liquidity to the depositor and hence banks have to

invest these assets in a highly liquid form.

Liquidity Asset/ demand Deposit

Liquidity Asset to Total Deposit:

This ratio measures the liquidity available to the deposits of a bank. Total deposits

include demand deposits, savings deposits, term deposits and deposits of other financial

institutions. Liquid assets include cash in hand, balance with the RBI, balance with other

banks (both in India and abroad), and money at call and short notice.

Liquidity Asset/ Total Deposit


3.1: PRIVATE BANKS

3.1.1: KARUR VYSYA BANK LIMITED

Karur Vysya Bank Limited, universally known as KVB has made a mark in commercial

banking arena right from 1916 when it was set up by two great visionaries and famous

sons of Karur, Late M A Venkatarama Chettiar and Late Athi Krishna Chettiar. The main

aim for setting up this bank was to instill the habit of savings and also for providing

financial support to traders and small agriculturists in and around Karur (the textile town

in Tamil Nadu). The journey for the bank started off with a meager capital of Rs.1 lakh.

But over the years, KVB has met all the market dynamics and challenges and created a

strong base for itself.

Presence of Karur Vysya Bank

The Bank, in its initial days, bore a regional flavor in its transactions but slowly made a

mark and expanded. At present, it has around 285 branches spanning 13 States and 2

Union Territories. The Bank has been prudential and has followed all the statutory

regulations to make a mark in its area of operations. They have been maintaining a strong

Capital Adequacy Ratio of more than 15% as against the compulsory rule of 9% set by

the RBI. This is sure to take care of the asset growth of the bank.

Financial highlights of the KVB

Total business of KVB stood at Rs.25664.29 cr., with total deposits of Rs.

15101.39 cr. and total advances of Rs. 10562.90 cr. as at 31.03.2009. It was the

first

Tamil Nadu based private sector bank to have crossed the Rs. 25000 cr. total

business mark.

The net owned funds of KVB stood at Rs. 1350.16 cr with healthy capitalization

levels, with high share of Tier I capital at 96.53%. This indicates that they have


strength on owned funds. The Tier II capital forms only a paltry part (3.47%),

having provision for standard assets only.

It has one of the lowest net NPA ratios in India @ 0.25%

Till date the bank has been only earning profits with no interruption in the

declaration of dividend.

The bank has declared 100% dividend since 2003-04. For 2005-06, 2007-08 and

2008-09, the company declared a dividend of 120%

Branch and ATM network of Karur Vysya Bank

The bank has a branch network of 312 and an ATM network of 322. The bank plans to

improve the branch network to over 350 by the end of 2009 -10.

Contact details of Karur Vyasa Bank Limited

Chennai Divisional Office

KVB Towers

I Floor

568, Anna Salai

Teynampet,

Chennai - 600 018 (T.N.)

STD: 044 - 24314418 044 - 24314418 , 24314421, 24347250

Website: www.kvb.co.in

3.1.2: KOTAK MAHINDRA BANK

Kotak Mahindra Bank is one of India's leading financial private banking institutions. It

offers banking solutions that covers almost every sphere of life. Some of its financial

services include commercial banking, stock broking, mutual funds, life insurance and

investment banking. Established under the brand of Kotak Mahindra Finance Ltd in 1984,

it was given the license to carry on with banking business by the Reserve Bank of India

in February 2003. It is the first company in the Indian banking history to convert to be

converted from a private financial institution to a bank.


Kotak Mahindra Bank: Branches and Business

Within a small span of 6 years, the bank has spread it wings in several sphere of finances.

Presently, spread in 82 cities in India, the bank caters to the needs of its 5.9 million

customers spread throughout the length and breadth of country and even abroad. By the

end of FY 2007-2008, the Kotak Mahindra Bank had about 178 branches spread all over

the country and it plans to add some more branches by the end of FY 2010.

The entire Kotak Mahindra group has a net worth of over Rs. 6,327 crore and at the end

of FYP 2007-2008,it was reported that the consolidated profit of Kotak Mahindra Bank

individually was Rs 991.2 crore which was 84% higher than the consolidated profit of Rs

538.2 crore in FY07. Kotak Mahindra Bank has 75 ATMs at 41 locations in the country

which are 24x7 accessible. Before the free transactions facility of RBI was made

mandatory to all the ATM operating banks in India from April 1, 2009, Kotak Mahindra

Bank had underwent under a treaty with the HDFC Bank to provide free network free of

cost to most of its customers through its 1335 ATMs spread in the country to ensure

comfort to its customers.

Kotak Mahindra Bank: Facilities and Customer Care

The facilities of Kotak Mahindra Bank are wide spread. It's banking sector acts as a

central platform for customer relationships across the entire Kotak Mahindra group's

various businesses. The bank marks its presence in the commercial vehicles, retail

finance, corporate banking and treasury and housing finance segments. It offers you

several facilities like personal banking, commercial banking, insurance and investment

banking.

Apart from traditional facilities like deposits accounts, savings account, current account,

term deposits, personal loans, home loans the bank has spread its wing in the investment

services by providing its customer facilities like Demat, mutual fund and insurance. The

bank has also opted for net banking, mobile banking and phone banking for convenience

of its customers.


Contact details of Kotak Mahindra Bank Limited

Registered Office

Kotak Mahindra Bank Limited

36-38A, Nariman Bhavan,

227 Nariman Point,

Mumbai - 400 021

E-mail: [email protected]


3.2. PUBLIC BANKS

3.2.1: BANK OF BARODA

Bank of Baroda (BoB) is the third largest Public Sector bank in India, after State Bank

of India and Punjab National Bank. BoB has total assets in excess of Rs. 2.27 lakh

crores, or Rs. 2,274 billion, a network of over 3000 branches and offices, and about

1100+ ATMs. It offers a wide range of banking products and financial services to

corporate and retail customers through a variety of delivery channels and through its

specialized subsidiaries and affiliates in the areas of investment banking, credit cards and

asset management.

