INDIRA INSTITUTE OF MANAGEMENT

SUBJECT - BANKING & OPERATIONS.

CCA-1
BY GROUP NO- 14

NAME ROLL NO
Akshay Kawade 08
Pratik Tiwari 53
Ram Agrawal 57
Sayali Bangale 67
Vivek Kadam 88
 CAMEL ANALYSIS

Banking sector is one of the fastest growing sectors in

India. Today’s banking sector is way too complex than what it used to
be. Evaluating Indian banking sector is not an easy task. There are
many factors, which need to be taken care while evaluating the
financial soundness of bank.

CAMEL model measures the performance of banks from each of

the important parameter like:

• Capital Adequacy

• Assets Quality

• Management Efficiency,

• Earning Quality and

• Liquidity.

A) CAPITAL ADEQUECY
Capital adequacy is an important indicator of the financial
health of a banking entity. It specifies whether the bank has adequate
capital to recover from the unanticipated losses.

1) CAPITAL ADEQUECY RATIO

This ratio indicates the ratio of capital fund in relation to bank’s assets.
Higher value of this ratio means better solvency and financial strength.
 YEAR/RATIO BOB YES BANK
Mar-17 13.17 17.00
Mar-18 12.13 18.40
Mar-19 13.42 16.50
Mean 12.90 17.30
STDEV 0.68 0.98
C.V. 5.2 5.67

Interpretation - The banks are required to maintain the

capital adequacy ratio (CAR) as specified by RBI from time to time. As
per the latest RBI norms, the banks should maintain a CAR of 9%. Both
the banks have maintained the average CAR above required value.
But, yes bank has better mean CAR.

2) DEBT EQUITY RATIO

This ratio indicates the degree of leverage of a bank. It shows how

much of the bank businesses financed through debt and how much
through equity. Higher ratio indicates less protection for the creditors
and depositors in the banking system.

YEAR/RATIO BOB YES BANK

Mar-17 15.1 8.2
Mar-18 14.4 10.7
Mar-19 14.7 12.5
Mean 14.73 10.4
STDEV 0.35 2.15
C.V. 2.3 20.6
 Interpretation - Here, D/E ratio of BOB is higher than YES
bank. Thus, yes bank is little safer for investors.

3) TOTAL ADVANCES TO TOTAL ASSETS RATIO -

This ratio measures the aggressiveness of banks in lending. This ratio

indicates a bank’s sternness in lending which ultimately results in
better profitability.

YEAR/RATIO BOB YES BANK

Mar-17 0.54 0.61
Mar-18 0.58 0.63
Mar-19 0.59 0.63
Mean 0.57 0.62
STDEV 0.02 0.011
C.V. 3.5 1.77

Interpretation - The ratio of Yes bank is more compared

to BOB. Thus, it can be concluded that Yes bank is more stern
while lending.

4) G-SEC / TOTAL INVESTMENT RATIO

This ratio measures the risk involved in a bank’s investment.

G-Sec / Tot INV Ratio = Government and State Government

securities in India + Government Securities outside India/ Total
Investments
 YEAR/RATIO BOB YES BANK
Mar-17 0.80 0.73
Mar-18 0.88 0.71
Mar-19 0.92 0.74
Mean 0.86 0.72
STDEV 0.06 0.01
C.V. 6.90 1.38

Interpretation - Government Securities, are commonly,

considered as the most safe debt instrument, which, as a result, brings
the lowest return. Since government securities are risk-free, a higher
investment in Government Securities to investment ratio, the lower
the risk involved in a bank’s investment.

B) ASSET QUALITY
Asset Quality reflects the magnitude of credit risk
prevailing in the bank due to its composition and quality of loans,
advances, investments and off- balance sheet activities. The financial
soundness of a bank is determined with the quality of assets that the
bank possesses.

1) NET NPA TO NET ADVANCES RATIO

Net Nonperforming Assets to Net Advances Ratio is a measure of the
overall quality of banks advances.

