Chapter V

THE FINANCIAL PERFORMANCE OF ANDHRA BANK AND

ICICI BANK IN PRE AND POST E-BANKING ERA
5.0

Introduction
In the beginning of 90s, there were so many deficiencies were prevailing in the

Indian economy, particularly in the financial sector in general and in the banking sector
in particular. The financial system has to play a crucial role in mobilization of funds and
their allocation to the most productive use to fulfill its role in economic growth. The
financial service industry needs to operate on the basis of operational flexibility and
functional autonomy with a view to enhance efficiency, productivity and profitability351.
Despite the impressive quantitative achievements, several distortions have crept into
Indian financial system in respect of allocation of resources, productivity and profitability
has suffered and portfolio has deteriorated, work technology is outdated and transaction
costs have mounted.
Keeping in mind all the above said distortions in the economic, financial and
banking sectors, the government of India and the RBI thought it was necessary to
introduce reforms in the financial and banking sector. The financial sector reforms were
introduced in the country covering banking, insurance and capital market were the core
aspect needed to be improved. But as the financial sector, therefore the banking sector
reforms formed the core of objective for improving efficiency, productivity and

351

The Banking Sector in India: Emerging Issues and Challenges, Report on currency and Finance, Reserve
Bank of India, Volume -1, 2006-08.

188

profitability of banks. These reforms were introduced in two phases in 1991-1997352.

The banking sector reforms have brought in major changes with the improvement in
efficiency of the banks. The first phase of reforms (Narasimhan Committee-I) brought
out structural changes and improved the overall performance of banks. The second phase
reforms were recommended by the Narasimham Committee II to make the banks
capable to compete successfully in the changing environment.
Under the regime of banking sector reforms, IT Act of 1999 gave new dimensions
to the Indian banking sector. IT has created transformation in banking structure, business
process, work culture and human resource development. It has affected the productivity,
profitability and efficiency of the banks to a large extent353. For decades, it has been a
matter of debate whether Technology354 provides better financial results. Till date there is
no conclusive evidence that spending on IT improves financial performance. The present
chapter attempts to link banking technology with the financial productivity and
profitability of Andhra Bank & ICICI banks The chapter analyzes the performance of
Andhra Bank & ICICI Banks in terms of productivity and profitability in the pre and post
e-banking period.
5.1

Road Ahead: Turnaround Success Strategy:

Productivity and profitability are interrelated. Though productivity is not the sole

factor, it is an important factor influencing profitability. The key to increase profitability

352

Uppal.R.K, Banking Sector Reforms: Policy Implications and Fresh Outlook, Information Management
and Business Review Vol. 2, No. 2, pp.55-64, Feb 2011.
353 Dr. Dhiraj Sharma, & Dr. R.K Uppal, IT-Productivity Paradox in Banks A Study of India
Banks in Hyper IT Era, IJBEMR Volume 1, Issue 1 (2010) ISSN-2229-4848.
354 The term Technology has many definitions. Technology or Information Technology refers to
the knowledge of using tools and machines to do tasks efficiently. For the purpose of present
study Technology/ Information Technology refers to the use of computers and other electronic
equipments to store and send information (Cambridge Learner's Dictionary, 2004.

189

is increased productivity. Public sector banks have not been as profitable as the other
banks primarily because of two reasons--Low Productivity and High Burden ratio. Since
the process of liberalization and reform of the financial in the financial sector were
introduced in 1991, banking sector has undergone major transformation.. As per the IBA
report "Banking Industry Vision 2010" there would be greater presence of international
players in the Indian. The key to success in the competitive environment is increased
productivity and profitability. Indian banks especially the public sector banks and the old
private sector banks are lagging far behind their competitors in terms of both productivity
and profitability with the exception of the State bank of India and its associates. The other
public sector banks and old private sector banks need to go for the major transformation
program for increase their productivity and profitability355. To overcome these drawbacks
private banks should chalk out a program to increase productivity.
The underlying objectives of the reform will make the banking system more
competitive, productive and profitable.

Reduces overstaffing

Forge strategic alliance with the rural regional banks to open up rural branches
and

Increased use of technology for improved products and services for the same
Development and implementation of nationwide standards for smart cards
including instructions on interoperability.

190

Change in the guidelines covering smart card issue:

along with the

development of the above mentioned standards, the guidelines too must be

modified keeping in mind the rural and in some senses a remote market segment.
Eligibility of clients: Banks should be allowed to issue smart cards to customers
without a bank account or a history of savings and credit servicing.

Such

measures allow banks to reach out to the poorest of customers who in a majority
of cases would have no banking history.
Written reports and receipts: though banks should attempt to provide receipts
of transactions to its customers, such a condition should not be a compulsion on
the bank especially when the bank is attempting to service large number of rural
clients.
Allowing appointment of third parties for banking: Banks can collaborate with
third parties acting as agents to expand their outreach exponentially and provide
doorstep banking to the rural population356.
Indian public sector banks have a unique advantage over their competition in
terms of their branch network and the large customer base, but it is the use of technology
that will enable PSBs to build on their strengths. No doubt, technology is taking place
but this speed is quite slow in Indian banking industry particularly, in public sector
banks357. The future outlook demands heavy investment in information technology.
Foreign banks and the new private sector banks have embraced technology right from
356

Amitabh Verma, Lecturer, Birla Institute of Technology, Ranchi, The impact of technology on
productivity and profitability of Indian banks in post liberalization period, Foundation for Organisational
Research & Education, www.thefreelibrary.com. Jul, 2009.
357
Uppal.R.K, E-Delivery channels in Banks - A Fresh outlook, Researchers Word, International
Refereed Research Journal www..researchersworlld..com,Vol. II, Issue 1,January 2011.

