Financial Performance of Banks A comparative study of Private and Public Banks

SUBMITTED BY:

Submitted By:
Prateek Dudeja Nitish Malhotra Shivani Bansal Aditya Shantanu Rajat Bhardwaj 071018 071177 071268 071330 071375 Ashima Aggrawal 071150

(Electronics and Electrical Communication)

Submitted To:
Ms. Anju Singla

Decl

i

We hereby decl re that the project work entitled ³Financial Performance of Banks: A comparati e st dy of Pri ate and Public Banks´ is an authentic record of the research and analysis carried out by us as a part of the academic curriculum for the subject ³Managerial Finance´ for the award of degree of B E Electronics and Electrical Communication Engineering, PEC Uni ersity of Technology, Chandigarh, under the guidance of Ms. Anju Singla during January to April, 2011.

Prateek Dudeja (071018) Ashima Aggarwal (071150) Nitish Malhotra (071177) Shi ani Bansal (071268) Aditya Shantanu (071330) Rajat Bhardwaj (071375)

Date: April 18, 2011

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Acknowledgement
We are greatly thankful to our professor, Ms. Anju Singla for helping us out immensely in this project. This project would never have seen the light of the day had she not solved the problems we faced during the making of this project. With this project we have taken a new step into the world of Finance where not only theoretical knowledge, but a great amount of analytical knowledge is required to succeed. We feel that this project has done just the same for us. Once again we would like to express our gratitude for giving us an opportunity to learn and we hope to be presented with more opportunities that open us up to a whole new plethora of knowledge. Prateek Dudeja Ashima Aggarwal Nitish Malhotra Shivani Bansal Aditya Shantanu Rajat Bhardwaj

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T

le of Contents

Abstract«««««««««««««««««««««««««««««««««««...7 Chapter 1: Public and Pri ate Sector Banks in India: A comparati e Anal sis ........................ 8 1.1 Introduction ................................ ................................ ................................ .............................. 9 1.1.1 Public Sector Banks ................................ ................................ ................................ ...............11 1.1.2 Private Sector Banks ................................ ................................ ................................ ..............11 1.1.3 Performance of Private Sector and Public Sector Banks ................................ ......................... 12 1.2 Performance Parameters ................................ ................................ ................................ ...........13 1.2.1 Liabilities and Assets of Banks ................................ ................................ .............................. 14 1.2.2 Share in Aggregate Deposits ................................ ................................ ................................ ..15 1.2.3 Priority Sector Lending................................ ................................ ................................ ..........16 1.2.4 Sensitive Sector Lending ................................ ................................ ................................ .......17 1.2.5 Credit Deposit Ratio ................................ ................................ ................................ ..............18 1.2.6 Cost of Funds and Return on Funds ................................ ................................ ....................... 19 1.2.7 Operating and Net Profit ................................ ................................ ................................ ........20 1.2.8 Net Profitability of Bank Groups ................................ ................................ ........................... 21 1.2.9 Gross and Net NPAs ................................ ................................ ................................ ..............22 1.2.10 Capital Adequacy Ratio ................................ ................................ ................................ .......23 1.2.11 Number of ATMs ................................ ................................ ................................ ................24 1.3 Challenges«««««««««««««««««««««««««««««««««.25 Chapter 2: Comparati e Study of top 5 Indian Banks ................................ ............................... 28 2.1 Introduction ................................ ................................ ................................ ............................. 29 2.2 Bank Profiles ................................ ................................ ................................ ............................ 31 2.3 Data Analysis ................................ ................................ ................................ ........................... 40 2.4 Findings and Recommendations ................................ ................................ ............................... 48 Conclusion ................................ ................................ ................................ ................................ ....51 Bibliography................................ ................................ ................................ ................................ .52

