RESEARCH PROPOSAL

On
ANALYSIS OF INCOME AND EXPENDITURE OF
BANKING SECTOR
BY
RUZUTA SHAH
FOR
Ph.D IN COMMERCE
SUB: COMMERCE
RESEARCH SUPERVISOR
DR. HUSIEN HASAN
COMMERCE COLLEGE, GODHRA

CONTENTS
Title

Page No.
3
3
4
5

1
1.1
1.2
1.3

INTRODUCTION
INTRODUCTION TO BANKING SYSTEM
HISTORY OF INDIAN BANKING SYSTEM
INDIAN BANKING SYSTEM

1.4

EVOLUTION OF INTERNET BANKING IN INDIA

1.5

SOURCES OF INCOME AND EXPENDITURE OF BANKING

SECTOR

1.6

1.5.1 INTEREST INCOME AND NON INTEREST INCOME

1.5.2 THE STRUCTURE OF MAJOR EXPENDITURES OF BANKS

11
11

FAILURES OF BANKING SECTORS

1.6.1 NON-PERFORMING ASSETS (NPAS) MEANING

12

1.62 GROSS NPA AND NET NPA

12

1.6.3 IMPACT OF NPAS ON BANKING OPERATIONS

12

2.
2.1
2.2
2.3
2.4

RESEARCH METHODOLOGY
OBJECTIVE OF THE STUDY
SAMPLE SELECTION
PERIOD OF STUDY
DATA COLLECTION

13
13
13
14
14

2.5
2.6
2.7
3

RESEARCH HYPOTHESIS
TOOLS AND TECHNIQUES
LIMITATION OF STUDY
LITERATURE REVIEWS
PROPOSE TOPIC
REFERENCES

14
15
16
17-19
20-21
22

CHAPTER: 1
1.1 INTRODUCTION TO BANKING SYSTEM
A bank is a financial institution that provides banking and other financial services to their
customers. A bank is generally understood as an institution which provides fundamental banking
services such as accepting deposits and providing loans. There are also nonbanking institutions
that provide certain banking services without meeting the legal definition of a bank. Banks are a
subset of the financial services industry.
Indian banking industry, the backbone of the countrys economy, has always played a key role
in prevention the economic catastrophe from reaching terrible volume in the country. It has
achieved enormous appreciation for its strength, particularly in the wake of the worldwide
economic disasters, which pressed its worldwide counterparts to the edge of fall down. If we
compare the business of top three banks in total assets and in terms of return on assets, the Indian
banking system is among the healthier performers in the world. This sector is tremendously
competitive and recorded as growing in the right trend (Ram Mohan, 2008). Indian banking
industry has increased its total assets more than five times between March 2000 and March 2010,
i.e., US$250 billion to more than US$1.3 trillion. This industry recorded CAGR growth of 18
percent as compared to countrys average GDP growth of 7.2 percent during the same period.
The Indian banking sector has two kinds of scheduled banks i.e. scheduled commercial banks
and scheduled co-operative banks scheduled banks, four types of entities have found based on
their establishments and legal obligations. They are:
i) Public banks
ii) Private Banks (25),
iii) Foreign Banks working in India (29) and
iv) Regional Rural Banks (91)
The second category of scheduled cooperative banks consists of:
i) Scheduled Urban Co-operative banks (55) and
ii) Scheduled State Co-operative Banks (16)
Under public & private sector, banks are more clearly defined according nationalization and
privatization. The banks under public banks are Nationalized Banks (20) and State Banks of

India (with its associates, the number is come to 8). Under Private Bank category, banks are
divided into two types i.e., Old private banks (17) and New-private banks (8).
1.2 HISTORY OF INDIAN BANKING SYSTEM
The first bank in India, called The General Bank of India was established in the year 1786.
The

East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay

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

Crores. Till the year 1980 approximately 80% of the banking segment in India was under
governments ownership. On the suggestions of Narsimhan Committee, the Banking Regulation
Act was amended in 1993 and thus the gates for the new private sector banks were opened.
The following are the major steps taken by the Government of India to Regulate Banking
institutions in the country:1949: Enactment of Banking Regulation Act.
1955: Nationalisation of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalisation of 14 major Banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalisation of seven banks with deposits over 200 Crores
1.3 INDIAN BANKING SYSTEM