191

their inception and they have better adapted themselves to the changes in technology.
Where as the public sector banks and old private banks have been slow in keeping pace
with the changing technology, which is regarded as one of the major reason affecting
their profitability and productivity. However, the future of banking will be one in which
customers can address most of their needs through self-directed means and the key
differentiator will be how effective a bank is in getting its customers online and deriving
measurable value from this presence. One can sum up the whole Internet banking
scenario with the adage, "For while winners may not see massive gains, the losers will
fade from view as their ability to compete is eroded with every mouse click. 358
5.2 Database
To calculate the financial performance of this analysis, The data has been
collected from Money control.com, financial ratios from the Annual Reports of Andhra
Bank & ICICI Bank from 1999-2000 to 2009-2010, RBI Annual Reports, Statistical
tables relating to India Economy 1999-2000 to 2009-2010, RBI Trend & Progress Report,
Profile of Banks 1999-2000 to 2009-2010, Performance Highlights of Indian Banks
Association IBA-Mumbai 1999-2000 to 2009-2010. A number of websites of both Indian
and foreign universities and academic institutes were also browsed to gather more
information for the present study.
5.3

Methodology

358

Amitabh Verma, Lecturer, Birla Institute of Technology, Ranchi, The impact of technology on
productivity and profitability of Indian banks in post liberalization period, Foundation for Organisational
Research & Education, www.thefreelibrary.com. Jul, 2009.

192

The study is an analysis of financial performance of the Andhra Bank &

ICICI Bank. By classifying the banks on the basis of different financial values of the
selected banks the performance can be measured. The study of financial performance of
banks has been carried out from the year 1999 to the year 2010.
Time period has been divided deliberately into two parts i.e. pre e-banking period
and post e-banking period. Pre e-banking period ranges between 1999-2000 to 2001-2002
and the Post e-banking period ranges between 2002-2003 to 2009-2010.
The period from the years 1999-2000 to 2001-2002 has been taken as Indias Pretechnology Induction Era while Post technology Induction Era has been considered to be
effectively started from 2002 onwards. During the period 1999-2000 to 2001-2002, the
technological applications in the Indian banking sector were not very developed and
mature. Moreover, new private sector banks started entering the Indian banking industry
in a big way from the year 1999. The technological boost only came after the
implementation of IT Act. The Indian government gave its assent to the act in October
2000 but the Information Technology Act which is a comprehensive legislation for IT
applications in the business, became effective only after 2002. The Act has brought the
structure, legal validity and authenticity for transacting and making payments online.
Hence, the period after 2002 has been termed as Post Technology Induction Era. Another
reason for assuming such period as Post Technology Induction Era is that in India Ebanking and Internet banking services started in full-swing only 2002 onwards.
The performance of a bank can be measured by a number of indicators.
Productivity and profitability are the most important and reliable indicators of the capacity
193

of a bank to increase its size and earnings.

For measuring the profitability and

productivity of selected banks, the present study employs two methods viz., ratio analysis
and Profitability gap.
To compare the performance of selected banks in pre and post e-banking period,
ratio analysis method is used. The following ratios are analyzed to examine the
performance of the selected banks with respect to profitability and productivity.
5.3.1

Profitability Analysis
Three sets of ratios have been employed for assessing the profitability of

commercial banks; viz. spread ratio, burden ratios and profitability ratios.
1.

Spread ratios

Spread which is the difference between interests earned (on loans and advances) and
interest paid (on deposits and borrowings) by the banks a major rate in determining the
profitability of banks.
A. Interest earned as a percentage of Total assets
B. Interest paid as a percentage of Total assets
C. Spread as a percentage of Total assets
2. Burden Ratios
Burden is defined as the difference between non- interest expenditure and non
interest expenditure and non-interest income of the banks.
A.

Non interest expenditure as a percentage of Total assets

194

B.

Non interest income as a percentage of Total assets

C.

Burden as a percentage of Total assets

3. Profitability Ratios
Profitability is a ratio of earnings to the funds used. It stands for profits deflated
by the size of the unit and indicates the efficiency with which a bank deploys its total
resources of maximize its profit.
A.

Net Profit as a percentage of Total income

B.

Net Profit as a percentage of Total deposits

C.

Net Profit as a percentage of Total assets

5.3.2

Productivity Analysis
The present study also analyses the productivity of various bank groups on

the following basis.

1.
A.

Deposits per employee

B.

Credit per employee

C.

Total expenditure per employee

D.

Total earning per employee

2.

5.4

Employee Productivity:

Branch productivity:

A.

Deposits per branch

B.

Credit per branch

C.

Total expenditure per branch

D.

