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A CAMEL MODEL ANALYSIS OF STATE BANK GROUP

Sushendra Kumar Mishra* Parvesh Kumar Aspal**
ABSTRACT The economic importance of banks to the developing countries may be viewed as promoting capital formation, encouraging innovation, monetization, influence economic activity and facilitator of monetary policy. Performance evaluation of the banking sector is an effective measure and indicator to check the soundness of economic activities of an economy. In the present study an attempt was made to evaluate the performance & financial soundness of State Bank Group using CAMEL approach. It is found that in terms of Capital Adequacy parameter SBBJ and SBP were at the top position, while SBI got lowest rank. In terms of Asset Quality parameter, SBBJ held the top rank while SBI held the lowest rank. Under Management efficiency parameter it was observed that top rank taken by SBT and lowest rank taken by SBBJ. In terms of Earning Quality parameter the capability of SBM got the top rank while SBP was at the lowest position. Under the Liquidity parameter SBI stood on the top position and SBM was on the lowest position. SBI needs to improve its position with regard to asset quality and capital adequacy, SBBJ should improve its management efficiency and SBP should improve its earning quality.

JEL Classification: G21, G24 and L25
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*Sushendra Kumar Mishra, Director – Finance, Department of Finance and Accounts, Punjab Technical University, Jalandhar. Email: skmishra_cofptu@yahoo.co.in **Parvesh Kumar Aspal, Assistant Registrar, Department of Finance and Accounts, Punjab Technical University, Jalandhar, India. Email: pk_aspal.ptu@hotmail.com.

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Electronic copy available at: http://ssrn.com/abstract=2177099

1. Introduction
The economic development of a country depends more on real factors such as the industrial growth & development, modernization of agriculture, expansion of internal trade and foreign trade. The role and importance of banking sector and the monetary mechanism cannot be under-estimated in the development of a nation. Hence the banks and financial institutions play significant and crucial role by contributing in Economic planning such as lying down of specific goals and allocating particular amount of money that constitute the economic policy of the government. A sound financial system is indispensable for the growth of a healthy and vibrant economy. A sound banking industry comprises a paramount component of the financial services sector. Performance of the banking sector is an effective measure and indicator to check the performance of any economy to a large extent. The banking sector’s performance is perceived as the replica of economic activities of the economy as a healthy banking system plays as the bedrock of economic, social and industrial growth of an economy. Banking system in our economy has been allotted a crucial and noteworthy role in financing the planned economic growth. The studies of McKinnon (1973) and Shaw (1973) emphasized the role of financial system in economic growth and opined that there is a strong correlation between economic growth and financial system development. One more study concluded that development of financial system excels the economic growth through various channels (Levine and Zervos, 1998). The banks according to Gerschenkron (1968) substituted for the absence of a number of elements crucial to industrialization. The German investment banks were a powerful invention like a steam engine, which played the capital-supplying functions a substitute for the insufficiency in the financial system. Banks are playing crucial and significant role in the economy in capital formation due to the inherent nature, therefore banks should be given more attention than any other type of economic unit in an economy. Evaluation of financial performance of the banking sector is an effective measure and indicator to check the soundness of economic activities of an economy. The banking sector’s performance is perceived as the replica of economic activities of the economy. The stage of development of the banking industry is a good reflection of the development of the economy. There is a substantial improvement over the earlier supervisory system of banking sector in terms of recovery, management efficiency, assets quality, earning quality and internal control system to regulate the level of risk and financial viability of commercial banks. The regulators have augmented bank supervision by using CAMEL (capital adequacy, asset quality, management quality, earnings and liquidity) rating criterion to assess and evaluate the performance and financial soundness of the activities of the bank. The CAMEL supervisory criterion in banking sector is a significant and considerable improvement over the earlier criterions in terms of frequency, check, spread over and concentration. During this period, the banking sector has experienced a paradigm change and it was the time to make performance appraisal of operations. Accordingly, Reserve Bank of India provided a framework for the performance appraisal of the current strength of the system, operations and the performance of the banks. Padmanabhan Working Group (1995) recommended two supervisory rating models named as CAMELS (Capital Adequacy, Assets Quality, Management, Earning, Liquidity, Systems and Controls) and CACS (Capital Adequacy, Assets Quality, Compliance, Systems and Controls) for rating of Indian commercial Banks and Foreign Banks operating in India.
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Electronic copy available at: http://ssrn.com/abstract=2177099

