A COMPARATIVE STUDY ON PROFITABILITY

ANALYSIS OF SELECTED PUBLIC AND PRIVATE

BANKS
Submitted in partial fulfillment of
MASTER OF APPLIED MANAGEMENT
Submitted by
KARNA VASANTHA LAKSHMI
([Link]-1568-3024)
Under the guidance of
[Link]
Assistant Professor

VISHWA VISHWANI INSTITUTE OF SYSTEMS

AND MANAGEMENT

2
 THUMKUNTA (V), SHAMEERPET, HYDERABAD-
500078

DECLARATION

I hereby declare that the dissertation titled “A COMPARATIVE STUDY ON

PROFITABILITY ANALYSIS OF SELECTED PUBLIC AND PRIVATE BANKS IN
INDIA” has been documented by me during year 2017-2018, under the guidance of Mr.
CH. Naresh, Assistant professor working at Vishwa Vishwani institute of systems and
management, Hyderabad in partial fulfillment of the requirement of the award of
Bachelor’s degree in management.

I also declare that the dissertation is the result of my own efforts and has not been copied
from any other source or submitted to any university before.

Place:

Date:

(KARNA VASANTHA LAKSHMI)

[Link]
 ACKNOWLEDGEMENT

I feel a great privilege to get the opportunity to take up this project work on “A
COMPARATIVE STUDY ON PROFITABILITY ANALYSIS OF SELECTED PUBLIC
AND PRIVATE BANKS IN INDIA”.

I would like to express my sincere gratitude and heartfelt thanks to

[Link], PRINCIPAL and Mr. G. SUMANTH KUMAR, H.O.D,
Associate Professor for his continuous support, guidance, and encouragement at all stages
of my work.

I also express my sincere thanks to my guide [Link] for giving me the

opportunity to do this project and as well helping me by providing all the facilities in the
college.

My special thanks to my family, for constant encouragement, guidance and support in

completion of project work.

I extend my sincere thanks to all my friends and relatives for their valuable help and
suggestions. Finally I thank all those who co-operated with me in every aspect as
demanded by the circumstances during the period completion of project work.
 (KARNA VASANTHA LAKSHMI)

[Link]

TABLE OF CONTENTS

CHAPTERS [Link]
CHAPTER- 1 1-5
Introduction
Need of the study
Scope of the study
Importance of the study
Research methodology

CHAPTER-2
Review of literature

CHAPTER-3
Industry and Company profile

CHAPTER-4
Data analysis

CHAPTER-5
Summary of findings
Suggestions and recommendations
Conclusion

Bibilography
Annexure-1
Annexure-2
Annexure-3
 CHAPTER-1

INTRODUCTION
1.1 INTRODUCTION:
The banking sector mirrors the larger economy – its linkages to all sectors make it a
proxy for what is happening in the economy as a whole. Efficient functioning of banking
sector is required for the growth of overall economy. Banking plays a silent, yet crucial
role in our day-to-day lives. The banks work as financial intermediaries, pooling savings
and channelizing them into investment, helps in economic development of a country. A
banking system also referred as a system provided by the bank which offers cash
management services for customers, reporting the transactions of their accounts and
portfolios, throughout the day. The banking system in India should not only be hassle free
but it should be able to meet the new challenges posed by the technology and any other
external factors. For the past three decades, India’s banking system has several
outstanding achievements to its credit. The banks are the main participants of the
financial system in India. The banking sector offers several facilities and opportunities to
their customers. All the banks safeguard the money and valuables and provide loans,
credit, and payments services, such as checking accounts, money orders, and cashier’s
cheques. The banks also offer investment and insurance products. As a variety of models
for cooperation and integration among finance industries have emerged, some of the
traditional distinctions between banks, insurance companies, and securities firms have
diminished. In spite of these changes, banks continue to maintain and perform their
primary role- accepting deposits and lending funds from these deposits. The efficient
working of banking system leads to survival of any country.

The banking system of India is featured by a large network of bank branches, serving
many kinds of financial needs of the people.

The commercial Banking system provides a large portion of the medium of exchange of a
given country, and is the primary instrument through which Monitory policy is
conducted, through their deposit mobilization and lending operations. Commercial banks
make the productive utilization of ideal funds, thus assists the society to produce wealth.
Commercial Banks are the institutions specifically designed to further the capital
formation process through the attraction of deposits and extension of credit.
A better performance in terms of Efficiency and profitability of banking sector is must for a
flourishing economy to ensure the growth and development by facing intense competition,
meeting greater customer demands and changing banking reforms. Since the adoption of
Liberalization, Privatization and Globalization in 1991the banking sector has undergone
significant changes. The Fundamental Analysis, which aims at developing an insight into the
economic performance of the business, is of paramount importance from the view point of
investment decisions. The present study attempts to analyze and measure the relative
performance of the major banks in India. ; private bank: bank of barado Bank ;public bank:
SBI .The financial performance of a bank is measured by a number of key indicators with
reference to Return on assets(ROA), Return on networth, Credit deposit ratio(CDR), Net interest
margin(NIM),Current ratio, Quick ratio ,Net profit margin.

NEED OF THE STUDY:

1. Purpose of the present study is to evaluate the financial performance of the banks.

2. Profits are very essential for the survival of every business unit.

3. Not only the survival but the long term growth of the business is also determined by the
profits. Study of profitability of banks is a very difficult task because the main purpose of
establishment of Indian banks is to serve the society.

4. In the light of this purpose banks had not given much importance to earn profits.

5. In the present study, I tried to study the meaning of profitability of Indian banks and make
comparison of profitability of Indian banks.

SCOPE OF THE STUDY:

The study endeavors to utilize techniques to explore the possibilities of reduction in different
aspects of the private and public bank, thereby maximizing their profitability, as this aspect has
not received due attention in previous research work. This study will also help to understand the
financial performance of both public sector and private sector. The study shows the role of
profitability position of private and public sectors banks in India. A properly conducted
profitability analysis provides invaluable evidence concerning the earnings potential of a
company and the effectiveness of management. This study will throw light on the different
aspects where the public sector and private sector banks excel and how the banks will provide an
opportunity in balancing its activities to achieve the best performance. Therefore, it is considered
appropriate to focus on this aspect in this study.

IMPORTANCE OF THE STUDY:

The study useful to any Bank to understand the major factor relating to the performance of Bank,
any Bank may work on major factor of profitability and performance. Study will helpful to take
strategically decisions for the Banks. Government and RBI may easily make out which Bank is
the better performer in the banking industry and hence propose to prepare rules and regulation.
Potential and future new entrants may be understood the particular Bank. The outcome of the
said research may be one of the useful inputs for various stake holders of the society.

OBJECTIVES OF THE STUDY:

1. To study and analysis of the profitability of banks.
2. To enable the investors to take investments decision on the basis of Risk & Return.
3. To analyze the financial statements to find out the bank's financial position.
4. To find the profitability position of the bank for 5 years.
5. To highlight the nature of change influencing financial position and performance of the
bank with aid of comparative balance sheet and comparative income statement for 5
years.

LIMITATIONS OF THE STUDY:

 1. The secondary data was taken from the annual reports of the selected public and private
Banks. It may be possible that the data shown in the annual reports may be window
dressed which does not show the actual position of the banks.
2. The study records restricted to a period of 5 years
3. Ratio analysis has its own limitations.
4. Time constraint

RESEARCH METHODOLOGY:
The study is descriptive in nature and this attempt is made to evaluate the performance of the
bank through the financial data which are disclosed in accounting policies. Thus the study is
based on the published accounts and annual reports of SBI and bank of baroda. The periods
cover from [Link] a comparative study, the design of the paper is descriptive. It
explains the various ratios involved to study the profitability of two sector banks. The raw data is
obtained from the secondary sources and the following profitability ratios are calculated
accordingly.
 CHAPTER-2

REVIEW OF LITERATURE
REVIEW OF LITERATURE:

Review of literature has vital relevance with any research work due to literature review the
possibility of repetition of study can be eliminated and another dimension can be selected for the
study. The literature review helps researcher to remove limitations of existing work or may assist
to extend prevailing study. Several researches have been conducted to analyze the different
aspects of performance of commercial banks in India and abroad. Present review of literature is
related to the subject of thesis “A COMPARATIVE STUDY ON PROFITABILITY ANALYSIS
OF SELECTED PRIVATE AND PUBLIC BANKS IN INDIA”.

The theoretical literature implies that profit earned by a particular concern indicates its strength
in yielding benefits from all sorts of its efforts injected in earning the same. On the other hand,
profitability indicates the earning ability or earning power of a particular source to which it is
affected. Over the period, there are various profitability-based studies conducted in the area of
banking and some of them have been reviewed as follows:

Goel and Chitwan Bhutan Rekhi(2013) in their study “Efficiency and profitability of the banking
sector in India has assumed primal importance due to intense competition, greater customer
demands and changing banking reforms. Since competition cannot be observed directly, various
indirect measures in the form of simple indicators or complex models have been devised and
used both in theory and in practice. This study attempts to measure the relative performance of
Indian banks. For this study, he has used public sector banks and private sector banks.

Segmentation of the banking sector in India was done on bank assets size. Overall, the analysis
supports the conclusion that new banks are more efficient than old ones. The public sector banks
are not as profitable as other sectors are. It means that efficiency and profitability are
interrelated. The key to increase performance depends upon ROA, ROE and NIM.

Amandeep (1993) in her work profitability of commercial banks has made an attempt to examine
the trends in profit and profitability of 20 nationalized banks she used trend analysis ratio
analysis and concentration indices of the selected parameters. She also used multi variant
analysis. She concluded that to have excellent profitability performance, banks need to have
excellent performance in managing burden

Kaushik (1995)studied the social objectives and profitability of public and private sector banks
during the period 1973 to 1991. He compared the public and private banks with the help of
various profitability and productivity indicators through ratios, average, correlation, regression
and factor analysis. He found that public sector banks were having lower profitability as
compared to private sector banks. He suggested that productivity could be increased with the
help of innovative banking, improved technological and managerial knowledge, well-educated
and trained manpower and infrastructural facilities.

Chandan and Rajput (2002) evaluated the performance of banks on the basis of profitability
analysis. The researchers analyzed the factors determining the profitability of banks in India with
the help of multiple regression technique. They found that spread, i.e., net interest income is the
major source of income for banks. The study found public sector banks at weaker position in
relation to foreign banks and private sector banks. The authors suggested that public sector banks
should concentrate on nonperforming asset management and also make investment in technology
up gradation for better data management and quicker flow of information.

Sharma (2006) studied the performance of Punjab National Bank in comparison to other Public
Sector Banks and all Commercial Banks (Public, Private and Regional Rural Banks) operating in
rural, semi-urban and urban areas of Haryana state.

The study depicted that Punjab National Bank is having highest growth rate in terms of
nonagricultural sector advances but minimum growth rate in agricultural advances. The study
found that Punjab National Bank has introduced the fee based income approach to improve the
profitability of bank and accelerated the economic growth of Haryana state. The researcher
further suggested that the Public Sector Banks should improve their communication system,
customer relationship in rural market and suitable marketing strategies.
Mittal, R.K. and Dhingra, S. (2007) conducted a study on assessing the impact of
computerization on productivity and profitability of Indian Banks for a period of 2003-04 and
2004-05 by using Data Envelopment Analysis (DEA). The output of DEA, indicates that Private
Banks are much better than Public Sector Banks in productivity and profitability indicators,
Hence, of the many factors which could lead to improved performance of banks, increased IT
investment is one of the vital contributing factors for enhanced performance.

Shukla (2009) aimed at examining the recent trends in Indian Banking System and its impact on
cost and profitability of 27 public sector banks, 27 private sector banks, and 29 foreign banks in
India during the period 1991-06. The study evaluated that banks should focus on high operating
cost and diversification of activities to remain competitive and profitable. The study evidenced
the use of technology based services to intensify competition and to reduce operating cost and
achieve higher profitability. The researcher recommended that some critical factors like security
and integrity of system should be addressed, and greater emphasis should be given on banking
and financial policies to strengthen the banking sector.

M.N. Mishra (1992) in his paper evaluated the profitability of scheduled commercial banks
taking into account the interest and non - interest income and interest expenditure, manpower
expenses and other expenses. The Author has identified that the growing preemption of funds in
the form of statutory liquidity ratio, cash reserve ratio, faster increase of expenses as compared to
the income, advances, and total investment than interest income and few more factors have
contributed to the declining profitability of Indian commercial banks.

Jha and Sarangi (2011) evaluated the performance of seven public sector and private sector
banks for the year 2009-10. They used three sets of ratios, operating performance ratios,
financial ratios and efficiency ratios. they found that Axis bank took the first position and
followed by ICICI Bank, PNB, BOI, SBI, IDBI AND HDFC bank, in that order.

Ms. Sunita Sukhija in his paper examined the consistency of the profitability of the major private
sector bank in India. For this purpose, she has been taken five year data from 2006 to 2010 and
ratio analysis has been used to evaluate the profitability performance of private sector banks.
They found that interest income and non-interest to total assets is maximized of TamilNadu
Mercantile Bank Ltd and ratio of interest expended to total assets, non-interest expenses to total
Assets and burden to total Assets is minimum subsequently HDFC bank, City Union Bank and
Axis bank. (Sukhija, 2011)

Rohit Bansal (2014) in his article researcher investigates performance of four private sector
banks for the period of 2011 to 2014 and ratio analysis has been used to evaluate the profitability
performance of selected banks. They found that HDFC and Federal has fairly stable asset
turnover ratio which indicates its efficient utilization of resources in revenue generation and
Federal has the best price earnings ratio among other banks. (Bansal, 2014).

Singla HK in his paper “Financial performance of banks in India” has examined that how
financial management plays a crucial role in the growth of banking. It is concerned with
examining the profitability position of the selected sixteen banks of banker index for a period of
six years (2001-2006). The study reveals that the profitability position was reasonable during the
period of the study when compared with the previous years. Strong capital position and balance
sheet place, banks in better position to deal with and absorb the economic constant over a period
of time. (Singh, 2008).

Verghese, S. (1983) examined whether the profit and profitability of Indian commercial banks
has been declining in seventies and indentified the main factors affecting on profit performance
of banks.

Garg, S. C. (1989) stressed on rising costs and declining profitability of the Indian Commercial
banks since 1970. Study recommended that, RBI in collaboration with bank should organize
regular and systematic sample survey to estimate cost and profitability; branch level
performance, standardizing and simplifying the systems and procedures for bank operations
which lead to reduction of the cost of banking service and improves the profit.

Greuning & Bratanovic, (2003) used the various ratios for assessing profitability of banks such
as interest received/average loans and advances, interest paid/average deposits, return on assets
return on equity etc.
Satyanarayana, (1996) analyzed the profitability of banks using various ratios such as interest
income on average advances, interest income on average investment, interest cost on average
deposits, book value of share and earnings per share etc.

Nandy, D. (2011) attempted to indentify factors which are influence on profit and also examined
whether these factors have any significant influence on profitability of banks. Study observed
that an interest expense is the good predictor for net profit of all different bank groups.

Mistry, (2012) undertook the profitability analysis based on ROA and interest income as an
independent variable and operational efficiency, asset utilization and asset size as dependent
variables.

Alrabei, A. M. (2013) evaluates the profitability of SBI from India and Cairo Amman Bank
(CAB) from Jordan, for the period of 2006-07 to 2010-11. To evaluate the profitability of banks
seven ratios like gross profit ratio, net profit ratio, operating profit ratio, operating ratio, return
on equity share holders fund, return on capital employed ratio, return of total assets ratio have
been used.

Gupta, R., & Sikarwar, N. S. (2013) explored the profitability of PNB and HDFC bank during
the period of 11 years from 2000 to 2011. Mainly three techniques were uses for financial
analysis i.e. arithmetic technique, accounting technique and statistical techniques.

[Link] and Reetu Kapoor (2010) conducted a study on financial performance of

commercial banks. In this study they compared financial performance of 19 commercial banks
with respect to eight parameters and they classified the banks as excellent, good, fair and poor
categories.

Dutta (2013) studied about determinants of return on assets of public sector bank. The study was
based on backward multiple regression analysis to analyze the impact of determinants on the
ROA of public sector banks. The variable Spread Ratio, OE, Provisions and Contingencies,
NPA, NII is the significant determinants of ROA. The result of the study is that Spread and NII
had positive influence and all other had negative impact. To improve the return on investment
banks should focus on reducing their Operating bank should reduce operating expenses.
Bapat (2013) studied about Growth, Profitability and Productivity in Public Sector Banks: An
Assessment of Their Interrelationship. The study is conducted to measure the relationship among
growth, profitability and productivity for Indian public sector banks. Business per employee,
ROA, profit per employee is used to measure the same. The research methodology of study is
ANOVA. The finding of study is growth rates do not significantly affect the profitability.
Business per employee and profit per employee for Public sector banks remained higher for
banks with higher growth rates.

Gautam (2012) analyzed about how new technologies in banking have impacted on the
profitability of the banks in India. With the availablity of internet, the retail banks are offering
banking services to their customers through electronic medium i.e. e-banking. The study is
qualitative in nature. It is based on the personal in-depth interviews of the bank managers of
fourteen banks. The result suggests that electronic-banking has increased the profitability of
banks, enabled the banks to meet their costs and earn profits even in the short [Link] main
motive of the banks to sport electronic-banking is to increase their clientele and to retain them.

Juneja et al (2012) studied about the profit earning and increasing the customer base the sole
objective of all the bank groups. Keeping in view this competitive tendency of the banks, this
study is mainly concentrated upon the comparison of different bank groups on their deposits,
borrowings, loans and advances and investments related to different time periods. For the above
analysis, all the banks are divided into four groups i.e. public sector banks, new private sector
banks, old private sector banks and foreign banks. After the performance analysis, it is concluded
that foreign banks are performing much better than the other bank groups, whereas the
performance of old private sector banks is disappointing among all the bank groups. New private
sector banks and Public sector banks are performing only satisfactorily.