Total earning per branch

Data Analysis
195

For analysis of data two important statistical tools viz. mean and T-test has been
used to arrive at conclusions in scientific way.
5.5 Profitability Analysis:
Profitability of banks is governed by several factors, some of them endogenous,
some exogenous to the system and yet structural359. The profitability, which is an
important criteria to measure the performance of banks in addition to productivity,
financial and operational efficiency, has come under pressure because of changing
environment of banking360. An efficient management of banking operations aimed at
ensuring growth in profits and efficiency requires up-to-date knowledge of all those
factors on which the bank is profit depends. The profitability of Indian banks have
increased since the second generation banking reforms and among the several bank
groups.
In this section we have presented an analysis of profitability in Andhra Bank and
ICICI Bank during pre & post e-banking period.

The mean gap between two periods

that is pre and post e-banking period has been calculated of each parameter. The selected
indicators are as follows:
The profitability shows the average of following ratios.
1. Spread ratios
2. Burden ratios
3. Profitability ratios
359

V.B. Angadi and V John Devraj, Productivity and Profitability of Banks in India, Economic and
Political Weekly Vol.18, no.48, Nov 26, 1983.
360
B.S.Badola and Richa verma, Determinants of Profitability of Banks in India A Multivariate
Analysis, Delhi Business Review X Vol. 7, No. 2, July - December 2006.

196

5.5.1

Spread Ratios:

In this section we have presented the following spread ratios.

A.

Interest earned as a percentage of Total Assets

B.

Interest paid as a percentage of Total Assets

C.

Spread as a percentage of Total Assets

5.5.1.a Ratio of Interest Earned as a Percentage of Total Assets (IE %TAs)

This ratio is an indicator of the rate at which a commercial bank earns income by lending
the funds to the public. The higher ratio is an indicator of efficient management of banks
total assets.
As evident from the table 5.5.1.a. in the case of Andhra Bank, the interest earned as a
per cent of TAs was 10.24 percentage in pre-e-banking period came down to 8.05 per
cent in post e-banking period. There is decrease of 2.18 per cent mean gap between post
e-banking period and pre e-banking period. The t-test exhibits significant difference in
the mean of two periods at 0.1 per cent level of significance.
In the case of the ICICI Bank, a mean gap of 0.82 per cent is evident between the
two periods. The mean of post e- banking period has become 7.56 per cent which was
6.74 per cent in pre-e-banking period. The t-test exhibits insignificant difference in the
means of two periods.
On the whole, it can be concluded that in Indian banking due to decline in interest
rates, the mean of the said ratio declined between pre-e-banking period and post ebanking period. As regards interest earned there is a significant difference between pre ebanking and post e-banking period in the Andhra Bank where as it is not significant in the
ICICI Bank.
197

Table - 5.5.1.a.: Interest Earned as a Percentage of Total Assets (IE %TAs)

Rs. Crores
IE%TAs
Andhra Bank
ICICI Bank
10.24
6.74
8.05
7.56
2.18
0.82
0.52
1.04
4.17
0.79
**
NS

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

Note: x1 = mean of Pre-e-banking, x2 = mean of Post-e-banking, S.E: Standard Error

LOS: Level of Significance, NS - Not Significant,
Source: Money control.com, financial ratios of Andhra Bank & ICICI Bank 1999-2000 to 2009-2010.RBI
Annual Reports, Statistical tables relating to India 1999-2000 to 2009-2010.
RBI Trend & Progress Report, Profile of Banks 1999-2000 to 2009-2010.
Performance Highlights, IBA, Mumbai 1999-2010.
** Mean is Significant at the 0.01 level (1-tailed)

12
10
8
6

Pre e-banking

Post e-banking

2
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.1.a.

198

5.5.1.b Ratio of Interest Paid as a Percentage of Total Assets:

Interest expended to total assets ratios shows the rate at which a private bank
incurs expenditure by borrowing funds. Interest expenses by bank refers to fund bases
expenditure which consists of interest paid on total deposit (time deposit plus saving
deposit plus demand deposit ) and interest paid on external borrowings (debt).
As evident from the table 5.5.1.b. in the case of Andhra Bank, Due to reduction
in interest rates in public sector banks the profit of banks decreases because of which, the
mean of post e- banking period become 4.66 per cent which was 6.72 per cent in pre-ebanking period. There is decrease of 2.07 per cent mean gap between post e- banking
period and pre-e-banking period and is significant at .01 per cent level of significance.
In the case of ICICI Bank the mean in pre-e-banking period was 3.75 per cent and
in post e- banking period is 5.28. The mean gap of profitability in ICICI Bank is 1.53 per
cent is evident between the two periods. The t-test shows an insignificant difference in
the means of both periods.
As far as interest paid as percentage of total assets is concerned there is no
significant difference in Andhra Bank when compared to ICICI Bank. So this reflects
again the confidence of the people in the public sector banks. The public sector banks are
forced to reduce the ratio of interest paid, to avoid unforeseen risks of the market and
high accumulation of NPAs. ICICI Bank, it is interesting to find that the bank has
increased the ratio of interest payable, which may be due to large amount of business
with less number of branches.