YEAR/RATIO BOB YES BANK

Mar-17 4.72 0.81
Mar-18 5.49 0.64
Mar-19 3.33 1.86
Mean 4.51 1.10
STDEV 1.09 0.6
C.V. 24.1 54.4

Interpretation- A Higher value of this ratio indicates more

number of rising of bad loans. Thus, BOB seems to have more bad
loans.

2) GROSS NPA/ NET ADVANCES

Gross Non-Performing Assets (GNPA) to Net Advances Ratio is a

measure of the quality of assets in a situation. A low ratio signifies
that the bank has granted sound loans and proves the good quality
of advances

YEAR/RATIO BOB YES BANK

Mar-17 0.011 0.015
Mar-18 0.011 0.012
Mar-19 0.012 0.030
Mean 0.047 0.019
STDEV 0.063 0.009
C.V. 134 47.4
 Interpretation- The lower ratio indicates that bank has good
quality of advances and has granted better loans. Here, both the
banks are performing well.

3) TOTAL INVESTMENT TO TOTAL ASSET-

This ratio measures the proportion of total assets of the bank that
are locked up in investments which does not form a part of the core
income of the bank, as against providing advances to the customers.

YEAR/RATIO BOB YES BANK

Mar-17 0.19 0.21
Mar-18 0.23 0.23
Mar-19 0.23 0.23
Mean 0.21 0.22
STDEV 0.02 0.011
C.V. 9.5 5

Interpretation - A high ratio signifies that the bank has very

conventionally kept a high cover of investment to safeguard against
the risk of Non-Performing Assets. Here, both the banks maintain
similar ratios.
C) MANAGEMENT EFFCIENCY
Management efficiency, another vital component of
the CAMEL framework, means management’s adherence to standards
and policies, capability to plan and be anticipatory, leadership,
innovativeness and managerial aptitude of the top level management.

1) TOTAL EXPENDITURE / TOTAL INCOME

The ratio gives investors a clear view of how efficiently the bank is
being run – the lower it is, the more profitable the bank will be.
Changes in the ratio can also highlight potential problems.

YEAR/RATIO BOB YES BANK

Mar-17 0.97 0.83
Mar-18 1.04 0.83
Mar-19 0.99 0.95
Mean 1 0.87
STDEV 0.03 0.069
C.V. 3 7.93

Interpretation – It is ideal for banks to have lower ratio to be

profitable. Here, both the banks can be seen maintaining lower ratio
over the given period.

2) TOTAL ADVANCES / TOAL DEPOSITS

The ratio measures the efficiency and ability of the bank's

management in converting the deposits available with the bank into
high earnings advances.
 YEAR/RATIO BOB YES BANK
Mar-17 0.63 0.92
Mar-18 0.72 1.01
Mar-19 0.73 1.06
Mean 0.69 0.99
STDEV 0.055 0.070
C.V. 7.9 7.07

Interpretation- A higher ratio indicates more reliance on

deposits for lending, whilst a low ratio signifies less reliance on
deposits. Here, both the banks have more than 60%. Thus, it can be
concluded that given banks have reliance on deposits for lending.

3) ASSET TURNOVER RATIO- Asset Turnover

measures how quickly a bank turns over its asset through its income,
both interest incomes as well as non-interest income. It measures the
ability of a bank to use its assets to efficiently generate income.

YEAR/RATIO BOB YES BANK

Mar-17 0.7 0.09
Mar-18 0.7 0.08
Mar-19 0.7 0.09
Mean 0.7 0.08
STDEV 0 0.005
C.V. 0 6.25

INTERPRETATION- The higher the ratio indicates that the

bank is utilizing all its assets efficiently to generate income. Here,
both the banks have lower ratio and it can be observed that BOB has
been utilizing its resources a little better than YES bank.