The entire organized banking system comprises of scheduled and non-scheduled banks. Largely,
this segment comprises of the scheduled banks, with the unscheduled ones forming a very small
5

component. Banking needs of the financially excluded population is catered to by other

unorganized entities distinct from banks, such as, moneylenders, pawnbrokers and indigenous
bankers.
Scheduled Banks
A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934. In
order to be included under this schedule of the RBI Act, banks have to fulfill certain conditions
such as having a paid up capital and reserves of at least 0.5 million and satisfying the Reserve
Bank that its affairs are not being conducted in a manner prejudicial to the interests of its
depositors.
Scheduled Commercial Banks (SCBs):
Scheduled commercial banks (SCBs) account for a major proportion of the business of the
scheduled banks. As at end-March, 2009, 80 SCBs were operational in India. SCBs in India are
categorized into the five groups based on their ownership and/or their nature of operations.. IDBI
ltd. has been included in the nationalized banks group since December 2004. Private sector banks
include the old private sector banks and the new generation private sector banks- which were
incorporated according to the revised guidelines issued by the RBI regarding the entry of private
sector banks in 1993. As at end-March 2009, there were 15 old and 7 new generation private
sector banks operating in India.
Foreign banks are present in the country either through complete branch/subsidiary route
presence or through their representative offices. At end-June 2009, 32 foreign banks were
operating in India with 293 branches. Besides, 43 foreign banks were also operating in India
through representative offices.
Non-Scheduled Banks:
Non-scheduled banks also function in the Indian banking space, in the form of Local Area Banks
(LAB). As at end-March 2009 there were only 4 LABs operating in India. Local area banks are
banks that are set up under the scheme announced by the government of India in 1996, for the
6

establishment of new private banks of a local nature; with jurisdiction over a maximum of three
contiguous districts.
1.4 Evolution of Internet Banking In India
Indian banking industry, today, is in the midst of an IT revolution. The technology changes have
put forth the competition among the banks. This has led to increasing total banking automation in
the Indian banking industry. New private sector banks and foreign banks have an edge over
public sector banks as far as implementation of technological solutions is concerned. However,
the later are in the process of making huge investment in technology.
The financial reforms that were initiated in the early 90s and the globalization and liberalization
measures brought in a completely new operating environment to the banks. Services and
products like Anywhere Banking, Tele-Banking, Internet Banking, Web Banking, EBanking etc. have become the buzzwords of the day and the banks are trying to cope with the
competition by offering innovative and attractively packaged technology based services to their
customers.
Like most of other activities in banking RBI also set up two committees in quick succession to
accelerate the pace of automation of operations in the banking sector. In the early 80s, a high
level committee was formed under the chairmanship of Dr. C. Rangarajan, then Governor of
RBI, to draw up a phased plan for computerization and mechanization in the banking industry
over a five year time frame of 1985-89. The focus by this time was on customer service and two
models of branch automation were developed and implemented. Having gained experience in the
earlier mode of computerization, the second Rangarajan committee constituted in 1988 drew up a
detailed perspective plan for computerization of banks and for extension of automation to other
areas like funds transfer, e-mail, BANKNET, SWIFT, ATMs, Internet banking etc.
The Government of India enacted the Information Technology Act, 2000, generally known as IT
Act, 2000, with effect from the 17 th October 2000 to provide legal recognition to electronic
transactions and other means of Electronic Commerce. Reserve bank of India had set up a
Working Group on Internet Banking to examine different aspects of Internet banking (Ibanking). The Group had focused on three major areas of I-banking i.e., (i) technology and
7