199

Table - 5.5.1.b.: Interest Paid as a Percentage of Total Assets (IP % TAs)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

IP%TAs
Andhra Bank ICICI Bank
6.72
3.75
4.66
5.28
2.07
1.53
0.49
0.98
4.23
1.57
**
NS

Note: S.E: Standard Error, LOS: Level of Significance. NS - Not Significant,

Source: same as table 5.5.1.a.
** Mean is Significant at the 0.01 level (1-tailed)

7
6
5
4
Pre e-banking

Post e-banking

2
1
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.1.b

200

5.5.1.c Spread as a Percentage of Total Assets (S%TAs)

Spread which is the difference between interest earned (on loans and advances)
and interest paid (on deposits and borrowings) by the banks plays a major rate in
determining the profitability of banks.
As evident from the table 5.5.1.c. in the case of Andhra Bank, the spread as a
percentage of total assets was 2.86 per cent in pre-e-banking period and 3.05 per cent in
post e-banking period. The gap between two periods is increased by 0.19 per cent.
Therefore the t-test exhibits insignificant difference in the means of two periods.
In the case of the ICICI Bank, the spread as percentage of total assets was1.82
per cent in pre e- banking period and 1.92 per cent in post e-banking period. The gap
between two periods is .01 per cent which is almost negligible. The t-test exhibits
insignificant difference in the means of two periods.
Comparatively the mean gap of both banks shows increase this may be due to
more interest earned on loans and advances determining profitability of banks. Thus
Andhra Bank is more in profits than ICICI Bank.

201

Table 5.5.1.c. : Spread as a Percentage of Total Assets (S%TAs)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

S%TAs
Andhra Bank ICICI Bank
2.86
1.82
3.05
1.92
0.19
0.10
0.28
0.32
0.67
0.34
NS
NS

Note: S.E: Standard Error, LOS: Level of Significance. NS - Not Significant,

Source: same as table 5.5.1.a.

3.5
3
2.5
2
Pre e-banking

1.5

Post e-banking

1
0.5
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.1.c.

202

5.5.2

Burden ratio:

Burden is defined as the difference between non- interest expenditure and non interest
expenditure and non-interest income of the banks.
A.
B.
C.

Non interest expenditure as a percentage of Total assets

Non interest income as a percentage of Total assets
Burden as a percentage of Total assets

5.5.2.a Non - Interest Expenditure as a Percentage of Total Assets

Non interest expenditure of a bank represents manpower expenses, establishment charges
and other contingent expenses.
As evident from the table 5.5.2.a. in the case of Andhra Bank,

the non interest

expenditure as a percentage of total assets is 3.14 per cent in pre e-banking period which
decreased to 3.07 per cent in post-e-banking period. There is a little mean gap 0.07 per
cent between two periods. The t-test shows an insignificant difference in the means of
two periods.
In the case of the ICICI Bank, the non-interest expenditure as a percentage of
total assets is 1.81 per cent in pre e-banking period which increased to 2.94 per cent in
post e-banking period. The mean gap is 1.13 per cent. The t-test exhibits significant
difference in the mean of two periods at .01 per cent level of significance.
Comparatively the burden on Andhra Bank is less compared to ICICI. This may
due to decrease in manpower expenses in Andhra Bank as there is decrease in no. of
employees where as in ICICI bank there may be increase in ratio due to of expansion of
premises.
203

Table 5.5.2.a : Non - Interest Expenditure as a Percentage of Total Assets

(NIE%TAs)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

NIE%TAs
Andhra Bank
ICICI Bank
3.14
1.81
3.07
2.94
0.07
1.13
0.40
0.31
0.18
3.59
NS
**

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant,

Source: same as table 5.5.1.a.
** Mean is Significant at the 0.01 level (1-tailed)

3.5
3
2.5
2
Pre e-banking

1.5

Post e-banking

1
0.5
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.2.a.

204

5.5.2.b Non - Interest Income as a Percentage of Total Assets (NII % TAs)

Non interest income of banks represents income earned by way of commission,
brokerage service charges and other miscellaneous receipts.
As evident from the table 5.5.2.b. in the case of Andhra Bank the mean in pre-e-banking
period was 1.31 per cent which has increased to 1.60 per cent in post e-banking period.
The mean gap in pre and post e-banking period is 0.29 per cent. The t-test shows
insignificance.
In the case of the ICICI Bank the mean in pre e-banking period was 1.09 per cent
which increased to 2.23 per cent in post e-banking period. The mean gap in pre and post
e-banking periods is 1.14 per cent. The t-test shows insignificant difference in both
periods at .01 per cent level of significance.
Comparatively the mean gap is higher in ICICI Bank (1.14 per cent) when
compared to Andhra Bank (0.29 per cent).

The difference of non interest income

between pre and post e-banking in both banks can be attributed to services charges,
commissions, brokerage service charges and other miscellaneous receipts. This shows
more efficiency of ICICI Bank when compared to Andhra Bank.

205

Table 5.5.2.b: Non - Interest Income as a Percentage of Total Assets (NII % TAs)

NII%TAs
Andhra Bank
ICICI Bank
1.31
1.09
1.60
2.23
0.29
1.14
0.42
0.26
0.71
4.41
NS
**

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

Note: S.E: Standard Error, LOS: Level of Significance. NS - Not Significant,

Source: same as table 5.5.1.a.
** Mean is Significant at 0.01 level (1-tailed)

2.5
2
1.5
Pre e-banking

Post e-banking

0.5
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.2.b.