Bodla et al (2007) studied about key determinants of profitability of public sector banks in India
is identified. As per the study result importance of some variable like NII, OE, NPA, CD ratio is
significantly high. Non-interest income, operating expenses, provision and contingencies and
spread have a significant relationship with net profit.
Nagarjuna et al (2006) studied about how performance of banking in terms of profitability,
productivity, asset quality and financial management has become important to stable the
economy. They found that public sector banks have been more efficient than other banks
operating in India.

Utaya (2005) studied about Profitability Analysis of the Pondicherry State Co-operative Bank.
Various ratios, such as cost of management (total expenses) to working capital ratio, profit to
working capital ratio, non-interest income to total income ratio, etc. were used to assess the
general performance of the bank. Spread and burden positions of the bank were also analyzed.

Ganesan (2001) studied about, “determinants of Profits and Profitability of public sector banks in
India: A profit function approach” it examine the factors which showed that interest cost, interest
income, other income, deposits per branch, credit to total assets. The study is based on the
regression model .The result of study is significant determinants of profits and profitability of
Indian public sector banks are interest income loss. The important note in paper was that the
average establishment cost positively contributes to the profitability but it adversely affects the
net profit of the public sector bank.

Amandeep (1991), in her thesis titled, “Profits and Profitability of Indian Nationalized
Banks” opined that the banks have become an instrument to meet effectively the
needs of the development of the economy to effect the total socioeconomic transformation. It
has adversely affected the profitability of the bank operations. According to the
researcher, the profitability of a bank is determined and affected mainly by two factors: spread
and burden. The other factors determining bank’s profitability are credit policy, priority sector
lending, massive geographical expansion, increasing establishment expenses, low non-
fund income, deposit composition etc. She has chosen 11 factors affecting a bank’s
profitability to identify the most significant variable affecting its profitability. The study
recommended the banks to focus their attention on the management of spread, burden,
establishment expenses, non-fund income and deposit composition. The banks need to
adequately charge for various non-fund services (like merchant banking, consultancy, and
factoring services) with proper cost benefit analysis, to have maximum profitability.
Krishna (1996), in his article titled, “Profitability Analysis: An Overview”, has defined the
profitability analysis in detail. According to the researcher, it is a rate expressing profit as a
percentage of total aspects or sales or any other variable to represent assets or sales. What should
be used in the numerator and the denominator to compute the profit rate depends upon the
objective for which it is being measured.

Ram Mohan (2002) evaluated the performance of public sector banks (PSBs) since deregulation
in both absolute and relative terms and also highlighted the reason underlying the improved
performance of PSBs. The author mentioned that the banking system has neither collapsed nor
there has been any banking crisis. One important point that advocates the improved
performance of PSBs is the improvement in declining spreads of PSBs.

The author measured performance of PSBs during the period 1991-92 to 1999-00 on the basis of
key performance indicators like interest spread, intermediation cost, nonperforming assets,
provision and contingencies and net profits as percentage to total assets. But in the relative
performance he makes a comparison between public sector banks, private sector and
foreign banks from 1994-95 to 1999-00. In this category he also made comparison of
the performance of PSBs and old private sector banks during the same period.

The author concluded that partly due to regulatory norms, the government-owned banks have
had minimal exposure to risky assets such as real estate and stock market. Another reason for
survival of banks in the deregulation era was that the government wisely stayed away from
the move towards full-blown capital convertibility. In his article, the author also talked of
recapitalization requirement of PSBs. Not the least, government ownership facilitates
recapitalization of banks at outset of reforms and this has arguably precipitated costlier
bailouts down the road. Further, it was explained that the government had no choice but to infuse
funds in the banking sector, the fiscal situation notwithstanding, thanks to mandatory Basel
norms for banks.

Pathak (2003), while comparing the financial performance of private sector banks since 1994-95,
explained that the private sector banks have delivered a new banking experience. Looking to the
growing popularity of services provided by them, their public sector counterparts have
started emulating them. He studied the performance of these banks in terms of financial
parameters like deposits, advances, profits, return on assets and productivity.

In this paper, the author made an attempt to have an insight into the financial operation of
these institutions. A sample of 5 banks has been taken for financial analysis. Financial track
record of all these banks was evaluated, and their financial performance was compared. The
working of all the constituents was satisfactory but the HDFC Bank emerged as a top performer
among them followed closely by the ICICI Bank.

Ram Mohan and Ray (2004), in their article titled, “Comparing Performance of Public and
Private Sector Banks: A Revenue Maximization Efficiency Approach” made a comparison of
performance among three categories of banks - public, private and foreign banks - using physical
quantities of input and outputs and comparing the revenue maximization efficiency of banks
during 1992-00. The findings of the study showed that public sector banks performed
significantly better than the private sector banks but in no way different from foreign banks.

In this study, a comparison of public, private and foreign banks in India has been made using
data envelopment analysis (DEA). In DEA, physical quantities of inputs and outputs are used.
Therefore measures of efficiency based on output-input quantities may be more suitable.

In the Indian context, the approaches of using deposits and loans as output have been
appropriate in the nationalized era when maximizing these was indeed the objective
of a bank. But the main business of the banks is to maximize their profits. Interest expense and
operating expense are treated as input when amount to maximizing revenue. Finally
they concluded that the superior performance of PSBs is to be described higher technical
efficiency rather than higher allocative efficiency.

Bansal (2005), in his research work, attempted to find out the impact of
liberalization on productivity and profitability of public sector banks in India. The researcher
evaluated the productivity and profitability of 27 PSBs in the post- liberalization
period, i.e., from 1991-02. The productivity of all the PSBs has been measured on the basis
of employee productivity (labour productivity), branch productivity and overall
productivity. The researcher ranked different banks from all the three levels of productivity.
While measuring productivity he used parameters like Deposit, Advances, Business, Total
Income, Total Expenditure, Burden, Spread and Net Profit. The study brought out that from the
overall productivity angle, BOB, BOI, SBI, COB, OBC have been the top rankers, whereas the
ranking of SBBJ, SB, AIIB, SBM and UCB was far from satisfactory.

While measuring profitability of all the PSBs, the trend analysis results showed that
net profits in absolute terms have increased for majority of the PSBs but profitability has
witnessed a decline. But a few banks have improved their profitability over the period of study.
The main reason for the declining trend in profitability is due to increased competition which
has been resulting in a narrowing spread. While measuring profitability, the researcher
used various ratios like interest income, interest expended, spread, non-interest income,
non-interest expenditure, burden and net profits to working funds ratios. The researcher also
used ratios like interest income to total income ratios, interest expanded to total expenditure ratio
and staff expenditure to operating expenditure ratio.

Jain (2006), in his article titled, “Ratio Analysis: An Effective Tool for Performance
Analysis in Banks” discussed various ratios relating to profitability of the banks. The author
classified the various ratios under three categories, viz. Costing Ratio, Returns / Yield Ratio and
Spread Ratios. Such ratios can be used to understand a bank’s financial condition, its operation
and attractiveness as an investment. He explained that such ratio analysis can be used to make an
inter-branch comparison for investigating the strengths and weaknesses of individual bank’s and
to enable them to take strategic decisions and initiate necessary corrective actions.

Under costing ratio, the author advocated for computation of average cost of deposits, average
cost of borrowings, average cost of interest bearing liabilities, average cost of funds
and operating expenses to average working funds. Similarly under yield/return category, he
computed ratios like yield on advances, yield on investment, average return on interest
earnings, average return on funds and non-interest income to average working funds and total
income. Under spread category, he subcategorized the ratios like interest spread, net interest
margin and burden ratios. The author discussed the significance of ratio analysis as a tool for
evaluating the performance of different banks / bank branches. Apart from profitability ratios,
the author mentioned the following categories of ratios for undertaking comparative
performance of banks, viz. Productivity Ratios, NPA Ratio, Efficiency Ratio, Ratios on Shares
(Shareholders front).

Gopal and Dev (2006), in their research paper, empirically analyzed the productivity and
profitability of selected public and private sector banks in India. They evaluated the effect of
globalization and liberalization on the productivity and profitability of Indian banks
during the period 1996-97 to 2003-04. The author observed that emergence of new
private sector banks as well as entry of new foreign banks in this era has thrown tremendous
challenges in the form of tough competition among the Indian banks. The spirit of competition
and emphasis on profitability are also forcing the PSBs towards greater profit orientation.

For the purpose of their study, they selected five large banks each on the basis of highest
quantum of deposit mobilization from both the public and private sectors during the period under
study. It was found that the process of globalization and liberalization has exerted its huge
influence on the Indian banking sector. The ongoing reforms in the banking sector, with a thrust
on transparency and efficiency have forced the Indian banking sector to adopt suitable strategies
which focus on productivity and sustainability. The study reveals that except few cases, the
productivity index is found to be greater than one in the selected banks. As far as the matter of
achieving the target profitability is concerned, SBI and PNB were most successful
followed by HDFC Bank and ICICI Bank but the performance of J& K Bank, Canara Bank and
Bank of India was poor in terms of achievements. Interest spread emerged as the only strong
factor influencing the profitability. A high degree of positive association between
productivity and profitability during the study period speaks about the efficiency of
the banks in utilizing their resources.

Ramudu and Rao (2006), while making a fundamental analysis of Indian banking industry,
revealed that ever since the Indian economy opened its doors to MNCs, the Indian banking sector
has been witnessing bizarre changes in terms of new products and services and shift competition
as well. The sorts of IPOs that have been taking place in banking sector are amazing. In the light
of these recent developments, a careful analysis of the profitability of Indian banking sector is
inevitable.

The researchers have selected three major banks in India, viz. SBI, ICICI, and HDFC. While
analyzing profitability of these banks they used different variables of profitability like OPM,
NPM, ROE, EPS, PEB, DPS and DPR. They analyzed the data for a period of 5 years from 2001
to 2005. For making analysis of data and interpreting the results, they used different statistical
tools like Arithmetic Mean, Compounded Annual Growth Rate (CAGR) and one way analysis of
variance (ANOVA).

The study aims at examining the economic sustainability of SBI, ICICI and HDFC. The study
concluded that SBI performed better in terms of Earning per Share and Pay out Ratio, and its
CAGR in most of the parameters was also higher than ICICI and HDFC. On the other hand,
HDFC performed better in terms of OPM, NOM, ROE and PER. As far as the pay-out-ratio was
concerned, ICICI paid the highest portion of its earnings despite the fact that its earning capacity
was not better than that of other two banks. The CAGR in all the parameters of SBI was more
than that of ICICI and HDFC.

Brinda and Dubey (2007) made an econometric analysis on the performance of public sector
banks in India. They studied the performance of PSBs vis-à-vis other bank groups, i.e., private
sector banks and foreign banks present in India. They tested the performance of different
bank groups on different profitability and efficiency parameters and through econometric
model. In their paper, they tested the hypothesis that government ownership per se makes public
enterprises inefficient.

For evaluating a bank’s performance, they have used the two profitability measures,
i.e., return on assets (ROA) and operating profit ratio (OPR). Two banks with identical OPR can
differ in terms of ROA; one, to difference in the risk of their loan portfolio; and two, efficiency
measures used in their analysis are net interest margin (NIM) and operating expense Ratio
(OER). They applied the statistical techniques like ordinary least square method and
bounded influence to analyze the data. They concluded that private sector banks and foreign
banks are not found to be superior to the PSBs in any of the performance indicators, namely,
ROA, OPR and OER given the present regulation environment. They also found that PSBs
scored well against benchmarks as well as against other bank groups in India in
the area of profitability (ROA), Non-Performing Loans (gross) (NPL) and operating costs as a
proportion of total Assets, Capital adequacy requirement, etc.

The above observations support the econometric findings of their study that PSBs are not
inherently less efficient than private sector banks and foreign banks, given the regulatory
environment. While the boom in the economy has helped greater operational flexibility, and
improved corporate governance has contributed to improved performance. Going forward
with the given performance of PSBs they are confident that with greater deregulation and
financial sector reforms gaining further momentum, PSBs can meet the challenges of 2009, when
RBI proposes to open up the sector in a bigger way to foreign players.

Singla (2008), in his research paper titled “Financial Performance of Bank in India”, examined
how financial management plays a crucial role in the growth of banking. During 2005-06, bank
credits witnessed a strong expansion and a steady growth in deposits was also observed.
Currently, banking in India is considered as fairly mature in terms of supply, product range and
reach. In terms of quality of supply, assets and capital adequacy, Indian banks are considered to
have strong and transparent position. As Indian economy is constantly growing especially the
service sector, the demand for banking services is also expected to be stronger. Indian banking
stands at a threshold of a mega change in the next 3-5 years. Many new situations are predicted
to emerge.

The study is conducted by examining the profitability of the selected sixteen banks (BANKEX-
based) for the period of six years (2000-01 to 2006-07). For this purpose, the researcher
computed various (Nine) ratios, which throw light on the various dimensions of the
business. The study revealed that the profitability position was reasonable during the period of
study when compared with previous years. Return on investment (ROI) proved that the
overall profitability and the position of the selected banks were sustained at a moderate
rate. With respect to debt-equity position, it was evident that the banks were maintaining 1:1
ratio, though at one point of time it was quite high. Interest coverage ratio was continuously
increasing. Capital adequacy ratio was constant over a period of time. It was also observed that
return on net worth had a negative correlation with debt-equity ratio. Interest income to working
funds also had a negative association with interest coverage ratio and NPA to Net advances was
negatively correlated with interest coverage ratio

Finally, the researcher predicted that with the increasing level of globalization of Indian banking
industry and the evolution of universal banks, competition in the banking industry would
intensify further. Though the potential and ability exist, Indian banks have to be faster now to
sustain the growth. On the basis of this study, it can be concluded that financial position of
banks is reasonable. Debt-Equity ratio is maintaining an adequate level throughout and
NPA also witnessed a decline. The ROI remains at a very low position, which is a worrying
factor. The banking sector system, which is going through major reforms is one of the emerging
sector and will grow at a sustained rate over a period of time.

Joshi P.V. & Bhalerao J. V.(2011), Banks deal with people’s most liquid asset (cash), and
run a country’s economy. The banking system in India is significantly different from that of
other nations because of the country’s unique economic, social and geographic characteristics.
India has a large population and land size, a diverse culture, and extreme disparities in income,
which are marked among its regions. There are high levels of illiteracy among a large percentage
of its population but, at the same time, the country has a large reservoir of managerial
and technologically advanced talents. Between about 30 and 35 percent of the population
resides in metro and urban cities and the rest is spread in several semi-urban and rural
centers. The country’s economic policy framework combines socialistic and capitalistic features
with a heavy bias towards public sector investment. However, the last couple of decades have
witnessed continuous change in regulation, technology and competition in the global
financial services industry. Rising cost-income ratios and declining profitability reflect increased
competitive pressure. To assess the stability of the banking system, it is therefore crucial to
benchmark the performance of banks operating in India. An efficient banking system contributes
in an extensive way to higher economic growth in any country. Thus, studies of banking
efficiency are very important for policy makers, industry leaders and many others who are reliant
on the banking sector.
This paper investigates the technical efficiency of major representatives of Indian commercial
banks. For this purpose, the data envelopment analysis (DEA) model was used with four input
variables (viz. Deposits, Interest expenses, Operating expenses, Assets) and four output variables
advances & loans, investments, net interest income, and non-interest income. DEA is a
nonparametric method of measuring the efficiency of a Decision Making Unit (DMU) such as a
firm, a public sector unit (Bank in this case), first introduced in the operations research by
Charnes, Cooper and Rhodes (CCR) (European Journal of Operational Research [EJOR],
1978). DEA is a technique of determining efficiency of DMU’s based on multiple inputs and
multiple outputs.

Veni (2004) examined the capital adequacy requirement of banks and the measures adopted by
them to strengthen their capital ratios. The author highlighted that the rating agencies give
prominence to Capital Adequacy Ratios of banks while rating the banks certified of deposits,
fixed deposits and bonds. Thus, Capital Adequacy is considered as the key.

Dr. M. Dhanabhakyam, M. Kavitha Jan 2012 Financial performance of selected public sector
bank in india. This study emphasis on public sector financial performance. Banks play an
important role in the economic development of every nation. They have control over a large part
of the supply of money in circulation. They are grouped as follows, ratio analysis, correlation
and regression. For this study six Public Sector Banks are selected. The Indian banking system
faces several difficult challenges.

Chennu goel, Chitwan Bhutani Rekhi July 2013 A Comparative Study on the Performance of
Selected Public Sector and Private Sector Banks in India This study of a performance of selected
private and public sector banks in India. Efficiency and profitability of the banking sector in
India has assumed primal importance due to intense competition, greater customer demands and
changing banking reforms. This study attempts to measure the relative performance of Indian
banks. For this study, we have used public sector banks and private sector banks. Overall, the
analysis supports the conclusion that new banks are more efficient that old ones. The key to
increase Performance depends upon ROA, ROE and NIM.
Elisha and Guido (2016) investigate the profitability and bank specific variable sin 35 European
banks over the period 2009- 2013. The results find that deposits and loans ratio has positive
impact on the profitability of banks.

Sharifi and Akhter (2016) studied the impact of the credit-deposit ratio on the profitability of the
public sector banks in India. ROA, Return on Equity (hereafter, ROE), and Net Interest Margin
(hereafter, NIM) were taken as the measures of the profitability of banks in India. They found
that there is no significant impact of the credit-deposit ratio on Return on Assets and Return on
Equity.

