“A comparative study on financial performance of private and public

sector banks with special reference to affecting factors and their impact on
performance indicators”

SYNOPSIS

Submitted To
Gujarat Technological University

For The Degree of

Doctor of Philosophy
(Faculty of Management)

Submitted By
Alpesh C. Gajera
Enrollment No. 119997392009
Assistant Professor
Sunshine Group of Institutions

Under The Supervision of

Dr. Vijay Pithadia
Director
Smt. S. H. Gajera MBA Mahila College – Amreli

International Co-Supervisor
Dr. Timotej Jegric

DPC Members
Dr. Sandip Solanki
Dr. Dharmesh Raval
 INDEX
Sr. No. Particular Page No.
A Title of the thesis and abstract 1
B Brief Description on the state of the art of the research 2
topic
C Definition of the problem 4
D Objective and scope of the work 5
E Original contribution by the thesis 6
F Methodology of Research, Result/Comparison 7
G Achievement with respect to objectives 8
H Conclusion 14
I Copies of papers published and the list of all publications 15
arising from the thesis
J References 16
 A. Title of the thesis and abstract

TITLE OF THESIS

“A comparative study on financial performance of private and public sector banks with
special reference to affecting factors and their impact on performance indicators”

ABSTARCT

Research work under this title is divided into two parts (1) Evaluation of financial
performance of private and public sector banks and (2) Identifying the factors responsible for
better/poor financial performance of private/public sector banks.

(1) Evaluation of financial performance of private and public sector banks: For
analyzing financial performance of private and public sector banks all private sector
banks (20) as well as all public sector banks (26) are taken into consideration. Private
sector banks include old private sector banks (13) as well as new private sector banks
(7). Public sector banks include SBI and its associates (6) as well as all nationalized
banks (20). (As on date of 31/03/2012). To evaluate the financial performance of
above banks 29 financial performance parameters are selected. Financial data of last
12 years, i.e. from year 2001 - 02 to 2012 – 13 are collected for calculating and
analyzing financial performance parameters.
(2) Identifying the factors responsible for better/poor financial performance of
private/public sector banks. : On the basis of result of financial performance
analysis, second part of research is to carry forward for identifying the factors
responsible for deviation in financial performance of private and public sector banks.
For identifying the factors responsible for better/poor financial performance of
private/public sector banks, parameters are decomposed by using their definitions.

So at the end of these two stage research, I came to know about the factors responsible for
better/poor financial performance of private/public sector banks in each financial indicators.

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 B. Brief Description on the state of the art of the research topic

It is most important to decide appropriate parameter at the time of measuring financial

performance of banks. Till today many experts have given their opinion on parameters of
financial performance of banks, even enormous numbers of research are available on
financial performance of banks which has used different parameters for measuring financial
performance.

In terms of financial performance of banks I would like to add one more point regarding
parameters of financial performance that time period also play a vital role in terms of
selection of financial parameters. The financial parameters that we should select in 1990 or
before must be different that the parameters we should select in 2010 -11, as since
independent Indian banking is passing through lots of changes which does not permit us to
evaluate on same parameters.

One more important aspect which one should highlight at the time of selecting financial
performance parameters is availability of data on selected parameters for desired time period.

Financial performance of banking industry

Definition of Financial performance

“The performance of banks in India has been assessed by considering variables, viz.
branches, deposits, advances, investments, spread, burden, business, operating profits, NPA,
cost of deposits, cost of borrowings, cost of funds, return on advances, return on investments,
return on funds, net profit, spread, burden and operating expenses and sectorial deployment
of credit.”

Suby, B. (2011). Performance of public and private sector banks in Kerala - A comparative study.
Kerala: Mahatma Gandhi University.

For this research work financial performance of banks is measured by selected financial
performance parameters which are divided into seven heads such as capital adequacy ratios,
debt coverage parameters, balance sheet parameters, management efficiency parameters,
profitability parameters, employee’s efficiency parameters and non performing assets
parameters.