206

5.5.2.c Burden as a Percentage of Total Assets (B%TAs)

Burden is defined as the differences between non-interest expenditure and noninterest income of the banks
As evident from the table 5.5.2.c. in the case of Andhra Bank the mean was 1.83 per
cent in pre e-banking banking period which decreased to 1.46 per cent in post e-banking
period. The mean gap is 0.37 per cent between the two periods. The t-test exhibits
significant difference in the means of two periods at .01 per cent level of significance.
In the case of the ICICI Bank the burden as a percentage of total assets is same
0.71 per cent in pre-e-banking period and in post e-banking period. There is no mean gap
in pre and post e-baking period. The t-test shows an insignificant difference in the means
of two periods.
The mean gap in both banks shows a profitable position. This may be attributed to
decrease in non interest expenditure and increase in non interest income.

207

Table 5.5.2.c. : Burden as a Percentage of Total Assets (B%TAs)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

B%TAs
Andhra Bank
ICICI Bank
1.83
0.71
1.46
0.71
0.37
0.01
0.14
0.27
2.60
0.02
**
NS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant,

Source: same as table 5.5.1.a.
** Mean is significant at 0.01 level (1-tailed)

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.5.2.c.

208

5.5.3

Profitability Ratios
Profitability is a ratio of earnings to the funds used. It stands for profits deflated

by the size of the unit and indicates the efficiency with which a bank deploys its total
resources of maximize its profit.
A.
B.
C.

Net Profit as a percentage of Total income

Net Profit as a percentage of Total deposits
Net Profit as a percentage of Total assets

5.5.3.a Net Profit as a percentage of Total Income (NP%TI)

Net profit implies the balance of profit as per profit & loss account. This ratio indicates
the efficiency with which a bank deploys its total assets in order to increase its
profitability and serves as an index to the degree of asset utilization by banks.
As evident from the table 6.22.1 in the case of Andhra Bank the mean was 7.23
per cent in pre e- banking period which increased to 15.15 per cent in post-e-banking
period. There is a mean gap of 7.92 per cent and it is significant at .01 per cent level of
significance.
In the case of the ICICI Bank the mean was 7.58 per cent in the pre e-banking
period which increased to 11.86 per cent in post e- banking. The mean gap between pre
and post e- banking period is 4.27 per cent. The t-test exhibits insignificant difference in
the means of two periods.
Comparatively the net profit as a percentage of total income has doubled in
Andhra Bank when compared to ICICI Bank. This may be due to efficiency of Andhra
Bank in deploying its total assets as a result there is increase in profitability. Andhra bank
shows more efficiency when compared to ICICI bank.

209

Table 5.5.3.a.: Net Profit as a percentage of Total Income (NP%TI)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

NP%TI
Andhra Bank ICICI Bank
7.23
7.58
15.15
11.86
7.92
4.27
1.89
2.29
4.20
1.87
**
NS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant,

Source: same as table 5.5.1.a
** Mean is significant at 0.01 level(1-tailed)

16
14
12
10
8

Pre e-banking

Post e-banking

4
2
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.3.a.

210

5.5.3.b Net Profit as a percentage of Total Deposits (NP% TD)

As evident from the table 6.22.1 in the case of Andhra Bank, the net profit as a
percentage of total deposits was only 0.86 per cent in pre-e-banking period which
increased to 1.62 per cent in post e-banking period. The mean gap is 0.76 per cent
between the pre and post e-banking period. The t-test shows significant difference in the
means of two periods at .01 per cent level of significance.
In the case of the ICICI Bank the mean in pre-e-banking period was 0.98 per
cent which increased to 1.90 per cent in post e-banking period. The mean gap is 0.92 per
cent between two means. The t-test exhibits significant difference in the means of two
periods at .01 per cent level of significance.
Comparatively ICICI banks Net profit as a per cent of total deposits shows a
better profitable ratio when compared to Andhra Bank. This may be attributed to high net
profits and lowering of total deposits.

211

Table 5.5.3.b.: Net Profit as a percentage of Total Deposits (NP% TD)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

NP%TD
Andhra Bank ICICI Bank
0.86
0.98
1.62
1.90
0.76
0.92
0.30
0.25
2.59
3.75
**
**

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant,

Source: same as table 5.5.1.a.
** Mean is significant at 0.01 level (1-tailed)

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.5.3.b.

212

5.5.3.c Net Profit as a Percentage of Total Assets (NP % TAs)

As evident from the table 5.5.3.c. in the case of Andhra Bank the net profit as
per cent of total assets was 0.77 per cent in pre-e-banking period which increased to 1.39
per cent in post e-banking period. The mean gap is 0.62 per cent between the two periods.
The t-test exhibits significant difference in the means of two periods at .05 per cent level
of significance.
In the case of the ICICI Bank the mean in pre e-banking period was 0.66per cent
which increased to 1.08 per cent in post e-banking period. The mean gap in two periods
is 0.42per cent.
Comparatively, the mean gap is higher in Andhra Bank than ICICI Bank. This may
be due to improved efficiency of Andhra bank which resulted in increase of profits.
Thus it can be concluded that in the ongoing analysis of average profitability gap
between public and private sector bank indicates that there is a little change in
profitability of ICICI Bank. But there is paradigm shift in profitability of Andhra Bank.