security issues, (ii) legal issues and (iii) regulatory and supervisory issues. RBI had accepted the
recommendations of the Working Group and accordingly issued guidelines on Internet banking
in India for implementation by banks. The Working Group has also issued a report on Internet
banking covering different aspects of I-banking.
Considerable progress has been made in consolidating the existing payment systems and in
upgrading technology with a view to establishing an efficient, integrated and secure system
functioning in a real-time environment. Major projects under implementation are electronic
clearing, centralized funds management, structured financial messaging solutions and the Indian
Financial Network (INFINET). Facilities under Electronic Funds Transfer (EFT) have been
upgraded and their spatial reach expanded with multiple settlements in a day. Foreign exchange
clearing has been initiated through the Clearing Corporation of India Limited (CCIL). Adequate
security features are being incorporated into the EFT. Preparatory work for the real time gross
settlement (RTGS) is complete. (RBI, 2001)
As per an Internet survey conducted by NASSCOM the Indian Internet market grew steadily in
terms of subscribers. There is a growth of 30% in March 2002 compared to the 1.1 million active
subscriber bases in March 2001. The survey also forecasts that the number of Internet subscribers
in the year 2004-05 is likely to reach 7.7 million, with the user base to grow over 50 million.
India's Internet user base is growing at a rapid pace. India's Internet population grows to 29
million by March 2003 from 10.7 million in 2002. Banking and finance market has got the
largest share i.e. 21 percent among the other sectors of economy in using information technology.
Thus there is a lot of scope for banking institutions to expand their Internet banking services to
have a more sophisticated customer base.
Private and foreign banks have been the early adopters of e-banking while the Public sector
banks are also beginning to hold on to the competition. ICICI Bank and HDFC Bank have taken
a lead in introducing e-banking in India. ICICI Bank is the first one to have introduced Internet
banking for a limited range of services such as access to account information; correspondence for
the first time in 1996 and recently, funds transfer between its branches (Rajneesh
and Padmanabhan, 2002). ICICI is also getting into e trading, thus offering a broader range of
integrated services to the customer. Other banks also followed the suit. However, 1996-98 was
8

the period of Internet banking adoption while the Internet banking usage gained importance only
in 1999. After ICICI, Citibank, IndusInd Bank and HDFC Bank were the early ones to adopt the
technology in 1999.This paper is confined to the study of Internet banking services offered by
private, public and foreign banks operating in India.
It incurred huge cost for installation and maintenance of the technology but it increases overall
profitability of banks in long run.
1.5 SOURCES OF INCOME AND EXPENDITURE OF BANKING SECTOR
At present, the banking sector income is divided into two major parts i.e. interest income and
non-interest income. The structure of income is given below:
1.5.1 INTEREST INCOME
1) Net Interest/Discount
2) Income on Investment
3) Balance with RBI
4) Others
NON-INTEREST INCOME
1) Fee, Commission & Brokerage
2) Sale of investment
3) Sale of land building
4) Exchange transaction
5) Income from e-delivery channels
6) Miscellaneous income
1) Interest on Loans and discounts
The main function of a commercial bank is to borrow money for the purpose of lending at a
higher rate of interest. Bank grants various types of loans to the industrialists and traders. The
9

yields from loans constitute the major portion of the income of a bank. Such loans are granted to
share brokers and other banks .Commercial banks invest a part of their funds in bills of exchange
by discounting them. Banks discount both foreign and inland bills of exchange, or in other
words, they purchase the bills at discount and receive the full amount at the date of maturity.
2) Interest on Investments
Banks also invest an important portion of their resources in government and other first class
industrial securities. The interest and dividend received from time to time on these investments is
a source of income for the banks.
.
3) Commission, Brokerage, etc.
Banks perform numerous services to their customers and charge commission, etc., for
such services. Banks collect cheques, rents, dividends, etc., accept bills of exchange,
issue drafts and letters of credit and collect pensions and salaries on behalf of their
customers.
They pay insurance premiums, rents, taxes etc., on behalf of their customers. For all these
services banks charge their commission. They also earn locker rents for providing safety
vaults to their customers. Recently the banks have also started underwriting the shares
and debentures issued by the joint stock companies for which they receive underwriting
commission.
Commercial banks also deal in foreign exchange. They sell demand drafts, issue letters of
credit and help remittance of funds in foreign countries. They also act as brokers in
foreign exchange. Banks earn income out of these operations.
Net interest income is generated from what is known as the spread. The spread is simply the
difference between the interest a bank earns on loans extended to customers and the interest paid
to depositors and other creditors for the use of their money. Fifty-six per cent of bank revenue
earned is net interest income.
Added together, net interest income and non-interest income from total revenue. From total
revenue, a number of items are subtracted, including expenses for its staff, locations, equipment

and technology. Taxes must also be paid out of total revenues.