Hirtle and Lopez (1999) stressed that the bank’s CAMEL rating is highly confidential. On the other hand Singh and Kohli (2006) undertook SWOT analysis of 20 old and 10 new private sector banks.A Brief History The SBI was established on 1 July 1955. At present SBI is India's largest bank with assets of US$360 billion and 14. and only exposed to the bank’s senior management for the purpose of projecting the business strategies.1.500 branches. This rating criterion ensures a bank’s healthy conditions by reviewing different aspects of a bank based on variety of information sources such as financial statement. including 173 foreign offices in 37 countries across the globe. Similarly a study by Sarker (2005) in Bangladesh examined the CAMEL model for regulation and supervision of Islamic banks by the central bank. Jutur and Surender (2005) concluded that the Indian banking system looks sound and Information Technology will help the banking system grow in strength in future. SBI has been ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012. The main attempt of CAMEL system is to find out problems which are faced by the banks themselves and catch up the comparative analysis of the performance of various banks.1 State Bank of India (SBI) . Said and Saucier (2003) used CAMEL rating methodology to evaluate the liquidity. The viability of the banks was analyzed on the basis of the offsite supervisory exam model—CAMEL model. budget and cash flow. CAMEL is an acronym for five components of bank safety and soundness: capital adequacy.119 branches. Review of Literature In order to evaluate the financial performance of banking and financial sector the researchers. Barr et al. earning ability. and to appropriate supervisory staff. assets and management quality. (2002) viewed that “CAMEL rating criteria has become a concise and indispensable tool for examiners and regulators”. earnings ability and liquidity position. This study enabled the regulators and supervisors to get a Shariah benchmark to supervise and inspect Islamic banks and Islamic financial institutions from an Islamic perspective. Similarly Kapil (2005) investigated the relationship between the CAMEL ratings and the bank stock performance. macroeconomic data.com/abstract=2177099 . innovative products and better bargains. These banks have also been ranked on the basis of financial data for the years 2003-2005 and the performance was evaluated by using CAMEL model. Including the branches that belong to its associate banks. 2. The study concluded that the competition was tough and consumers benefited from better services quality. Similarly 3 Electronic copy available at: http://ssrn. academicians and policy makers have investigated several studies in different perspectives and in different time periods. management quality. solvency and efficiency of Japanese Banks. In India Prasuna (2004) analyzed the performance of Indian banks by adopting the CAMEL Model. It has a market share among Indian commercial banks of about 20% in deposits and loans. the study evaluated capital adequacy. funding sources. A study conducted by Lace and Stephen (2001) showed that there is definitely a relationship between bank efficiency scores and financial ratios used to proxy a bank's CAMEL rating. asset quality. In a similar way Satish. liquidity. Bodla and Verma (2006) recommended that such types of rating would help the Reserve Bank of India to identify the banks whose performance needs special supervisory attention. SBI has 21.

Analysis and Discussion 4. It is very useful for a bank to conserve & protect stakeholders’ confidence and preventing the bank from being bankrupt. 3.1 Capital Adequacy Capital adequacy has come forth as one of the prominent indicators of the financial health of a banking system. One Way ANOVA. It is an instrument to rate/rank the banks.Gupta and Kaur (2008) conducted the study with the main objective to assess the performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to top five and bottom five banks. State Bank of Patiala (SBP). F-test. 3. It also reflects 4 . 2. State Bank of India (SBI) and its subsidiaries i. a ratio-based model to evaluate the performance of banks under various criteria. Maheshwara and Prasad (2011) discussed the financial performance of selected regional rural banks during post reorganization period. To give recommendations and suggestion for improvement of performance and financial position of State Bank India and its subsidiaries.1 Objective of the Study The objectives of our study are: 1. State Bank of Hyderabad (SBH). The requirement for additional capital is indicated by capital adequacy. Beside these the data has been tested for normality distribution. The study concluded that annual CAMEL scanning helps the commercial bank to diagnose its financial health and alert the bank to take preventive steps for its sustainability. Twenty ratios related to CAMEL model are calculated in the study. A study on regional rural banks Reddy. The data of the sample banks for a period of 2009-2011 have been collected from the annual reports published by the banks. basically. 3. For analysis and interpretation of results. The present study is a descriptive research study based on analytical research design. the statistical tools used are arithmetic mean. State Bank of Bikaner and Jaipur (SBBJ). A sample of 6 public sector banks viz. Research Methodology CAMEL is. To analyze the financial position and performance of the State Bank Group using CAMEL model. State Bank of Travancore (SBT) is taken for study. The study adopted CAMEL model to examine the overall performance of Andhra Pragathi Grameena Bank and Sapthagiri Grameena Bank. State Bank of Mysore (SBM).e.2 Hypothesis of the Study There is no significant difference in performance of SBI and its subsidiaries as assessed by CAMEL model. 4. Similarly a study on State Bank Group by Siva and Natarajan (2011) empirically tested the applicability of CAMEL norms and its consequential impact on the performance of SBI Groups.