213

Table 5.5.3.c.: Net Profit as a Percentage of Total Assets (NP % TAs)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

NP%TAs
Andhra Bank ICICI Bank
0.77
0.66
1.39
1.08
0.62
0.42
0.24
0.14
2.53
3.09
*
NS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5..1.a.
* Mean is significant at 0.05 level (2-tailed)

1.4
1.2
1
0.8
Pre e-banking

0.6

Post e-banking

0.4
0.2
0
Andhra
Bank

ICICI Bank

Source: Table 5.5.3.c.

214

5.6 Productivity Analysis

Productivity is a ratio of input and output361. When we talk of productivity, we
enter into the area of employee efficiency, branch efficiency which has definite bearing
on the profitability.

If the funds are used efficiently due to higher productivity of

personnel it will definitely lead to higher profitability. Therefore, the most important
aspect of organizational profitability management is its productivity.
The present section analyzes the Employee Productivity, Branch Productivity. The
present study also analyses the productivity of various bank groups on the following basis.
5.6.1

Employee Productivity:
A.

Deposits per employee

B.

Credit per employee

C.

Total expenditure per employee

D.

Total earning per employee

5.6.1.a Deposit per employee (D/E)

As evident from the table 5.6.1.a. in the case of Andhra Bank, the average of deposits
per employee was only 1.25 per cent during pre-e-banking period but they have become
almost three times in post e-banking period 3.05 per cent. The gap between pre and
post e-banking period is 1.80 per cent. The t-test shows significant change in means of
two periods in deposits per employee at .05 per cent level of significance.

361

T T Ram Mohan and Subhash C. Ray, Productivity and efficiency at public and private sector banks in
India,Document 1462007490.7004358.pdf.

215

In the case of the ICICI Bank, the average of D/E which was 4.10 per cent in pre
e-banking period. Now in post e-banking period there is a tremendous change of 5.77 per
cent which follows a gap of 1.67 per cent. There is a significant change between the
means of two periods in deposits per employee at .01per cent level of significance.
The mean gap of Andhra Bank is higher than ICICI Bank. This may be
attributed to training and development given to employees which further helped in bring
out the quality in them, secondly increased rates of interest payable attracted more
deposits.

216

Table 5.6.1.a.: Deposit per employee (D/E)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

D/E
Andhra Bank ICICI Bank
1.25
4.10
3.05
5.77
1.80
1.67
0.80
0.53
2.26
3.16
*
**

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
* Mean is significant at 0.05 level (2-tailed)
** Mean is significant at 0.01 level (1-tailed)

6
5
4
3

Pre e-banking

Post e-banking

1
0
Andhra
Bank

ICICI Bank

Source: Table 5.6.1.a.

217

5.6.1.b Credit per Employee (C/E)

As evident from the table 5.6.1.b. in the case of Andhra Bank, the average of
credit per employee was only 0.76 per cent during pre-e-banking period but there is a
tremendous increase in post e-banking which has become 1.77 per cent.

The gap

between pre and post e-banking period is very large, i.e. 1.02 per cent. The t-test shows
insignificant difference in means of two periods.
In the case of the ICICI Bank, the average of C/E is very high in pre-e-banking
i.e. 6.08 per cent but it reduced to 5.35 per cent in post e-banking period with a mean gap
of 0.73 per cent between the two periods. The t-test exhibits insignificant difference in
means of two periods.
The mean gap of Credit per Employee in Andhra Bank is 1.02 per cent which is
two times of ICICI Bank, it may be due to increased credit port folios and also increase in
Non- performing assets. With regards to credit per employee there is no significant
difference between pre and post e-banking period in both banks.

218

Table 5.6.1.b.: Credit per Employee (C/E)

Average
Pre-e-banking (x1)

C/E
Andhra Bank ICICI Bank
0.76
6.08
1.77
1.02
0.64
1.58
NS

Post e-banking (x2)

Mean Gap
S.E
t-value
LOS

5.35
0.73
0.38
1.91
NS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.

7
6
5
4
Pre e-banking

Post e-banking

2
1
0
Andhra
Bank

ICICI Bank

Source: Table 5.6.1.b

219

5.6.1.c Total Expenditure per Employee (TEXP/E)

As evident from the table 5.6.1.c in the case of Andhra Bank, the average of
total expenditure per employee was 0.16 per cent in pre-e-banking period but increased to
0.47 per cent in post e-banking period. The mean gap between pre and post e-banking
period is 0.31per cent. The t-test shows insignificant change in means of two periods.
In the case of the ICICI Bank, the mean during pre-e-banking period was 0.32
per cent and it increases up to 0.81 per cent in post e-banking period. There is a minor
mean gap of only 0.49 per cent between pre and post e-banking period. The t-test shows
significant change in means of two periods at .01 per cent level of significance.
Comparatively in Andhra Bank the total expenditure per employee during pre and
post e-banking period is less than ICICI bank. This may be due to increased in Training
and development programmes, attractive incentive packages to employees to motivate
them.