Net income (after expenses and taxes) is used, among other things, to:
Expand the capital base of the bank;
Make investments to improve the bank;
Pay dividends to shareholders; and,
Make acquisitions.

10

1.5.2 THE STRUCTURE OF MAJOR EXPENDITURES OF BANKS IS AS FOLLOWS:

Operating Expenditure
(a) Interest Expenses
i) On Customer deposits
ii) On Inter-bank deposits
iii) On Inter-bank borrowings (including from RBI / FIs)
iv) Others
i)

(b) Operating Expenses

Staff expenses
ii) Directors fees
iii) Auditors' fees
(c) Other Operating expenses
i)
Rent, taxes, insurance and lighting
ii)
Law charges
iii)
Postage, telegrams and stamps
iv)
Stationery, printing and advertising
v)
Depreciation on and repairs to bank's property
vi)
Others

1.6 FAILURES OF BANKING SECTORS

A strong banking sector is important for flourishing economy. The failure of the banking sector
may have an adverse impact on other sectors. Non-performing asset (NPA) is one of the major
concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs
suggests high probability of a large number of credit defaults that affect the profitability and networth of banks and also erodes the value of the asset. The NPA growth involves the necessity of
provisions, which reduces the overall profits and shareholders value.
1.6.1 NON-PERFORMING ASSETS (NPAS) MEANING
Assets which generate periodical income are called as performing assets. Assets which do not
generate periodical income are called as non-performing assets. NPAs are further classified into
sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. An asset, including
a leased asset becomes nonperforming when it ceases to generate income for the bank for a
specified period of time.
1.6.2 GROSS NPA AND NET NPA
Gross NPA is advance which is considered irrecoverable, for bank has made provisions, and
which is still held in banks' books of account. Net NPA is obtained by deducting items like

11

interest due but not recovered, part payment received and kept in suspense account from Gross
NPA.
1.6.3 IMPACT OF NPAS ON BANKING OPERATIONS
The efficiency of a bank is not reflected only by the size of its balance sheet but also by the level
of return on its assets. The NPAs do not generate interest income for banks. At the same time,
banks are required to provide provisions for NPAs from their current profits. The NPAs have
deleterious impact on the return on assets in the following ways:
1) The interest income of banks will fall and it is to be accounted only on receipt basis.
2) Banks profitability is affected adversely because of the providing of doubtful debts and
consequent to writing it off as bad debts.
3) Return on investments (ROI) is reduced.
4) The capital adequacy ratio is disturbed as NPAs enter into its calculation.
5) The cost of capital will go up.
6) Asset and liability mismatch will widen.

CHAPTER: 2
RESEARCH METHODOLOGY
2.1 OBJECTIVE OF THE STUDY:
The following are the objectives of the study:
1. To conduct comparative study of

income and expenditure trend of selected public

and private banks

2. To assess the degree of correlation across the various components of profit earned by the
selected public and private banks.
3. To conduct comparative analysis of the profitability performance of selected public
and private banks.

12

4.To conduct Dynamics analysis (horizontal analysis) of the incomes, expenses of selected
public and private bank and results from profit and loss account is based on indexes which are

expressed as percentage changes from the value of the same position of a base period considered
equal to 100% or sequentially from the previous period.
5. To conduct Structural analysis (vertical analysis) is based on weights, every income or
expenses of selected public and private banks being expressed through a percentage value
from total income or total expenses. These types of analysis allow establishing the sources of the
results, the quality of the performances and all the changes in income and expenses structure.
6. To study the relationship between Net profit and Net NPA of selected public and private
banks.
7. To offer suitable suggestions based on the finding of the study.
2.2 SAMPLE SELECTION:
For the purpose of the study, following public sector banks such as
1) STATE BANK OF INDIA
2) BANK OF BARODA
3) PUNJAB NATIONAL BANK
4) IDBI BANK
5) CENTRAL BANK OF INDIA
And private sector banks such as
1) HDFC BANK
2) ICICI BANK
3) AXIS BANK
4) KOTAK MAHINDRA BANK
5) INDUSLND BANK

Will be selected.

2.3. PERIOD OF STUDY:

The study will be conducted for a period of five years i.e. 2011-12 to 2015-16.