16 13. indicates stronger the bank and the more will be the protection of investors.53 12.90 12. Sr.15 1. Tier 1 capital includes permanent shareholders’ equity. No.56 1. General provisions/general loan-loss reserves.85 0.60 14. 4. It is calculated by dividing total borrowings with shareholders’ net worth. Disclosed reserves and Innovative capital instruments.2 Debt-Equity Ratio This ratio represents the degree of leverage of a bank. The higher the CAR ratio.30 Rank 6 3 4 2 1 5 5 . 2. 6. 3.45 1.89 1.03 2010 13. 3.19 1.68 0. CAR = (Tier-I Capital + Tier-II Capital)/Risk Weighted Assets.68 14.52 11.41 12.2 Debt-Equity Ratio (Times) 2009 1. No. SBM scored the lowest position.91 1. The banks are required to maintain 9% capital adequacy ratio as per latest RBI norms.65 Average 1.13 2010 1. 5. 4.25 13.13 0. perpetual non-cumulative preference shares. It shows how much proportion of the bank business is financed through equity and how much through debt. Sr. 2. Higher ratio is an indication of less protection for the depositors and creditors and vice-versa.05 0.20 13.24 1.98 11.43 Rank 3 4 1 6 5 2 It is found that SBH ranked on the top position with highest CAR of 13.1.99 0. 4.05 13.76 13.99 1. 5.42 13. Tier 2 capital includes Undisclosed reserves.54 Average 13.74 2011 11. 1.83 1.99 12. 6. SBI SBBJ SBH SBM SBP SBT Bank Table 1.43) and SBI (13.25 14.04 1. 4.39 13.56 13. 1.23 1.18 1.whether the bank has enough capital to bear unexpected losses arising in the future and bank leverage.56 followed by SBT (13.14 1.1.30 14. Revaluation reserves of fixed assets and long-term holdings of equity securities. Hybrid debt capital instruments and subordinated debt.1 Capital Adequacy Ratio (%) 2009 14.1 Capital Adequacy Ratio (CAR) The capital adequacy ratio is propounded to ensure that banks can take up a reasonable level of losses arising from operational losses.09 13.14 2011 1.42 1.26 13.20).61 1. SBI SBBJ SBH SBM SBP SBT Bank Table 1.

25 97.65 87.3 Advances/Assets Ratio (%) 2009 56.83 89. SBP is on the top position with least average of 1. SBH scored the lowest position.64 92. 4.13 64. SBT is on the top position with highest average of 65.90 63.24 88. No.56 62.79 2011 78. 1.34 97. 2.64 96.97 94.30 64.56).75 95.16 81. 1.79 Rank 6 2 5 3 1 4 In above table.88 95. SBP is on the top position with highest average of 96.23 Rank 5 2 6 3 4 1 In above table.70 65.90 Average 59. 5. SBI scored the lowest position. SBI SBBJ SBH SBM SBP SBT Bank Table 1. Higher ratio is preferred to a lower one. 5.10 2010 60.50 2010 76.14) and SBBJ (1.40 63.82 80.80 65.90 84.60 66.44) on second and third positions.26 65. SBI scored the lowest position.00 60. This ratio indicates a bank’s aggressiveness in lending which ultimately produces better profitability. Sr.62 86. Since government securities are risk-free. 6 .70 2011 61.23 followed by SBBJ (64.In above table.90 followed by SBBJ (95.05 97.93 83.50 60. It is calculated by dividing the amount invested in government securities by total investment.15).44 96. SBI SBBJ SBH SBM SBP SBT Bank Table 1.30 62. 3.00 65.4 Government Securities/ Total Investments (%) 2009 81.04 followed by SBM (1. 4. lower will be the risk involved in a bank’s investment and vice versa.4 Government Securities to Total Investments This ratio reflects the risk involved in a bank’s investment.30 64.1. 4. higher the proportion of government securities in total investment.66 85. Sr. 6. No. 3.00 59. 6.20 88.01 83.36 64. 4.93) and SBM (89.96 59.1. 2.40 56.3 Advances to Assets This is a ratio indicates the relationship between the total advances and total assets.96) and SBM (64.90 64.80 65.10 Average 78.