220

Table 5.6.1.c: Total Expenditure per Employee (TEXP/E)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

TEXP/E
Andhra Bank ICICI Bank
0.16
0.32
0.47
0.81
0.31
0.49
0.34
0.09
0.92
5.42
NS
**

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a
** Mean is significant at 0.01 level (1-tailed)

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.6.1.c

221

5.6.1.d Total Earning per Employee (TE/E)

As evident from the table 5.6..1.d. in the case of Andhra Bank, the total earning
of employee was only 0.18 per cent during pre-e-banking period which is increased to
0.31 per cent in post e-banking period the mean gap between the two periods is 0.13 per
cent which follows an insignificant change according to t-test.
In the case of the ICICI Bank, the total earning of employee of pre-e-banking
period was 0.35per cent which increased to 0.92 per cent in post e-banking period. The
mean gap is 0.57 per cent between pre & post e-banking. The t-test shows significant
change in means of two periods at 0.01 per cent level of significance.
Comparatively the mean gap of total earning per employee in ICICI Bank is four
times that of Andhra Bank. This may be attributed to increased motivation levels of
employees.

222

Table 5.6.1.d.: Total Earning per Employee (TE/E)

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

TE/E
Andhra Bank ICICI Bank
0.18
0.35
0.31
0.92
0.13
0.57
0.07
0.09
1.90
6.32
NS
**

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
** Mean is significant at 0.01 level (1-tailed)

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.6.1.d.

223

5.6.2 Branch Productivity

5.6.2.a Deposits per Branch (D/B)
As evident from the table 5.6.2.a. in the case of Andhra Bank, during the pre ebanking period the average of branch productivity in deposits is 17.24 per cent which
increased to 30.78 per cent in post e-banking period. The mean gap between the mean of
two periods is 13.54 per cent. The t-test exhibits significant difference in the two means
at .01 level of significance.

In the case of the ICICI Bank, the branch productivity in

deposits is 8.37 per cent in pre e-banking period which increased to 194.10 per cent in the
post e-banking period. The mean gap is 104.73 per cent. The t-test shows significant
difference between two means at .05 per cent level of significance.
The mean gap of ICICI Bank in pre and post e-banking period is higher than
Andhra Bank. This can be attributed to less number of branches in ICICI bank when
compared to Andhra Bank.

224

Table 5.6.2.a: Deposits per Branch (D/B)

D/B
Average

Andhra Bank

ICICI Bank

Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

17.24
30.78
13.54
6.25
2.17
*

89.37
194.10
104.73
44.68
2.34
*

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
*Mean is significant at 0.05 level (2-tailed)

200
180
160
140
120
100
80
60
40
20
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.6..2.a.

225

5.6.2.b Credit per Branch (C/B)

As evident from the table 5.6..2.b. in the case of Andhra Bank, the mean in credit per
branch productivity was 9.03 per cent in pre-e-banking period but increase to 20.69 per
cent in post e-banking period. The mean gap is 11.66 per cent between two periods. The
t-test exhibits a significant gap in two means at .05 per cent level of significance.
In the case of the ICICI Bank, the average branch productivity in credit in pre ebanking period is 131.01 per cent which increased to 177.86 per cent in post e-banking.
The mean gap between the means of two periods is 46.85 per cent. The t-test shows
insignificant difference between two means.
Comparatively the mean gap between the two banks ICICI Bank is higher than
Andhra Bank. This may be due to increased credit portfolios.

226

Table 5.6..2.b.: Credit per Branch (C/B)

C/B
Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

Andhra Bank
9.03
20.69
11.66
5.33
2.19
*

ICICI Bank
131.01
177.86
46.85
34.92
1.34
NS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
*Mean is significant at 0.05 level (2-tailed)

180
160
140
120
100
80
60
40
20
0

Pre e-banking
Post e-banking

Andhra
Bank

ICICI Bank

Source: Table 5.6.2.b

227

5.6.2.c Total Expenditure per Branch (TEXP/B)

As evident from the table 5.6.2.c. in the case of Andhra Bank, the average of total
expenditure per branch in Andhra bank was 1.99 per cent in pre e-banking period which
increased to 2.72 per cent in post e-banking period. The mean gap between two periods
is 0.73 per cent.
In the case of the ICICI Bank, the average branch productivity in terms of total
expenditure in pre e-banking period was 6.89 per cent which increased to 26.26 per cent
in post e-banking period. The mean gap between two periods is 19.37 per cent. The ttest exhibits significant difference in the means of two periods at .01 per cent level of
significance.
The mean gap between pre and post e-banking period of Andhra Bank is less than
ICICI Bank. This may be due to huge cost of computerization, training and
advertisements and other related expenditure.

228

Table 5.6.2.c : Total Expenditure per Branch (TEXP/B)

TEXP/B
Andhra Bank ICICI Bank
1.99
6.89
2.72
26.26
0.73
19.37
0.47
3.67
1.54
5.28
NS
**

Average
Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
** Mean is significant at 0.01 level (1-tailed)

30
25
20
15

Pre e-banking

10

Post e-banking

5
0
Andhra
Bank

ICICI Bank

Source: Table 5.6.2.c.