4) DIVERSIFICATIO RATIO

DIVRSF Ratio= (Total Income - Interest Income) / Total Income

YEAR/RATIO BOB YES BANK

Mar-17 0.99 0.99
Mar-18 1 0.98
Mar-19 0.99 0.99
Mean 0.99 0.99
STDEV 0.005 0.005
C.V. 0.5 0.5

INTERPRETATION - A high ratio indicates increasing proportion

of fee-based income. Here, both the banks have almost same ratios
which are considerably low. So, fee based income is not prominent in
any of the banks

5) PROFIT PER EMPLOYEE

This is an important parameter to measure the efficiency of the

banks management as this ratio measures the company’s profits in
relation to number of employees. The ratio indicates the surplus
earned per employee

YEAR/RATIO BOB YES BANK

Mar-17 20.94 20
Mar-18 21.57 23
Mar-19 20.08 8.9
 Mean 20.86 17.3
STDEV 0.74 7.4
C.V. 3.54 0.42

INTERPRETATION - A high ratio clearly signifies efficient

management. Here, BOB has succeeded in maintaining the higher
ratio throughout the given years

6) BUSINESS / EMPLOYEE IN CRORE Business

per employee ratio shows the productivity of employees of the bank
and is used as a tool to measure the efficiency of all the employees of
a bank in generating business for the bank. It indicates how much
business each employee is producing for the bank.

YEAR/RATIO BOB YES BANK

Mar-17 17.49 15.9
Mar-18 17.66 21.3
Mar-19 18.88 23.2
Mean 18.01 20.13
STDEV 0.75 3.78
C.V. 4.1 18.77

INTERPRETATION - A high business per employee ratio means

that employees are generating adequate sales or revenue for the
bank which is a clear indicator of efficient and sound management of
the bank, while a low ratio is a sign of low productivity. Here, Yes
bank is surely more productive over the given years.
D) EARNING QUALITY
It is an indicator of profitability of banks. The ultimate aim of a bank
is to increase its bottom line and bring profit to the stakeholders.

1) NET PROFIT MARGIN RATIO- It is explained as

percentage of revenue that is residual after all operating expenses,
interest, taxes and preferred stock dividends other than common
stock dividend is deducted from the total income of the bank.

YEAR/RATIO BOB YES BANK

Mar-17 4.08 20.33
Mar-18 - 4.09 20.88
Mar-19 2.07 5.76
Mean 0.68 15.65
STDEV 4.25 8.57
C.V. 625 54.56

INTERPRETATION – A high value of this ratio denotes the

steady earnings. Thus, YES bank surely will have better profit margin.
Thus, share price may move upward for YES bank.

2) RETURN ON EQUITY - ROE measures how

much the shareholders earned for their investment in the bank. This
ratio indicates how profitable a bank is by comparing its net income
to its average shareholders’ equity.
 YEAR/RATIO BOB YES BANK
Mar-17 4.2 6.4
Mar-18 -4.0 16.5
Mar-19 2.2 15.1
Mean 0.8 12.66
STDEV 4.2 5.47
C.V. 525 0.43

INTERPRETATION - The higher the ratio percentage, the more

efficient the bank is in earnings and utilizing its equity base to
generate better return is to investors. Here, ratio percentage of YES
bank is more over the years.

3) NET INTEREST MARGIN- Net Interest margin is

an important parameter of the performance of banks. It is the
difference between the interest income and the interest expended as
a percentage of total assets

YEAR/RATIO BOB YES BANK

Mar-17 2.2 2.9
Mar-18 2.4 2.6
Mar-19 2.6 2.7
Mean 2.4 2.73
STDEV 0.2 0.15
C.V. 8.3 5.5

INTERPRETATION - A higher NIM indicates better earnings as

against the total assets. Here, YES bank has slightly greater NIM over
the years.
 4) INTEREST SPREAD -Interest spread is the
difference between yield and cost of borrowing, where yield is the
interest income earned on interest earning assets and cost of
borrowing is interest expense charged on interest bearing liabilities. It
clearly indicates the extent to which interest earning capacity of the
bank exceeds or falls short of its interest cost obligations.