5.13 64.1. No.44 96.55 1.79 6 2 5 3 1 4 5. 1. SBI SBBJ SBH SBM SBP SBT Bank Table 2. SBBJ and SBP was at the top position with group average of 2.05 13.1.20 13.60 followed by SBBJ (0.43 Rank Times 3 4 1 6 5 2 1.88 95.15 1.81 0.56 13. 4.Net of provisions on NPAs .2 ASSETS QUALITY The quality of assets is an important parameter to examine the degree of financial strength. 7 .71.38 1.5 Composite Capital Adequacy Bank CAR Debt-Equity Table 1.77 0.5 Advances/ Assets % 59.50).00 6 1. measuring the net nonperforming assets as a percentage of net advances.00 2.56 62. Advances to Assets and Government Securities to Total Investments ratios. SBH is on the top position with least average of 0.interest in suspense account.75 4.87 1.58 2010 1.5 3 % SBI SBBJ SBH SBM SBP SBT 13.79 0.85 0.61 1.96 59.98 Average 1.60 0.60 0. Sr.91 2011 1.00).16 13.23 Govt.96 0.14 1.50 0. 6. 3.82 Rank 6 2 1 5 4 3 In table 2. 2.09 13.1 Net NPAs to Net Advances It is the most standard measure to judge the assets quality.5. SBM (3.50 2.2.72 0.4.83 0.18 1.26 65. The foremost objective to measure the assets quality is to ascertain the composition of non-performing assets (NPAs) as a percentage of the total assets.02 1.30 Rank 6 3 4 2 1 5 On the basis of group averages of four ratios of capital adequacy as expressed in table 1. Net NPAs = Gross NPAs .36 64.5 5 4 1.90 84. SBI scored the lowest position with highest percentage of 1.93 83. SBI scored the lowest position due to its poor performance in DebtEquity.21 0.95 0. 4. Group Rank Securities/ Total Investments Rank % Rank Avg Rank 5 2 6 3 4 1 78.1 Net NPAs to Net Advances (%) 2009 1.83 89. 4. followed by SBT (3.04 1.63 0.75.71 0.00 3.75 3.38 0.81) and SBT (0.04 0.82) on second and third positions respectively.

89 0.66 0.50 15.2.10 27.13 followed by SBBJ (20.37 0. SBI SBBJ SBH SBM SBP SBT Bank Table 2.83.60 2011 24.2.30 Average 23.63 0.53) respectively. 4. 4.53).36) and SBM (22.3 Net NPAs to Total Assets This ratio reflects the efficiency of bank in assessing the credit risk and recovering the debts.53 Rank 6 2 1 5 4 3 In table 2.90 14.00 0. The higher the reduction in net NPAs levels reflect. No. the Net NPAs are measured as a percentage of Total Assets. 3. 4.73 0.32 0.30 25.3 Net NPAs to Total Assets Ratio (%) 2009 1. 6.62 0.2. A higher ratio shows the conservative policy of a bank to provide safeguard to the investments against NPAs.20 21.70 24.01. This ratio is used as a tool to measure the percentage of total assets locked up in investments.3.00 0.21 0.36 23.38 2010 1. SBI SBBJ SBH SBM SBP SBT Bank Table 2.52 0.54 0. 8 .49 0. the better is the quality of advances.13 22. SBI scored the lowest position with highest ratio of 1. 1.53 20.20 25. 1.2 Total Investments to Total Assets Ratio (%) 2009 18. SBH is on the top position with least average of 0.4 Percentage Change in Net NPAs This ratio measures the movement/trend in net NPAs in current year in relation to net NPAs in the previous year.90 26.57 0.10 25.35 0.58 2011 1.83 22.52) and SBT (0. 3. SBH scored the lowest position with highest ratio of 23. 5. In this ratio. Sr.54 0.2.80 Rank 5 2 6 3 1 4 In table 2.20 16.52 0.03 0.2 Total Investments to Total Assets Ratio This ratio indicates the extent of deployment of assets in investment as against advances.63 Average 1.50 17.60 17. No.80 21.50 2010 28.35 followed by SBBJ (0. 2. 6.4.30 23.01 0. 2. SBP is on the top position with least average of 20.73 20.50 26.31 0. the better is for the bank. The lower the ratio reflects. 4. Sr. 5.

5.56 44.01.53 20.75 3. 9 . No.27 132.58 26. Percentage of net NPAs of all banks increased except in the case of SBT.10 86.50 4.01 77.5.74 18.56 44.75.2. total investments to total assets and net NPAs to total assets ratios.32 7.83 22.01 77. 3.35 0. there is no decrease in the percentage of net NPAs of State Bank Group.53 Rank 2 1 6 5 4 3 In table 2. SBI scored the lowest position with 6. 2.84 2011 13. ability to plan and respond to changing environment.5 Composite Asset Quality Bank Net NPAs to Net Advances % SBI SBBJ SBH SBM SBP SBT 1.0 rank due to its poor performance in net NPAs to net advances.23 74.4 Percentage Change in Net NPAs (%) 2009 30.94 2010 12.17 120.60 28. 6.5 2.17 120.74) and SBT (28.53) respectively.5 Net NPAs to Total Assets Ratio % 1.33 94. 4.13 22.26 83.17 followed by SBI (18. SBBJ is on the top position with least average of 18.Sr. SBBJ was at the first position with group average of 1.53 Rank 2 1 6 5 4 3 Avg 4.97 191.5).76 56.73 20. followed by SBT and SBP with ranking of (2.36 23. 4.95 0.70 Average 18.80 5 2 6 3 1 4 Table 2.4. 1.39 28.01 0.62 0.01 44.06 28.96 0.50 3.71 0.49 -29.81 0.60 0.38 21. Management efficiency means adherence with set norms.34 20.94% of net NPAs in 2009 as compared to previous year.57 0. leadership and administrative capability of the bank.82 Rank 6 2 1 5 4 3 Total Investments to Total Assets Ratio % Rank 23.39 28. SBI SBBJ SBH SBM SBP SBT Bank Table 2.25 3.25 Rank 6 1 4 5 2.52 0.3 Management Efficiency Management efficiency is another essential component of the CAMEL model that guarantee the growth and survival of a bank.53 Rank 6 2 1 5 4 3 Percentage Group Rank Change in Net NPAs % 18. where there was a decrease of 29.75 1.5 On the basis of group averages of four ratios of assets quality as expressed in table 2. SBH scored the lowest position with highest ratio of 120.74 18. 4.