Alalaya and Al Khattab (2015) empirically investigated the determinants affecting the
profitability of banks and found a negative influence of ROA and GDP on profitability whereas
positive influence of ROE and TD/TA on profitability of commercial banks has been noticed.

Capraru and Ihnatov (2015) examined the negative impact of bank size, credit risk, market
concentration and cost to income ratio on the profitability of banks.

Lartey et al (2013) studied the trends of net interest margin and return on assets and also the
relationship between these two variables, return on assets as a dependent variable for measuring
the profitability of listed banks in Ghana and net interest margin as an independent variable.
They found a significant positive correlation between net interest margin and return on assets and
also the significant regression coefficient with high explanatory power R2 of 82.6%.

Ong and Teh (2013) examined the negative impact of non-performing loans on the bank
profitability that further enhance the loan loss provision.

Sufian and Chong (2008) reported a negative influence of bank size, credit risk and inflation on
profitability whereas capitalization gave the reverse impact on profitability of banks.

Athanasoglou et al (2006) argued with its contradictory finding that beyond a certain limit the
positive relation turns into negative between bank size and profitability of banks.

AL Omar and AL Mutairi (2008) studied return on assets as one of the indicators of the banks’
profitability in the context of Kuwait. In their study, credit-deposit ratio and cash-deposit ratio
has been used as a measure of lending capacity and liquidity positions of the commercial banks,
respectively.

Stiroh and Rumbie (2006) observed in their study that bank profitability does not increase with
increase in diversification of operations of banks. So, non- interest income activities must be
standardised at some level.

Staikouras and Wood (2004) identified a negative impact of increase in loan volume with lower
margin on the profitability of banks.

Singh, B. A. and Tandon, P. (2012) affirmed that banking Sector plays an important role in
economic development of a country. The banking system of India is featured by a large network
of bank branches, serving many kinds of financial services of the people. The State Bank of
India, popularly known as SBI is one of the leading bank of public sector in India. ICICI Bank is
second largest and leading bank of private sector in India. The present study is conducted to
compare the financial performance of SBI and ICICI Bank on the basis of ratios such as credit
deposit, net profit margin etc. The period of study taken is from the year 2007-08 to 2011-12.
The study found that SBI is performing well and financially sound than ICICI Bank but in
context of deposits and expenditure ICICI bank has better managing efficiency than SBI.

Kumbirai, M. and Webb, R. (2010) investigates the performance of South Africa‟s commercial
banking sector for the period 2005- 2009. Financial ratios are employed to measure the
profitability, liquidity and credit quality performance of five large South African based
commercial banks. The study found that overall bank performance increased considerably in the
first two years of the analysis. A significant change in trend is noticed at the onset of the global
financial crisis in 2007, reaching its peak during 2008-2009. This resulted in falling profitability,
low liquidity and deteriorating credit quality in the South African Banking sector.

Mohi-ud-Din Sangmi; Nazir, T. (2010) stated that sound financial health of a bank is the
guarantee not only to its depositors but is equally significant for the shareholders, employees and
whole economy as well. As a sequel to this maxim, efforts have been made from time to time, to
measure the financial position of each bank and manage it efficiently and effectively. In this
paper, an effort has been made to evaluate the financial performance of the two major banks
operating in northern India .This evaluation has been done by using CAMEL Parameters, the
latest model of financial analysis. Through this model, it is highlighted that the position of the
banks under study is sound and satisfactory so far as their capital adequacy, asset quality,
Management capability and liquidity is concerned.

Nathwani , Nirmal(2004) This study emphases on the financial performance of all the
commercial banks of the country for the period of five years from the year 1997-1998 to 2001-
2002. The aim of this study is to understand and to find out different types of efficiency level of
all the commercial banks in India. The operational efficiency reveals the performance of banks
regarding operational aspects. The profitability tells about banks financial strength with the same
and other banking groups in the industry. The productivity parameter indicates the labour
productivity of the employees of a bank. The credit efficiency parameter shows how the given
credits are efficient and what will be the effect on solvency of the bank. All these parameters
have been taken with different ratios for the period of five years.

Sanjeev Kumar Srivastaw (2013), to analyze the selected foreign and new private sector banks
operating in India by using financial ratios.

Anurag (2012), The purpose of the study is to examine the financial performance of SBI and
ICICI Bank, public sector and private sector respectively. The data used for the study was
entirely secondary in nature. The present study is conducted to compare the financial
performance of SBI and ICICI Bank on the basis of ratios such as credit deposit, net profit
margin etc. The period of study taken is from the year 2007-08 to 2011-12. The study found that
SBI is performing well and financially sound than ICICI Bank but in context of deposits and
expenditure ICICI bank has better managing efficiency than SBI.

Vradi, Vijay, Mauluri, Nagarjuna (2006), in his study on´ Measurement of efficiency of bank in
India concluded that in modern world performance of banking is more important to stable the
economy .in order to see the efficiency of Indian banks we have see the fore indicators i.e.
profitability, productivity, assets, quality and financial management for all banks includes public
sector, private sector banks in India for the period 2000 and 1999 to 2002-2003. For measuring
efficiency of banks we have adopted development envelopment analysis and found that public
sectors banks are more efficient then other banks in India.

Pai (2006) in his paper entitled “Trends in the Indian Banking Industry: Analyses of Inter-
regional Trends in Deposits and Credits” reveals that the performance of banks, as far as deposits
and credits are concerned at two point of time, has been largely similar. It was also observed that
private scheduled commercial banks had shown superior performance. This would challenge the
pre-eminent position of the public sector banks. The regions studied also reveal that their
growths on these parameters, at the two points in time, have been comparable between
themselves.

Harish Kumar Singla (2008) it is concerned with examining the profitability position of the
selected sixteen banks (BANKEX-based) for a period of five years (2000-01 to 2006-2007). The
study reveals that the profitability position was reasonable during the period of study when
compared with the previous years. Return on Investment proved that the overall profitability and
the position of selected banks were sustained at a moderate rate. From the study of the financial
performance analysis of selected banks, it can be concluded that the financial positions of banks
is reasonable. Debt equity ratio is maintained at an adequate level throughout and NPAs also
witnessed a decline during the study period. The ROI remains at a very low position, which is a
worrying factor. We can conclude that the banking sector, which is going through major reforms,
is one of the emerging sectors and will grow at a sustained rate over a period of time
Profitability, efficiency and liquidity of the co-operative banks.

Junxun Dai [Link], (2009) has presented a comparative analysis of matched sample, univariate and
multivariate methods by using variety of empirical methods. Further author take a sample case
study in which author focus on corporate governance character of 437 banks with an appropriate
proxy. Author explains the two measures of banks‟ prior performance, a q-ratio and return on
assets (ROA). q is the ratio of the market value to the replacement cost of a firm‟s asset, if q is
interpreted as the ratio of the bank‟s value as an ongoing concern to its liquidation value, q =
(total assets market value of equity book value of equity)/(total assets market value of investment
securities and book value of investment securities). Government banks agree to merger
systematically benefits, targets, shareholders and outside investors. Author fined a greater
frequency of outside block holders in the banks that become target, for large non-investors,
shareholders who encourage banks to act in shareholders‟ best interest.

In the analysis regarding financial performance of State Bank of India for the year 2000-2012
based on parameters of different ratios like Capital Adequacy Ratios, Asset Quality Ratios,
Capability Ratios, Profitability Ratios and Liquidity Ratios, the researcher has investigated that
the bank’s financial performance has been almost progressive over the operational periods
considered for the study.

So the study highlights the points where the banks need to proliferate and sustain that
development in the realm of financial performance (Aravind & Nagamani, 2013).

GAP IDENTIFICATION:

Apart from literature review mentioned above there are enormous numbers of research which
have analyzed profitability and financial performance of different sector of banks time to time
with suitable parameters as per the objectives that they have stated in their research work. This
research work is on research gap i.e. to extend from evaluation of profitability to identifying the
reason or factors responsible for better or poor profitability and performance in between different
sector of banks.

CONCEPTUAL FRAMEWORK OF RESEARCH:

INTRODUCTION AND MEANING OF PROFITABILITY OF BANK:

Profitability depicts the relationship of the absolute amount of profit with various other factors.
Profitability is a relative concept, which is quite useful in decision making. Another main issue
here is profit planning, which consists of various steps to be taken to improve the profitability of
the bank. The word “Profitability” is composed of two words viz. Profit and Ability‟. The terms
“Ability showed the power of the business firm to earn profits. The term Ability is also referred
to as “earning power” or “Operating Performance” of the concerned investment. It can be
remarked that “Profitability‟ is helpful in providing a useful basic for measuring tool in point of
view performance and overall efficiency for Indian banking. Profitability is the most important
and reliable indicator as it gives a broad indication of the ability of a bank to raise its income
level.

Profit is the very reason for the continued existence of every commercial organization. The rate
of profitability and volume of profits are therefore, rightfully considered as indicators of
efficiency in the deployment of resources of banks.

Profitability indicates earning capacity of the banks. It highlights the managerial competency of
the banks. It also portrays work culture, operating efficiency of the bank. A number of factors
affect profitability of banks. Some of these are endogenous, some are exogenous and yet
structural. The profitability analysis of commercial banks used to be a frustrating experience as
the financial statements of banks concealed much and revealed less. However, now a day, after
liberalization under pressure from regulatory agencies and the public, the trend has changed. So
now, the profitability analysis of commercial banks means something. The financial statements
of commercial banks are now prepared keeping in mind are the various changes, so they reveal
each aspect.

The present trend of low and declining profitability can be arrested and reversed if the remedial
measures are tried in right direction to ease the pressure on profitability.

Profitability ratios are the most important and appropriate indicators for the evaluation of the
financial performance of a bank. Profitability ratios serve as an important measurement of the
efficiency with which the operations of the banks are going on. In case of banking industry
income, assets, deposits and working funds can be used as measures for finding out profitability.

FINANCIAL PERFORMANCE:
The performance of the firm can be measured by its financial results, i.e., by its size of earnings
Riskiness and profitability are two major factors which jointly determine the value of the
concern. Financial decisions which increase risks will decrease the value of the firm and on the
other hand, financial decisions which increase the profitability will increase value of the firm.
Risk and profitability are two essential ingredients of a business concern.

There has been a considerable debate about the ultimate objective of firm performance, whether
it is profit maximization or wealth maximization. It is observed that while considering the firm
performance, the profit and wealth maximization are linked and are effected by one-another.

FINANCIAL ANAYSIS:

Financial analysis is the approach to judge the effectiveness of the finance function of a firm.
Financial analysis is the process of determining the significant operating and financial
characteristics of a firm from accounting data. The profit and loss account and balance sheet are
indicators of two significant factors-profitability and financial soundness. Analysis of statement
means such a treatment of the information contained in the two statements as to afford a full
diagnosis of the profitability and financial position of the firm concerned. Financial statement
analysis is largely a study of relationship among the various financial factors in a business as
disclosed by a single set of statements.

FINANCIAL STATEMENT:

In order to take right decision at right time, the management is equipped with sufficient past and
present information about the firm and its operations. Much of the information that is used by the
management is derived from the financial statement is known as financial information.

The financial statement contains summarized information of the firm’s financial affairs,
organized systematically. They are means to present the firm’s financial situation to users.
Financial statements are the outcome of summarizing process of accounting. It is prepared for
the purpose of presenting a periodical review or reports on the progress by the management and
deal with the status of the investments in the business and results achieved during the period
under review.

According to John N. Mayer, “The financial statement provides a summary of the accounts of
business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain
date and the income statement showing the results of operations during a certain period”.

Objectives of Financial Statements:

The objectives of financial statements are as:

 To serve as the basis for future operations.

 To provide sufficient financial information to various parties interested in financial statements

to analyze and to make economic decisions.

 To provide financial data on economic resources and obligations of any concern.

 To reveal implications of operating profit of a concern.

 To present fair and true view of the business.

VARIOUS FINANCIAL STATEMENTS:

1. Profit And Loss Account (Statement of Income): Profit and loss account presents the
summary of revenues, expenses and net Income (or net loss) of a firm. It is prepared usually for a
period of twelve months. The earning capacity and potential of a firm are reflected by profit and
loss account. If revenue is more than expenses the result is profit, if expenses are more than
revenue the result is loss.

2. Balance Sheet (Position Statement): Balance sheet is the most important financial statement,
which indicates the financial position of the firm at a particular date. It communicates
information about assets, liabilities and owners equity. To make balance sheet more meaningful
to reader, assets and liabilities are grouped on its nature.
(A) The Balance Sheet Serves The Following Important Functions:

 It gives a concise summary of the firm’s resources and liabilities and owners’ equity.

 It is a measure of the firm’s liquidity.

 It is a measure of the firm’s solvency.

3. Statement of Retained Earnings:

It is also called P & L appropriation account. As the name suggests it does the company earn an
appropriation of profits. The previous year balance of profit is first brought forward and the net
profit for the current year is added to it. From this dividend declared both on equity and
preference share capital, the amount transferred to general reserve or development rebate reserve
or any other reserve are appropriation. The balance of this account is shown in the balance sheet.
Therefore cannot be appropriate without profits.

4. Fund flow statement: The fund flow statement shows the various sources and application of
funds. The Fund Flow Statement is a financial statement which reveals the methods by which the
business has been financed and how it has used its funds between the opening and closing
balance sheet dates. Thus, it is a report non movement of funds explaining where from working
capital originates and where into the same goes during an accounting period. The “fund” refers to
the working capital or net current assets (CA – CL). This statement shows the various sources
from which fund has been raised and the uses to which this was put. This statement improves the
understanding of the operation and activities of an enterprise for the reporting period. These
statements is also great importance to creditors and owner’s as it enable them to obtain
information concerning financing and investing activity of the business enterprises and the
consequent changes in its financial position for a period.

5. Cash Flow Statement: A cash flow statement it designed to indicate changes in financial
position of enterprises on cash basis. It summarizes the causes for change in cash position of
business enterprises between two balance sheet dates. It shows the movement of cash into and
out of a business by listing the sources of cash receipts and uses or disbursement of cash the
difference being the “Net Cash Flow”. Cash flow statement is an essential tool for analysing
short-term financial solvency. With the help of this, management can evaluate its ability to its
obligations, such as repayment of loans, payment to creditors, and payment of interest, dividend
and taxes.

6. Schedules: A number of schedules are prepared to supplement the information supplied in the
balance sheet. The schedules of investments, fixed assets, debtors and Creditors etc., are
prepared generally by business enterprises.

PERSONS INTERESTED IN FINANCIAL STATEMENT:

The following parties are interested in financial statements:

Owners: The owners provide funds or capital for the organization. They possess curiosity in
knowing whether the business is being conducted on sound lines or not and whether the capital is
being employed properly or not. Owners, being businessmen, always keep an eye on the returns
from the investment. Comparing the accounts of various years helps in getting good piece of
information.

Management: The management of the business is greatly interested in knowing the position of
the firm. The accounts are the basis, on which the management can study the merits and demerits
of the business activity. Thus, the management is interested in financial statement to find
whether the business carried on is profitable or not. The financial statements are the “eyes and
ears of management and facilitate in drawing future course of action, further expansions etc.” for
taking sound decisions and also framing the policies and procedure in future.

Creditors: Creditors are the persons who supply goods on credit, or bankers or lenders of money.
They include both long term and short term creditors. These groups are interested to know the
financial soundness before granting credit. The progress and prosperity of the firm, to which
credits are extended, are largely watched by creditors from the point of view of security and
further credit. Profit and loss account and balance sheet are nerve centres to know the soundness
of the firm.
Employees: Payment of bonus depends upon the size of profit earned by the firm more important
point is that the workers expect regular income for the bread. The demand for wage rise, bonus,
better working conditions etc., depends upon the profitability of the firm and in turn depends
upon financial position. For these reasons, this group is interested in financial statements.

Investors: The prospective investors, who want to invest their money in a firm, of course wish to
see the progress and prosperity of the firm, before investing their money. They include both
short-term and long-term investors. They are the suppliers of basic capital to run the business
they sacrifice their present consumption for investment, expecting for future benefits. So, the
investors analyse the company performance through the financial statement of the firm. This is to
safeguard the investment. For this purpose, this group is eager to go through the accounting
statements which enable them to know the safety of investment.

Government: Big concern like company it is compulsory to prepare financial statement

according section 209 of the Indian Companies Act and how to be published in its annual
reports. The small business concern will prepare voluntary to be known. Its result and financial
position. Financial statements are used by various government department like income tax, sales
tax, excise duty, etc., to determine the tax liability of the company.

Other Interested Groups: Financial statement also served the needs of many other user groups
like stock exchanges, banks, consumers, etc.

FINANCIAL STATEMENT ANALYSIS:

Financial statements are prepared primarily for decision making. The statements are not an end
in themselves, but are useful in decision making. Financial analysis is the process of determining
the significant operating and financial characteristics of a firm from accounting data. The profit
and loss account and balance sheet are indicators of two significant factors – profitability and
financial soundness. Financial statement analysis is largely a study of relationship among the
various financial factors in a business as disclosed by a single set of statements and a study of the
trend of these factors as shown in a series of statements. The main function of financial analysis
is the pinpoint of the strength and weakness of a business undertaking by regrouping and
analysis of figures contained in the financial statements, by making comparisons of various
components and examining their content. The financial statements are the best media of
documenting the results of managerial efforts to the owners of the business, its employees, its
customers and the public at large and thus become excellent tools of the public relations.

The analysis of financial statements provides valuable information for managerial decisions.
Financial statement doesn’t speak anything. It merely contains financial about business events.
The user may gain from these data through his/her own analysis and interpretation of the
information.

Steps in Financial Statement Analysis:

 Determination of objectives and scope of analysis.

 Study of financial statements.

 Collection of relevant information.