It all started with a visionary Maharaja's uncanny foresight into the future of trade and

enterprising in his country. On 20th July 1908, under the Companies Act of 1887, and

with a paid up capital of Rs 10 Lacs started the legend that has now translated into a

strong, trustworthy financial body, THE BANK OF BARODA.

It has been a wisely orchestrated growth, involving corporate wisdom, social pride and

the vision of helping others grow, and growing itself in turn.

The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a

bank of this nature will prove a beneficial agency for lending, transmission, and deposit

of money and will be a powerful factor in the development of art, industries and

commerce of the State and adjoining territories."

MISSION

“To be a top ranking National Bank of International Standards committed

to augmenting stake holders' value through concern, care and

competence.”


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

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

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

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

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

By December 1996, Bank of Baroda penetrated the equity market by successfully

implementing the Follow on Public Offer' of around 71 million equity shares in January

2006. In the present scenario, Bank of Baroda's public shareholding is as high as 46.19

percent with a total equity capital of 365.53 crore. This is held by Retail Investors, Banks

and Financial Institutions, Employees, FIIs and OCBs, Mutual Funds, Insurance

Companies and Others.

3.2.2: CORPORATION BANK

The Corporation Bank in India started its journey in the name of the Canara Banking

Corporation (Udupi) Ltd in 1906 with a sum of Rs. 5000 only in a small town of Udupi

near the city of Mangalore in Karnataka.

Corp Bank received RBI license in 1952 and saw a merger with the Bank of Citizens in

1961. In the month of April 1980, it was given a status of nationalized bank. From the

time of its establishment till today, the bank has never looked back. Currently it is one of

the well-recognized Public Sector Banks in India.

Today, Corporation Bank India is identified with dynamic services of its young and

dedicated staffs, who know no bounds. It runs more than 600 ATMs extending across 21

States and 2 Union Territories. It shares ATM network with Andhra Bank, ING Vysya

Bank Ltd. and IndusInd Bank Ltd.

Branches of Corporation Bank India

The branches of the Corporation Bank India are located at all the key destinations like

Bangalore, Belgaum, Bhopal, Chandigarh, Chennai, Coimbatore, Delhi, Goa, Mumbai,

Gujarat, Hassan, Hubli, Hyderabad, Kerala, Kolkata, Lucknow, Pune, Udupi and

Vijayawada.


Awards and Recognition of Corporation Bank India

In its journey to cater successfully to the needs of valuable customers, Corporation Bank

has bagged many awards and accolades. Some of them are as follows:

National Award for Assistance to Exporters

Gem & Jewellery Export Promotion Council Award (it won this award 5 times in

a row from 1981 to 1985)

Shiromani Award for Banking

Best Bank Award for Excellence in Banking Technology

Best Bank Award for Innovative Usage and Application on INFINET (Indian

Financial Network)

Best Bank Award for Delivery Channels

Runner-up Awards in the categories of "Best Online and Multi-channel Banking

Team" and "Outstanding achiever of the year-corporate".

Corporation Bank has been recognized as one of the Best Public Sector Banks in India by

Business Today on 26 February 2006. Prior to this, Forbes Global announced it one of

the Best 200/100 companies in Asia/Pacific and Europe. Outlook Money called it Best

Public Sector Bank in India and The Asian Banker said it to be the strongest bank in

India and second strongest in Asia.

Contact details of Corporation Bank India:

Corporation Bank,

Mangaladevi Temple Road,

Pandeshwar,

Mangalore - 575 001

Karnataka, India


4.1 OBJECTIVE OF THE STUDY

“To study the strength of using CAMELS framework as a tool of

performance evaluation for banking institutions”

To understand the financial performance of the banks.

To describe the CAMELS model of ranking, banking institutions, so as to analyze

the comparative of various banks.

To analyze the banks performance through CAMEL model and give suggestion

for improvement if necessary

4.1.1 STATEMENT OF PROBLEM

In the recent years the financial system especially the banks have undergone numerous

changes in the form of reforms, regulations & norms. The attempt here is to see how

various ratios have been used and interpreted to reveal a bank’s performance and how

this particular model encompasses a wide range of parameters making it a widely used

and accepted model in today’s scenario.

4.1.2 RESEARCH TYPE - DESCRIPTIVE RESEARCH

Here, we are under going to have descriptive research i.e. analysis of banks financial

statements which will make us understand the position of one bank in comparison of

another and their financial position.


4.2 RESEARCH METHODOLOGY

1) AREA OF SURVEY:

The survey will be done for four banks. The study environment will be the

Banking industry.

2) PLAN OF ANALYSIS:

Here, we will be using financial statements of the banks in order to calculate

different ratios required for camel rating system as it considers all areas of

banking operations and considered to be the best available method for evaluation

bank performance and bank’s health.

4.2.1 DATA SOURCE

1) PRIMARY DATA

Primary data was collected from the bank’s balance sheet and bank‘s income

statement and interview of the bank employees.

2) SECONDARY DATA

Secondary data on the subject was collected from bank’s prospectus, annual

reports and other websites.

4.2.2 CONTRIBUTION OF THE STUDY

Major issues pertaining to the preparation of a project from Start to End of Project to be

covered, Basel II norms will be taken into consideration while calculating each ratio and

this report will be provided to the bank for their future use.


4.2.3 BENEFICIARIES

CAMELS rating system help the banks to enhance required capital adequacy, strengthen

asset quality, improve management, increase earnings and reduce sensitivity to various

financial risks. Keeping this in mind, they will able to make improvements and

deteriorates the problems effectively.