78. 6.94 77.54 2010 78.1 Total Advances to Total Deposits Ratio (%) 2009 73.00 5.51 73.17 Average 77.00 7.45 6.3. 5.00 4.18 6. SBBJ scored the lowest position with least ratio of 4. The higher the ratio.72 75.56 followed by SBM (77.10 76.85 5.43 Rank 1 4 6 2 5 3 In table 3.63 77.41 4. Higher the ratio.3 Business per Employee: Business per employee reveals the productivity and efficiency of human resources of bank. 3.02 76. 5.2. 2.2 Profit per Employee: It is calculated by dividing the profit after tax earned by the bank with the total number of employees.33 4 6 2 5 3 1 In table 3.1.1 Total Advances to Total Deposits: This ratio evaluate the efficiency and capability of the bank’s management in applying the deposits (including receivables) available excluding other funds viz.11 4.78 77.56 76. Bank Profit per employee (In lakhs) No.43) on second and third positions respectively. 4. 6.48 4. SBH scored the lowest position with least percentage of 71.79 75.58 4.39 75.68 5.00 3. 2009 2010 2011 Average Rank 1. Table 3. SBI SBBJ SBH SBM SBP SBT 4.50 73. 4. Sr.10 69. the better it is for the bank and vice versa.82 72.35 4.02 78.00 4. into rich earning advances. SBT is on the top position with highest average of 6.77) respectively.3.00 5.89 5.56 79.58 76. It is followed as a tool to measure the efficiency of employees of a bank.2 Sr.58 2011 81.32 71. No. 1. 4. 3.4.20 8.96 71.74 3. 4.11) and SBP (4.50) and SBT (77. SBI SBBJ SBH SBM SBP SBT Bank Table 3. equity capital.37 72.46 4. 10 . SBI is on the top position with highest average of 77.55 4.29 4. etc.33 followed by SBH (6. 2.18.3.87 3. higher is the efficiency of the management and vice versa.77 6.32 77.

62 20.43 16.3.50 3.41%) and SBBJ (20.75 3.78 77.32 71.5 Profit per Business per Employee Employee lakh 4.91 24. Bank Return on Equity (%) No.39 22.87 18. 4.21.39 839.35 15. 6.43 16.00 2010 636.00 Average 632. 3.33 Rank 6 5 2 4 1 3 In table 3.70 689.20 30.35 4. SBI scored the last position with least average of 14.24 658.21 644. 3.00 1037.95 26.92 22.82%.02 18. SBI SBBJ SBH SBM SBP SBT 17.65 23.11 4.5 Composite Management Efficiency: Bank Total Advances to Total Deposits Ratio % Rank 77.00 956.70 689. No.87 6 3 2 4 5 1 In table 3. 1.64 14.00 3.Sr.82 20.00 910. 2009 2010 2011 Average Rank 1. 2.25 4.33 Rank 6 5 2 4 1 3 Return Equity % 14.58) followed by SBH (877.00 Rank 5 6 2 4 3 1 SBI SBBJ SBH SBM SBP SBT 11 .79 877.70) and SBT (747. Profit after tax is expressed as a percentage of equity. SBI SBBJ SBH SBM SBP SBT Bank Table 3.01 26.43 1 4 6 2 5 3 Table 3.56 76.92 22.88 12.41 17.95 26. 5.47 18.33) respectively.00 2011 704.50 73.82 602.06 16.33 Rank 4 6 2 5 3 1 In lakh 632.21 644.09 14.32 77.3.79 877.77 6.80 20.62 672.66 920.29 4.65 751.66 920.68 795. In calculation of this ratio.77 16.21 696.00 628. SBT is on the top position with highest average of 26.00 755.3.00 895.41 17.30 888.58 747.87% followed by SBH (22.4 Return on Equity It is a measure of the profitability of a bank.82 20. SBI scored the lowest position with least ratio of 632.46 20. 4. 4.18 6. Table 3.87 on Group Rank Rank 6 3 2 4 5 1 Avg 4.4.00 555.3 Business per Employee(In lakhs) 2009 556. 6.50 2.58 747. SBP is on the top position (920. 2. 4.05 21.4 Sr.92%) respectively. 5.