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List Of Tables
Chapter 1: Public and Pri ate Sector Banks in India: A comparati e Analysis 1.1 Growth in Balance Sheet of Scheduled Commercial Banks«««««««««««««....14 1.2 Priority Sector Lending by Public and Private Sector Banks«««««««««««««...16 1.3 Lending to Sensitive Sector- Bank Group-wise«««««««««««««««««««17 1.4 Cost of Funds and Return on Funds: Bank Group-wise«««««««««««««««...19 1.5 Operating Profit and Net Profit- Bank Group-wise«««««««««««««««««..20 1.6 Gross and Net NPAs of Scheduled Coemmercial Banks«««««««««««««««..22 1.7 Capital Adequacy Ratio- Bank Group-wise«««««««««««««««««..«««23 1.8 Number of ATMs of SCBs (as at end-March 2010)«.««««««««««««««««24 Chapter 2: Comparati e Study of top 5 Indian Banks 2.1 Capital Adequacy Ratio (CAR) ................................ ................................ ................................ 41 2.2 Earning Per Share (EPS)................................ ................................ ................................ ...........42 2.3 Net Profit Margin (NPM) ................................ ................................ ................................ .........43 2.4 Return on Assets (ROA) ................................ ................................ ................................ ... ««44 2.5 Credit Deposit Ratio (CDR)««««««««««««««««««««««««««..45 2.6 Gross Non Performing Assets (GNPAs)«««««««««««««««««««««...46 2.7 Net Non Performing Assets (NNPAs)««««««««««««««««««««««...47

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5 Percentage change in Net Sales and Net Profit for ICICI Bank«««««««««««.........44 2........««««««««««««««««««««....3 Net Profitability of Bank Groups ««««««««««««««««««««««««21 Chapter 2: Comparati e Study of top 5 Indian Banks 2....33 2..46 2.7 Earning Per Share (EPS)««««««««««««««««««««««««««««42 2..Bank Group-wise «««««««««««««...«.4 Percentage change in Net Sales and Net Profit for IDBI«««««««««««««««.......2 Group-wise Credit-Deposit Ratio «««««««««««««..18 1.... ...43 2....45 2.15 1.11 Gross Non Performing Assets (GNPAs)«««««««««««««««««««««..........41 2..9 Return on Assets (ROA)«««««««.....8 Net Profit Margin (NPM)««««.38 2.34 2..6 Capital Adequacy Ratio (CAR)«««««««««««««««««««««««««.39 2......List of igures Chapter 1: Public and Pri ate Sector Banks in India: A Comparati e Analysis 1....2 Percentage change in Net Sales and Net Profit for State Bank of India«««««««««.36 2.««««««««««««««««««««.10 Credit Deposit Ratio (CDR)«««««...«47 6 .1 Percentage change in Net Sales and Net Profit for HDFC Bank««««««««««««.«««««««««««««««««««««««.3 Percentage change in Net Sales and Net Profit for AXIS Bank««««««««««««.12 Net Non Performing Assets (NNPAs)«««««««««««««««««««««.......1 Share in Aggregate Deposits.

State Bank of India. Non-performing Assets. In Chapter 2. deposits and lending. Further a comparison study of top 5 banks in India namely ICICI. Graph and charts were used to illustrate trends. In Chapter 1 we have compared public and private sector banks on the basis of eleven crucial parameters. The data analysis of the information got from the balance sheets of the 5 banks was done and ratios were used. The various challenges and opportunities confronting the Public sector banks and Private sector banks have also been discussed. The Sampling Plane of our analysis had the following 5 banks as a sample: HDFC. AXIS Bank. IDBI and ICICI Bank. 7 . performance of 5 banks is compared based on certain criteria. State Bank of India has also been presented. IDBI. AXIS Bank. HDFC. and cost of funds? This report is a modest effort to compare public and private sector banks on the basis of eleven such crucial parameters.Abstract What are the trends observed in the performance of Public Sector and Private Sector Banks? How do they perform when compared across the critical parameters of profitability. The various challenges and opportunities confronting the Public sector banks and Private sector banks have also been discussed.

CHAPTER 1 Public Sector and Private Sector Banks in India A Comparative Analysis 8 .