There will be a vast difference in terms of selecting parameters for financial performance,
when we are talking about financial performance of any individual bank and financial
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performance of banking sector, as Indian banking sector is divided into different sectors such
as SBI and its associates banks, nationalized banks, old private sector banks, new private
sector banks etc…which has some distinct characteristics in terms of its operations, rules and
regulations etc…

The diversity of Indian banking sector makes it more difficult for researcher to determine and
come up with a final list of parameters for financial performance of banking sector which
give equal representation to all banks and also depict true picture about financial performance
of Indian banking.

In this research work by going through lots of literature review, RBI bulletins, RBI database,
discussion with panel members at various occasions of progress review presentation,
discussion with DPC members and guide, I came up with final list of parameters for
measuring financial performance of banks, which are as under.

 Capital adequacy ratio (BASEL – II)

 Debt coverage parameters
 Balance sheet parameters
 Management efficiency parameters
 Profitability parameters
 Employee efficiency parameters
 Nonperforming assets parameters

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 C. Definition of the problem

By going through literature review in form of research papers and Ph. D. thesis, I came to
know that almost all research papers are only talking about financial performance of different
sector banks such as private, public, foreign, co operative or combination there off. I came
across hundreds of research works which are advocating that one sector banks are performing
well compare to other sector banks, but I haven’t found any research work which extends
from evaluation of financial performance to identifying the reasons or factors responsible for
better or poor financial performance between different sector of banks.

So my research work is divided into two aspects.

1. Evaluating financial performance of all public sector banks, including SBI and its
associates and nationalized banks and private sector banks, including old private and
new private sector banks.
2. Identifying the factors responsible for better or poor financial performance of private
or public sector banks.

This research work will be helpful to readers in terms of judging financial performance of
Indian banks as well as they will also come to know about the reason behind better or poor
financial performance of banks.

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 D. Objective and scope of the work

This research work is carried out for attaining below mentioned objectives.

1. To study the financial performance of last 12 years of public and private sector banks.

2. To identify the parameters in which private/public sector banks are performing

better/poor compare to private/public sector banks.

3. To identify the factors (reasons) responsible for better/poor financial performance of

private/public sector banks.

As I have mentioned earlier there are enormous numbers of research which have analyzed
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. The scope of work in my Ph. D.
work is to extend from evaluation of financial performance to identifying the reason or
factors responsible for better or poor financial performance in between different sector of
banks.

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 E. Original contribution by the thesis

The thesis on mentioned topic will contribute to the Indian banking industry as a whole as
well as parties associated with banking industry as mention below.

1. As in this research work financial performance is evaluated on the basis of current

data, it will give the idea about current position of Indian banking industry.
2. All private sector banks and public sector banks are included in research. So all
bankers can get idea about their bank’s financial performance.
3. All Bankers and associated parties of banks can also get comparative analysis of
banking industry and compare their banks with other private and public sector banks
of Indian banking industry.
4. The main contribution of this thesis is identification of factors responsible for
better/poor financial performance of private/public sector banks. So reader of thesis
can also get information about the reasons behind better/poor financial performance in
particular parameters of their banks.

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 F. Methodology of Research, Result/Comparison

Research Methodology includes the assumptions and values, which is useful for interpreting
data and reaching to conclusions.

Any project requires a basic plan of action, or a series of actions chalked out, in order to
accomplish the objectives effectively and efficiently within a time framework, without
deviating from the original target. In other words we can say that, from where we are and
where we want to go, the process involved is carefully transformed in to a blue print called
the research design.

In this research three different research design have been used in parallel, which are as under

1. Descriptive Research Design

As in this research work first task is of determining financial performance parameters,
which is descriptive in nature as in this research work financial performance of banks
are described with the help of selected parameters.
2. Analytical Research Design
After selecting parameters for measuring financial performance the next task is to
analyze the financial performance of banks with the help of secondary data collected
on selected parameters. So this part of research is analytical in nature.
3. Exploratory Research Design
Next task after analyzing financial performance of banks is to identify the factor
responsible for better/poor financial performance of private/public sector banks. For
identification of factor responsible for better/poor financial performance of banks
exploratory research design is best suitable.

