Performance and Efficiency of Indian Banking Sector

8/10/2019 Performance and Efficiency of Indian Banking Sector

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Presented by-Pooja Gupta (090)Yogesh Mittal

(091)


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Banking means the accepting, for the purpose of

lending or investments, of deposits of money from

the public repayable on demand or otherwise, and

withdrawal by cheques, drafts, order or otherwise -Banking Companies Act, 1949


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Two essential feature of bank-

A. Acceptance of chequable deposits from the public

B. Lending

Thus,

A commercial bank is a financial institution which

performs the function of accepting deposits from thegeneral public and giving loans for investment with

the aim of earning profit.


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It accepts deposits

It gives loans and advances

Overdraft facility

Discounting bills of exchange and hundies Agency functions of the bank

Financing of foreign trade

Performing general utility functions


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Scheduled banks in India

Scheduledcommercial banks

Public Sector banks

Nationalizedbanks

State Bank ofIndia and itsAssociated

Private sector banks

Old Privatebanks

Newprivatebanks

Foreignbanks in

India

Regional ruralbanks

Scheduledcooperative banks

Scheduled urbancooperative

banks

Scheduled statecooperative

banks


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The Indian banking sector consists of 26 public sector banks,20 private sector banks and 43 foreign banks along with 61regional rural banks (RRBs) and more than 90,000 creditcooperatives.

The Indian Banking industry is currently worth Rs. 81 trillion(US $ 1.31 trillion) and banks are now utilizing the latesttechnologies like internet and mobile devices to carry outtransactions and communicate with the masses.

With the potential to become the fifth largest banking industryin the world by 2020 and third largest by 2025 according toKPMG-CII report, Indias banking and financial sector is

expanding rapidly.


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1770 The first bank in India Bank of Hindustan

1921 Bank of Bengal, Bank of Bombay and Bank of Madras were merged into Imperial Bank .

1926 Establishment of Hilton Young Commission to suggest central bank in India

1935 Establishment of Reserve Bank of India as central bank .

1955 Imperial Bank taken over by State Bank of India.

1969 Nationalization of 14 commercial banks.

1975 Establishment of Regional Rural Bank.

1980 Second round of nationalization of 6 commercial banks.

1991 First Phase of banking sector reform.

1998 Second phase of banking sector reform .


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Lowering SLR and CRR

Prudential Norms

Capital Adequacy Norms

Deregulation of Interest Rates Competition From New Private Sector Banks

Phasing Out Of Directed Credit

Access to Capital Market

Freedom of Operation


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New area

Strengthening technology

Increase in FDI Limit

Adoption Of Global Standards Information Technology

Management Of NPAs

Managerial Autonomy

Customer Service


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Competition

Profitability

Productivity

The need and scope for harmonization of globaloperational standards and adoption of best practices


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Automation

Core banking solutions

Business Extension

More and more branches Employee development

Marketing Initiatives


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Given that some Indian banks were completelygovernment-owned, a bank that has been allowed to tapcapital market to raise capital by diluting governmentequity has been considered as privatized

To evaluate the impact, financial performance andefficiency of the banks are analysed.


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Measures of financialperformance of banks

Returns on assets

Spread to working fundratio

Establishment expensesto total expenses ratio

Loan out ratio

non-performing assets tonet advances ratio

Efficiency of the banks was

measured usingaccounting

ratios such as

Deposits per employee(depo/staff),

Advances peremployee(loans/staff),and

Net profit per employee(NP/Staff).


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Financial performance of partially privatized banks andtheir efficiency were significantly higher than that of thefully public banks.

In the matter of quality of advances, significant differencewas not found in these two groups.


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The performance of the banking sector after the initiationof financial liberalization in India has improved verymuch. Consequent to nationalization in 1969 andeconomic liberalization in 1991, banks in India are on fast

track growth in size, technology and deliverables tocustomers.

Partially privatized banks have continued to show

improved performance and efficiency in the years afterprivatization.


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An IBA-FICCI-BCG report suggests that Indias grossdomestic product (GDP) growth will make the Indianbanking industry the third largest in the world by 2025.

The domestic banking industry is set for an exponentialgrowth in coming years with its assets size poised totouch USD 28,500 billion by the turn of the 2025.


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Documents

Performance and Efficiency of Indian Banking Sector