1 Introduction 9 .1.

The sudden boom of investment in the 1900¶s led to the emergence of leading joint stock banks such as the Punjab National (1895). 10 .e. Later.The Indian financial system comprises of four segments or components. Thus. The Reserve Bank of India thus made it compulsory for reconstruction and / or merger of the weak units with the sound one¶s as per the Banking Companies Act of 1960 and the number of banks declined from 548 in 1947 to 89 in 1969. The foundation for the financial sector reforms was laid by recommendations of the Committee on Financial System 1991 (Narasimham Committee). The major functions of these banks were to finance foreign trade while domestic trade was largely handled by the Multani Shroffs and moneylenders.e. Central bank of India (1911) and Union Bank of India (1919). The Indian financial system was quite well developed even prior to India¶s political independence in August 1947. Fourteen private banks were nationalized on July 19. Bank of Baroda (1909). 2000 to 1400 BC. which specifically included a reform of the financial system. The objectives of the financial sector reforms were to bring about greater efficiency and competitiveness in all the spheres of the economic activity.The Imperial Bank of India later became the State Bank of India. the officers of East India Company set up the first bank in Madras. The Committee again reviewed the financial system in 1998 and made further recommendations. 1969 and another six in 1980. i. financial instruments and financial services. Following the balance of payments crisis in 1991-92. Three Presidency Banks i. financial markets. Banking in India has its origin in Vedic times. Indian Bank (1907). One of the objectives of nationalization was to extend the reach of organized banking to rural areas and neglected sections of the society. Between 1947 and 1969 banks were under private ownership of maharaja¶s. Between 1941 and 1945. Calcutta Bank. Financial institutions are intermediaries that mobilize savings and facilitate allocation of funds in an efficient manner. or king s of the princely states of India and these banks served the rich families and industrial houses which narrowed the industrial growth of the banking system. Bank of Madras and Bank of Bengal which were set up between 1809 and 1843 were amalgamated to form the Imperial Bank of India in 1921. Both foreign and domestic banks were present and so was a well-developed stock market. the number of banks increased from 473 to 737 but these banks suffered from certain limitations such as inadequate capital structure and unsound methods of operations and management. Until the 1990s. Banks come under the financial institutions segment. Bank of India (1906). a stabilization program was initiated with the help of International Monetary Fund. the Indian financial system was tightly regulated. Commercial Bank. In 1683. the government in consultation with Reserve Bank of India enacted the Banking Companies Act in 1949. Between 1770 and 1850 banks such as Bank of Hindustan. Commercial Bank and Calcutta Bank merged to form Union Bank. Bank of Bombay. These are financial institutions. Modern banking in India emerged between the 18th and beginning of 19th centuries. Bank of Calcutta and Bank of Bombay. Indigenous bankers and moneylenders have played a vital role for centuries.

decline in productivity and erosion of profitability of banking sector. Narasimham Committee I (1991) which recommended the free entry of new banks in the financial market provided they confirm the minimum start up capital and other requirements by the permission of Reserve Bank of India. Small Scale.2 Pri ate Sector Banks Private sector banks came into existence to supplement the performance of Public sector banks and serve the needs of the economy better. by Bharti Pathak. The banking system spread to rural areas. They are divided into two groups i. The number of bank branches increased from 8262 to 60570. 1. there are 19 nationalized banks and 8 State Bank of India associates. and 8 new banks. (Indian financial system. Nationalized Banks and State Bank of India and its associates. there was rapid expansion of bank network.1. 1. This resulted in low levels of investment and growth. by Bharti Pathak. The share priority sector in total banking grew up from14 percentage in 1969 to 43% in 1990 and banking density improved from 64000 people per branch in 1969 to 14000 people per branch in 1991. As the public sector banks were merely in the hands of the government.1 Public Sector Banks Public sector banks are the ones in which the government has a major holding.1.e. banks had no incentive to make profits and improve the financial health. Banks operated in regulatory environment with administered rate of interest structure. quantitative restrictions on credit flows. 2003). Public Sector Banks dominate 75% of deposits and 71% of advances in the banking industry (Indian financial system. tiny and cottage industries benefited from the spread of banking system. Thus. Currently there are 31 Private Sector Banks. Among them. 2003) 11 . which includes 23 old. high reserve requirements and significant proportion of lend able resources going to the priority and government sectors.Between 1969 and 1992. Nationalized killed competition and stifled competition in banking.