 Arrangement of data.

 Analysis of data.

 Interpretation, presentation and preparation of reports.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS ;

For analysis of financial statements, they should be rearranged to reveal the relative significance
and effect of various items of data in relation to time period and for making inter-firm
comparison while rearranging the data. Logical relationship and sequence should be given
consideration. The analysis of financial statements will help in interpretation and logical
conclusions. The important techniques used in analysis of financial statements are as follows:

 Comparative Financial Statements

 Common – size Statements

 Ratio Analysis

Comparative Financial Statements:

Comparison of financial statements is one of the very important tools of analysis of financial
statements. It has been seen that balance sheet and profit and loss accounts are the two most
important financial statements. In these statements figures for two or more periods are placed
side by side to facilitate comparison. These statements render comparison between two periods
of time, exhibit the magnitude and direction of historical changes in the operating result i.e.,
comparative income statement and financial statement i.e., comparative balance sheet of a
business.

Financial statements of two or more firms may also be compared for drawing inferences. This is
known as inter-firm comparison. The comparative statements reveal the followings:

a) Absolute data (money value or rupee amount)

b) Increase or reduction in absolute data in terms of money value

c) Increase or reduction in absolute data in terms of percentage.

Comparative Income Statement-

It shows the absolute figures for two or more period and the absolute change from one period to
another. Since the figures are shown side by side, the user can quickly understand the operational
performance of the firm in different periods and draw conclusions.

Comparative Balance Sheet-

Balance sheets as on two or more different dates are used for comparing the assets, liabilities and
the net worth of the company. Comparative balance sheet is useful for studying the trends of an
undertaking.

Common Size Statements:

It is a type of comparative financial statements in which each item of the financial statement is
expressed as a percentage of the appropriate total. The appropriate total is taken as 100% and
each item is shown as a proportion of this 100%. Such a statement is known as 100% statement
or ‘vertical analyses. It should be noted that when a comparative statement is prepared for a
number of years to show the trend. It is known as ‘Horizontal Analysis’. A common size
statement may be prepared for balance sheet as well as income statement.13 Common size
income statement analysis is stating every line item on the income statement as a percentage of
sales, if more than one year of financial data, compare income statements to see financial
progress. This type of analysis will see how the revenues and the spending on different types of
expenses change from one year to the next. The items of the income statement as a percentage of
sales figures, it is easy to compare the income and expenses and understand the financial position
of the company. Common size analysis is an excellent tool to compare companies of different
sizes or to compare different years of data for the same company. Common size analysis is not as
detailed as trend analysis using ratios. It does not provide enough data for sophisticated investing
decisions. For managers of small businesses who do not have a lot of formal education in
financial management, vertical analysis provides a simple way for them to analyze their financial
statements. Under this statement all figures are converted into a common unit by expressing
them as a percentage of key figures in the statement. Assets and liabilities are shown as
percentage of total assets and total equities respectively in common size balance sheet.

Two components of the common size financial statement are:

1. Balance sheet

2. Income statement

When both these components are clubbed together, a common size financial statement is
obtained.

Ratio Analysis:

Though a simple procedure of comparing the financial and operative data as under the first three
methods or tools of analysis and interpretation is possible and useful, the real picture becomes
clear only when the relationship between the two items having cause and effect relationship with
each other is worked out and compared .

The ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of the firm. Analysis and
interpretation of various accounting ratios gives a skilled and experienced analyst, a better
understanding of the financial condition and performance of the firm than what he/she could
have obtained only through a perusal of financial statements.

Objectives of Ratio Analysis:

Accounting ratios are true test of the profitability, efficiency and financial soundness of the
company. These ratios have the following objectives.

 Facilitating comparative analysis of the performance

 Helpful in budgeting and forecasting

 Assessing the efficiency of the business

 Measurement of the profitability

 Judgment the operational efficiency of management

 Measuring short and long term financial position of the company

 Indicator of true efficiency

 Helpful in simplifying accounting figures.

Importance of Ratio Analysis:

 Ratios act as an index of efficiency of a firm

 They serve as an instrument of management control

 They are useful in evaluating performance

 They facilitate and help in forecasting future events

 They help management in exercising effective decisions

 They help management in take corrective actions

 They facilitate intra firm comparisons

 They play effective role for easy and clear communications

 To ensure secrecy

 They facilitate inter-firm comparisons.

Steps Involved in the Ratio Analysis:

1. Selection of relevant data from the financial statements depending upon the objective of the
analysis.

2. Calculation of appropriate ratios from the above data.

3. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios
developed from projected financial statements or the ratios of some other firms or the
comparison with ratios of the industry to which the firm belongs.

4. Interpretation of the ratios.

Guidelines for use of Ratios:

The calculation of ratios may not be difficult task but their use is not easy. The information on
which these are based, the constraints of financial statements, objective for using them, the
caliber of the analyst, etc., are important factors which influence the use of ratios.

1. Accuracy of Financial Statements:

The ratios are calculated from the data available in financial statements. The reliability of
ratios is linked to the accuracy of information in these statements. Before calculating ratios
one should see whether proper concepts and conventions have been used for preparing
financial statements or [Link] statements should also be properly audited by competent
auditors. The precautions will establish the reliability of data given in financial statements.

2. Objective of Analysis:

The type of ratios to be calculated will depend upon the purpose of which these are required.
If the purpose is to study current financial position then ratios relating to current assets and
current liabilities will studied. This purpose of “user” is also important for the analysis of
ratios. A creditor, a banker, an investor, a share holder, all has different objects for studying
ratios. The purpose or object for which ratios are required to be studied should always be
kept in mind for studying various ratios. Different objects may require the study of different
ratios.

3. Selection of Ratios:

Another precaution in ratio analysis is the proper selection of appropriate ratios. The ratios
should match the purpose for which these are required. Calculation of large number of ratios
without determining their need in the present context may confuse the things instead of
solving them. Only those ratios should be selected which can throw proper light on the matter
to be discussed.

4. Use of Standards:

The ratios will give an indication of financial position, only when discussed with reference
to certain standards. Unless otherwise these ratios are compared with certain standards one
will not be able to reach at conclusions. These standards may be rule of thumb as in case of
current ratio (2:1) and acid – test ratio (1:1), may be industry standards, may be budgeted or
projected ratios, etc., the comparison of calculated ratios with the standards will help the
analyst in forming his opinion about financial situation of the concern.

5. Caliber of the Analyst:

The ratios are only the tools of analysis and their interpretation will depend upon the caliber
and competence of the analyst. He should be familiar with various financial statements and
the significance of changes, etc., a wrong interpretation may create havoc for the concern
since wrong conclusions may lead to wrong decision. The utility of ratios is linked to the
expertise of the analyst.

6. Ratios Provide Only Base:

The ratios are only guidelines for the analyst, he/she should not base his decisions entirely
on them. He/she should study any other relevant information, situation in the concern,
general economic environment, etc., before reaching final conclusions. They study of ratios
in isolation may not always prove useful. A businessman will not afford a single wrong
decision because it may have far-reaching consequences. The interpretation should use the
ratios as guide and may try to solicit any other relevant information which helps in reaching
a correct decision.

Users of Ratio Analysis:

 Utility to shareholders/investors

 Utility to creditors

 Utility to employees

 Utility to government

 Utility to financial institutions.

 Other users

Advantages of Ratio Analysis:

1. Simplifies Financial Statements: Ratio analysis simplifies the comprehension of financial

statements. Ratios tell the whole story of changes in the financial condition of the business.
2. Facilitates Inter-firm Comparison: Ratio analysis provides data for inter-firm comparison.
Ratios highlight the factors associated with successful firms. They also reveal strong firms
and weak firms, overvalued and under-valued firms.

3. Makes Intra-firm Comparison Possible: Ratio analysis also makes possible comparison
of the performance of the different divisions of the firm. The ratios are helpful in deciding
about their efficiency or otherwise in the past and likely performance in the future.

4. Helps in Planning: Ratio analysis helps in planning and forecasting. Over a period of
time, a firm or industry develops certain norms that may indicate future success or failure. If
relationship changes in firm’s data over different time periods, the ratios may provide clues
on trends and future problems. Thus, “ratios can assist management in it s basic function of
forecasting, planning, co-ordination, control and communication”.

5. Useful in Judging the Efficiency of a Business: The ratios help in judging the efficiency
of a business liquidity, solvency, profitability etc. of a business can be easily evaluated with
the help of various accounting ratios like current ratio, liquid ratio, debt-equity ratio, net
profit ratio, etc., such an evaluation enables the management to judge the operating
efficiency of the various aspects of the business.

Limitations of Ratio Analysis:

1. Comparative Study Required: Ratios are useful in judging the efficiency of the business
only when they are compared with the past results of the business or with the result of a
similar business. However, such a comparison only provides a glimpse of the past
performance and forecast for future may not be correct since several other factors like
market conditions, management policies, etc., may affect the future operations.

2. Limitations of Financial Statements: Ratios are based only on the information which has
been recorded in the financial statements. As indicated that financial statement suffer from a
number of limitations, the ratios derived there from therefore, are also subject to those
limitations.
3. Ratios Alone are not Adequate: Ratios are only indicators they cannot be taken as final
regarding good or bad financial position of the business. Other things have also to be seen.
The value of a ratio should not be regarded as good or bad inter say. It may be an indication
that a firm is weak or strong in a particular area, but it must never be taken as proof. “Ratios
may be linked to railroad. They tell the analyst, “stop, look and listen”.

4. Window Dressing: The term window dressing means manipulation of accounts in a way
so as to conceal vital facts and present the financial statements in a way to show a better
position than what it actually is. On account of such a situation, presence of a particular ratio
may not be a definite indicator of good or bad management.

5. Problem of Price Level Changes: Financial analysis based on accounting ratios will give
misleading results, if the effects of changes in price level are not taken into account.

6. Ratios Ignore Qualitative Factors: Ratios are as a matter of fact, tools of quantitative
analysis. It ignores qualitative factors which sometimes are equally or rather more important
than the quantitative factor. As a result of this, conclusions from ratio analysis may be
distorted.
 CHAPTER-3

INDUSTRY AND COMPANY PROFILE

NDUSTRY PROFILE

INTRODUCTION TO BANKING SECTOR:

A bank is a financial institution that provides banking and other financial services to their
customers. A bank is generally understood as an institution which provides fundamental banking
services such as accepting deposits and providing loans. There are also nonbanking institutions
that provide certain banking services without meeting the legal Banks are a subset of the
financial services industry. A banking system also referred as a system provided by the bank
which offers cash management services for customers, reporting the transactions of their
accounts and portfolios, throughout the day. The banking system in India, should not only be
hassle free but it should be able to meet the new challenges posed by the technology and any
other external and internal factors. For the past three decades, India’s banking system has several
outstanding achievements to its credit. The Banks are the main participants of the financial
system in India.

Before the establishment of banks, the financial activities were handled by money lenders and
individuals. At that time the interest rates were very high. Again there were no security of public
savings and no uniformity regarding loans. So as to overcome such problems the organized
banking sector was established, which was fully regulated by the government. The organized
banking sector works within the financial system to provide loans, accept deposits and provide
other services to their customers.

The Banking sector offers several facilities and opportunities to their customers. All the banks
safeguards the money and valuables and provide loans, credit, and payment services, such as
checking accounts, money orders, and cashier’s cheques. The banks also offer investment and
insurance products. As a variety of models for cooperation and integration among finance
industries have emerged, some of the traditional distinctions between banks, insurance
companies, and securities firms have diminished. In spite of these changes, banks continue to
maintain and perform their primary role—accepting deposits and lending funds from these
deposits.

HISTORY OF INDIAN BANKING SECTOR

The first bank in India, called The General Bank of India was established in the year 1786. The
East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay (1840)
and Bank of Madras (1843). The next bank was Bank of Hindustan which was established in
1870. These three individual units (Bank of Calcutta, Bank of Bombay, and Bank of Madras)
were called as Presidency Banks. Allahabad Bank which was established in 1865, was for the
first time completely run by Indians. Punjab National Bank Ltd. was set up in 1894 with head
quarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of
Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. In 1921, all presidency
banks were amalgamated to form the Imperial Bank of India which was run by European
Shareholders. After that the Reserve Bank of India was established in April 1935. At the time of
first phase the growth of banking sector was very slow. Between 1913 and 1948 there were
approximately 1100 small banks in India. To streamline the functioning and activities of
commercial banks, the Government of India came up with the Banking Companies Act, 1949
which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act
No.23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of
banking in India as a Central Banking Authority. After independence, Government has taken
most important steps in regard of Indian Banking Sector reforms. In 1955, the Imperial Bank of
India was nationalized and was given the name "State Bank of India", to act as the principal
agent of RBI and to handle banking transactions all over the country. It was established under
State Bank of India Act, 1955. Seven banks forming subsidiary of State Bank of India was
nationalized in 1960. On 19th July, 1969, major process of nationalization was carried out. At
the same time 14 major Indian commercial banks of the country were nationalized. In 1980,
another six banks were nationalized, and thus raising the number of nationalized banks to 20.
Seven more banks were nationalized with deposits over 200 Crores. Till the year 1980
approximately 80% of the banking segment in India was under government’s ownership. On the
suggestions of Narsimhan Committee, the Banking Regulation Act was amended in 1993 and
thus the gates for the new private sector banks were opened. The following are the major steps
taken by the Government of India to Regulate Banking institutions in the country:-

1949 : Enactment of Banking Regulation Act.

1955 : Nationalisation of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalisation of 14 major Banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalisation of seven banks with deposits over 200 Crores.

Nationalisation

By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer, and
a debate has ensured about the possibility to nationalise the banking industry. Indira Gandhi, the-
then Prime Minister of India expressed the intention of the Government of India (GOI) in the
annual conference of the All India Congress Meeting the GOI issued an ordinance and
nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969.
Jayaprakash Narayan, a national leader of India, described the step as a "Masterstroke of
political sagacity" Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the
presidential approval on 9 August, 1969. A second step of nationalisation of 6 more commercial
banks followed in 1980. The stated reason for the nationalisation was to give the government
more control of credit delivery. With the second step of nationalisation, the GOI controlled
around 91% of the banking business in India. Later on, in the year 1993, the government merged
new Bank of India with Punjab National Bank. It was the only merger between nationalised
banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this,
until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average
growth rate of the Indian economy. The nationalised banks were credited by some; including
Home minister P. Chidambaram, to have helped the Indian economy withstand the global
financial crisis of 2007-2009.

Liberalisation :

There are two areas of competitions which banking industry is facing internationally and
nationally. In the early 1990s, the then Narsimha Rao government embarked on a policy of
liberalisation, licensing a small number of private banks. In the pre-liberalization era, Indian
banks could grow in a closed economy but the banking sector opened up for private competition.
It is possible that private banks could become dominant players even within India. These came to
be known as New Generation techsavvy banks, and included Global Trust Bank (the first of such
new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce,
Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move along with the rapid
growth in the economy of India revolutionized the banking sector in India which has seen rapid
growth with strong contribution from all the three sectors of banks, namely, government banks,
private banks and foreign banks. The new policy shook the banking sector in India completely.
Use of ATM cards, Internet Banking, Phone Banking, Mobile Banking are the new innovative
channels of banking which are being widely used as they result in saving both time and money
which are two essential things that everyone is short of and is running to catch hold of them.
Moreover private sector banks are aligning its infrastructures, marketing quality and technology
to build deep commitment in building consumer and retail banking. The main focus of these
banks is on innovative range of services or products. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government. The stated policy of the Bank on
the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly
been true. With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail banking,
mortgages and investment services are expected to be strong.

2.1.3 CLASSIFICATION OF BANKING INDUSTRY IN INDIA

Indian banking industry has been divided into two parts, organized and unorganized sectors. The
organized sector consists of Reserve Bank of India, Commercial Banks and Co-operative Banks,
and Specialized Financial Institutions (IDBI, ICICI, IFC etc). The unorganized sector, which is
not homogeneous, is largely made up of money lenders and indigenous [Link] outline of the
Indian Banking structure may be presented as follows:

[Link] bank of India

The reserve bank of India is a central bank and was established in April 1, 1935 in accordance
with the provisions of reserve bank of India act 1934. The central office of RBI is located at
Mumbai since inception. Though originally the reserve bank of India was privately owned, since
nationalization in 1949, RBI is fully owned by the Government of India. It was inaugurated with
share capital of Rs. 5 Crores divided into shares of Rs. 100 each fully paid up.

RBI is governed by a central board (headed by a governor) appointed by the central government
of India. RBI has 22 regional offices across India. The reserve bank of India was nationalized in
the year 1949. The RBI Act 1934 was commenced on April 1, 1935. The Act, 1934 provides the
statutory basis of the functioning of the bank. The bank was constituted for the need of
following:
- To regulate the issues of banknotes.

- To maintain reserves with a view to securing monetary stability

- To operate the credit and currency system of the country to its advantage.

Functions of RBI as a central bank of India are explained briefly as follows:

Bank of Issue: The RBI formulates, implements, and monitors the monitory policy. Its main
objective is maintaining price stability and ensuring adequate flow of credit to productive
sector.

Regulator-Supervisor of the financial system: RBI prescribes broad parameters of banking

operations within which the country’s banking and financial system functions. Their main
objective is to maintain public confidence in the system, protect depositor’s interest and provide
cost effective banking services to the public.
Manager of exchange control: The manager of exchange control department manages the
foreign exchange, according to the foreign exchange management act, 1999. The manager’s
main objective is to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.

Issuer of currency: A person who works as an issuer, issues and exchanges or destroys the
currency and coins that are not fit for circulation. His main objective is to give the public
adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role: The RBI performs the wide range of promotional functions to support
national objectives such as contests, coupons maintaining good public relations and many more.