229

5.6.2.d Total Earning per Branch (TE/B)

As evident from the table 5.6.2.d. in the case of Andhra Bank, the average
branch productivity in terms of total earning is 2.18 per cent in pre e-banking period
which increased to 3.18 per cent in pre-e-banking period. The mean gap is 1.00 per cent
between these two periods. The t-test shows significant difference between the means of
two periods at.05 level of significance.
In the case of the ICICI Bank, the bank indicates a mean gap of 29.75 per cent in
pre-e-banking period which decreased to 22.12 per cent in post e- banking period. The
gap between post e-banking period and pre-e-banking period is 7.63 per cent. The t-test
shows significant difference between means of two periods at .05 per cent level of
significance.
The mean gap of total earnings per branch in Andhra Bank is higher than ICICI
Bank during the period of pre and post e-banking period. This can be attributed to
increased earning in various branches due to technological upgradation in bank.

230

Table 5.6.2.d.: Total Earning per Branch (TE/B)

TE/B
Andhra Bank ICICI Bank

Average

2.18
3.08
1.00
0.51
1.99
*

Pre-e-banking (x1)
Post e-banking (x2)
Mean Gap
S.E
t-value
LOS

29.75
22.12
7.63
3.96
5.59
*

Note: S.E: Standard Error, LOS: Level of Significance, NS - Not Significant

Source: same as table 5.5.1.a.
* Mean is Significant at the 0.05 level (2-tailed)

30
25
20
15

Pre e-banking
Post e-banking

10
5
0
Andhra
Bank

ICICI Bank

Source: Table 5.6.2.d.

231

5.7 Conclusion:
The following is the summary of the conclusions drawn in this chapter.
1. As regards spread ratios in interest earned, interest paid on total assets, there is
an increase from pre e-banking period due to decline in interest rates. Here the
Andhra bank is more efficient than ICICI Bank.
2. With regards to burden ratios on non interest expenses, non interest income,
burden on total assets, the efficiency of post e-banking period is higher than pre ebanking period in ICICI Bank when compared to Andhra Bank.
3. With regards to profitability ratios there is a huge improvement in net profit on
total income in Andhra Bank and ICICI Bank. Here the Andhra bank is more
efficient than ICICI Bank. The efficiency of post e-banking period in net profit on
total deposits is increases horizontally in Andhra Bank and ICICI Bank. The
efficiency of Andhra Bank in net profit on total assets has been increasing in post
e-banking period than ICICI Bank.
4. A paradigm shift in the profitability of both banks in pre and post e-banking
period exhibits that the parameters like I/E, I/P, Spread on total assets, Net profit
as % of - total income, total deposits, (except total assets) have the mean gap on
the top in Andhra Bank. The mean gap in burden ratios on total assets is the
highest in ICICI Bank.
5. From the employee productivity, the deposit per employee efficiency of ICICI
Bank is more than Andhra Bank. Compared to Andhra Bank the credit per
employee of ICICI Bank is very high in pre e-banking period, it is almost equal in
232

post e-banking period. And the total expenditure per employee is high in ICICI
Bank than Andhra Bank. The total earnings per employee between two banks,
ICICI Bank is more efficient in post e-banking period than pre e-banking period.
Employee productivity in parameters like D/E, C/E is higher in Andhra Bank, but
in TEXP/E, TE/E is high in ICICI Bank.
6. After analyzing the branch productivity, the efficiency in deposit per employee,
credit per employee, total expenditure per employee, total earning per employee
D/B, C/B, TEXP/B, TE/B is very high in ICICI Bank than Andhra Bank. The
mean gap in operational productivity on total assets is the highest in Andhra Bank
(except NII on TA).
The analysis concluded that transformation is taking place almost in all categories
of the banks. This transformation will be helpful to cope with new economic and
financial policies of the banks. IT is playing a crucial role to create the drastic changes
in the banking industry particularly in the new private sector and foreign banks. The
private banks take a big share of cake; public sector banks are still lagging behind due to
various financial parameters. The immense opportunities are also available for the public
sector banks if they change / modify and adapt to new policies to combat the recent
challenges. It can be concluded that mere introduction of IT alone is not sufficient to
bring necessary performance improvement and to get the competitive edge. Efficient
people are required to use new technological tools. Thus, IT management is a challenge
in future banking scenario.

233

Most customers are of the view that liberalization has played a crucial role in the
development of the Indian banking industry by making banking more efficient and
customer friendly. Private Banks are tech savvy and have compelled nationalized banks
to think of new schemes and innovative ideas to retain their loyal customers. Youngsters
who began banking in the flexible hour ATM (All Time Money) era, find the bouquet
of services, particularly convenient banking options more appealing which are being
offered by private banks. To attract young generation public sector banks are also
catching up fast362.
The recent global financial crisis has taught several lessons to the world banking
system. The worst suffers are the so called more developed/industry like India, has least
impact of the financial crisis. This is a blessing in disguise. The Indian banking system
has never deviated from the fundamental principles of banking according to Dr.Y.V.
Reddy, the Former Governor, Reserve Bank of India. However, the performances of
Indian banks whether private or public have to respond to the globalization process and
rise to the international standards. To achieve this Indian banking system must introduce
technology enabled services to the customers (both individuals as well as firms).

362

Tripti Nath, Nationalised banks Fare Well with Third Generation customers in Banking Sector in
India, Yojana A Development Monthly, February, 2010.

234