1. Share in Aggregate Deposits 3.1. We have compared Public and Private sector banks based on 11 parameters. which are critical while evaluating their performance. Number of ATMs 12 . These criteria are as follows: 1. Gross and Net NPAs 10. Credit Deposit Ratio 6. Sensitive Sector Lending 5. Priority Sector Lending 4. The banks. Assets and Liabilities 2. both private as well as public have to now operate in an increasingly competitive environment.3 Performance of Public and Private Sector Banks: A Comparison The performance and the roles of private and public sector banks are undergoing changes. Cost of Funds and Return on Funds 7. the public sector banks are under tremendous pressure to maintain their margins and to survive the competition. Despite having the e advantage of a substantial presence and penetration in the rural areas. The customercentric approach of private sector banks have thrown open many more challenges for the public sector banks especially in retaining customers and expanding customer base. Operating Profit and Net Profit 8. Net Profitability of Banks 9. Capital Adequacy Ratio 11. The competition for public sector banks is coming from the privat sector banks.

1.2 Performance Parameters 13 .

Borrowings and net-owned funds (capital and reserves and surplus). nationalized banks and other public sector bank (one)).1. increased sharply underscoring the growing importance of non deposit resources of SCBs. investments. followed by public sector banks and old private sector banks. 14 .9 new private sector banks. Deposits showed a lackluster performance in the wake of increased competition from other saving instruments. Source: RBI Table 1. assets of new private sector banks grew at the highest rate. however.1 Liabilities and Assets of Banks On the back of robust economic growth and industrial recovery. 20 old Private sector banks and 31 foreign banks. As you can see below the percentage of total assets and liabilities of New Private sector banks is higher than the Public sector Banks. loans and advances witnessed strong growth.2.1 Growth in Balance Sheet of Scheduled Commercial Banks NOTE: Scheduled commercial banks (SCBs) consist of 28 public sector banks (State Bank of India and its seven associates. Bank group-wise. in a rising interest rate scenario.

as demand deposits had witnessed an unusually high growth last year. The higher growth of term deposits was mainly because of NRI deposits and certificates of deposit (CDs).9 per cent). was in line with the long-term average.1.1 Share in Aggregate Deposits.6 per cent). the growth rate of term deposits showed a deceleration. which reflect the strength of the retail liability franchise and are at the core of the banks¶ customer acquisition efforts. old private sector banks (10.Bank Group-wise 15 . Across bank groups.2 Share in Aggregate Deposits It can be seen below that Deposits of SCBs grew at a lower rate during 2009-10 as compared in the previous year because of slowdown in demand deposits and savings deposits. Savings deposits. Deceleration in demand deposits was due mainly to the base effect. Source: RBI igure 1.8 per cent) and foreign banks (7. Excluding these deposits. The growth in demand deposits. followed by PSBs (15. which was on account of a possible substitution in favor of postal deposits and other investment products.2. grew at a healthy rate. which continued to grow at a high rate benefiting from tax incentives and their attractive rate of return in comparison with time deposits. which took the initiative in hiking the deposit rates. the rate of expansion of deposits was highest in respect of new private sector banks (21. however. The share of new private sector banks in total deposits has gradually increased over the years. although the growth was somewhat lower than the high growth of last year.1 per cent). They are the ones.

Agricultural sector gets less importance in priority sector as compared to other sectors because private sector banks concentrate less on this sector as compared to PSB¶s. Only one private sector bank could achieve the sub-targets within the priority sector.3 Priority Sector Lending The performance of private sector banks in the area of priority sector lending remained less satisfactory with 12 out of 30 private sector banks failing to achieve the overall priority sector targets. Source: RBI Table 1.2 Priority Sector Lending by Public and Pri ate Sector Banks 16 . Public sector banks are enforced by government to undertake lending mostly in the priority sector (40%) at subsidized rates to encourage and support the rural sectors. Private sector banks aims at profitability and marginal returns.2. so they concentrate more on the sensitive sector. Advances to weaker sections by the private sector banks of net bank credit were much lower than the stipulated target for the sector.1.