Related functions: There are also some of the related functions to the above mentioned main
functions. They are such as, banker to the government, banker to banks etc.

• Banker to government performs merchant banking function for the central and the state
governments; also acts as their banker.

• Banker to banks maintains banking accounts to all scheduled banks.

Controller of Credit: RBI performs the following tasks:

• It holds the cash reserves of all the scheduled banks.

• It controls the credit operations of banks through quantitative and qualitative controls.

• It controls the banking system through the system of licensing, inspection and calling for
information.

• It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Supervisory Functions: In addition to its traditional central banking functions, the Reserve Bank
performs certain non-monetary functions of the nature of supervision of banks and promotion of
sound banking in India
2. Indian Scheduled Commercial Banks

The commercial banking structure in India consists of scheduled commercial banks, and
unscheduled banks.

Scheduled Banks: Scheduled Banks in India constitute those banks which have been included in
the second schedule of RBI act 1934. RBI in turn includes only those banks in this schedule
which satisfy the criteria laid down vide section 42(6a) of the Act. “Scheduled banks in India”
means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955),
a subsidiary bank as defined in the s State Bank of India (subsidiary banks) Act, 1959 (38 of
1959), a corresponding new bank constituted under section 3 of the Banking companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a
bank included in the Second Schedule to the Reserve bank of India Act, 1934 (2 of 1934), but
does not include a co-operative

bank”. For the purpose of assessment of performance of banks, the Reserve Bank of India
categories those banks as public sector banks, old private sector banks, new private sector banks
and foreign banks, i.e. private sector, public sector, and foreign banks come under the umbrella
of scheduled commercial banks.

Commercial Banks: Commercial banks may be defined as, any banking organisation that deals
with the deposits and loans of business organisations. Commercial banks issue bank checks and
drafts, as well as accept money on term deposits. Commercial banks also act as moneylenders,
by way of installment loans and overdrafts. Commercial banks also allow for a variety of deposit
accounts, such as checking, savings, and time deposit. These institutions are run to make a profit
and owned by a group of individuals.

Public Sector Banks : The Public sector banks are those where govt holdings are more than 50%
while nationalized banks are those banks which were nationalized in 1969 and 1980. Thus all
nationalized banks are public sector banks. Thus in total 27 PSB's are there Examples of public
sector banks are: SBI, Bank of India, Canara Bank, etc.
Private Sector Banks: These are banks majority of share capital of the bank is held by private
individuals. These banks are registered as companies with limited liability.

“Private banks" can also refer to non-government owned banks in general, in contrast to
government-owned (or nationalized) banks, which were prevalent in communist, socialist and
some social democratic states in the 20th century. Private banks as a form of organisation should
also not be confused with "Private Banks" that offer financial services to high net worth
individuals and others.

Private banks are banks that are not incorporated. A private bank is owned by either an
individual or a general partner(s) with limited partner(s). In any such case, the creditors can look
to both the "entirety of the bank's assets" as well as the entirety of the soleproprietor's/general-
partners' assets. These are the major players in the banking sector as well as in expansion of the
business activities India. Reserve Bank of India (RBI) came in picture in 1935 and became the
centre of every other bank taking away all the responsibilities and functions of Imperial bank.
The share of the private bank branches stayed nearly same between 1980 and 2000. Then from
early 1990’s, RBI's liberalization policy came in picture and with this the government gave
licenses to a few private banks, which came to be known as new private sector banks.

Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.

Foreign Banks: These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Now, foreign banks in India are permitted to set up local
subsidiaries. The policy conveys that foreign banks in India may not acquire Indian ones (except
for weak banks identified by the RBI, on its terms) and their Indian subsidiaries will not be able
to open branches freely. Foreign banks have brought latest technology and latest banking
practices in India. Government has come up with a road map for expansion of foreign banks in
India. Examples of foreign banks in India are: HSBC, Citibank, Standard Chartered Bank, JP
MorganChase Bank etc.
Regional Rural Bank: The government of India set up Regional Rural Banks (RRBs) on October
2, 1975 . The banks provide credit to the weaker sections of the rural areas, particularly the
small and marginal farmers, agricultural laborers, and small entrepreneurs. Initially, five RRBs
were set up on October 2, 1975 which was sponsored by Syndicate Bank, State Bank of India,
Punjab National Bank, United Commercial Bank and United Bank of India. The total authorized
capital was fixed at Rs. 1 Crore which has since been raised to Rs. 5 Crores. There are several
concessions enjoyed by the RRBs by Reserve Bank of India such as lower interest rates and
refinancing facilities from NABARD like lower cash ratio, lower statutory liquidity ratio, lower
rate of interest on loans taken from sponsoring banks, managerial and staff assistance from the
sponsoring bank and reimbursement of the expenses on staff training. The RRBs are under the
control of NABARD. NABARD has the responsibility of laying down the policies for the
RRBs, to oversee their operations, provide refinance facilities, to monitor their performance and
to attend their problems.

Co-operative Banks: Co-operative banks are small-sized units organized in the cooperative
sector which operate both in urban and non-urban centers. These banks are traditionally centered
around communities, localities and work place groups and they essentially lend to small
borrowers and businesses. A co-operative bank is a financial entity which belongs to its
members, who are at the same time the owners and the customers of their bank. Co-operative
banks are often created by persons belonging to the same local or professional community or
sharing a common interest. Co-operative banks generally provide their members with a wide
range of banking and financial services (loans, deposits, banking accounts, etc).they provide
limited banking products and are specialists in agriculture-related products. Cooperative banks
are the primary financiers of agricultural activities, some small-scale industries and self-
employed workers. Co-operative banks function on the basis of "no profit no-loss". Anyonya Co-
operative Bank Limited (ACBL) is the first co-operative bank in India located in the city of
Vadodara in Gujarat.
Primary credit societies: These are formed in small locality like a small town or a village. The
members using this bank usually know each other and the chances of committing fraud is
minimal. Central cooperative banks: These banks have their members who belong to the same
district. They function as other commercial banks and provide loans to their members. They act
as a link between the state cooperative banks and the primary credit societies. State cooperative
banks: these banks have a presence in all the states of the country and have their presence
throughout the state.

SERVICES PROVIDED BY BANKING ORGANISATIONS :

Banking Regulation Act in India, 1949 defines banking as “Accepting” for the purpose of

lending or investment of deposits of money from the public, repayable on demand and

withdrawable by cheques, drafts, orders etc. as per the above definition a bank essentially

performs the following functions:-

• Accepting Deposits or savings functions from customers or public by providing bank account,
current account, fixed deposit account, recurring accounts etc.

• The payment transactions like lending money to the public. Bank provides an effective credit
delivery system for loanable transactions.

• Provide the facility of transferring of money from one place to another place. For performing
this operation, bank issues demand drafts, banker’s cheques, money orders etc. for transferring
the money. Bank also provides the facility of Telegraphic transfer or tele- cash orders for quick
transfer of money.

• A bank performs a trustworthy business for various purposes.

• A bank also provides the safe custody facility to the money and valuables of the general public.
Bank offers various types of deposit schemes for security of money. For keeping valuables bank
provides locker facility. The lockers are small compartments with dual locking system built into
strong cupboards. These are stored in the bank’s strong room and are fully secured.
• Banks act on behalf of the Govt. to accept its tax and non-tax receipt. Most of the government
disbursements like pension payments and tax refunds also take place through banks.

There are several types of banks, which differ in the number of services they provide and the
clientele (Customers) they serve. Although some of the differences between these types of banks
have lessened as they have begun to expand the range of products and services they offer, there
are still key distinguishing traits.

These banks are as follows:

Commercial banks, which dominate this industry, offer a full range of services for individuals,
businesses, and governments. These banks come in a wide range of sizes, from large global
banks to regional and community banks.

Global banks are involved in international lending and foreign currency trading, in addition to
the more typical banking services.

Regional banks have numerous branches and automated teller machine (ATM) locations
throughout a multi-state area that provide banking services to individuals. Banks have become
more oriented toward marketing and sales. As a result, employees need to know about all types
of products and services offered by banks.

Community banks are based locally and offer more personal attention, which many individuals
and small businesses prefer. In recent years, online banks—which provide all services entirely
over the Internet—have entered the market, with some success. However, many traditional banks
have also expanded to offer online banking, and some formerly Internet-only banks are opting to
open branches.

Savings banks and savings and loan associations, sometimes called thrift institutions, are the
second largest group of depository institutions. They were first established as community-based
institutions to finance mortgages for people to buy homes and still cater mostly to the savings
and lending needs of individuals.
Credit unions are another kind of depository institution. Most credit unions are formed by people
with a common bond, such as those who work for the same company or belong to the same
labour union or church. Members pool their savings and, when they need money, they may
borrow from the credit union, often at a lower interest rate than that demanded by other financial
institutions.

Federal Reserve banks are Government agencies that perform many financial services for the
Government. Their chief responsibilities are to regulate the banking industry and to help
implement our Nation’s monetary policy so our economy can run more efficiently by controlling
the Nation’s money supply—the total quantity of money in the country, including cash and bank
deposits. For example, during slower periods of economic activity, the Federal Reserve may
purchase government securities from commercial banks, giving them more money to lend, thus
expanding the economy. Federal Reserve banks also perform a variety of services for other
banks. For example, they may make emergency loans to banks that are short of cash, and clear
checks that are drawn and paid out by different banks. The money banks lend, comes primarily
from deposits in checking and savings accounts, certificates of deposit, money market accounts,
and other deposit accounts that consumers and businesses set up with the bank. These deposits
often earn interest for their owners, and accounts that offer checking, provide owners with an
easy method for making payments safely without using cash. Deposits in many banks are insured
by the Federal Deposit Insurance Corporation, which guarantees that depositors will get their
money back, up to a stated limit, if a bank should fail.

FUNCTIONS Of BANKS :

A. Primary Functions of Banks

The primary functions of a bank are also known as banking functions. They are the main
functions of a bank. These primary functions of banks are explained below.

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be of different types, such as :-
a. Saving Deposits

b. Fixed Deposits

c. Current Deposits

d. Recurring Deposits

Saving Deposits :

This type of deposits encourages saving habit among the public. The rate of interest is low.
Withdrawals of deposits are allowed subject to certain restrictions. This account is suitable to
salary and wage earners. This account can be opened in single name or in joint names.

Fixed Deposits :

Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid,
which varies with the period of deposit. Withdrawals are not allowed before the expiry of the
period. Those who have surplus funds go for fixed deposit.

Current Deposits :

This type of account is operated by businessmen. Withdrawals are freely allowed. No interest is
paid. In fact, there are service charges. The account holders can get the benefit of overdraft
facility.

Recurring Deposits :

This type of account is operated by salaried persons and petty traders. A certain sum of money is
periodically deposited into the bank. Withdrawals are permitted only after the expiry of certain
period. A higher rate of interest is paid.

2. Granting of Loans and Advances :The bank advances loans to the business community and
other members of the public. The rate charged is higher than what it pays on deposits. The
difference in the interest rates (lending rate and the deposit rate) is its profit.
The types of bank loans and advances are :-

a. Overdraft

b. Cash Credits

c. Loans

d. Discounting of Bill of Exchange

a. Overdraft :

This type of advances are given to current account holders. No separate account is maintained.
All entries are made in the current account. A certain amount is sanctioned as overdraft which
can be withdrawn within a certain period of time say three months or so. Interest is charged on
actual amount withdrawn. An overdraft facility is granted against a collateral security. It is
sanctioned to businessman and firms.

b. Cash Credits :

The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current
account holders as well as to others who do not have an account with bank. Separate cash credit
account is maintained. Interest is charged on the amount withdrawn in excess of limit. The cash
credit is given against the security of tangible assets and / or guarantees. The advance is given for
a longer period and a larger amount of loan is sanctioned than that of overdraft.

c. Loans :

It is normally for short term say a period of one year or medium term say a period of five years.
Now-a-days, banks do lend money for long term. Repayment of money can be in the form of
installments spread over a period of time or in a lumpsum amount. Interest is charged on the
actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly lower
than what is charged on overdrafts and cash credits. Loans are normally secured against tangible
assets of the company.
d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills of exchange both domestic
and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of the bill by
deducting usual discount charges. On maturity, the bill is presented to the drawee or acceptor of
the bill and the amount is collected.

B. Secondary Functions of Banks

The bank performs a number of secondary functions, also called as non-banking [Link]
important secondary functions of banks are explained below.

1. Agency Functions

The bank acts as an agent of its customers. The bank performs a number of agency functions
which includes :-

a. Transfer of Funds

b. Collection of Cheques

c. Periodic Payments

d. Portfolio Management

e. Periodic Collections

f. Other Agency Functions

THEY ARE:

a. Transfer of Funds :

The bank transfer funds from one branch to another or from one place to another.

b. Collection of Cheques :
The bank collects the money of the cheques through clearing section of its customers. The bank
also collects money of the bills of exchange.

c. Periodic Payments :

On standing instructions of the client, the bank makes periodic payments in respect of electricity
bills, rent, etc.

d. Portfolio Management :

The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients
and accordingly debits or credits the account. This facility is called portfolio management.

e. Periodic Collections :

The bank collects salary, pension, dividend and such other periodic collections on behalf of the
client. f. Other Agency Functions

They act as trustees, executors, advisers and administrators on behalf of its clients. They act as
representatives of clients to deal with other banks and institutions.

2. General Utility Functions :

The bank also performs general utility functions, such as :-

a. Issue of Drafts, Letter of Credits, etc.

b. Locker Facility

c. Underwriting of Shares

d. Dealing in Foreign Exchange

e. Project Reports
f. Social Welfare Programmes

g. Other Utility Functions

a. Issue of Drafts and Letter of Credits :

Banks issue drafts for transferring money from one place to another. It also issues letter of credit,
especially in case of, import trade. It also issues travellers' cheques.

b. Locker Facility :

The bank provides a locker facility for the safe custody of valuable documents, gold ornaments
and other valuables.

c. Underwriting of Shares :

The bank underwrites shares and debentures through its merchant banking division.

d. Dealing in Foreign Exchange :

The commercial banks are allowed by RBI to deal in foreign exchange.

e. Project Reports :

The bank may also undertake to prepare project reports on behalf of its clients.

f. Social Welfare Programmes:

It undertakes social welfare programmes, such as adult literacy programmes, public welfare
campaigns, etc.

g. Other Utility Functions :

It acts as a referee to financial standing of customers. It collects creditworthiness information

about clients of its customers. It provides market information to its customers, etc. It provides
travellers' cheque facility.

WORK STRESS IN BANKING SECTOR:

Occupational stress is becoming increasingly globalized and affects all countries, all professions
and all categories of workers, as well as families and society in general (Ahmad and Ahmad,
1992). Every employee is prone to stress either knowingly or unknowingly. Banking
professionals are no exemption from this. During the past decade, the banking sector had under
gone rapid and striking changes like policy changes, increased competition due to the entrance of
more private sector banks, introduction of new technologies, etc. Due to these changes, the
employees in the banking sector are experiencing a high level of stress. Bank employees admit
that stress is affecting their jobs, family life and health. Unpredictable economy, pressure to
maintain profitability and increased responsibilities are main causes of stress.

According to a study conducted by Associated Chambers of Commerce and Industry of India

(ASSOCHAM), it has been found that banks are the top 10 high stress workplace in recent times.
Due to globalization and liberalization, the banking sector had undergone substantial policy
changes, in response to the changes that have been taking place in the social, political, economic
and technological environments. In addition to meeting the increasing demands from the
traditional markets, new markets have been brought into the banking sector, entailing in the
process the adoption of new marketing practices, calling for an entirely new approach and a
significant change in the market attitude.

Entry of new private and foreign banks, non-banking financial institutions, technological
changes, downsizing, appointment of contract labor and VRS are some of the important
challenges that the bank employees are facing increasingly. Due to these rapid and striking
changes, the employees in the banking sector are experiencing a high level of stress.. Increased
competition, growing customer demands, prompt customer service, time pressure, targets and
role conflicts are the main factors of stress to bank employees.

Bankers are under a great deal of stress and due to many antecedents of stress such as Overload,
Role ambiguity, Role conflict, Responsibility for people, Participation, Lack of feedback,
Keeping up with rapid technological change, Being in an innovative role, Career development,
Organisational structure and climate, and Recent episodic events.
COMPANY PROFILE
COMPANY PROFILE

PUBLIC SECTOR BANKS:

[Link] BANK OF INDIA :

SBI

Type Public

Traded as NSE: SBIN
BSE: 500112
LSE: SBID
[[BSE SEN X|BSE
SENSEX Constituent]]
CNX Nifty Constituent
Industry Banking, financial services
Founded 2 June 1806, Bank of
Calcutta
27 January 1921, Imperial
 Bank of India
1 July 1955, State Bank of
India
2 June 1956, nationalization
Headquarters Mumbai, Maharashtra, India
Area served Worldwide
Key people Rajnish Kumar (Chairman)
Products Consumer banking, corporate
banking, finance and
insurance, investment
banking, mortgage loans, private
banking, private equity,
savings, securities, asset
management, wealth management,
credit cards
Revenue

₹210,979 crore (US$31 billion)
(2017)
Operating
income ₹50,848 crore (US$7.6 billion)
(2017)
Net income ₹10,484 crore (US$1.6 billion)
(2017)
Total assets

₹3,445,121 crore(US$510 billion)
(2017)
Total equity ₹2.171 trillion (US$32 billion)
(2016)
Owner Government of India (61.23%)
Number of 278,872 (2017)
 employees

State Bank of India (SBI) is an Indian multinational, public sector banking and financial

services company. It is a government-owned corporation headquartered in Mumbai,
Maharashtra. The company is ranked 217th on the Fortune Global 500 list of the world's biggest
corporations as of 2017. It is the largest bank in India with a 23% market share in assets, besides
a share of one-fourth of the total loan and deposits market. 