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 G. Achievement with respect to objectives

This research work is carried out to attain above mentioned three objectives. The
achievement with respect to individual objective is as under.

1. To study the financial performance of last 12 years of public and private sector
banks.

Activities required to achieve first objective is accomplished which includes.

a. Deciding parameters for analyzing financial performance.

b. Collecting secondary data for selected parameters to analyze financial performance.
c. Apply appropriate statistical tools on secondary data to analyze financial
performance.

2. To identify the parameters in which private/public sector banks are performing

better/poor compare to private/public sector banks.

Activities required to achieve second objective is also accomplished which include.

a. Achieving first objective which is pre-requisite for achieving second objective.

b. To identify whether there is any significant difference in the financial performance of
private and public sector banks.
c. Difference in financial performance is identified at three different level i. e. 1)
Identification of difference in financial performance between banks within sub sector.
2) Identification of difference in financial performance between sub sectors and 3)
Identification of difference in financial performance between private and public sector
banks.

3. To identify the factors (reasons) responsible for better/poor financial performance of

private/public sector banks.

Achievement of first and second objectives will automatically lead to achievement of third
and last objective. So there is nothing new, which needs to be done to achieve this objective.
To achieve this objective factors are identified for better/poor financial performance of
private/public sector banks with the help of secondary data analysis, parameter definition and
literature review of past research.

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 Summary of Financial Performance evaluation at three different level
Private V/S
Interbank Comparison
Parameter Parameter Public
Bank Sector comparison between Remarks
No. Name banks
within sector sector
comparison
SBI & Its Associate Banks Fail to Reject Difference in
Capital Nationalized Banks Reject performance
1.1 adequacy ratio Old Private Sector Banks Reject Reject Reject identified at all
(Tier – I) three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Fail to Reject Difference in
Capital Nationalized Banks Reject performance
1.2 adequacy ratio Old Private Sector Banks Reject Reject Reject identified at all
(Tier – II) three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Fail to Reject Difference in
performance
Cash to Deposit Nationalized Banks Reject Fail to Fail to
2.1 Old Private Sector Banks Reject identified at first
Ratio Reject Reject
level of evaluation
New Private Sector Banks Reject only
SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Reject performance
Credit to Fail to
2.2 Old Private Sector Banks Reject Reject identified at first
Deposit Ratio Reject
two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Reject performance
Investment to Fail to
2.3 Old Private Sector Banks Reject Reject identified at first
Deposit Reject
two level of
New Private Sector Banks Reject evaluation.
2.4 Ratio of SBI & Its Associate Banks Reject Reject Reject Difference in

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 Deposit to Total Nationalized Banks Reject performance
Liabilities Old Private Sector Banks Reject identified at all
three level of
New Private Sector Banks Reject evaluation
Ratio of SBI & Its Associate Banks Fail to Reject Difference in
Demand & Nationalized Banks Fail to Reject performance
Fail to Fail to
2.5 Saving Bank Old Private Sector Banks Fail to Reject identified at first
Reject Reject
Deposit to total level of evaluation
Deposit New Private Sector Banks Reject only
SBI & Its Associate Banks Reject Difference in
Ratio of
Nationalized Banks Reject performance
Priority Sector Fail to
3.1 Old Private Sector Banks Reject Reject identified at first
Advance to Reject
two level of
total Advance
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Ratio of
Nationalized Banks Reject performance
Secured
3.2 Old Private Sector Banks Reject Reject Reject identified at all
Advance to
three level of
total Advance
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Reject Difference in
Ratio of term Nationalized Banks Reject performance
Fail to
3.3 loan to total Old Private Sector Banks Reject Reject identified at first
Reject
Advance two level of
New Private Sector Banks Reject evaluation.
Ratio of SBI & Its Associate Banks Reject Difference in
investment in Nationalized Banks Reject performance
3.4 non approved Old Private Sector Banks Reject Reject Reject identified at all
secirities to three level of
total Investment New Private Sector Banks Reject evaluation
Ratio of Interest SBI & Its Associate Banks Fail to Reject Difference in
Fail to
4.1 Income to Total Nationalized Banks Reject Reject performance
Reject
Assets Old Private Sector Banks Reject identified at first