It will be helpful for the reader to know the specific details of the model which in turn

lead to identify the strengths and weaknesses of the banks.

By having a standardized CAMELS model for all banks, it becomes easy to compare

different banks.

As this model uses all significant ratios of banks, it will be useful for the reader to know

how effectively bank manages each ratio and whether it meets its pre-determined criteria

for each ratio as per RBI rules and regulations.


4.3 LIMITATION OF THE STUDY

The study was limited to four banks only.

Time and resource constrains.

The method discussed pertains only to banks though it can be used for

performance evaluation of other financial institutions.

The study was completely done on the basis of ratios calculated from the balance

sheets.

It was not possible to get a personal interview with the top management

employees of all banks under study


5.1 CALCULATIONS OF DIFFERENT RATIOS FOR


TABLE 1.1

CORPORATION BANK

CAPITAL RATIOS (Values in Lakhs)

1. Capital Adequency Ratio

Ratio (%) 13.66% 2. Debt Equity Ratio Debt= Deposits + borrowings + unsecured debts debt = 7855631Equity = Capital + Reserves and surplus equity = 489651Ratio = Debt/ equity

Ratio (%) 16.04 3. Advances to Assets Advances 4851216Total assets 8690581Ratio = Advances/ Total Assets

Ratio (%) 55.82 4. Securities To Total Investments Securities = Government securities+ approved securities Securities 1764165Investments 2493777Ratio = Securities/Total Investments

Ratio (%) 70.74


TABLE 1.2

ASSETS (Values in Lakhs)

1. Gross NPA To Net Advances gross NPA 55922Ratio = Gross NPA/ Net Advances

Ratio (%) 1.15 2. Net NPA to Net Advances Net NPA 13830Ratio = Net NPA / Net Advances

Ratio (%) 0.29 3.Total Loans To Total shares Total loans 4892712No. of shares 614.4Ratio = Total Loans/ Total Shares

Ratio (Rs.) 7963.398 4.Total Loans To Total Assets Total assets 8690581Ratio = Total Loans/Total Assets

Ratio (%) 56.30 5.Fair Market Value To Book Valuemarket value 176.58Book Value 341.36Ratio (%) 51.73

TABLE 1.3


MANAGEMENT (Values in Lakhs)

1.Market Value To Equity CapitalFace value 10

Ratio (%) Market value/Equity capital 17.66 2.Total Advances To Total Deposits Total deposits 7398391Ratio = Total advances/Total deposits

Ratio (%) 65.57 3.Business Per Employee Business= Advances+ deposits Business= 12249607no of employees= 12465Ratio = Business/No.of Employees

Ratio (Rs.) 982.72 4.Profit Per Employee Profit = Net Profit Profit 89277Ratio = Profit/No.of Employees

Ratio (Rs.) 7.16

TABLE 1.4


EARNINGS (Values In Lakhs)1.Operating profit To Average Working Funds Average Working funds = 6950000operating prfit 179661Ratio = Operating profit/Average Working Funds

Ratio (%) 2.58505 2.Interest Spread Interest earned 606735.2Interest spend 437637.5Interest Spread = Interest Earned - Interest expenditure

Spread 72.13 3.Net profit To Average Assets Average Assets = Opening Assets+Closing Assets/2 avg.assets 7675175Ratio = Net Profit/Average Assets

Ratio (%) 1.16 4.Interest Income To Total Income Total income 717457Ratio= Interest Income/Total Income

Ratio (%) 84.57 5.Non-Interest Income To Total Income Non-interest income 110721Ratio = Non-interest Income/ Total Income

Ratio (%) 15.43 6.Operating Expense To Average Assets operating expenses 100158Ratio = Operating expense/Average Assets

Ratio (%) 1.30TABLE 1.5

LIQUIDITY (Values in Lakh)


1.Liquid Assets To Total Assets Liquid Assets = Cash with RBI+ Cash for short notice Liquid assets 1053970Ratio = Liquid assets/Total assets

Ratio (%) 12.13 2.Government Securities To Total Assets Govt. securities 1755238Ratio = Government securities/Total assets

Ratio (%) 20.20 3.Approved Securities To Total Assets Approved securities 1706165Ratio = Approved securities/Total assets

Ratio (%) 19.63 4.Liquid Assets To Demand Deposits demand deposits 1317419Ratio = Liquid assets/Demand deposits

Ratio (%) 80.00262 5.Liquid Assets To Total DepositsRatio = Liquid assets/Total deposits

Ratio (%) 14.25




TABLE 2.1

KARUR VYSYA BANK (Values in lakhs)

CAPITAL


Ratio (%) 14.92% 2. Debt Equity Ratio Debt= Deposits + borrowings + unsecured debts debt 1512443Equity = Capital + Reserves and surplus equity 135016.6Ratio = Debt/ equity

Ratio (%) 11.2019

3. Advances To Assets Advances 1040988Total assets 1706074Ratio = Advances/ Total Assets

Ratio (%) 61.01657 4. Securities To Total Investments Securities = Government securities+ approved securities securities 382907.1Invetments 471598Ratio = Securities/Total Investments

Ratio (%) 81.19354


TABLE 2.2

ASSETS (Values in lakhs)

1. Gross NPA To Net Advances gross NPA 20586Ratio= Gross NPA/ Net Advances

Ratio (%) 1.977544 2. Net NPA To Net Advances Net NPA= 2582Ratio = Net NPA / Net Advances

Ratio (%) 0.248034 3.Total Loans To Total Shares Total loans 960136.7No. of shares 539.99Ratio = Total Loans/ Total Shares

Ratio (%) 1778.064 4.Total Loans To Total Assets Total assets 1706074Ratio = Total Loans/Total Assets

Ratio (%) 56.27754 5.Fair market value To Book Valuemarket value 199.38book value 250.3Ratio (%) Fair market value/Book value 79.65641