The bank descends from the Bank of Calcutta, founded in 1806, via the Imperial Bank of India,
making it the oldest commercial bank in the Indian subcontinent. The Bank of Madras merged
into the other two "presidency banks" in British India, the Bank of Calcutta and the Bank of
Bombay, to form the Imperial Bank of India, which in turn became the State Bank of India in
1955. The Government of India took control of the Imperial Bank of India in 1955, with Reserve
Bank of India (India's central bank) taking a 60% stake, renaming it the State Bank of India. In
2008, the government took over the stake held by the Reserve Bank of India.

HISTORY:

The roots of the State Bank of India lie in the first decade of the 19th century, when the Bank of
Calcutta later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal
was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15
April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks
were incorporated as joint stock companies and were the result of royal charters. These three
banks received the exclusive right to issue paper currency till 1861 when, with the Paper
Currency Act, the right was taken over by the Government of India. The Presidency banks
amalgamated on 27 January 1921, and the re-organised banking entity took as its name Imperial
Bank of India. The Imperial Bank of India remained a joint stock company but without
Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India,
which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 1
July 1955, the imperial Bank of India became the State Bank of India. In 2008, the Government
of India acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest
because the RBI is the country's banking regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made SBI
subsidiaries of eight that had belonged to princely states prior to their nationalization and
operational takeover between September 1959 and October 1960, which made eight state banks
associates of SBI. This une with the first Five Year Plan, which prioritised the development of
rural India. The government integrated these banks into the State Bank of India system to expand
its rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of
Bikaner (est.1944).
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI
acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of
Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram
Baldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of
Maharaja Madho Rao Scindia. The bank had been the Dukan Pichadi, a small moneylender,
owned by the Maharaja. The new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI
acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its
affiliate, the State Bank of Travancore, already had an extensive network in Kerala.
There has been a proposal to merge all the associate banks into SBI to create a single very large
bank and streamline operations. The first step towards unification occurred on 13 August 2008
when State Bank of Saurashtra merged with SBI, reducing the number of associate state banks
from seven to six. On 19 June 2009, the SBI board approved the absorption of State Bank of
Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares prior to its
takeover by the government hold the balance of 1.7%.)
The acquisition of State Bank of Indore added 470 branches to SBI's existing network of
branches. Also, following the acquisition, SBI's total assets will approach ₹10 trillion. The total
assets of SBI and the State Bank of Indore were ₹9,981,190 million as of March 2009. The
process of merging of State Bank of Indore was completed by April 2010, and the SBI Indore
branches started functioning as SBI branches on 26 August 2010.
On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed
Chairperson of the bank.  Mrs. Bhattacharya received an extension of two years of service to
merge into SBI the five remaining associated banks.

OPERATIONS:

SBI provides a range of banking products through its network of branches in India and overseas,
including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal
Offices that are located at important cities throughout India.

DOMESTIC PRESENCE:
SBI has 18,354 branches in India. In the financial year 2012–13, its revenue was ₹2.005
trillion (US$30 billion), out of which domestic operations contributed to 95.35% of revenue.
Similarly, domestic operations contributed to 88.37% of total profits for the same financial year.
Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government in
August 2014, SBI held 11,300 camps and opened over 3 million accounts by September, which
included 2.1 million accounts in rural areas and 1.57 million accounts in urban areas.
INTERNATIONAL PRESENCE:

As of 2014–15, the bank had 191 overseas offices spread over 36 countries having the largest
presence in foreign markets among Indian banks.
SBI operates several foreign subsidiaries or affiliates.
In 1989, SBI established an offshore bank: State Bank of India International (Mauritius) Ltd in
Mauritius. SBI International (Mauritius) Ltd amalgamated with The Indian Ocean International
Bank, which has been doing retail banking business in Mauritius since 1979 with the new name,
SBI (Mauritius) Ltd. Today, SBI (Mauritius) Ltd is having fully integrated 14 branches- 13
Retail Branches covering major cities and town of Mauritius, including Rodrigues, and 1 Global
Business Branch at Ebene in Mauritius. Apart from Branch Banking, customers also have the
convenience of 24x7 ATM Banking at 18 ATMs across the country. Bank also has a 24x7 robust
Internet Banking Channel enabling customers to work from their homes and offices.  SBI Sri
Lanka now has three branches located in Colombo, Kandy and Jaffna. The Jaffna branch was
opened on 9 September 2013. SBI Sri Lanka, the oldest bank in Sri Lanka, celebrated its 150th
year in Sri Lanka on 1 July 2014.
In 1982, the bank established a subsidiary, State Bank of India, which now has ten branches—
nine branches in the state of California and one in Washington, D.C. The 10th branch was
opened in Fremont, California on 28 March 2011. The other eight branches in California are
located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and
Bakersfield.
In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo–Nigerian
Merchant Bank and received permission in 2002 to commence retail banking. It now has five
branches in Nigeria.
In Nepal, SBI owns 49% of SBI Nepal (State Bank in Nepal) share with Nepal Government
owing the rest and SBI NEPAL has branches throughout the country in each and every city as
banking has become the major part of daily life for Nepalese people.
In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest.
In Indonesia, it owns 76% of PT Bank Indo Monex.
The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.
In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8
million in October [Link] January 2016, SBI opened its first branch in Seoul, South Korea
following the continuous and significant increase in trade due to the Comprehensive Economic
Partnership Agreement signed between New Delhi and Seoul in 2009.

FORMER ASSOSCIATE BANKS:

SBI acquired the control of seven banks in 1960. They were the seven regional banks of former
Indian princely states. They were renamed, prefixing them with 'State Bank of'. These seven
banks were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State
Bank of Indore (SBN), State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of
Saurashtra (SBS) and State Bank of Travancore (SBT). All these banks were given the same logo
as the parent bank, SBI.
The plans for making SBI a single very large bank by merging the associate banks started in
2008, and in September the same year, SBS merged with SBI. The very next year, State Bank of
Indore (SBN) also merged. In the same year, a subsidiary named Bharatiya Mahila Bank was
formed. The negotiations for merging of the 6 associate banks (State Bank of Bikaner and
Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of
Travancore and Bharatiya Mahila Bank) by acquiring their businesses including assets and
liabilities with SBI started in 2016. The merger was approved by the Union Cabinet on 15 June
2016. The State Bank of India and all its associate banks used the same blue Keyhole logo. The
State Bank of India wordmark usually had one standard typeface, but also utilized other
typefaces.
On 15 February 2017, the Union Cabinet approved the merger of five associate banks with SBI.
What was overlooked, however, were different pension liability provisions and accounting
policies for bad loans, based on regional risks. The State Bank of Bikaner & Jaipur, State Bank
of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore,
and Bharatiya Mahila Bankwere merged with State Bank of India with effect from 1 April 2017.

NON BANKING SUBSIDIARIES:

Apart from its five associate banks (merged with SBI since April 1, 2017), SBI also has the
following non-banking subsidiaries:

 SBI Capital Markets Ltd

 SBI Funds Management Pvt Ltd
 SBI Factors & Commercial Services Pvt Ltd
 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI DFHI Ltd
 SBI Life Insurance Company Limited
 SBI General Insurance

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the
remaining capital), to form a joint venture life insurance company named SBI Life Insurance
company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its
headquarters in Mumbai.

Other SBI service points:

As of 31 March 2017, SBI group (including associate banks) has 59,291 ATMs.

Since November 2017, SBI also offers an integrated digital banking platform named YONO.
LISTING AND SHAREHOLDING:
As on 31 March 2017, Government of India held around 61.23% equity shares in SBI. The Life
Insurance Corporation of India, itself state-owned, is the largest non-promoter shareholder in the
company with 8.82% shareholding.

Shareholders Shareholding

Promoters: Government of
61.23%
India

FIIs/GDRs/OCBs/NRIs 11.17%

Banks & Insurance Companies 10.00%

Mutual Funds & UTI 8.29%

Others 9.31%

Total 100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a constituent of
the BSE SENSEX index, and the National Stock Exchange of India, where it is a constituent of
the CNX Nifty. Its Global Depository Receipts (GDRs) are listed on the London Stock
Exchange.
EMPLOYEES:
SBI is one of the largest employers in the country with 209,567 employees as on 31 March 2017,
out of which there were 23% female employees and 3,179 (1.5%) employees with disabilities.
On the same date, SBI had 37,875 Scheduled Castes (18%), 17,069 Scheduled Tribes (8.1%)
and 39,709 Other Backward Classes (18.9%) employees. The percentage of Officers, Associates
and Sub-staff was 38.6%, 44.3% and 16.9% respectively on the same date. Around 13,000
employees have joined the Bank in FY 2016-17. Each employee contributed a net profit
of ₹511,000 (US$7,600) during FY 2016-17.
RECENT REWARDS AND RECOGNITIONS:

 SBI was ranked as the top bank in India based on tier 1 capital by The Banker magazine
in a 2014 ranking.
 SBI was ranked 232nd in the Fortune Global 500 rankings of the world's biggest
corporations for the year 2016.
 SBI was named the 29th most reputed company in the world according to Forbes 2009
rankings.
 SBI was 50th most trusted brand in India as per the Brand Trust Report 2013,an annual
study conducted by Trust Research Advisory, a brand analytics company and subsequently,
in the Brand Trust Report 2014, SBI finished as India's 19th most trusted brand in India.

State Bank of India

Balance Sheet as at 31st March, 2020

(000s omitted)
Schedule As at As at 31.03.2019
No. 31.03.2020 (Previous Year)
(Current `
Year)
`
CAPITAL AND LIABILITIES
Capital 1 892,46,12 892,46,12
 Reserves & Surplus 2 231114,96,63 220021,36,33
Deposits 3 3241620,73,43 2911386,01,07
Borrowings 4 314655,65,21 403017,11,82
Other Liabilities and Provisions 5 163110,10,41 145597,29,55
TOTAL 3951393,91,8 3680914,24,8
0 9
ASSETS
Cash and Balances with Reserve Bank of India 6 166735,77,90 176932,41,75
Balances with Banks and money at call and short notice 7 84361,22,64 45557,69,40
Investments 8 1046954,51,75 967021,94,75
Advances 9 2325289,56,07 2185876,91,77
Fixed Assets 1 38439,28,18 39197,56,94
0
Other Assets 1 289613,55,26 266327,70,28
1
TOTAL 3951393,91,8 3680914,24,8
0 9
Contingent Liabilities 1 1214994,60,69 1116081,45,94
2
Bills for Collection - 55758,16,19 70022,53,97
Significant Accounting Policies 1
7
Notes to Accounts 1
8
Schedules referred to above form an integral part of the Balance Sheet.

BALANCE SHEET OF SBI:

Mar 18 Mar 17 Mar 16

12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 892.46 797.35 776.28
Total Share Capital 892.46 797.35 776.28
Revaluation Reserve 24,847.99 31,585.65 0.00
Reserves and Surplus 193,388.12 155,903.06 143,498.16
Total Reserves and Surplus 218,236.10 187,488.71 143,498.16
Total ShareHolders Funds 219,128.56 188,286.06 144,274.44
Deposits 2,706,343.29 2,044,751.39 1,730,722.44
Borrowings 362,142.07 317,693.66 224,190.59
Other Liabilities and Provisions 167,138.08 155,235.19 159,875.57
Total Capital and Liabilities 3,454,752.00 2,705,966.30 2,259,063.03
ASSETS
Cash and Balances with Reserve Bank of India 150,397.18 127,997.62 129,629.33
Balances with Banks Money at Call and Short
41,501.46 43,974.03 37,838.33
Notice
Investments 1,060,986.72 765,989.63 477,097.28
Advances 1,934,880.19 1,571,078.38 1,463,700.42
Fixed Assets 39,992.25 42,918.92 10,389.28
Other Assets 226,994.20 154,007.72 140,408.41
Total Assets 3,454,752.00 2,705,966.30 2,259,063.03
OTHER ADDITIONAL INFORMATION
Number of Branches 22,414.00 17,170.00 16,784.00
Number of Employees 264,041.00 209,567.00 207,739.00
Capital Adequacy Ratios (%) 13.00 13.00 13.00
KEY PERFORMANCE INDICATORS
Tier 1 (%) 10.00 10.00 10.00
Tier 2 (%) 2.00 3.00 3.00
ASSETS QUALITY
Gross NPA 223,427.46 112,342.99 98,172.80
Gross NPA (%) 11.00 7.00 7.00
Net NPA 110,854.70 58,277.38 55,807.02
Net NPA (%) 6.00 4.00 4.00
Net NPA To Advances (%) 6.00 4.00 4.00
CONTINGENT LIABILITIES, COMMITMENTS
Bills for Collection 195,266.85 65,640.42 199,140.17
Contingent Liabilities 1,040,781.75 1,046,440.93 865,027.48

State Bank Of India

Profit and Loss Account for the Year Ended 31st March, 2020
 ( 000s omitted)
Schedule Year Year
No. End End
ed ed
31.0 31.0
3.20 3.20
20 19
(Cur (Pre
rent viou
Year s
) Year
` )
`
I. INCOME
Interest earned 13 2573 2428
23,5 68,6
9,22 5,35
Other Income 14 4522 3677
1,47, 4,88,
80 78
TOTAL 302 279
545, 643,
07,0 54,1
2 3
II. EXPENDITURE
Interest expended 15 1592 1545
38,7 19,7
6,57 7,80
Operating expenses 16 7517 6968
3,69, 7,73,
02 74
Provisions and contingencies 5364 5457
4,50, 3,79,
37 61
TOTAL 288 278
056, 781,
95,9 31,1
6 5
III. PROFIT
Net Profit for the year 1448 862,
8,11, 22,9
06 8
Profit/ (Loss) brought forward (152 (150
26,0 78,5
5,54) 6,86)
TOTAL (737 (142
,94, 16,3
48) 3,88
)
IV. APPROPRIATIONS
Transfer to Statutory Reserve 4346 258,
,43,3 66,8
2 9
Transfer to Capital Reserve 3985 379,
,83,9 20,7
3 6
 Transfer to Investment Fluctuation Reserve 1119 -
,88,0
9
Transfer to Revenue and other Reserves 308, 371,
20,3 84,0
9 1
Balance carried over to Balance Sheet (104 (152
98,3 26,0
0,21) 5,54)
TOTAL (737 (142
,94, 16,3
48) 3,88
)
V. EARNINGS PER EQUITY SHARE
(Face value ` 1 per share)
Basic (in `) 16.2 0.97
3
Diluted (in `) 16.2 0.97
3
Significant Accounting Policies 17
Notes to Accounts 18
The schedules referred to above form an integral part of the Profit & Loss Account.

PROFIT AND LOSS ACCOUNT OF SBI:

Mar 18 Mar 17 Mar 16

INCOME
Interest / Discount on Advances / Bills 141,363.17 119,510.00 115,666.01
Income from Investments 70,337.62 48,205.31 42,303.98
Interest on Balance with RBI and Other Inter-
2,250.00 1,753.47 621.07
Bank funds
Others 6,548.53 6,049.46 5,094.25
Total Interest Earned 220,499.32 175,518.24 163,685.31
Other Income 44,600.69 35,460.93 28,158.36
Total Income 265,100.00 210,979.17 191,843.67
EXPENDITURE
Interest Expended 145,645.60 113,658.50 106,803.49
Payments to and Provisions for Employees 33,178.68 26,489.28 25,113.82
Depreciation 2,919.47 2,293.31 1,700.30
Operating Expenses (excludes Employee Cost
23,845.30 17,690.18 14,968.24
& Depreciation)
Total Operating Expenses 59,943.45 46,472.77 41,782.37
Provision Towards Income Tax 673.54 4,033.29 3,577.93
Provision Towards Deferred Tax -9,654.33 337.78 245.47
Other Provisions and Contingencies 75,039.20 35,992.72 29,483.75
Total Provisions and Contingencies 66,058.41 40,363.79 33,307.15
Total Expenditure 271,647.46 200,495.07 181,893.01
Net Profit / Loss for The Year -6,547.45 10,484.10 9,950.65
Net Profit / Loss After EI & Prior Year
-6,547.45 10,484.10 9,950.65
Items
Profit / Loss Brought Forward 0.32 0.32 0.32
Transferred on Amalgamation -6,407.69 0.00 0.00
Total Profit / Loss available for
-12,954.83 10,484.42 9,950.98
Appropriations
APPROPRIATIONS
Transfer To / From Statutory Reserve 0.00 3,145.23 2,985.20
Transfer To / From Capital Reserve 3,288.88 1,493.39 345.27
Transfer To / From Revenue And Other
-1,165.14 3,430.55 4,267.35
Reserves
Dividend and Dividend Tax for The Previous
0.00 0.00 0.01
Year
Equity Share Dividend 0.00 2,108.56 2,018.32
Tax On Dividend 0.00 306.38 334.51
Balance Carried Over To Balance Sheet -15,078.57 0.32 0.32
Total Appropriations -12,954.83 10,484.42 9,950.98
OTHER INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) -7.67 13.43 12.98
Diluted EPS (Rs.) -7.67 13.43 12.98
DIVIDEND PERCENTAGE
Equity Dividend Rate (%) 0.00 260.00 260.00
 PRIVATE SECTOR BANK:
BANK OF BARODA:

HDFC BANK
Type Public

Traded as BSE:532134
NSE: BANKBARODA

Industry Banking, financial
services

Founded  20 July 1908,

Vadodara, Gujarat
Headquarters
India[
Area served India

Hasmukh Adhia
Key people (Chairman)
Sanjiv Chadha

Products Credit cards, consumer

banking, corporate
banking, finance and
insurance, investment
banking, mortgage
loans, private
banking, private
equity,wealth
management

Revenue  ₹45,800
crore (US$6.4 billion) (2021)

Operating  ₹22,683
income crore (US$3.2 billion) (2021)

Net  ₹1,548
income crore (US$220 million) (202
1)

Total  ₹1,202,676
assets crore (US$170 billion) (2021
)

Total  ₹81,354
 equity crore (US$11 billion) (2021)

Owner Government of
India (63.97%)

Number 84,283 (2020)
of
employee
s

Bank of Baroda (BoB) (BSE: 532134) (Hindi: बैंक ऑफ़ बड़ौदा) is the third largest bank in India, after
the State Bank of India and the Punjab National Bank and ahead of ICICI Bank.[3] BoB is
ranked 763 in Forbes Global 2000 list. BoB has total assets in excess of Rs. 3.58 lakh crores, or
Rs. 3,583 billion, a network of over 3,409 branches and offices, and about 1,657 ATMs. It plans
to open 400 new branches in the coming year. 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. Its total business was Rs. 5,452 billion as of June 30.[4]
As of August 2010, the bank has 78 branches abroad and by the end of FY11 this number should
climb to 90. In 2010, BOB opened a branch in Auckland, New Zealand, and its tenth branch in
the United Kingdom. The bank also plans to open five branches in Africa. Besides branches,
BoB plans to open three outlets in the Persian Gulf region that will consist of ATMs with a
couple of people.
The Maharajah of Baroda, Sir Sayajirao Gaekwad III, founded the bank on 20 July 1908 in the
princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of
India, was nationalized on 19 July 1969, by the government of India.