old private sector banks had the highest exposure to the sensitive (measured as percentage to total loans and advances of banks). Among bank groups. Private sector banks focuses more on sensitive sectors as these markets are highly volatile involving high returns and higher risk. Source: RBI Table 1.1.3 Lending to Sensiti e Sector. Commodities. followed by new private sector banks.2. Real Estate Market. Since Public sector banks require high expertise and high risk is. foreign banks and public sector banks. involved they refrain from lending to sensitive sector.Bank Group-wise 17 . and Venture Capital.4 Sensiti e Sector lending Sensitive Sector comprises of Capital Market.

are influenced by the structural transformation of the economy. followed by foreign banks. the new private sector banks had the highest C-D ratio.2. which implies greater credit orientation of banks. the C-D ratio is regarded as an aggregative measure for gauging the effectiveness of credit delivery system. Source: RBI igure 1. This ratio is indicative of percentage of funds lend by the bank out of total amount raised through deposits. is used as a credit efficiency indicator for analyzing the role of banks in promoting productive sectors and contributing to economic growth. in general. Private sector Banks are deploying their deposits in the way of loans at higher Interest rates thereby making profit hence the credit-deposit ratio is higher compared to public sector banks where the deposits are being deployed in the form of government securities and subsidies where the returns is low or nil.5 Credit Deposit Ratio Among bank-groups. Although the deployment of credit and the time path of C-D ratio. The C-D ratio. the role of credit culture and banks¶ lending policy have an inherent impact on the size of the ratio. In a bank-based financial system.1. Higher ratio generally helps in increasing the income of the banks. old private sector and public sector banks.2 Bank Group-wise Credit-Deposit Ratio 18 . PSB¶s cost of deposits is higher as compared to private banks as private banks concentrate more on Currents accounts. Higher ratio reflects ability of bank to make optimal use of available resources.