13

2.4 DATA COLLECTION

In this study, mainly secondary data will be collected. It would be obtained from the following
sources:
1) Published annual reports of the selected public and private banks for the financial year
2011-12 to 2015-16.
2) Websites of the selected banks.
3) Other related websites.
4) RBI BULLETIN
5) Published report of selected public and private banks.
2.5 RESEARCH HYPOTHESIS
1) OBJECTIVE- THE INCOME AND EXPENDITURE TREND OF SELECTED PUBLIC
AND PRIVATE BANKS
HO: There is no significant difference between the trend of income and expenditure of selected
banks.
H1: There is significant difference between the trend of income and expenditure of selected
banks.
2) OBJECTIVE- THE DEGREE OF CORRELATION ACROSS THE VARIOUS
COMPONENTS OF PROFIT EARNED BY THE SELECTED PUBLIC AND
PRIVATE BANKS.
H0: There are no significant differences across the different components of income and
expenditure of selected banks.
H1: There are significant differences across the different components of income and
expenditure of selected banks.
3) OBJECTIVE- ANALYSIS OF THE PROFITABILITY PERFORMANCE OF
SELECTED PUBLIC AND PRIVATE BANKS.
H0: The profitability performance of selected banks is not significant during the study period.
H1: The profitability performance of selected banks is significant during the study period.
4) OBJECTIVE- RELATIONSHIP BETWEEN NET PROFIT AND NET NPA OF
SELECTED BANKS
H0: There is no significant relation between Net profit and Net NPA of selected banks.
H1: There is significant relation between Net profit and Net NPA of selected banks.
2.6 TOOLS AND TECHNIQUES

14

The study is descriptive in nature and this attempt is made to evaluate the performance of the
bank through the financial data which are disclosed in accounting policies. Thus the study is
based on the published accounts and annual reports of selected private and public Banks The
periods cover from 2011-12 to 2015-16.Being a comparative study, the design of the study is
descriptive.
In order to analyze the trend of income and profitability performance of the bank certain
ratios have been considered such as Operating Profit as a percentage to Working Funds,
Return on Assets, Return on Equity, Return on Investment, Earning per share. Such ratios
as well as the components of profit of the bank have been further analyzed through index,
mean, coefficient of variation and compound annual growth rate.
The study employed Karl Pearson's coefficient in order to find the correlation of various
components of income and expenditure with the net profit earned as well as across the
Components.
Further, the study used t test and ANOVA for testing the hypotheses.
Dynamics analysis (horizontal analysis) of the incomes, expenses and results from profit
and loss account will be based on indexes which are expressed as percentage changes from
the value of the same position of a base period considered equal to 100% or sequentially
from the previous period.
Structural analysis (vertical analysis) is based on weights, every income or expense being
expressed through a percentage value from total income or total expenses. These types of
analysis allow establishing the sources of the results, the quality of the performances and
all the changes in income and expenses structure.
The coefficient of correlation will be used to determine whether there is any relation
between Net Profits and Net NPA of selected banks.
Graphic representation: charts would be used for the clear understanding of the data.
2.7 LIMITATION OF THE STUDY:
The study is based on the secondary data and the limitation of using secondary data may affect
the results.
1. The secondary data will be taken from the annual reports of the selected public and private
Bank. It may be possible that the data shown in the annual reports may be window dressed which
does not show the actual position of the banks.
3. The study records restricted to a period of 5 years.
15

4. Ratio analysis has its own limitations.

5. The study of analysis of income and expenditure of only five public and private sectors banks
will be undertaken.

CHAPTER: 3
LITERATURE REVIEWS
Review of literature is essential for every research to carry on investigation successfully. Hence
the present study is also based on the following review.
Siraj. K. K & prof. (dr). P. Sudarsanan pillai says that NPA is a virus affecting banking sector.
It affects liquidity and profitability, in addition posing threat on quality of asset and survival of
banks. The study concluded that NPA still remains a major threat and the incremental component
explained through additions to NPA poses a great question mark on efficiency of credit risk
management of banks in India.
S.G. Shah (1979) in his paper analyzed weakness of the banks and pointed out the specific areas
where action could be taken to improve profitability. He revealed that rising expense and
overheads increase in wasteful work practices, declines in productivity were major weakness. He
suggested these following areas for improving profitability of bank