12 1.1. 2009 2010 2011 Average Rank 1.41 2. Table 4. followed by SBH (3.84 1.27 1.84.13 2.98 0.13 Rank 5 4 2 3 6 1 12 . 2. 6.80 1.80 1. SBI SBBJ SBH SBM SBP SBT 2.95 2.50) respectively.67 0.87 1.80 0.93 2.72 1. 5.4.23 1.09 0. 4.02 Average 0. SBT was at the first position with group average of 2.82 1. 3.24 1.80 2.76 1. SBM is on the top position with highest average of 2.It primarily determines the profitability of bank and explains its sustainability and growth offuture earnings.87 0.92 0. 1.82 0.On the basis of group averages of four ratios in table 3.50 2.11) and SBI (2.76 1.2 Sr.06 1.4 Earning Quality The quality of earnings is a very important criterion which represents the quality of a bank’s profitability and its capability to maintain quality and earn consistently.4.04 1.87 0.94 0.12 followed by SBH (2.08 2. 4.83 0. 2.88 1. SBBJ scored the lowest position with 6.06) on second and third positions respectively. Higher the ratio reflects better earning potential of a bank in the future.38 2.5.00.23 Net Profit to Total Assets (%) 2010 0. SBI SBBJ SBH SBM SBP SBT Bank 2009 0.00) and SBP (3. 5.11 2.80 2. No. Table 4. 4.79 2.In this ratio operating profit are expressed as percentage of total assets. 6.0 rank due to its poor performance in total advances to total deposits. 4.85 0.92 0.78 1. Bank Operating Profit to Total Assets (%) No. 4.93 0.18 1.83 0.96 0.1 Sr. 3.1 Operating Profit to Total Assets: This ratio reflects how much a bank can earn profit from its operations for every rupee invested in its total asset. profit per employee and business per employee ratios.95 3 5 2 1 6 4 In table 4. SBP scored the lowest position with least percentage of 1.15 2011 0. It is calculated by dividing the net profits with total assets of the bank.2 Net Profit to Total Assets: This ratio reflects the return on assets employed or the efficiency in utilization of assets.

6. 5. SBT is on the top position with highest average of 1. 13 .25 2. SBI SBBJ SBH SBM SBP SBT Bank Table 4.56 2.12 87. SBI scored the lowest position with least ratio of 83.4 Spread or Net Interest Margin (NIM) to Total Assets NIM is the difference between the interest income and the interest expended. A higher spread indicates the better earnings given the total assets.18 87. 4. The interest income to total income reflects the capability of the bank in generating income from its lending business.65) and SBT (2.86 89.41 88.13 followed by SBH (0. 4.00 Rank 6 5 4 3 1 2 In table 4.2.00) and SBM (88.99 Average 83.79 89.88 2.31 89.4.84 followed by SBBJ (2.52 2. 1. SBM is on the top position with highest average of 2.48 2.11 2. Table 4.40 86.84 2.86 followed by SBT (89.79 Interest Income to Total Income (%) 2009 2010 82.35 2.11 90.In table 4.23.75 2010 2.23 88. 5.57 2011 2.22 88.85 89. No.86 3.64) respectively.92) respectively. SBP scored the last position with least ratio of 2.23 87.76. 3.64 Rank 4 2 5 1 6 3 In table 4.28 1.41 2.79) respectively.27 89. No.23 2011 83. SBP is on the top position with highest average of 89. 4.27 2.72 88. 4.97 2. 2.93) and SBM (0.92 3.27. SBP scored the lowest position with least ratio of 0.65 2.4 Net Interest Margin (NIM) to Total Assets (%) 2009 2.60 Average 2.55 89.86 89. Sr.84 88. 1.3 Interest Income to Total Income Interest income is considered as prime source of revenue for banks. SBI SBBJ SBH SBM SBP SBT Bank 83.12 2.02 2.3.3 Sr.43 2.96 89. 2.75 2.4. 6. 3.4.58 87.36 2. It is expressed as a percentage of total assets.43 88.