TABLE 2.3

MANAGEMENT (Rupees in Lakhs)

1.Market Value To Equity Capitalface value 10Ratio = Market value/Equity capital 19.938 2.Total Advances To Total Deposits total deposits 1510139Ratio = Total advances/Total deposits

Ratio (%) 68.93326 3.Business Per Employee Business= Advances+ deposits Business= 2551127no of employees= 3941Ratio = Business/No.of Employees

Ratio (%) 647.3299 4.Profit Per Employee Profit = Net Profit Profit 23584.15Ratio = Profit/No.of Employees

Ratio (%) 5.984306

TABLE 2.4


EARNINGS (Values in Lakhs)

1.Operating profit To Average Working Funds Average Working funds = 1576270operating prfit 41802Ratio = Operating profit/Average Working Funds


Spread 41040.86 3.Net profit To Average Assets Average Assets = Opening Assets+Closing Assets/2 avg.assets 1582188Ratio = Net Profit/Average Assets

Ratio (%) 1.490603 4.Interest Income To Total Income Total Income 171129.9Ratio= Interest Income/Total Income

Ratio (%) 84.50246 5.Non-Interest Income To Total Income Non-interest income 26520.92Ratio = Non-interest Income/ Total Income

Ratio (%) 15.49754 6.Operating Expense To Average Assets Operating Expenses 25759.64Ratio = Operating expense/Average Assets

Ratio (%) 1.628102TABLE 2.5


LIQUIDITY (Values in Lakhs)

1.Liquid Assets To Total Assets Liquid Assets = Cash with RBI+ Cash for short notice Liquid Assets 137416.6Ratio = Liquid assets/Total assets

Ratio (%) 8.05455 2.Government Securities To Total Assets Govt. securities 381548.1Ratio = Government securities/Total assets

Ratio (%) 22.3641 3.Approved Securities To Total Assets Approved Securities 1359.05Ratio = Approved securities/Total assets

Ratio (%) 0.079659 4.Liquid Assets To Demand Deposits Demand Deposits 149677Ratio = Liquid assets/Demand deposits

Ratio (%) 91.80877 5.Liquid Assets To Total Deposits Ratio = Liquid assets/Total deposits

Ratio (%) 9.0996



TABLE 3.1


BANK OF BARODA

CAPITAL (Values in Lakhs)


Ratio (%) 14.05% 2. Debt Equity Ratio Debt= Deposits + borrowings + unsecured debts Debt 20516486Equity = Capital + Reserves and surplus Equity 1283554Ratio = Debt/ equity

Ratio (%) 15.98412 3. Advances To Assets Advances 14398590Total assets 22740673Ratio = Advances/ Total Assets

Ratio (%) 63.31646 4. Securities To Total Investments Securities = Government securities+ approved securities Securities 4084894Invetments 5244588Ratio = Securities/Total Investments

Ratio (%) 77.88781


TABLE 3.2


1. Gross NPA to Net Advances Gross NPA 184292Ratio= Gross NPA/ Net Advances


Ratio (%) 0.313329 3.Total Loans To Total Shares Total Loans 13003751No. Of Shares 227406.7Ratio = Total Loans/ Total Shares

Ratio (%) 57.18 4.Total Loans To Total Assets Total Assets 22740673Ratio = Total Loans/Total Assets

Ratio (%) 57.18279 5.Fair Market Value To Book ValueMarket Value 227.05Book Value 352.37Ratio(%) = Fair market value/Book value 64.43511

TABLE 3.3



1.Market Value To Equity CapitalFace Value 10Ratio(%) = Market value/Equity capital 22.705 2.Total advances To Total Deposits Total Deposits 19239695Ratio = Total advances/Total deposits

Ratio (%) 74.83793 3.Business Per Employee Business = Advances+ deposits Business 33638285No Of Employees 36838Ratio = Business/No.of Employees

Ratio (Rs.) 913.1409 4.Profit Per Employee Profit = Net Profit Profit 222720.2Ratio = Profit/No.of Employees

Ratio (Rs.) 6.045936

TABLE 3.4


EARNINGS (Values in Lakhs)1.Operating profit To Average Working Funds Average Working funds 19366972Operating Profit 334295Ratio = Operating profit/Average Working Funds

Ratio (%) 1.726109 2.Interest Spread Interest earned 1509158Interest spend 996816.8Interest Spread = Interest Earned - Interest expenditure

Spread 512341 3.Net profit To Average Assets Average Assets = Opening Assets+Closing Assets/2 Avg.Assets 20350312Ratio = Net Profit/Average Assets

Ratio (%) 1.094431 4.Interest Income To Total Income Total Income 1784924Ratio= Interest Income/Total Income

Ratio (%) 84.55027 5.Non-Interest Income To Total Income Non-interest Income 275765.8Ratio = Non-interest Income/ Total Income

Ratio (%) 15.44973 6.Operating Expense To Average AssetsOperating Expenses 357606.2Ratio = Operating expense/Average Assets

Ratio (%) 1.757252TABLE 3.5


1.Liquid Assets To Total Assets


Liquid Assets = Cash with RBI+ Cash for short notice Liquid Assets 2408712Ratio = Liquid assets/Total assets

Ratio (%) 10.59209 2.Government Securities To Total Assets Govt. Securities 4084894Ratio = Government securities/Total assets

Ratio (%) 17.96294 3.Approved Securities To Total Assets Approved Securities 96665.27Ratio = Approved securities/Total assets

Ratio (%) 0.425077 4.Liquid Assets To Demand deposits Demand Deposits 1445122Ratio = Liquid assets/Demand deposits

Ratio (%) 166.6787 5.Liquid Assets To Total deposits Ratio = Liquid assets/Total deposits