9 5 2.3 6 6.8 2 1 0. reflecting mainly the increased lending at subPLR rates because of competitive pressures.1 1 8 .4 1 6 .8 3 6. banks are taking the deposits at much higher rate of interest than the real rate at which they should take it.3 1 5.0 7 3 .0 1 9.9 4 5. 6) R e turn on Fu n d s = (Inte re st E arne d on Advances + I n te re st E arn ed on Investments)/( Average of curre n t an d pre vio u s year¶s advan ce s plu s inve stme nts).4 4 1.1 8 4 . 4) R e turn on Advances = I n te re st E arn e d on Advances /Average of curre nt an d p re vio us year¶s adv an ce s.6 1 9 .7 3 6.5 8 3 .0 4 1 .3 9 7 . 7) *.2.2 5 9.4 1 S p re ad 8 = (7-4) 3 .2 4 5 .3 4 3.6 8 6.9 5 4.9 9 6 .9 0 8.4 7 1.9 6 5 .7 7 3.7 2 7.2 5 6. they feel that the interest on the advances should be increased.8 1 3 . The decline in cost of funds was accompanied by a larger decline in return on advances.3 7 1 .2 6 5 .6 Cost of unds and Return on unds Cost of deposits declined significantly during 2009-10.4 9 Cost of B orrow ings 3 3 .9 6 4 .1.5 6 5.1 0 5 .1 7 5. As a result.5 6 1 2 .0 7 1 .1 3 2.1 2 3. However.2 8 3 . 2) Cost o f B orrow in g s = Inte re st Paid on Borrowings/ Average of cu rre nt an d p re vio us year¶s borrow ings.2 9 R e turn on Inve stme nts 6 6 .3 4 6.1 7 9. As it is. interest spread came under pressure. reflecting largely the impact of significant decline in deposit rates in the last year.4 2 3.4 8 8.7 7 6. the cost of borrowings was much lower than the cost of deposits across all bank groups. Source : C al culate d fro m b alan ce she e ts of re spe ctiv e b an ks.5 8 3 .9 3 6 .1 Old p rivat e se cto r b an k s 2 0 0 8-0 9 2 0 0 9-1 0 2.2 SBI G rou p 2 0 0 8-0 9 2 0 0 9-1 0 2 Priv ate se cto r b a n k s 2 0 0 8 -0 9 2 0 0 9 -1 0 2.0 1 6 .8 5 8 .0 9 5.0 4 5 .7 7 3.1 4 3.6 7 6. suggesting that the benefits of low interest rates have begun to percolate to banks¶ borrowers.4 2 4 .4 9 3 .1 N ationalise d banks* 2 0 0 8-0 9 2 0 0 9-1 0 1.5 0 9 . 5) R e turn on In ve stm e nt s = Inte re st E arne d on Inve stm e nt s /Average of cu rre nt an d pre vio u s year¶s inve stme nts.4 6 2 .2 8 7 .7 5 6 .1 3 6.3 2 6 .3 6 8 .2 0 6 . What is happening is that deposit rates are being increased without a parallel need for the increase of the worth.8 9 1 1.3 6 9. barring foreign banks.8 0 8.0 8 9 .9 5 6 .8 8 6. 3) Cost of Fu n d s = (I n te re st Pai d on D e p o sits + I n te re s t Pai d on Borrowings)/( Average of cu rre nt an d p re vio us year¶s de p osit s pl u s borrow ings).2 9 9.8 9 8.3 5 5.6 0 1 0.0 1 4 .3 1 N ote : 1) Cost of D e p o sits = Inte re st Pai d on Deposits/ Average of curre n t an d pre vio u s year¶s de po sits.7 6 1. the RBI's liquidity report suggests that there is an excess of liquidity.4 0 3 .5 6 1 .5 7 Cost of Funds 4 6 .9 9 1 0 . T Table 1. B an k group/ye ar 1 1 P u b li c se ct o r b a n k s 2 0 0 8 -0 9 2 0 0 9 -1 0 1.0 5 6. Significantly.4 Cost of unds and Return on unds: Bank Group -wise 19 .2 New priv ate se ctor b an k s 2 0 0 8-0 9 2 0 0 9-1 0 3 Fo re ig n b a n k s 2 0 0 8 -0 9 2 0 0 9 -1 0 All SCBs 2 0 0 8 -0 9 2 0 0 9 -1 0 Cost of D e posits 2 6 .0 2 3.9 2 1 1 .8 2 5 .1 8 9.6 7 3 .2 7 6.1 0 1 0.6 4 6.0 4 4.4 0 1 0 .4 1 9 .5 7 6.9 5 1 1.1 3 9 .5 9 R e turn on Fu n d s 7 9 .6 0 5 .1 8 7.5 5 8 .0 9 R e turn on A dv an ce s 5 1 0 .9 4 3. If the cost of funds is going up then obviously.In clude s IDBI B an k Ltd.6 3 6 .3 7 2. banks have to increase the return on their advances also.2 2 8.3 0 9 .0 3 6.5 2 1.

Bank Group-wise 20 .5 Operating Profit and Net Profit. While net profits of nationalized banks. the borrowing costs are higher as compared to the lending rates offered. conversion of non-banking entity to banking entity) during 2009-10 as against an increase of 30. Source: RBI Table 1. old private sector banks and foreign banks declined. which mainly includes salary cost and network expansion cost. Operating margins are profits earned by banks on its total interest income. Sharp increase in the net profits of new private sector banks was because of a sharp decline in provision and contingencies (loans). those of SBI group and new private sector banks increased.4 per cent in the last year. since the cost of funds i. Net Profit is calculated after deducting various cost of funds.e.2. the PSB¶s net profit is lesser compared to the private banks. Banks operating profit is calculated after deducting administrative expenses.0 per cent (excluding the conversion impact i.7 Operating and Net Profit Net profits declined by 7.1.e.