YEAR/RATIO BOB YES BANK

Mar-17 6.77 6.56
Mar-18 6.18 5.41
Mar-19 6.50 6.38
Mean 6.48 6.11
STDEV 0.29 0.61
C.V. 4.47 9.98

INTERPRETATION- The larger the spread, the more profitable

the bank is likely to be; the lower the spread, the less profitable the
bank. Here, both the banks appear profitable.

5) INTEREST INCOME / TOTAL INCOME - Interest

income to total income indicates the capability of the bank in
generating interest income from its advances. Interest income is a
basic source of revenue for banks.

In other words, this ratio computes the income from lending

operations as a percentage of the total income generated by the bank
in a year
 YEAR/RATIO BOB YES BANK
Mar-17 6.31 8.64
Mar-18 6.28 7.68
Mar-19 6.75 8.55
Mean 6.44 8.29
STDEV 0.26 0.53
C.V. 4.03 6.39

INTERPRETATION - a high ratio as it signifies regularity in

income and represents the income of the bank in the regular course
of banking operations. Here, Yes bank has successfully managed to
keep the higher ratios across the given years.

E) LIQUIDITY
Liquidity is an important aspect for any organization
dealing in money and banks rank ahead in the list of institutions that
deal with money and therefore have to maintain that apt balance
between profitability and liquidity.

1) CASH TO DEPOSIT RATIO- This is an important

parameter to measure liquidity as it evaluates the amount of cash that
the bank has from the deposits that it has generated.
 YEAR/RATIO BOB YES BANK
Mar-17 4.11 5.00
Mar-18 3.92 5.35
Mar-19 3.88 5.19
Mean 3.97 5.18
STDEV 0.12 0.17
C.V. 3.02 3.28

INTERPRETATION- Banks need to maintain sound cash to

deposit ratio so as to ensure that large volume of cash is not
maintained, as idle cash does not generate any returns and will
subsequently endanger the earnings quality of the bank. Here, both
the banks are having low cash to deposit ratio.

2) GOVERMENT SECURITIES TO TOTAL ASSETS

Investment in government securities, whether within the country or

outside India are considered to be the safest investment and therefore
the most liquid investment. This ratio measures the total assets of the
bank that are held in government securities.

YEAR/RATIO BOB YES BANK

Mar-17 0.19 0.17
Mar-18 0.22 0.21
Mar-19 0.18 0.26
Mean 0.19 0.21
STDEV 0.02 0.045
C.V. 0.10 0.21
 INTERPRETATION - Here, both the banks show the low ratios.
Thus, none among these banks is dependent upon G-sec for their
returns.

3) TOTAL INVESTMENT TO TOTAL DEPOSIT RATIO

This ratio measures liquidity available to the depositors of a bank. It
measures how liquid the bank is in meeting its obligation towards the
depositors of the bank.

YEAR/RATIO BOB YES BANK

Mar-17 0.22 0.34
Mar-18 0.28 0.34
Mar-19 0.29 0.39
Mean 0.26 0.35
STDEV 0.037 0.039
C.V. 14.23 111.4

INTERPRETATION- The ideal ratio is nearly 70%. But for both the
banks the ratio is very low as compare to ideal ratio. None among the
given banks have a ratio above 40%.

4) INTEREST EXPENDED / INTEREST EARNED

This ratio measures interest expense as a percentage of interest

income. It measures the ability of the bank to meet the interest
expenditure on deposits from the interest income from advances.

YEAR/RATIO BOB YES BANK

Mar-17 66.55 64.70
Mar-18 63.31 61.82
 Mar-19 61.44 66.88
Mean 63.76 64.46
STDEV 2.58 2.52
C.V. 4.0 3.9

INTERPRETATION - If the ratio is less than 1, the bank is

generating enough interest from advances to meet its interest
obligations of deposits which signifies sound liquidity of the bank.
For both the banks the ratio is less than 1, i.e. it signifies sound
liquidity of the bank.