HISTORY:

Bank of Baroda is an Indian state-owned International banking and financial services company
headquartered in Vadodara (earlier known as Baroda) in Gujarat, India. It is the second largest
bank in India, next to State Bank Of India. Its headquarters is in Vadodara, it has a corporate
office in the Mumbai.

PRODUCTS AND SERVICES:

Bank of baroda provides a number of products and services including wholesale banking, retail
banking, treasury, auto loans, two wheeler loans, personal loans, loans against property
and credit [Link] with this various digital products aand
ACQUISITIONS:
State-run Bank of Baroda on Sunday said it has completed integration of 3,898
branches of erstwhile Vijaya Bank and Dena Bank with itself. In a first three-way
amalgamation, Vijaya Bank and Dena Bank were merged with Bank of Baroda from
April 1, 2019.
LISTINGS AND SHAREHOLDING:
The equity shares of Bank of baroda are listed on the Bombay Stock Exchange and the National
Stock Exchange of India. Its American Depository Shares are listed on NYSE and the global
depository receipt are listed on the Luxembourg Stock Exchange where two GDRs represent one
equity share of Bank of baroda .

Holder's Name No of Shares % Share Holding

NoOfShares 5171362179 100%

Promoters 3308184689 63.97%

ForeignInstitutions 356245394 6.89%

NBanksMutualFunds 475929039 9.2%

Others 175256955 3.39%

GeneralPublic 509584755 9.85%

FinancialInstitutions 346161347 6.69%

AWARDS AND RECOGNITIONS:

 Bank of Baroda is awarded 'Golden Peacock HR Excellence Award' for the
year 2020 for Excellence in Human Resources Management. ...
 The L&D innovation platform and tech summit & awards 2020 - Best use of
Online Learning – Baroda Radio & Best Learning Platform implementation of the
year – Baroda Gurukul

Balance Sheet as at 31st March, 2017

SCHEDULE 31st March 2017 31st March 2016

CAPITAL & LIABILITIES
Capital 1 462,09,31 462,09,31
Reserves and Surplus 2 39841,16,02 39736,89,22
Deposits 3 601675,17,29 574037,87,22
Borrowings 4 30611,44,00 33471,70,02
Other Liabilities and Provisions 5 22285,55,73 23667,91,92
TOTAL 694875,42,35 671376,47,69
ASSETS
Cash and Balances with Reserve
bank of India 6 22780,21,33 21672,41,54
Balances with banks and money
at call and short notice 7 127689,69,92 112227,93,45
Investments 8 129630,53,96 120450,52,10
Advances 9 383259,22,31 383770,18,03
Fixed assets 10 5758,37,34 6253,77,56
Other assets 11 25757,37,49 27001,65,01
TOTAL 694875,42,35 671376,47,69
Contingent Liabilities 12 252518,96,05 228977,16,33
Bills for collection 37599,41,85 32343,74,34
Significant accounting policies 17
Notes on accounts 18

Balance Sheet as at 31st March, 2019

SCHEDULE 31st March 2019 31st March 2018
CAPITAL & LIABILITIES
Capital 1 530,36,44 530,36,44
Share application money
pending allotment 1A 5042,00,00 -
Reserves and Surplus 2 45410,73,29 42864,40,75
Deposits 3 638689,71,72 591314,82,24
Borrowings 4 67201,29,78 62571,97,19
Other Liabilities and Provisions 5 24113,29,26 22718,20,54
TOTAL 780987,40,49 719999,77,16
ASSETS
Cash and Balances with Reserve
bank of India 6 26661,72,83 22699,63,98
Balances with banks and money
at call and short notice 7 62567,88,71 70197,73,91
Investments 8 182298,08,18 163184,53,05
Advances 9 468818,73,62 427431,83,13
Fixed assets 10 6990,29,54 5367,39,22
Other assets 11 33650,67,61 31118,63,87
TOTAL 780987,40,49 719999,77,16
Contingent Liabilities 12 380312,98,46 298226,66,31
Bills for collection 49059,93,06 45779,69,17
Significant accounting policies 17
Notes on accounts 18
 Balance Sheet as at 31st March, 2020

SCHEDULE 31st March 2020 31st March 2019

CAPITAL & LIABILITIES
Capital 1 925,37,45 530,36,44
Share application money
pending allotment 1A 5042,00,00
Reserves and Surplus 2 70930,84,48 45410,73,29
Deposits 3 945984,42,56 638689,71,72
Borrowings 4 93069,30,58 67201,29,778
Other Liabilities and Provisions 5 47005,56,44 24113,29,26
TOTAL 1157915,51,51 780987,40,49
ASSETS
Cash and Balances with Reserve
bank of India 6 32645,85,26 26661,72,83
Balances with banks and money
at call and short notice 7 89255,26,75 62567,88,71
Investments 8 274614,61,39 182298,08,18
Advances 9 690120,73,40 468818,73,62
Fixed assets 10 8889,29,11 6990,29,54
Other assets 11 62389,75,60 33650,67,61
TOTAL 1157915,51,51 780987,40,49
Contingent Liabilities 12 320747,63,48 380312,98,46
Bills for collection 52009,73,51 49059,93,06
Significant accounting policies 17
Notes on accounts 18
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st March 2017

SCHEDULE 31st March 2017 31st March 2016

I INCOME
Interest earned 13 42199,92,98 44061,27,74
Other income 14 6758,06,09 4998,86,16
TOTAL 48957,99,07 49060,13,90
II EXPENDITURE
Interest expended 15 28686,51,91 31321,42,57
Operating expenses 16 9296,40,23 8923,13,71
Provisions and contingencies 9591,93,33 14211,11,35
TOTAL 47574,85,47 54455,67,63
III PROFIT / LOSS
Net profit/(loss) for the period 1383,13,60 (53,955,373)
Available for appropriation 1383,13,60 (53,955,373)
IV Appropriations / transfers
a)statutory reserve 345,78,39 0
b)capital reserve 353,64,92 0
c)revenue and other reserves
I) General reserve 0 (53,955,373)
II) Special reserve u/s
36(1)(viii)of the income 350,91,51 0
tax Act 1961
III) Investment reserve
account 0 0
IV) Transfer from excess
appropriation of
previous year 7,78,84
d) proposed dividend (including
dividend Tax) 332,78,78 0
TOTAL 1383,13,60 (53,877,489)
V) Earnings per equity
share
Basic & diluted earnings per
share (Nominal value per share 6.00 (23.89)
2)
Significant accounting policies 17
Notes on accounts 18
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st March 2019

31st March 2019 31st March 2018

I INCOME
Interest earned 13 49974,10,93 43648,54,18
Other income 14 6090,99,15 6657,15,27
TOTAL 56065,10,08 50305,69,45
II EXPENDITURE
Interest expended 15 31290,30,04 28126,76,69
Operating expenses 16 11287,97,81 10173,36,96
Provisions and contingencies 13053,29,98 14437,37,02
TOTAL 55631,57,83 52737,50,67
III PROFIT AND LOSS
Net profit/(loss) for the period 433,52,25 (2431,81,22)
Available for appropriation 433,52,25 (2431,81,22)
Appropriations / transfers
a)statutory reserve 108,38,06 -
b)capital reserve 210,36,34 -
c)revenue and other reserves
I) Investment
fluctuation reserve 21,57,83 -
II) General reserve - (2431,81,22)
III) Special reserve u/s
36(1)(viii)of the
income tax Act 182,08,00 -
1961
IV) Investment reserve
account (88,87,98) -
V) Transfer from
 excess -
appropriation of -
previous year
d) proposed dividend (including
dividend Tax) - -
TOTAL 433,52,25 (2431,81,22)
Basic earnings per share 1.64 (10.53)
Diluted earnings per share 1.41 (10.53)
Significant accounting policies 17
Notes on accounts 18

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st March 2020

SCHEDULE 31st March 2020 31st March 2019

I INCOME
Interest earned 13 75983,65,50 49770,60,60
Other income 14 10317,32,38 6294,49,48
TOTAL 86300,97,88 56065,10,08
II EXPENDITURE
Interest expended 15 48532,36,95 31290,30,04
Operating expenses 16 18077,19,09 31290,30,04
Provisions and contingencies 19145,23,09 13053,29,98
TOTAL 85754,79,13 55631,57,83
III PROFIT AND LOSS
Net profit/(loss) for the period 546,18,75 433,52,25
Available for appropriation 546,18,75 433,52,25
Appropriations / transfers
a)statutory reserve 136,54,69 108,38,06
b)capital reserve 822,24,62 210,36,34
c)revenue and other reserves
I) Investment
fluctuation reserve 215,783
II) General reserve (560,32,75) -
III) Special reserve u/s
36(1)(viii)of the
 income tax Act 180,00,00 182,08,00
1961
IV) Investment reserve (41,58,33) (88,87,98)
account
V) Statutory
reserve(foreign) 9,30,52 -
d) proposed dividend (including
dividend Tax) - -
TOTAL 546,18,75 433,52,25
VI) Earnings per equity
share
Basic earnings per share 1.36 1.64
Diluted earnings per share 1.36 1.41
Significant accounting policies 17
Notes on accounts 18
 CHAPTER-4
DATA ANALYSIS

ANALYSIS AND INTERPRETATION

[Link] RATIO:
YEARS 2020 2019 2018 2017 2016
SBI 0.30 0.33 0.39 0.37 0.33
BOB 0.25 0.29 0.28 0.22 0.21
 0.45

0.4

0.35

0.3

0.25
SBI
0.2 BOB

0.15

0.1

0.05

0
2016 2017 2018 2019 2020

INTERPRETATION:
The current ratio of SBI growth rate is 50% less than HDFC in 2014; it is equal in 2015,2016
;SBI growth rate is 1% more than HDFC in 2017 and at present in 2018 SBI is 50% more
than [Link] proves that SBI has a positive growth rate and the short term liquidity of
SBI is satisfactory.

[Link] RATIO:
YEARS 2020 2019 2018 2017 2016
SBI 12.5 13.84 13.38 15.54 18.68
BOB 8.6 10.58 10.58 5.09 5.83
 20

18

16

14

12

10 SBI
BOB
8

0
2016 2017 2018 2019 2020

INTERPRETATION:

The quick ratio of SBI in 2014 is greater than HDFC and in the following two years HDFC is
greater than [Link] 2017 the SBI is slightly greater than HDFC and in 2018 the quick ratio of
HDFC is [Link] proves that HDFC has a positive growth rate and short term financial
strength of SBI is not satisfactory.

[Link] PROFIT GROWTH :

YEARS 2020 2019 2018 2017 2016

SBI - 65.2 113.17 -162.45 5.36 -24.05
BOB 55.26 117.83 -275.82 125.64 -258.77
 150

100

50

0
2016 2017 2018 2019 2020
-50
SBI
BOB
-100

-150

-200

-250

-300

INTERPRETATION:

The net profit margin of HDFC is greater in every year when compare to SBI. In 2018,the SBI’s
net profit margin is in the negative [Link] proves that the Revenue performance and
standard performance of the business concern of SBI is low.

[Link] ON NET WORTH:

YEARS 2020 2019 2018 2017 2016

SBI 0.22 0.44 -3.73 6.67 7.30
BOB 0.25 0.97 -5.81 3.62 -14.40
 25

20

15

SBI
10
HDFC

0
2014 2015 2016 2017 2018

-5

INTERPRETATION:

The return on networth of HDFC is in the stable growth in the past five years,while coming to
SBI it is decreasing gradually and in 2018 it is in the negative position which effects on the
return on equity of the [Link] overall performance and effectiveness of SBI is not satisfactory.

[Link] ON ASSETS

YEARS 2020 2019 2018 2017 2016

SBI 0.01 0.02 -0.21 0.41 0.45
BOB 0.02 0.06 -0.34 0.20 -0.78
 0.6

0.4

0.2

0
2016 2017 2018 2019 2020
-0.2 SBI
BOB
-0.4

-0.6

-0.8

-1

INTERPRETATION:
The return on assets ratio of SBI is high in 2014, where HDFC is very low. In the following
years the SBI has a very low graph when it is compared with [Link] has a positive
growth. This proves that HDFC is generating positive result on the total assets.

[Link] DEPOSIT RATIO:

YEARS 2020 2019 2018 2017 2016

SBI 5.86 6.82 7.42 6.76 5.81
BOB 9.95 5.71 5.77 6.46 6.02
 12

10

6 SBI
BOB

0
2016 2017 2018 2019 2020

INTERPRETATION:

The cash deposit ratio of HDFC has positive growth in 2014,2015 and it was slightly decreased
in the following two years i.e,2016,[Link] 2018 the cash deposit ratio of HDFC is increased
twice when compare to the previous [Link] has a positive growth year on year but in 2018 it
is slightly [Link] proves that HDFC has created more cash assets from its deposits as
compared to the SBI.

G: NET INTEREST MARGIN SPEED:

6.23 5.91 6.47 6.33

YEARS `2020 2019 2018 2017 2016

 SBI 5.64 6.45 6.65 6.36 6.00

BOB 5.23 6.23 5.91 6.47 6.33

4
SBI
3 B0B

0
2016 2017 2018 2019 2020

INTERPRETATION:

The Net interest margin helpful to measure how well the bank is utilizing the funds invested in
it and used by external [Link] the above graph the NIM of HDFC is in positive growth
while comparing with [Link] performance of SBI is declining year on [Link] SBI should
focus on the utilization of funds.
[Link] EQUITY RATIO:

YEARS 2020 2019 2018 2017 2016

SBI 14.6 13.3 13.4 13.5 14.5
BOB 8.6 8.1 8.7 8.1 9.4

16

14

12

10

8 SBI
B0B
6

0
2016 2017 2018 2019 2020

INTERPRETATION:
The debt equity ratio is a financial ratio indicating the relative proportion of shareholder’s equity
and debt used to finance a company’s assets which is high for SBI when it is compared with
HDFC.
 CHAPTER-5

FINDINGS, SUGGESTIONS, CONCLUSION

FINDINGS:

1. The performance of SBI is in the positive growth in the aspect of current ratio when
compared to [Link] 2018, the short term solvency position of SBI is in standard
position, where HDFC is decreasing its ability to pay its short term obligations.
2. The quick ratio of HDFC is increasing year on year when compare to SBI .In this regard
the firms liquidity of SBI in 2018 has been decreased ,so it should focus on its current
liabilities and quick assets.
3. The Net profit margin of HDFC growth rate is increasing during 2014-2018, while SBI is
in negative rate. Higher the Net profit margin higher the [Link] is more efficient at
converting sales in to actual profit where SBI leads to loss.
4. The return on networth of HDFC is high at 2014 and for the following years it is
fluctuating and coming to SBI it is in negative [Link] shows that HDFC is utilizing its
money invested by shareholders and has higher efficiency in generating profit , while
SBI generating losses.
5. Return on assets of SBI in 2014 was highest but later it was declined drastically and
while HDFC was very slowly increasing its growth .HDFC is efficiently managing its
assets to generate profits comparing to SBI which performance is low.
6. Cash deposit ratio of SBI is in parabola situation ,where HDFC was same during 2016
and 2017 and in 2018 it has been increased [Link] proves that HDFC created more
cash assets from its deposits compared to state bank.
7. The Net interest margin of HDFC in 2014 was high and the following years were
[Link] net interest ratio of HDFC is in positive growth while SBI is [Link] shows that
SBI has not made an optimal investment decision because interest expenses exceed the
amount of returns generated by investments.
8. The Debt equity ratio of SBI is high which indicates that may not be able to generate
enough cash to satisfy its debt obligations. However, low debt equity ratio of HDFC
indicates that ,it is not taking advantages of the increased profits that financial leverage
may bring.
This shows that the liquidity, profitability and overall financial performance of HDFC is well
compared to SBI.


CONCLUSION:
The study leads to conclude that the profitability position of private sector bank was better
than public sector bank. Even though the cost of funds was same for both banks, private
sector banks have more spread because return on advances was satisfactory. It has resulted
the slightly high return on funds in private sector banks. Public sector banks need to increase
the spread by widening the gap between return on funds and cost of funds.
Bank should augment return on funds through extending appropriate advance schemes,
simplifying the advance procedure etc. At the same time they should also focus on reducing
the cost of funds with controlling cost of deposits and cost of borrowings. Considering the
ranking of banks, public sector banks are more stable and private sector banks are more
profitable under study period.
Thus, the overall performance of private sector banks is more satisfactory than public sector
banks.