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 two level of
New Private Sector Banks Fail to Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Ratio of non Nationalized Banks Reject performance
Fail to
4.2 Interest income Old Private Sector Banks Reject Reject identified at first
Reject
to total assets two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Fail to Reject Difference in
Ratio of Nationalized Banks Reject performance
Fail to Fail to
4.3 operating profit Old Private Sector Banks Reject identified at first
Reject Reject
to total assets level of evaluation
New Private Sector Banks Reject only
SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Reject performance
Return on
5.1 Old Private Sector Banks Reject Reject Reject identified at all
Assets
three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Reject Difference in
Nationalized Banks Reject performance
Return on
5.2 Old Private Sector Banks Reject Reject Reject identified at all
Equity
three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Fail to Reject performance
Fail to
5.3 Cost of Deposit Old Private Sector Banks Reject Reject identified at first
Reject
two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Nationalized Banks Reject performance
Cost of
5.4 Old Private Sector Banks Reject Reject Reject identified at all
Borrowing
three level of
New Private Sector Banks Reject evaluation

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 SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Reject performance
Fail to
5.5 Cost of Fund Old Private Sector Banks Reject Reject identified at first
Reject
two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Fail to Reject Difference in
Nationalized Banks Reject performance
Return on
5.6 Old Private Sector Banks Reject Reject Reject identified at all
Advance
three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Reject Difference in
Nationalized Banks Reject performance
Return on
5.7 Old Private Sector Banks Reject Reject Reject identified at all
Investment
three level of
New Private Sector Banks Reject evaluation
SBI & Its Associate Banks Fail to Reject Difference in
Profit per Nationalized Banks Reject performance
Fail to
6.1 Emloyee Old Private Sector Banks Reject Reject identified at first
Reject
(Lakhs) two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Fail to Reject Difference in
Business per Nationalized Banks Reject performance
Fail to
6.2 Employee Old Private Sector Banks Reject Reject identified at first
Reject
(Lakhs) two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Nationalized Banks Reject performance
Wages as % of Fail to
6.3 Old Private Sector Banks Reject Reject identified at first
Total Expenses Reject
two level of
New Private Sector Banks Reject evaluation.
Wages as % to SBI & Its Associate Banks Reject Fail to Difference in
6.4 Reject
total Income Nationalized Banks Reject Reject performance

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 Old Private Sector Banks Reject identified at first
two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Gross NPA as Nationalized Banks Reject performance
Fail to
7.1 percentage of Old Private Sector Banks Reject Reject identified at first
Reject
Gross Advance two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Gross NPA as Nationalized Banks Reject performance
Fail to
7.2 percentage of Old Private Sector Banks Reject Reject identified at first
Reject
Assets two level of
New Private Sector Banks Reject evaluation.
SBI & Its Associate Banks Reject Difference in
Net NPA as Nationalized Banks Reject performance
Fail to Fail to
7.3 percentage of Old Private Sector Banks Reject identified at first
Reject Reject
Net Advance level of evaluation
New Private Sector Banks Reject only
SBI & Its Associate Banks Reject Difference in
Net NPA as Nationalized Banks Reject performance
Fail to
7.4 percentage of Old Private Sector Banks Reject Reject identified at first
Reject
Assets two level of
New Private Sector Banks Reject evaluation.

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 H. Conclusion

Since 2011 when I have been registered for Ph. D., lots of changes have been done in my
topic. I have given many presentations at various occasions such as DPCs, Research week
and also learned a lot in research. During these phases I have also attended various seminars
and FDPs which helped me lot to improve my research work.