65 7.1 Liquid Assets to Total Assets (%) 2009 10.0 rank due to its poor performance in Operating Profit to Total Assets.60 7.50 4.5.56 2.85 7. 4. SBP scored the lowest position with 6.50 5 4 3 1 6 2 SBI SBBJ SBH SBM SBP SBT On the basis of group averages of four ratios of quality of earning as expressed in table 4.12 4.5 1.79 89.5 Liquidity Risk of liquidity can have an effect on the image of bank. SBI is on the top position with highest average of 10.06 1. where organization can obtain sufficient liquid funds.53 6.82 0. Liquidity is a crucial aspect which reflects bank’s ability to meet its financial obligations.30 7. 6.85. money at call and short notice.90 6.43 2. SBI SBBJ SBH SBM SBP SBT Bank Table 5.11 1.27 2.5.08 5. followed by SBT and Hyderabad with an average of (2.12) respectively.70 8.95 3 5 1. 2.83) on second and third positions respectively.1 Liquid Assets to Total Assets: This ratio measures the overall liquidity position of the bank. 4.04 9.50) and (3.10 5.20 7. balance with Reserve bank of India and balance with banks (India and Abroad).00 6 5 4 3 1 2 2.08) and SBBJ (8. Sr.13 5 4 2 3 6 1 Table 4.12.5 6 4 Net Profit to Total Assets % Rank 0.92 0.12 Rank 1 3 2 6 4 5 In table 5.01 followed by SBH (9.64 4 2 5 1 6 3 4.5 Interest Income Net Interest Group Rank to Total Income Margin (NIM) to Total Assets % Rank % Rank Avg Rank 83.75 2.84 1. SBM scored the last position with least percentage of 5.23 87.4.11 2.85 0.20 9.93 0. 5.41 88.4.64 2011 10.43 88. Net Profit to Total Assets and Net Interest Margin (NIM) to Total Assets ratios.23 4.83 Average 10. An adequate liquidity position means a situation. No. 1.93 2.90 2010 9. 14 . either by increasing liabilities or by converting its assets quickly into cash.41 6.84 2.12 2.00 3.48 6.65 2. The total assets include the revaluation of all the assets. 4.86 89. SBM was at the top position with group average of 2.1.76 1.75 5. 3. The liquid assets include cash in hand.83 9.5 Composite Earning Quality: Bank Operating Profit to Total Assets % Rank 2.01 8.80 9.60 9.

16 108. Bank Liquid Assets to Demand Deposits (%) No.76 2011 13.23 followed by SBT (146.66 9. 4.67 90.78 78.34 Average 13. 3.41 95.07 10.74 6. 4.15 11.96 9. 5.19 165. It is calculated by dividing the liquid assets with total demand deposits.4 Approved Securities to Total Assets: This ratio is calculated by dividing the total amount invested in Approved securities with Total Assets. It is calculated by dividing the liquid assets with total deposits. 1. Approved securities include investments made in the stateassociated/owned bodies like Electricity Corporations.80 8.27) respectively.85 7.23 7.23 146.3.79. SBI is on the top position with highest average of 13. SBI SBBJ SBH SBM SBP SBT Bank Table 5.05 followed by SBH (11. Table 5.22 11. No.31 Rank 1 3 2 6 4 5 In table 5.3 Liquid Assets to Demand Deposits: This ratio reflects the ability of bank to honour the demand from depositors during a particular year.55 102.5. 4. 2. In order to provide higher liquidity for depositors.89 93.83 2010 11.2 Liquid Assets to Total Deposits: This ratio measures the liquidity available to the depositors of a bank.01 11. 5.34 164. Housing Development Corporations.89 107. 2. 4.05 10. SBP is on the top position with highest average of 155. Regional Rural Banks and corporation bond.50 8.26 115. bank has to invest these funds in highly liquid form.40) and SBBJ (134. SBM scored the lowest position with least ratio of 6.46 118.22 7. 6. SBI scored the lowest position with least ratio of 88.90 159.03 6.43 11.39 5. 3.2 Liquid Assets to Total Deposits (%) 2009 14.25 105.4.40 6 3 4 5 1 2 In table 5.55 146.3 Sr.27 101.54 88.98 8.06 11. SBI SBBJ SBH SBM SBP SBT 94. 6.94 8.2.79 134.5.46 94.23 160. 15 .56 155. 2009 2010 2011 Average Rank 1.14 97.5.65 168.98.43) respectively.13 6. Sr.03) and SBBJ (10.

5.00) and SBBJ (3.12 2010 0.00 2. 4.083 0.07 0.5 Composite Liquidity: Bank Table 5.03 6.98 8.25) respectively.08 5.00 3.25 3. 4.05 2011 0.50 4.5.85 7.83 9.10 0.00 3.19 0.50 4.75 1.50 3.75 3. we calculated the composite rating and results are presented in table 6.15 3. SBM scored the last position with 6.25 Table 6 M 4. 4.060 1 4 6 2 3 5 2.75 4.50 2.043 0.42 3.75 2.50 4.4 Approved Securities to Total Assets (%) 2009 0.066 0.23 146.083) respectively.03 0.12 2.79 134.00 A 4.04 0.25 3. 1.00 4. SBI was at the top position with group average of 2.25 3.50 3.05 0.100) and SBP (0. SBI SBBJ SBH SBM SBP SBT Bank Table 5.50 2.060 Rank 1 4 6 2 3 5 In table 5.103 0.18 0. No.08 0.Sr.02 0.75 3.56 155.53 6. 5.03 0.25 3. followed by SBP with average of (3.25 4.083 0. 6. SBH scored the lowest position with least ratio of 0.25 3.103 0.75 3.05 10.25 3.12 4.75 3.4.72 3. Liquid Assets to Total Deposits and Liquid Assets to Demand Deposits ratios.25 Average 4.103) followed by SBM (0.75 3.50 L 2.31 1 3 2 6 4 5 88.12 0.01 Average 0.066 0.43 11.01 8.00 3.12 1 3 2 6 4 5 13.00 Rank 6 2 3 5 4 1 16 . SBI is on the top position with (0.6 Composite Ranking (overall performance) of State Bank Group In order to assess the overall performance of State Bank Group.09 0.40 6 3 4 5 1 2 0.100 0.00 4.00 E 4.043 0.043.5 Liquid Assets Liquid Assets Liquid Assets Approved Group Rank to Total to Total to Demand Securities to Assets Deposits Deposits Total Assets % Rank % Rank % Rank % Rank Avg Rank 10.0 rank due to its poor performance in Liquid Assets to Total Assets.50 4.27 101.100 0. 3.13 0.25 1 3 4 6 2 5 SBI SBBJ SBH SBM SBP SBT On the basis of group averages of four ratios of liquidity as expressed in table 5.85 7. 2. Bank SBI SBBJ SBH SBM SBP SBT C 5.02 0.45 3.14 97.04 0.25.