16

(i) To evolve measures that could widen the spread between the cost of funds, services, and
administration and the return on them.
(ii) To developed supplementary sources of income.
(iii) To find profit centers and cost centers in the bank
(iv) To assess the extent to which these elements of the structure could be Influence by policy
and planning or by changing the nature of operations.
(v) To recognize the element that controls or settles the income and cost structure at each such
center and for the bank as a whole.
M.N. Mishra (1992) in his paper evaluated the profitability of scheduled commercial banks
taking into account the interest and non - interest income and interest expenditure, manpower
expenses and other expenses. The Author has identified that the growing pre emption of funds in
the form of statutory liquidity ratio, cash reserve ratio, faster increase of expenses as compared to
the income, advances, and total investment than interest income and few more factors have
contributed to the declining profitability of Indian commercial banks.
Mookerji (1998), Pegu (2000), Gupta (1999) and Dasgupta (2002) found that Internet banking
is fast becoming popular in India. However, it is still in its evolutionary stage. By the year 2005,
a large sophisticated and highly competitive Internet banking market will develop. Almost all the
banks operating in India are having their websites but only a few banks provide transactional
Internet banking.
Vijayakumar (2002) discovered declining trend of gross profit ratio of public sector banks in
pre reform period indicating the funds not used profitably.
Sathya (2005) analyzes the effect of privatization of banks on performance and efficiency. The
researcher has concluded that partially privatized banks have performed better as compared to
fully PSBs in respect of financial performance and efficiency point of view. Partially private
owned banks have continued to show improved performance and efficiency after privatization.
Badola and Verma (2006) concluded that explanatory power of spread, non-interest income,
provisions and contingencies, operating expenses is significant while credit deposit ratio, nonperforming asset as percentage to net advances and business per employee are found with low
explanatory power.
Ananth-(2007) - suggested that the Indian banking and financial system has made commercial
progress in extending its geographical spread and functions reach. The study shows the
17

performance and strength and weakness of private sector banks in the post liberalization era and
analyzing the cause of the poor performance and suggesting the measures to improve upon it.
Emitted various financial problems and focus on the financial problems and encourages new
technology and new products with the result the profitability and efficiency can be increased.
B.Satish Kumar (2008), in his article on an evaluation of the financial performance of Indian
private sector banks wrote Private sector banks play an important role in development of Indian
economy. The Indian banking industry was dominated by public sector banks. But now the
situations have changed new generation banks with used of technology and professional
management has gained a reasonable position in the banking industry.
Dr. Kingshuk Adhikari (JUNE, 2014) Assistant Professor Department of Commerce Assam
University, (A Central University) Silchar, India conclude that the profitability performance of
the SBI is not consistent during the study period but statistically significant. Further, the
management of the bank is efficient in converting its efforts in terms of expenditure into benefits
in terms of earning profit but not the increased volume of output i.e. net profit. The bank has no
control over external factors having experience of highest volatility in earning interest income
and incurring interest expenditure. Thus, the bank should focus more on earning other income,
and curtailing operating expenses having comparatively higher degree of consistency in order to
have improved profitability performance
Avneet kaur Assistant professor Department of management, GNIMT Ludhiana, Punjab
(NOVEMBER, 2012) the finding of the study are summarized below:
Interest income shows a fluctuating trend. The growth rate of interest income of PSCBs in
India was varying between 88 percent and 84 percent. The compound growth rate of interest
income of PSCBs was 85 percent.
The growth of total income of PSCBs in India was varying between Rs. 1,03,499 crores to Rs.
4,94,446 crores. The compound growth rate of total income of PSCBs in India was 16.1 percent.
The growth rate of total income expenditure of PSCBs in India was varying between 9.85
percent and 6.4 percent. The compound growth rate of total expenditure of PSCBs was7.52
percent.

18

PROPOSE TOPIC

CHAPTER PLAN
The study aims at analyzing the income and expenditure in banking sector.