After working for four years on this topic I am satisfactorily able to present it in a form of
synopsis. The present study titled “A comparative study on financial performance of private
and public sector banks with special reference to affecting factors and their impact on
performance indicators” has been undertaken to analyze the financial performance of all
private and all public sector banks, to compare the financial performance of private and
public sector banks and to identify the reason behind better/poor financial performance of
public/private sector banks for financial year 2001 - 02 to 2012 – 13.

Financial performances of banks have been analyzed at three different levels such as
interbank comparison within sector, comparison between sectors and comparison between
private and public sector banks. Differences in performances have been identified at all level
of comparison. Due to different level of comparison, level of intensity also came out in
difference in financial performance.

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 I. Copies of papers published and the list of all publications arising

from the thesis

1. Research Paper on the Title “Financial Performance Evaluation of Private & Public
Sector Banks with Reference to Capital Adequacy Ratio” Published in “PARIPEX
– Indian Journal of Research” in Volume No. 4 (2015), Issue No. 05(May) with
ISSN No. 2250-1991
2. Research Paper on the Title “Makers & Breakers for the Indian Banking sector in
2013” Published in “Vidyasankul Multidisciplinary Research Journal” in Volume
No. 1 (2014), Issue No. 01(July – Sep.) with ISSN No. 2350-0107
3. Research Paper on the Title “Employees efficiency analysis of private & public
sector banks of India” Published in “International Journal of Management, IT
and Engineering” in Volume No. 4 (2014), Issue No. 03 (March) with ISSN No.
2249-0558.
4. Research Paper on the Title “A Comparative Financial Analysis of Indian Banking
Sector in context of NPA Management” Published in “International Journal of
Research in Commerce, IT and Management” in Volume No. 3 (2013), Issue No.
08 (August) with ISSN No. 2231-5756.

15
 J. References
1. Alpesh Gajera, Vijay Pithadia, “Financial Performance Evaluation of Private &
Public Sector Banks with Reference to Capital Adequacy Ratio”, PARIPEX – Indian
Journal of Research, Volume No. 4 (2015), Issue No. 05(May) ISSN No. 2250-1991
2. Alpesh Gajera, Vijay Pithadia, “Makers & Breakers for the Indian Banking sector in
2013”, Vidyasankul Multidisciplinary Research Journal, Volume No. 1 (2014), Issue
No. 01(July – Sep.) ISSN No. 2350-0107
3. Alpesh Gajera, Vijay Pithadia, “Employees efficiency analysis of private & public
sector banks of India”, International Journal of Management, IT and Engineering,
Volume No. 4 (2014), Issue No. 03 (March) with ISSN No. 2249-0558.
4. Alpesh Gajera, Vijay Pithadia, “A Comparative Financial Analysis of Indian Banking
Sector in context of NPA Management”, International Journal of Research in
Commerce, IT and Management, Volume No. 3 (2013), Issue No. 08 (August) with
ISSN No. 2231-5756.
5. Baby, S. (2011). Performance of public and private sector banks in Kerala - A
comparative study. Kerala: Mahatma Gandhi University.

6. Arora, S.; and Kaur, S. (2006), “Financial Performance of Indian Banking Sector in
Post-Reform Era”, The Indian Journal of Commerce, Vol.59, No.1, pp.96-105.

7. Jain, V. (2006), “Ratio Analysis: An Effective Tool for Performance Analysis in

Banks”, PNB Monthly Review, November, pp.27-29.

8. Kalita, B. (2004), “Post-1991 Banking Sector Reforms in India: Policies and Impact”,
http://ssrn.com/abstract=1089020.

9. Jain, V. (2006), “Ratio Analysis: An Effective Tool for Performance Analysis in

Banks”, PNB Monthly Review, November, pp.27-29.

10. Report on Trend and Progress of Banking in India 2010-2011.

11. www.rbi.org.in

12. www.dbie.rbi.org.in

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