Ratio (%) 12.51949




TABLE 4.1

KOTAK MAHINDRA BANK

CAPITAL (Values in Lakhs)


Ratio (%) 19.86% 2. Debt Equity Ratio Debt= Deposits + borrowings +unsecured debts Debt 2237894Equity = Capital + Reserves and surplus Equity 390552.7Ratio = Debt/ equity

Ratio (%) 5.730071 3. Advances To Assets Advances 1662534Total Assets 2871187Ratio = Advances/ Total Assets

Ratio (%) 57.90405 4. Securities To Total Investments Securities = Government securities+ approved securities Securities 814993.3Invetments 911018.1Ratio = Securities/Total Investments

Ratio (%) 89.45962

TABLE 4.2



1. Gross NPA to Net Advances Gross NPA 73071Ratio= Gross NPA/ Net Advances


Ratio (%) 2.386959 3.Total Loans To Total Shares Total loans 1619143No. of shares 3456.69Ratio = Total Loans/ Total Shares

Ratio (%) 468.4084 4.Total Loans To Total Assets Total assets 2871187Ratio = Total Loans/Total Assets

Ratio (%) 56.39279 5.Fair Market Value To Book ValueMarket Value 277.98Book Value 112.98Ratio(%) = Fair market value/Book value 246.0435

TABLE 4.3



1.Market Value To Equity Capitalface value 10Ratio(%) = Market value/Equity capital 27.798 2.Total advances To Total Deposits Total Deposits 1564493Ratio = Total advances/Total deposits

Ratio (%) 106.2666 3.Business Per Employee Business= Advances + deposits Business 3227027No Of Employees 8400Ratio = Business/No.of Employees

Ratio (Rs.) 384.1699 4.Profit Per Employee Profit = Net Profit Profit 27609.72Ratio = Profit/No.of Employees

Ratio (Rs.) 3.286871

TABLE 4.4

EARNINGS (Values in Lakhs)


1.Operating profit To Average Working Funds Average Working funds 2814695Operating Profit 68000Ratio = Operating profit/Average Working Funds


Spread 151854.7 3.Net profit To Average Assets Average Assets = Opening Assets + Closing Assets/2 Avg.Assets 2851212Ratio = Net Profit/Average Assets

Ratio (%) 0.96835 4.Interest Income To Total Income Total Income 342300Ratio= Interest Income/Total Income

Ratio (%) 89.54554 5.Non-Interest Income To Total Income Non-interest Income 35786.26Ratio = Non-interest Income/ Total Income

Ratio (%) 10.45465 6.Operating Expense To Average Assets operating expenses 119642.3Ratio = Operating expense/Average Assets

Ratio (%) 4.196191TABLE 4.5


1.Liquid Assets To Total Assets


Liquid Assets = Cash with RBI + Cash for short notice Liquid Assets 114067Ratio = Liquid assets/Total assets

Ratio (%) 3.972815 2.Government Securities To Total Assets Govt. Securities 814993.3Ratio = Government securities/Total assets

Ratio (%) 28.38524 3.Approved Securities To Total Assets Approved Securities 0Ratio = Approved securities/Total assets

Ratio (%) 0 4.Liquid Assets To Demand deposits Demand Deposits 341816.1Ratio = Liquid assets/Demand deposits

Ratio (%) 33.37086 5.Liquid Assets To Total deposits Ratio = Liquid assets/Total deposits

Ratio (%) 7.290985

6.1 REASONS FOR WEIGHTAGE

1. Capital


In Capital ratios, we have given 0.5 to capital adequacy ratio as it is the most

important ratio which has significant impact on capital of the bank. Second most

important ratio which affects the capital ratio is debt – equity ratio and rest of

them are of low impact.

2. Assets

In assets Ratio, we have highest importance to Net GPA which shows clear

picture how well company is performing with its assets. Secondly Gross NPA is

given is not given so much importance compared to Net NPAs. Other ratios like

fair value to market value, totals loans to total assets are given equal importance.

3. Management

In management ratios, there is no specific ratio which has specific importance. All

ratios have equal impact so here we have equal weightage to all the ratios.

4. Earnings

In Earnings ratios, there is no specific ratio which has specific importance. All


5. Liquidity

In Liquidity ratios, there is no specific ratio which has specific importance. All



6.2 CAPITAL RATIOS

TABLE 5

CAPITAL RATIOS

PARTICULARS

Capital Adequacy Ratio

Debt Equity Ratio

Advances to Assets

Securities To Total Investments

CORPORATION BANK 13.66 16.04 55.82 70.74 KARUR VYSYA BANK 14.92 11.20 61.02 81.19 BANK OF BARODA 14.05 15.98 63.32 77.89 KOTAK MAHINDRA BANK 19.86

5.73 57.90 89.46

WEIGHTAGE 0.5 0.3 0.1 0.1 TOTAL CORPORATION BANK 6.83 4.81 5.58 7.07 14.67 KARUR VYSYA BANK 7.46 3.36 6.10 8.12 18.32BANK OF BARODA 7.03 4.80 6.33 7.79 16.35KOTAK MAHINDRA BANK 9.93 1.72 5.79 8.95 22.95


CHART 1

NOTES

1. As per capital adequacy ratio, the minimum ratio is 9% i.e. every bank has to

maintain with RBI. Here Kotak Mahindra Bank out stands from other banks.

2. In case of Debt- Equity ratio, Kotak Mahindra bank has the lowest debt – equity

ratio compared to other banks.

3. Advances to Assets ratio shows how efficient capital is managed, so here we have

Bank of Baroda on the top position.

4. Securities to Total Investment show the quick fund of the bank which can be

encashed at any point of time. Here, again kotak Mahindra bank is having highest

ratio against other bank.

5. So, overall Kotak Mahindra Bank is in first position followed by Karur Vysya

bank, Bank Of Baroda and Corporation Bank.