067 0.978 df 5 5 5 5 5 5 P . which means data are normally distributed.925 0.336 0. For this Kolmogorov-Smirnov and Shapiro-Wilk tests were applied and results are depicted in table 7 and table 8.Table 6 depicts the group ranking of the State Bank Groups in India for the period of 2009-2011.254 0.values are greater than the chosen alpha level of 0.867 0.937 0.157 0. 17 . we applied one-way ANOVA test on the data shown in table 6.200 0.929 0.980 0.Values 0.7.8 ANOVA Results For determining whether there is any significant difference between the means of CAMEL ratios. 4. In terms of earning quality parameter the capability of SBM got the top rank in the while SBP was at the lowest position.592 0.05 for all banks.1 Kolmogorov-Smirnov Test Table 7 Bank SBI SBBJ SBH SBM SBP SBT Statistic 0.Values 0.274 0. It is found that under the capital adequacy ratio parameter SBBJ and SBP were at the top position. 4.7 Tests of Normality For testing the normality of data.563 0. SBBJ held the top rank while SBI held the lowest rank. Under management efficiency parameter it is observed that top rank taken by SBT and lowest rank taken by SBBJ.184 df 5 5 5 5 5 5 P . while SBI got lowest rank.214 0.223 0. 4.200 4.063 0.200 0. The results of one-way ANOVA test are presented in table 9.200 0.787 0.2 Shapiro-Wilk Test Table 8 Bank SBI SBBJ SBH SBM SBP SBT Statistic 0. Under the asset quality parameter.200 0.7. Under the liquidity parameter SBI stood on the top position and SBM was on the lowest position.921 The results highlighted that calculated P. we proposed the hypothesis that the population distribution is normal.

liquid assets to total deposits and liquid assets to demand deposits ratios. advances to assets and government securities to total Investments ratios. The possible reason for this was the poor performance of SBM in liquid assets to total assets. The possible reason for this was the poor performance of SBP in operating profit to total assets. at 5% level of significance is 2.644 23. Our study concluded that in terms of capital adequacy ratio parameter SBBJ and SBP were at the top position. profit per employee and business per employee ratios.f. this may be because of adoption of modern technology. total investments to total assets and net NPAs to total assets ratios. SBBJ held the top rank while SBI held the lowest rank. while SBI got lowest rank.62). the different banks have obtained different ranks with respect to CAMEL ratios. Conclusion During the process of evaluation of performance of State Bank Group our study highlighted that. SBI needs to improve its position with regard to asset quality and capital adequacy.Sources of Variation Between Groups Within Groups Total Sum of Squares 3. In terms of earning quality parameter the capability of SBM got the top rank in the while SBP was at the lowest position. It signifies that there is no significant difference in performance of SBI and its subsidiaries assessed by CAMEL model. It signifies that the overall performance of State Bank group is same. But there is no statistically significant difference between the CAMEL ratios. Under management efficiency parameter it is observed that top rank taken by SBT and lowest rank taken by SBBJ. The possible reason for this was the poor performance of SBI in net NPAs to net advances.967 19. banking reforms and recovery mechanism. It means there is no statistically significant difference between the mean values of CAMEL ratios and we do not reject the null hypothesis.819 29 F-Value 0. The present study also depicted that though ranking of ratios is different for different banks in State Bank group. The possible reason for this was the poor performance of SBBJ in total advances to total deposits. Under the liquidity parameter SBI stood on the top position and SBM was on the lowest position.611 Table 9 Degree of Mean Square Freedom 5 0. net profit to total assets and net interest margin to total assets ratios. The possible reason for this was the poor performance of SBI in debt-equity. 18 . 5.793 24 0. SBBJ should improve its management efficiency and SBP should improve its earning quality.968 The results of ANOVA test highlighted the calculated values of F-ratio is less than the tabulated values (for 5. In terms of asset quality parameter. 24 d.

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