3 Net Profitability of Bank Groups 21 . Net profits to assets ratio of SCBs declined marginally in 2009-10. Source: RBI igure 1.2. the decline being the highest in case of old private sector banks. investment pattern differs. followed by foreign banks and public sector banks. In case of New Private Sector banks the duration of investment is low. However. the ratio declined across bank groups. except for the new private sector banks.8 Net Profitability of Bank Groups Return on assets reflects the efficiency with which banks deploy their assets. interest is high as a result the Net Profitability is high.1.

which may turn its lent amounts into a debt that could be returned by its defaulters comfortably as compared to the Private banks.1. reflecting the change in asset classification norm from the year ended March 2005. PSB's have a better management and monitoring over their deposits and the defaulters. PSB's NPA ratio is satisfactory compared to private banks. However. the ratio has been decreased compared to previous year.performing assets in µdoubtful¶ category increased. NPAs in doubtful category as percentage of net advances declined significantly.2. the decline in the NPA ratio was attributable to both increased recovery of NPAs and overall reduction in asset slippages. Private banks NPA ratio is higher as they are offering loans without having required deposits to lend them. whereby an asset was treated as doubtful if it remained as NPA for 12 months as against the earlier norm of 18 months.6 Gross and Net NPAs of Scheduled Commercial Banks 22 . Source: RBI Table 1. non. Higher NPAs ratio shows that bank is unable to maintain the quality of its loans however.9 Gross and Net NPAs With provisioning for NPAs being somewhat lower during 2004-05. while those in sub-standard category declined sharply. In absolute terms.

which brought them closer to other bank groups. a rate below the minimum indicates that the bank is not adequately capitalized to expand its operations.10 Capital Adequacy Ratio Among bank groups. Source: RBI Table 1. Decreasing ratio could affect the business expansion and result in low level of income. the CRAR of nationalized banks registered a marginal improvement during the year. Overall.Bank Group-wise 23 . Within the public sector banks. Higher CAR shows that bank can expand its business more and is less vulnerable to external shocks. The CRAR of the State Bank group. Public Sector Banks have shown satisfactory performance as compared to Private sector banks as they are more cautious while lending. the CRAR of new private sector banks improved significantly.1.7 Capital Adequacy Ratio. However banks CAR can be a little higher than the minimum. A banks CAR is ratio of qualifying capital to risk adjusted assets. old private sector banks and foreign banks declined. In case of PSB¶s CAR has decreased as compared to previous year.2. The RBI has set the minimum CAR at 10%.

new private sector banks.8 Number of ATMs of SCBs 24 .1. old private sector banks and SBI group had more on-site ATMs than offsite ATMs. followed by nationalized banks.2. SBI new private sector banks and foreign banks had more off-site ATMs than on-site ATMs. While nationalized banks. The SBI group of banks constituted the largest share of ATMs. old private sector banks and foreign banks.11 Number of ATMs Total number of ATMs installed in the country was 60. Source: RBI Table 1.153 at end-March 2010.

1.3 Challenges 25 .

Finally. The two important challenges for public sector banks are:  To maintain profitability inspite of government norms and regulations. as to maintain their PLR. internet banking. automatic money transfer. These changes are taking place at a particularly fast pace in few of the banks including the State Bank of India. Lending to corporates meant higher margins for banks.Recently a new technology of cheque truncation is being introduced. Customers no longer had to stand in long queues or make 10 trips for loans to be sanctioned. Credit and Debit cards. public sector banks have woken up to competition. private sector banks like ICICI and HDFC Bank could offer customer services like ATMs. better service.  Put in place appropriate technology of excellent standards that will make them be seen more as virtual banks rather than brick and mortar. several new generation private sector banks changed the face of the industry. they must be taken out of the purview of the Central Vigilance Commission. Core banking solutions and computerized monthly statements. These branches are not interlinked with each other and customers visiting hours are less. even if it entails bringing them under the Companies Act.and be completely board driven. Post-liberalization. That includes everything from ATM machines and computerized branches to never before seen marketing initiatives. with new technology. Clearly. They must be given autonomy -. Private sector banks brought in concepts like customer relations officers focused marketing teams and single window banking. Corporation Bank.operational and administrative -. phone banking. As interest rates came down corporates began to consider alternate sources of funds. under cheque truncation only the image of the instrument would travel. Banks then began to explore possibilities like retail lending. Public sector banks¶ focus had earlier remained on industrial credit. mobile banking. including in the selection of the chief executive officer. Bank of Baroda and the Union Bank of India. It is currently being implemented on a pilot basis in India. They lack behind in providing facilities like loans and other accounts. They need to improve in the services like ATMs. This will lead to consolidation of their respective network.Public Sector Banks The public sector banks are turning the spotlight on the customer and offering quicker. Moreover. As against physical travel of instruments. which was slowing down. 26 . This would totally alter the face of clearing systems facilitating faster realization of instruments. Indian Bank.