6. If we compare only Public banks, Bank Of Baroda is on top position followed by

Corporation Bank.


6.3 ASSETS RATIOSTABLE 6

ASSETS RATIOS

PARTICULARS

Gross NPA To Net Advances

Net NPA to Net Advances

Total Loans To Total Assets

Fair Market Value To Book Value

CORPORATION BANK 1.15 0.29 56.30 51.73 KARUR VYSYA BANK 1.98 0.25 56.28 79.66 BANK OF BARODA 1.28 0.31 57.18 64.44 KOTAK MAHINDRA BANK

4.40 2.39 56.39 246.04

WEIGHTAGE 0.1 0.5 0.2 0.2 TOTAL CORPORATION BANK 0.12 0.14 11.26 10.35 21.35 KARUR VYSYA BANK 0.20 0.12 11.26 15.93 26.87BANK OF BARODA 0.13 0.16 11.44 12.89 24.04KOTAK MAHINDRA BANK 0.44 1.19 11.28 49.21 58.85


CHART 2

Notes:

1. The net non-performing assets to loans (advances) ratio is used as a measure of

the overall quality of the bank’s loan book. Higher ratio reflects rising bad quality

of loans. But here NPA percentage of Karur Vysya Bank is just 0.25% which

shows bank is performing well and it is able to recover its debt. The Bank has

maintained high standard in asset quality through appropriate risk management

measures and recovery measures as evidenced by lower NPA levels. Here as

compared to its peers it has lowest ratio which is better.

2. The loans to assets ratio measures the total loans outstanding as a percentage of

total assets. The higher this ratio indicates a bank is loaned up and its liquidity is

low. The higher the ratio, the more risky a bank may be to higher defaults. Here

the ratio for all the banks is almost same.


3. Market value ratios are strong indicators of what investors think of the firm’s past

performance and future prospects. It basically shows Goodwill or Reputation of

the bank in the market. Here Kotak Mahindra Bank is highly reputed in the minds

of investors.

4. So overall in Assets Ratio, Kotak Mahindra Bank is on top position as compared

to its peers.

5. If we compare only public banks, again Bank Of Baroda is ahead than

Corporation Bank.


6.4 MANAGEMENT RATIOSTABLE 7

MANAGEMENT RATIOS MANAGEMENT RATIOS

PARTICULARS

Market Value To Equity Capital

Total Advances To Total Deposits

Business Per Employee ( IN LACS)

Profit Per Employee (IN LACS)

CORPORATION BANK

17.66 65.57

982.72 7.16

KARUR VYSYA BANK

19.94 68.93

647.33 5.98

BANK OF BARODA 22.71 74.84 913.14 6.05 KOTAK MAHINDRA BANK

27.80 106.27

384.17 3.29

WEIGHTAGE0.25

0.25 TOTAL 0.25 0.25

TOTAL (IN

LACS) %age CORPORATION BANK 4.41 16.39 20.81 245.68 1.79 247.47 33.56 KARUR VYSYA BANK 4.98 17.23 22.22 161.83 1.50 163.33 22.15BANK OF BARODA 5.68 18.71 24.39 228.29 1.51 229.80 31.16KOTAK MAHINDRA BANK 6.95 26.57 33.52 96.04 0.82 96.86 13.13 737.46


PARTICULARS TOTAL 1 TOTAL 2 Final Total

CORPORATION BANK 20.81 33.56 54.37 KARUR VYSYA BANK 22.22 22.15 44.37BANK OF BARODA 24.39 31.16 55.55KOTAK MAHINDRA BANK

33.52 13.13 46.65

Notes:

1. Business per employee/ profit per employee

These ratios indicate the productivity level of the bank’s employees. Since state

run banks are operating with large employee base, the productivity ratio for these

banks lags behind when compared with new generation private sector banks. Here

Corporation bank has ratio of 982, Karur Vysya Bank has ratio of 647, BOB has

913 and Kotak Mahindra Bank has 384.

2. Market Value to equity Capital

This Ratio indicates the price of the shares in the market compared to the actually

face value of the shares. It shows the premium on each shares people are ready to

pay because of the reputation and value of the company. Here, Kotak Mahindra

Bank is having almost 27 times the market value whereas Corporation Bank is

having only 17 times which is lowest of all four banks.

3. Total Advances to Total Deposits

It indicates Money Lend by the Bank compared to Money borrowed by the bank.

Higher the ratio indicates the Efficiency of the Bank. Kotak Mahindra Bank is

having 106% whereas Bank of Baroda is having 74%, Karur Vysya Bank is

having 68% and Corporation Bank is having 65%.


4. Over all if we compare Management Ratio, Bank of Baroda is on the top

position where as Corporation Bank is in second position. There is very Minor

difference between the two banks. They are well performing in Profit per

employee and Business per employee.

5. If we compare only Private Banks, Kotak Mahindra Bank is performing

comparatively better than Karur Vysya Bank.


6.5 EARNINGS RATIOSTABLE 8

EARNING RATIOS

PARTICULARS

Operating profit To Average Working Funds

Interest Spread

Net profit To Average Assets

Interest Income To Total Income

CORPORATION BANK 2.59 72.13 1.16 84.57 KARUR VYSYA BANK 2.65 71.62 1.49 84.50 BANK OF BARODA 1.73 66.05 1.09 84.55 KOTAK MAHINDRA BANK

2.42 50.46 0.97 89.55

WEIGHTAGE 0.25 0.25 0.25 0.25 TOTAL CORPORATION BANK 0.65 18.03 0.29 21.14 40.11KARUR VYSYA BANK 0.66 17.90 0.37 21.13 40.07BANK OF BARODA 0.43 16.51 0.27 21.14 38.36KOTAK MAHINDRA BANK 0.60 12.61 0.24 22.39 35.85


CHART 3

Notes:

1. Operating profit to Average Working Funds shows the return on working

funds. Higher the ratio indicates the profitability of the bank. Here Karur

Vysya Bank is having 2.65%, where as its peers are having lower than it has.