SUGGESTIONS:
To do business in a competitive environment the PSBs need to further reorient themselves to
be more responsive to market dynamics.
• When compared to private sector banks, the PSBs are lagging in their transaction
technology. Business models would need to be recast, processes, reengineered, redundancies
removed, efficiency and productivity improved.
• Changing demographic life styles and affluence levels led to retail revolution in the recent
past banks are expected to come out with innovative and attractive offerings to capture this
potential.
• The banks should create new opportunities for mobilization of savings and in extending the
geographical and functional coverage of banks.
• The banks should bring about reduction in costs both capital as well as operational cost to
improve operation efficiency through intelligent adoption and use of technology.
• They should study the impact of loan policies of banks on their environment.
• The cost studies should be undertaken by the banks for evolving standards for cost control,
rationalization of service charges and evolving suitable methods for profitability analysis.

SUMMARY:
This comparative study of selected private bank(HDFC) and public bank(SBI) of India
demonstrated the comparative analysis of profitability and liquidity position of banks.
To compare the private and public bank the profitability and liquidity aspects are taken in
which current ratio, quick ratio, net profit margin, return on networth, return on assets, net
interest margin have been calculated to evaluate the short term financial strength of the
banks.
This study shows that the private bank is better than public bank,The study also offers
meaningful suggestions in order to improve short term solvency of the banks selected for the
study.
REFERENCES:
[Link] & chitwan Bhutan (2013), A Comparative Study on the Performance of Selected
Public Sector and Private Sector Banks in India , Blue ocean publication
2. Amandeep (1993), “Profit and Profitability in Commercial Banks” Deep and Deep
Publications, New Delhi.
3. Kaushik, Sanjay (1995), “Social Objectives and Profitability of Indian Banks”. Ph. D.
Thesis,UBS. P.U. Chandigarh.
4. Chandan, C. and Rajput, P. K. (2002): “Profitability Analysis of Banks in India – A
Multiple Regression Approach”, Indian Management Studies Journal, June, pp.119-129
[Link] (2006), EVALUATING BANKS PERFORMANCE USING KEY
FINANCIAL INDICATORS – A QUANTITATIVE MODELING OF RUSSIAN
BANKS , The journal of developing areas,volume 50
6. Mittal, R.K. and Dhingra,S. (2007). "Assessing The Impact of Computerization on
Productivity and Profitability of Indian Banks", [Link]
[Link]/v8n1/[Link]
[Link] shukla(2009), Analysis of Banking System Performance Of Select Global
Economies With That Of India - During And After The Global Financial ,
[Link]
8. [Link], “Evaluated the Profitability of Scheduled Commercial Banks”, Indian
Journal of Banking and Finance, Vol.5, 1992.
 9. Jha, D.K., and D.S. Sarangi, “Performance of New Generation Banks in India: A
Comparative Study”, International Journal of Research in Commerce and Management,
Vol. 2, No. 1, pp. 85-89, 2011.
10. Bansal, S. (2005), Impact of Liberalization on Productivity and Profitability of
Public Sector Banks in India, A Ph.D. Thesis submitted to UBS, Panjab University,
Chandigarh.
11. Singla, H. (2008), “Financial Performance of Banks in India”, The ICFAI Journal of
Bank Management, Vol.7, No.1, February, pp.50-62.
12. Verghese, S. (1983). Profits and Profitability of Indian Commercial Banks in
Seventies. Economic & Political Weekly, 18(48), 145-147,149-157
13. Garg, S. C. (1989). Indian Banking Cost and Profitability. New Delhi: Anmol
Publication.

14. Greuning, H. V., & Bratanovic, S. B. (2003). Analysing and Managing Banking Risk.
Washington: The World Bank.

15. Satyanarayana, K. (1995-96). Capital Restructuring and Profitability of Banks. Prajnan,

14(1), 34-49.

16. Nandy, D. (2011). A Multivariate Analysis Approach of Selecting Profitability Indicators -

An Empirical Study of Commercial Banks in India. ZENITH International Journal of
Multidisciplinary Research, 1(6), 1-18.

17. Mistry, D. S. (2012). A Comparative Study on the Profitability Performance in the Banking
Sector: Evidence from Indian Public Sector Banks. Finance India, 26(2), 531-544.

18. Alrabei, A. M. (2013). Evaluate the Profitability in Commercial Bank: Comparative Study of
Indian and Jordanian Banks. Asian Journal of Finance & Accounting, 5(1), 259-273.

19. Gupta, R., & Sikarwar, N. S. (2013). A Comparative Study of Profitability Management of
PNB and HDFC Bank Limited of India. International Journal of Application or Innovation in
Engineering & Management (IJAIEM), 2(2), 68-76.
20. Dangwal, R.C., and ReetuKapoor (2010), Financial performance of Nationalised Banks ,
NICE Journal of Business, Vol. 5, No. 2, pp. 67-79

21. Bapat, D. (2013). Growth, Profitability and Productivity in Public Sector Banks:. The IUP
Journal of Bank Management , 12, 50-57.

22. Gautam, V. (2012). Measuring the Impact of New Technologies through Electronic-Banking
on Profitability of Banks: Evidence form Indian Banking Industry.

23. Bodla, B. S., & Varma, R. (2007). Determinants of profitability of banks in India: A
maltivarite analysis. Journal of Services Research , 6, 75-89.

24. Uppal, R. K. and Juneja, A (2011) Performance evaluation of scheduled commercial banks in
indiaA comparative study: AJRBF: Asian journal of research in banking and finance. Volume 1,
Issue 2 (November, 2011) ISSN: 2249, 7323, page.1.

25. Suryan [Link], a. V. (2005). “Profitability Analysis of the Pondicherry State Co-operative
Bank”,. NAFSCOB Bulletin, (April), Mumbai.

26. Ganesan, P. (2001, june). Determinants of profits and profitability of public sector banks in
India: A profit function approac. Journal of Financial Management & Analysis , 27-37

27. Amandeep (1991), Profits and Profitability of Indian Nationalized Banks, A Ph.D. Thesis
submitted to UBS, Panjab University, Chandigarh

28. Krishna, R. R. (1996), “Profitability Analysis: An Overview”, Indian Banking: Today and
Tomorrow, September.

29. Ram Mohan, T. T. (2002), “Deregulation and Performance of Public Sector Banks”, EPW,
February, pp.393-397.

30. Pathak, B. (2003), “A Comparison of the Financial Performance of Private Sector Banks”,
Finance India, Vol.17, No.4, pp.1345-1356.
31. Ram Mohan, T. T.; and Ray, C. (2004), “Comparing Performance of Public and
Private Sector Banks: A Revenue Maximization Efficiency Approach”, EPW, March, pp.1271-
1276.

32. Bansal, S. (2005), Impact of Liberalization on Productivity and Profitability of Public Sector
Banks in India, A Ph.D. Thesis submitted to UBS, Panjab University, Chandigarh.

33. Jain, V. (2006), “Ratio Analysis: An Effective Tool for Performance Analysis in
Banks”, PNB Monthly Review, November, pp.27-29.

34. Gopal, M.; and Dev, S. (2006), “Productivity and Profitability of Select Public Sector and
Private Sector Banks in India: An Empirical Analysis”, The ICFAI Journal of Bank
Management, Vol.5, No.4, pp.59-67.

35. Ramudu, J.; and Rao, D. (2006), “A Fundamental Analysis of Indian Banking
Industry”, The ICFAI Journal of Bank Management, Vol.5, No.4, pp.68-79. 38. Rathod, P. P.;
and Kulkarni, P. P. (2006), “Emerging Trends in Banking Sector: A Study on ING Vyasya
Bank”, Professional Banker, October, pp.37-40.

36. Brinda, J.; and Dubey, A. K. (2007), “Performance of Public Sector Banks:
An Econometric Analysis”, The Indian Banker, Vol.2, No.12, pp. 26-34.

37. Singla, H. (2008), “Financial Performance of Banks in India”, The ICFAI Journal of Bank
Management, Vol.7, No.1, February, pp.50-62.

38. Joshi P.V. & Bhalerao J. V.(2011), “Efficiency evaluation of banking sector in India based
on data envelopment analysis”, Indian Journal of Commerce & Management Studies, Vol–II ,
Issue -3 March 2011, ISSN – 2229-5674

39. Veni, P. (2004), “Capital Adequacy Requirement of Commercial Banks: A Study in Indian
Context”, GITAM Journal of Management, Vol.2, No.2, pp.99-107.

40. DR. Dhanabakyam M, Kavitha M. Financial Performance of selected public sector banks in
india, International Journal of Multidisciplinary Research. 2012; 2(1). ISSN 2231 5780.
41. Cheenu Goel, Chitwan Bhutani Rekhi. A Comparative Study on the Performance of Selected
Public Sector and Private Sector Banks in India, Journal of Business Management & Social
Sciences Research (JBM&SSR) ISSN No: 2319‐5614. 2013; 2(7)

42. Elisa Menicucci, & Guido Paolucci. (2016). The determinants of bank profitability: empirical
evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1),
86-115

43. Sharifi, O., & Akhter, J. (2016). Performance of Banking through Credit-Deposit Ratio in
Public Sector Banks in India. International Journal of Research in Management & Technology,
6(4), 14-18

44. Alalaya, M., & Al Khattab, S.A. (2015). A Case Study in Business Market: Bank’s
Profitability: Evidence from Jordanian Commercial Banks. International Journal of Business
Management and Economic Research, 6(4), 204-213.

45. Capraru, B., & Ihnatov, I. (2015). Determinants of bank’s profitability in EU15, Scientific
Annals of the “AlexandruIoanCuza”, 62(1), 93-101.

46. Lartey, V. C., Antwi, S., & Boadi, E. K. (2013). The Relationship between Net Interest
Margin and Return on Assets of Listed Banks in Ghana. Research Journal of Finance and
Accounting, 4(16), 73-78.

47. OngTze, S., & TehBoon, H. (2013). Factors affecting the profitability of Commercial Banks.
African Journal of Business Management, 7(8), 649-660.

48. Sufian. F., & Chong. R. (2008). Determinants of bank profitability in a developing economy:
empirical evidence from the Philippines. Asian Academy of Management Journal of Accounting
and Finance, 4(2), 91-112.

49. Athanasoglou, P.P., Brissimis S.N., & Delis. (2008). Bank Specific, Industry Specific and
Macroeconomic Determinants of Bank Profitability. Journal of International Financial Markets,
Institutions and Money, 18(2), 121-36.
50. AL Omar, H., & AL Mutairi, A. (2008). Bank Specific Determinants of Profitability: The
case of Kuwait, Journal of Economic and Administrative Sciences, 24(2), 20-34.

51. Staikouras. C., & Wood, G. E. (2004). The Determinants of bank Profitability. International
Business & Economics Research Journal, 3(6), 57-68.

52. Stiroh, K., & Rumbie, A. (2006). The dark side of diversification: The case of financial
holding companies. Journal of Banking and Finance, 30, 2131-2161

53. BA. Singh, P. Tandon, “A Study of Financial Performance: A Comparative Analysis of SBI
and ICICI Bank”, International Journal of Marketing, Financial Se

54. Mohi-ud-Din Sangmin, T. Nazir, “Analyzing Financial Performance of Commercial Banks in

India: Application of CAMEL Model”, Pakistan Journal of Commerce & Social Sciences, Vol.4,
Issue.1, pp.40-55, 2010

55. M. Kumbirai, R. Webb, “A Financial Ratio Analysis of Commercial Bank Performance in

South Africa”, African Review of Economics and Finance, Vol.2, Issue.1, pp.30-53, 2010

56. Nathwani, Nirmal (2004) The Study of Financial Performance of Banking Sector of India.
PhD thesis, Saurashtra University.

57. Sanjeev Kumar Srivastaw (2013), “A Financial Ratio Analysis Of Select Foreign And New
Private Sector Banks Operating In India”, “The International Journal Of Management” ISSN
2277-5846 Vol 2 Issue 4 (October, 2013), pp 28-34.

58. Anurag. B. Singh; Ms. Priyanka Tandon (2012), A Study Of Financial Performance: A
Comparative Analysis Of SBI And ICICI Bank, “International Journal of Marketing, Financial
Services & Management Research” Vol.1 Issue 11, November 2012, ISSN 2277 3622.

59. Pai, V. S. (2006). Trends in the Indian Banking Industry: Analyses of Inter-Regional Trends
in Deposits and Credits. The ICFAI Journal of Management Research, January, 5(1), pp. 65-72.

As per recent Nielsen report the share of food segment decreased to 43% and personal care share
increased to 22%. FMCG brands have high brand equity due to its unique characteristics and broad
consumer base. As per “Most Trusted Brands Survey 2014” conducted by Brand Equity, out of top 20
brands 16 were FMCG. FMCG brands like Colgate, Dettol, Maza and Magi were among top 5 brands.

Table No 1 Most trusted Brands of 2014 (FMCG)

Brand Ranking Brand Ranking

Colgate 1 Britania 11

Dettol 3 Rin 13

Maza 4 Parle 14

Magi 5 Lifeboy 15

Lux 6 Tata salt 16

Surf Excel 7 Cadbury Dairy Milk 18

Clinic Plus 8 Kurkure 19

Frooti 10 Glucon- D 20

( Source : Economic

Times )

Part B) Overview of Indian FMCG Sector

History

The Indian Fast Moving Consumer Goods (FMCG) industry began to shape during the last fifty odd years.
The growth of FMCG industry was not significant between 1950’s to the 80’s. The FMCG industry
previously was not attractive from investor’s point of view due to low purchasing power and the
government’s favoring of the small-scale sector. FMCG’s growth story further continued following the
deregulation of Indian economy in early 1990s. With relatively lesser capital and technological
requirements, a number of new brands emerged domestically as well, while the relaxed FDI conditions
led to entry of many global players in this segment. These factors made FMCG market in India highly
competitive and one of the important contributor in the Indian economy. In the mid - nineties, the
growth of the sector was very fast where as it declined rapidly at the end of the decade. The initial
growth was due to increase in product penetration and consumption levels4. Riding on a rapidly growing
economy, increasing per-capita incomes, and rising trend of urbanization, the FMCG market in India is
expected to further expand to $100 billion by 20255.

Growth of FMCG sector

The Indian FMCG sector growth between 2006 to 2013 has been phenomenal (approximately 16%). The
industry has tripled in size over the last 10 years , growing much faster than in past decades.

Graph no. 2 Growth of Indian FMCG sector

(Source: Nielsen )

Even during the slowdown of the Indian economy, the FMCG

sector has registered a growth rate of 14.5 percent for the

year 2007-08 6. According to Nomura, the volatility in agriculture sector has not had much impact on
FMCG sector7. The comparison of past ten years’ performance of top 50 Global FMCG companies versus
the Indian top 50 FMCG companies companies shows that India has outperformed global growth across
all major FMCG categories8. As per Pricewaterhousecoopers Private Limited, India is second biggest
market for Soaps &

cleansers in Asia after China. The growth for Indian FMCG sector for Food, beverages and tobacco
segment is promising in near future.

Part C) Analysis Of FMCG Sector

PEST analysis

i) Political

• Tax Structure: Complicated tax structure, high in direct tax and changing tax policies are challenges for
this sector.
• Infrastructure Issues: Performance of FMCG sector is very much dependent on government spending
on Agricultural, Power, and Transportation Infrastructure.

• Regulatory Constraints: Multiplicity permits and licenses for various states, prevailing outdated labor
laws, cumbersome and lengthy export procedures are major

constraints.

• Policy framework: FDI into Retail sector (single-brand & multi-brand retail), Licenserules in setting up
of Industry,

Changes in Statutory Minimum Price of commodities arebarriers for growth of this sector.

ii) Economical

• GDP Growth: Growth of FMCG industry is consistent with the Indian economy. It has grown by 15 %
over

past 5 years. It shows good scope for this sector in near future.

• Inflation: Inflationary pressures alter the purchasing power of consumer which Indian economy is
facing in recent years. But it has not affected much to Indian FMCG sector.

• Consumer Income: Over the past few years, India has seen increased economic growth. The GDP per
capita income of India increased from 797.26 US dollars in 2006 to 1262.4 US dollars in 2014 . It resulted
in increase of consumer expenditure

• Private Consumption: The Indian economy, unlike other economies, has a very high rate of private
consumption (61%).

iii) Social

• Change in consumer Profile: Rapid urbanization, increased literacy, increase in nuclear families and
rising per capita income, have all caused rapid growth and change in demand patterns, leading to an
explosion of new opportunities. Around 45 per cent of the population in India is below 20 years of age
and the young population is set to rise further.
• Change in Lifestyle : In past decade changes are taking place in consumption pattern of Indian
consumer with more spending on discretionary ( 52%) than necessities

( eg food, clothings). In last decade the apparel,

footwear and healthcare segments have registered highest growth whereas essentials such as cereals,
edible oil, fruits and vegetables shown decline9.

• Rural focus: As market is getting saturated, companies are focusing on rural area for penetration by
providing consumers with small sized or single-use packs such as

sachets.

iv) Technology

• Effective use of technology is seen only in leading companies like HUL, ITC etc.

• E- Commerce will boost FMCG sales in future. More than 150 million consumers would be influenced
by digital by 2020 and they will spend more than $45 billion on FMCG categories -CII

SWOT analysis

i) Strengths

• Low operational costs: One of the important strength of this sector is low operational cost.

• Presence of established distribution networks in

Financial Performance of Banks in India---Harish Kumar Singla (2008.)