CHAPTER 1 INTRODUCTION deals with establishing a background of Banking

Sector

CHAPTER 2 LITERATURE REVIEWS the various studies on analyses of income

and expenditure in banking sector.
CHAPTER 3 RESEARCH METHODOLOGY

describes present study which

includes major objectives, research hypothesis, and methodology and data analysis
technique.
CHAPTER 4 DATA AND DATA ANALYSIS wherein attempt will be made to
analyze figure wise, Bank wise, item wise disclosure of Income and expenditure of
selected sample units during study period. In the research study undertaken
19

comparative study the income and expenditure trend of public and private
banking sector in India will be taken through application of statistical techniques.
The degree of correlation across the various components of profit earned by the
sample units through application of Karl Pearson's coefficient. Analysis of the
profitability performance of sample units will be undertaken by accounting ratios and
statistical techniques. Dynamics analysis (horizontal analysis) of the incomes,
expenses of sample units and results from profit and loss account is based on indexes
which are expressed as percentage changes from the value of the same position of a
base period considered equal to 100% or sequentially from the previous period.
Structural analysis (vertical analysis) is based on weights, every income or expenses
of sample units being expressed through a percentage value from total income or total
expenses. These types of analysis allow establishing the sources of the results, the
quality of the performances and all the changes in income and expenses structure.
Lastly, suitable suggestions based on the finding of the study will be given.
CHAPTER 5 CONCLUSION, RECOMMENDATIONS AND LIMITATIONSthat it is to conclude that the profitability performance of the selected banks is not
consistent during the study period but statistically significant. Further, the
management of the bank is efficient in converting its efforts in terms of expenditure
into benefits in terms of earning profit but not the increased volume of output i.e. net
profit. The banks have no control over external factors having experience of highest
volatility in earning interest income and incurring interest expenditure. Thus, the bank
should focus more on earning other income, and curtailing operating expenses having
comparatively higher degree of consistency in order to have improved profitability
performance. The efficiency of a bank is not reflected only by the size of its balance
sheet but also by the level of return on its assets. The NPAs do not generate interest
income for banks. At the same time, banks are required to provide Provisions for
NPAs from their current profits. And this management can be done by following
way:1. Framing reasonably well documented loan policy and rule
2. Recovery effort should starts from the month of default with prompt legal action.

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3. Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh account
to NPA.
4. Credit appraisal and monitoring.
5. Inspection and credit audit.
6. Half yearly balance confirmation certificates should be obtained from the borrowers.
7. A committee is constituted at Head Office, to review irregular accounts.
Overall the disclosure of components, profitability and management of NPA of private banks are
better than public banks.
The study is based on the secondary data and the limitation of using secondary data may affect
the results.
1) Secondary data will be taken from the annual reports of the selected public and private Bank.
It may be possible that the data shown in the annual reports may be window dressed which does
not show the actual position of the banks.
2) The study records restricted to a period of 5 years.
3) Ratio analysis has its own limitations.
4) The study of analysis of income and expenditure of only five each public and private sector
banks will be undertaken
REFERENCES:

Dr. K. Madhusudhana rao, an analysis on the performance of private and public sector

banking systems
Mathur, B.S., Co-operation in India, Sahitya Bhavan, Agra.
Bhide, m.g, a. Prasad & gosh, s. (2002). Banking sector reforms, a critical overview.

Economic and political weekly, xxxvii (5), 399-08.

Chaudhuri, s. (2002). Some issues of growth and profitability in Indian public sector

banks. Economic and political weekly, xxxvii (22), 2155-62.

Badola, b.s. & verma, r. (2006). Determinants of profitability banks in India-a
multivariate analysis. Delhi business review, 7(2), 79-88.

Bhatia (2007), Non-Performing Assets of Indian Public, Private and Foreign

Sector Banks: An Empirical Assessment, ICFAI Journal of Bank Management,
Vol. 6, No. 3, pp. 7-28.

Kaur, N. & Kapoor, R. (2007). Profitability Analysis of Public Sector Banks in India.
Indian Management Studies Journal, 11, 167-180.

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Guruswamy D. (2012). Analysis of Profitability Performance of State Bank of India and

its Associates. ZENITH International Journal of Business Economics and Management
Research.

Books
1) Banking regulation act, 1949- Lawmann
2) National Bank ACT and Other Laws Relating to National Banks--Wolcott,
Edward Oliver
3) National Bank ACT- Gould, John M

Scholar

Research Supervisor

Rujuta shah

Dr. Husien Hasan

Vedant International school

Commerce College

Ahmedabad

Godhra

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