So Karur Vysya Bank is more profit making Bank.

2. Higher the Interest spread will be better for the bank as it shows the better

offering of bank in the market. Here Corporation Bank has the highest Interest

Spread as compared to its peers.

3. Net Profit To Average Assets shows return on assets of the banks. Higher the

return, better for the bank. Here Karur Vysya bank is having highest return on

the assets.


4. The main income of any bank is interest. This ratio shows the percentage of

income generated in bank through Interest. Here Kotak Mahindra Bank is

having 89.55% of income through interest followed by Corporation Bank,

Bank Of Baroda and karur Vysya Bank.

5. Here overall Corporation Bank is performing well in earnings ratio and it is

leading as compared to its competitors.

6. If we compare only private banks then Karur Vysya Bank is well performing

than Kotak Mahindra Bank.


6.6 LIQUIDITY RATIOSTABLE 9

LIQUIDITY RATIOS

PARTICULARS

Liquid Assets To Total Assets

Government Securities To Total Assets

Approved Securities To Total Assets

Liquid Assets To Demand Deposits

Liquid Assets To Total Deposits

CORPORATION BANK

12.13 20.20 19.63 80.00 14.25

KARUR VYSYA BANK

8.05 22.36 0.08 91.81 9.10

BANK OF BARODA 10.59 17.96 0.43 166.68 12.52 KOTAK MAHINDRA BANK

3.97 28.39 0.00 33.37 7.29

WEIGHTAGE 0.2 0.2 0.2 0.2 0.2 TOTAL CORPORATION BANK 2.43 4.04 3.93 16.00 2.85 29.24 KARUR VYSYA BANK 1.61 4.47 0.02 18.36 1.82 26.28BANK OF BARODA 2.12 3.59 0.09 33.34 2.50 41.64KOTAK MAHINDRA BANK 0.79 5.68 0.00 6.67 1.46 14.60


Chart 4

Notes:

1. Liquid Assets To Total Assets ratio shows the percentage of liquid assets out of

the total assets. Higher the ratio indicates better liquidity of the bank. Here

Corporation Bank is having better liquidity as compared to other banks.

2. Government securities are considered to be the quick assets of the bank which can

be encashed easily. Here, kotak Mahindra bank is having 28.39% of the assets as

government securities and is the highest among others.

3. Same as government securities, approved securities also can be encashed easily.

Here Corporation bank is having highest approved securities i.e. 19.63%

compared to others. Kotak Mahindra Bnak is not having any approved securities.

4. Liquid Assets To Total Deposits ratio indicates the Percentage of liquid assets

bank against deposits. Here Bank Of Baroda is having the highest ratio i.e.

166.68% as compared to its competitors. So it shows that it is having an ample

amount of liquidity to pay the deposits.


5. Overall, Bank of Baroda is performing well i.e. 41% followed by its peers i.e.

Kotak Mahindra Bank- 14%, Karur Vysya Bank- 26% and Corporation Bank -

29%.

6. In case of Private Banks, Karur Vysya Bank is having more Liquidity as

compared to Kotak Mahindra Bank


7.1 TABLE SHOWING CAMEL RATING COMPARSION

TABLE 10

CAMEL RATING

PARTICULARS CAPITAL ASSETS MANAGEMENT EARNINGS LIQUIDITY

CORPORATION BANK

14.67 21.35 54.37 40.11 29.24

KARUR VYSYA BANK

18.32 26.87 44.37 40.07 26.28

BANK OF BARODA 16.35 24.04 55.55 38.36 41.64 KOTAK MAHINDRA BANK

22.95 58.85 46.65 35.85 14.6

WEIGHTAGE 0.2 0.2 0.2 0.2 0.2 TOTAL RANK

CORPORATION BANK 2.93 4.27 10.87 8.02 5.85 31.95 3 KARUR VYSYA BANK 3.66 5.37 8.87 8.01 5.26 31.18 4BANK OF BARODA 3.27 4.81 11.11 7.67 8.33 35.19 2KOTAK MAHINDRA BANK 4.59 11.77 9.33 7.17 2.92 35.78 1


7.2 CHART SHOWING CAMEL RATING FOR DIFFERENT BANKS


INTERPRETATION

Rank 1 – Here kotak Mahindra Bank indicates strong performance and risk management

practices that consistently provide for safe and sound operations. The historical trend and

projections for key performance measures are consistently positive. It is not performing

well in Liquidity ratio but it performs strong in other ratios which covered up its weak

performing area.

Rank 2 – Here Bank of Baroda reflects satisfactory performance and risk management

practices that consistently provide for safe and sound operations. It maintains very well in

management and liquidity ratio which has become its strength. In order to lead, it should

focus more on Capital and Assets.


Rank 3 – Corporation Bank represents performance that is flawed to some degree and is

of supervisory concern. Performance is marginal. Risk management practices may be less

than satisfactory. In order to improve their position, it should maintain the capital and

Assets ratio so that it will be able to compete with their competitors.

Rank 4 –Karur Vysya Bank refers to poor performance that is of serious supervisory

concern. Risk management practices are generally unacceptable and the Bank should try

to improve its operations. It is performing Good in Earnings but Management and

Liquidity of the bank is not up to the mark and should give more importance to these

factors in order to be at the par with other banks.

RECOMMENDATION

Corporation Bank is excellent in Earnings ratio but lacks in other ratio like

Capital, Assets, and Liquidity etc.

