ABOUT BANKING INDUSTRY

Banking is an industry that handles cash, credit, and other financial transactions. Banks provide
a safe place to store extra cash and credit. They offer savings accounts, certificates of deposit,
and checking accounts. Banks use these deposits to make loans. These loans include home
mortgages, business loans, and car loans.
Banking is one of the key drivers of the economy. Why? It provides the liquidity needed for
families and businesses to invest for the future. Bank loans and credit mean families don't have
to save up before going to college or buying a house. Companies use loans to start hiring
immediately to build for future demand and expansion.

 Banks are classified into classified into four categories –

1. Commercial Banks
2. Small Finance Banks
3. Payments Banks
4. Co-operative Banks
Major types of Risk Involved in Banking Sector

 Liquidity risk is the risk of potential occurrence of adverse effects on the bank’s
financial result and capital due to the bank’s inability to meet the due liabilities caused
by the withdrawal of the current sources of funding, that is, the inability to raise new
funds (funding liquidity risk), aggravated conversion of property into liquid assets due
to market disruption (market liquidity risk);
 Credit risk is the risk of potential occurrence of adverse effects on the bank’s
financial result and capital due to debtor’s default to meet its obligations to the bank.
 Residual risk is the possibility of occurrence of adverse effects on the bank’s
financial result and capital due to the fact that credit risk mitigation techniques are
less efficient than expected or their application does not have sufficient influence on
the mitigation of risks to which the bank is exposed;
 Dilution risk is the possibility of occurrence of adverse effects on the bank’s
financial result and capital due to the reduced value of purchased receivables as a
result of cash or non-cash liabilities of the former creditor to the borrower;
 Settlement/Delivery risk is the possibility of occurrence of adverse effects on the
bank’s financial result and capital arising from unsettled transactions or
counterparty’s failure to deliver in free delivery transactions on the due delivery date;
 Counterparty credit risk is the possibility of occurrence of adverse effects on the
bank’s financial result and capital arising from counterparty’s failure to settle their
liabilities in a transaction before final settlement of transaction cash flows, or,
settlement of monetary liabilities in the transaction in question;
 Market risks entail foreign exchange risk, price risk on debt securities, price risk on
equity securities, and commodity risk;
 Interest rate risk is the risk of possible occurrence of adverse effects on the bank’s
financial result and capital on account of banking book items caused by changes in
interest rates;
 Foreign exchange risk is the risk of possible occurrence of adverse effects on the
bank’s financial result and capital on account of changes in foreign exchange rates;
 Concentration risk is the risk which arises directly or indirectly from the bank’s
exposure to the same or similar source of risk, or, same or similar type of risk;
About Vijaya Bank
Vijaya Bank was a public sector bank with its corporate office in Bengaluru, Karnataka,
India. It was one of the nationalised banks in India. The bank offered a wide range of
financial products and services to customers through its various delivery channels. The bank
had a network of 2031 branches (as of March 2017) throughout the country and over 4000
customer touch points including 2001 ATMs.
On 17 September 2018, the Government of India proposed the merger of Vijaya Bank and
Dena Bank with the Bank of Baroda, pending approval from the boards of the three banks.
The merger was approved by the Union Cabinet and the boards of the banks on 2 January
2019. Under the terms of the merger, Dena Bank and Vijaya Bank shareholders received 110
and 402 equity shares of the Bank of Baroda, respectively, of face value ₹2 for every 1,000
shares they held. The merger is effective from 1 April 2019
Vijaya Bank today is a PAN India Institution, serving diverse sectors of the society. The bank
has built a network of 2031 branches, 13 Extension Counters and 2001 ATMs as on
31.03.2017 that span across all States and Union Territories in the country.
Vijaya Bank offers a bouquet of innovative and attractive products and services to the
customers. Vijaya Bank also incorporated the latest technology to provide the best services to
our customers. The Bank offers several technology products, such as, ATMs, Cash Deposit
Machines, Debit and Credit cards, internet banking, Mobile Banking, Tab Banking, e-
Passbook, Mobile Wallet, Funds transfer through RTGS and NEFT etc. All Branches / offices
are under RTGS / NEFT. The Bank also offers RuPay cards to its customers.
The driving force behind Vijaya Bank's every initiative has been its 15000+ strong dedicated
workforce
Assets
DECOMPOSITION OF ROE

Interpretation – From the above table we can see that the ROE of Vijaya bank has decreased
in the current year from 9.51% to 7.74% in the year 2018.

Interpretation – Here we can see that the ROE in 2018 has decreased from 9.5% to 7.74% the
ROA is decrease slightly and the equity multiplier has also decreased which is also known as the
measurement of risk both the side positive as well as negative too. As if the ROA is positive and
higher equity multiplier which will give higher return in positive which is good.
 INDUSTRY AVERAGE
ROA ROE EQUITY MULTIPLIER
-0.10 -2.47 25.29

Interpretation – These industry average have been taken out of all the 93 banks of year 2018. The
ROE is -2.47% which is not good and this is due to negative ROA which is -0.10 and higher equity
multiplier which is the measurement of risk so the returns have fall even more. The Vijaya bank is
performing really well in comparison to overall industry average as the ROE is very high 7.74% which is
due to high ROA along with that risk factor means equity multiplier is also positive giving higher ROE
with low risk in comparison to overall industry.

th

Interpretation – Here we can see that the asset turnover ratio is decreased from 0.09 to 0.85 along
with the slightly decrease in the expense ratio.
Interpretation – From the above table we can see that the decrease in the ROA from 0.50% to 0.44% in 2018
is due to decrease in the interest income from .082 to .076 which further results in decrease in ROE.

NII = Interest Income –Interest Expenses

Burden = Non-Interest Expenses – Non-Interest Income

Interpretation – From the above table we can see that fall in the ROA from 0.50% to 0.44% is majorly
due to fall in NII from 0.023 to 0.0026 although the burden ratio falls remains same by 0.007