If we compare Corporation Bank with Bank Of Baroda i.e. both Public bank,

Bank of Baroda’s Liquidity ratio is quite good. So, Corporation Bank should

improve its liquidity ratio. The Major difference is due to Liquid assets to

Demand Deposits ratio.

Corporation bank’s fair market value to book value ratio is the lowest of the entire

banks. This shows Corporation Bank should create more awareness among the

people through Targeting youngsters as well as providing new schemes in order to

attract more customers.

The banks should adapt themselves quickly to the changing norms.


The system is getting internationally standardized with the coming of BASELL II

accords so the Indian banks should strengthen internal processes so as to cope

with the standards.

The banks should try to maintain a 0% NPA by always lending and investing or

creating quality assets which earn returns by way of interest and profits.

Corporation bank is performing well in Management, earnings and Liquidity but

lacking in Capital and Assets Management.

The Bank should focus more on managing Asset as it is at the last position

compared to other banks.

Even in Capital Management, Kotak Mahindra Bank is having almost 22% capital

adequency ratio whereas corporation bank is having 13.66% which is lowest of all

banks mentioned in the report.

CONCLUSION

The current Banking Crisis, which is quite unprecedented, underlines the importance of

regulatory issues and the effects of incompetence in this area. CAMEL, as a rating system

for judging the soundness of Banks is a quite useful tool, that can help in mitigating the

conditions and risks that lead to Bank failures.

The report makes an attempt to examine and compare the performance of four different

banks of India i.e. Corporation Bank, Kotak Mahindra Bank, Karur Vysya Bank and

Bank Of Baroda. The analysis is based on the CAMEL Model. The study has brought

many interesting results, some of which are mentioned as below:


All the three banks have succeeded in maintaining CRAR at a higher level than the

prescribed level, 9%. But KOTAK MAHINDRA BANK has maintained highest

i.e.19.86%. It is very good sign for the bank to survive and to expand in future.

In Management Quality, we have found that Business per Employee Ratio and Profit per

Employee Ratio is more in CORPORATION BANK AND BANK OF BARODA. This

shows the growth of the bank as well as efficiency of the employee, which is very good

in both the banks and they will help to the bank to grow in future.

After evaluating all the ratios, calculations and ratings we have given 1st Rank to

KOTAK MAHINDRA BANK, 2nd Rank to BANK OF BARODA, 3rd Rank to

CORPORATION BANK and 4th to KARUR VYSYA BANK.


BIBLIOGRAPHY

www. bankofbaroda .com

www. kotak .com/ bank /personal- bank ing

www. corpbank .com

www. kvb .co.in

www.allbankingsolutions.com

www.wikinvest.com

www.rbi.org.in

www.basel2implementation.com

http://ezinearticles.com/?Banks-and-Camels&id=2565867

Annual Reports

1. Corporation Bank 2008-09

2. Bank of Baroda 2008-09

3. Karur Vysya Bank 2008-09

4. Kotak Mahindra Bank 2008-09


http://ezinearticles.com/?Banks-and-Camels&id=2565867

http://www.basel2implementation.com/

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

http://www.wikinvest.com/

http://www.allbankingsolutions.com/

http://www.kvb.co.in/

http://www.corpbank.com/

http://www.kotak.com/bank/personal-banking

http://www.bankofbaroda.com/

KOTAK MAHINDRA BANK LIMITEDBALANCE SHEET AS AT 31st MARCH, 2009

(Rupees in 000)

PARTICULARSSche-dule

As at 31st MARCH,

2009

As at 31st MARCH, 2008

CAPITAL AND LIABILITIES Capital 1 34,56,689 34,46,728Reserves and Surplus 2 3,46,79,490 3,19,08,220Employees' Stock Options (Grants) Outstanding

9,19,086 5,82,140

Deposits 3 15,64,49,336 16,42,36,456Borrowings 4 5,90,40,706 5,11,92,532Other Liabilities and Provisions 5 3,25,73,432 3,17,57,539

Total 28,71,18,739 28,31,23,615

ASSETS

Cash and Balances with Reserve Bank of India

6 99,53,533 1,68,34,945

Balances with Banks and Money at Call and Short Notice

7 14,53,164 43,91,790

Investments 8 9,11,01,805 9,14,19,885

Advances 9 16,62,53,371 15,55,22,232

Fixed Assets 10 21,33,560 21,02,487Other Assets 11 1,62,23,306 1,28,52,276

Total 28,71,18,739 28,31,23,615Contingent Liabilities 12 57,95,42,087 1,21,62,75,762Bills for Collection 31,75,756 29,08,837


BALANCE SHEEET OF BANK OF BARODA

Balance Sheet as on 31st March, 2009 (Rs.In 000's)

Schedules As on 31.3.2009 As on 31.3.2008

Capital & Liabilities

Capital 1 365,52,77 365,52,77

Reserves & Surplus 2 124700135 10678,39,91

Deposits 3 1923969517 152034,12,72

Borrowings 4 5636,08,59 3927,04,80

Other Liabilities & Provisions 5 16538,14,66 12594,41,42

Total 227406,72,54 179599,51,62

Assets

Cash and balances with Reserve Bank of India

6 10596,34,35 9369,72,34

Balances with Banks and Money at Call and Short Notice

7 13490,77,35 12929,56,33

Investments 8 52445,87,58 43870,06,78

Advances 9 143985,89,61 106701,32,41

Fixed Assets 10 2309,71,93 2427,00,81

Other Assets 11 4578,11,72 4301,82,95

Total 227406,72,54 179599,51,62

Contingent Liabilities 12 73386,09,83 82362,32,83

Bills for Collection 13963,99,04 8315,01,73

Significant Accounting Policies 17

Notes on Accounts 18


http://www.bankofbaroda.com/fin/fin_fy2009_notes.asp



Documents

Camel Rating ( Framework) of Four Banks