Centurion Bank of Punjab needs the additional business to compensate for its relatively higher cost structures. private sector banks lend money to individuals and corporate sector whereas sectors like agriculture. inadequacy of capital will lead to their mergers sooner rather than later. RBI may be inclined to approve the merger. small-scale industries and retail trade small business is neglected. the old and the new. Some of the most important challenges for private sector banks are:  Priority sector credit: Generally. Private sector banks have good technology for handling transactions and also offer attractive products. but it cannot be said that corporate governance and risk management are far superior to that of the Public Sector Banks. including traditional banking products and fee-based services like wealth management products. The regulator.Pri ate Sector Banks There are two types of private sector banks. to affluent NRI customers. 27 . which has been insisting on promoters of smaller banks to lower their holdings.  Consolidation and Convergence: The recent merger that happened was of Lord Krishna Bank with Centurion Bank. It can cross-sell its banking products through the LKB network. As far as the old (mostly regional banks) are concerned. would possibly prefer such mergers.

CHAPTER 2 Comparative Study of Top 5 Indian Banks HDFC State Bank of India AXIS Bank IDBI ICICI 28 .

Intr du ti n 29 .2.

It is important to evaluate the banks on certain criteria. regulations & norms. y y y y y HDFC State Bank of India AXIS Bank IDBI ICICI 30                     . Graph and charts were used to illustrate trends.In the recent years the financial system especially the banks have undergone numerous changes in the form of reforms. The Sampling Plane of our analysis had the following 5 banks as a sample. The study is conducted to analy e 5 banks to get the desired results by comparing the following parameters: Capital Adequacy Ratio Earning Per Share Net Profit Margin Return on A et Credit Depo it Ratio Gro Non Performing A et Net Non Performing A et The data analysis of the information got from the balance sheets of the 5 banks was done and ratios were used.

2.2 Bank Profiles 31 .

The amalgamated bank emerged with a strong deposit base of around Rs. incorporated in August 1994. 1.The Bank commenced its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization policies.622. HDFC Bank is one of the Big Four Banks of India.000 crore. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. 2008 the bank had total assets of INR 1006. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1. ICICI Bank and Axis Bank ² its main competitors.82 billion.412 branches and over 3. Coleman & Co. the bank has reported net profit of Rs.8 crore in 2008-09. along with State Bank of India. in 2000. HDFC Bank has 1. 32 .2.244. Total annual earnings of the bank increased by 58% reaching at Rs. History HDFC Bank was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC). This was the first merger of two private banks in India.000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network. up 41%s from the previous fiscal. / Times Group) was merged with HDFC Bank Ltd.22. a premier housing finance company (set up in 1977) of India. Times Bank Limited (promoted by Bennett. is a major Indian financial services company based in Mumbai. The Bank was promoted by the Housing Development Finance Corporation. 1.295 ATMs. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India. in 528 cities in India. 89. India's premier housing finance company. The balance sheet size of the combined entity is over Rs.000 crore and net advances of around Rs.19. after the Reserve Bank of India allowed establishing private sector banks. and customer base. shareholders of Times Bank received 1 share of HDFC Bank for every 5. As of September 30. and all branches of the bank are linked on an online real-time basis.HDFC Bank Ltd.. In a milestone transaction in the Indian banking industry.000.9 crore.75 shares of Times Bank.63. geographic reach. For the fiscal year 2008-09. and a bigger pool of skilled manpower.

Corporate Governance Rating The bank was one of the first four companies. The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency.1 HDFC Bank 33 . Figure 2. The Credit Rating Information Services of India Limited (CRISIL). The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.

the Government took over the stake held by the Reserve Bank of India. making it the oldest commercial bank in the Indian Subcontinent. These managers took the retirement allowances and then went on to become senior managers in new private sector banks. etc. With an asset base of $260 billion and $195 billion in deposits. Figure 2. SBI provides a range of banking products through its vast network of branches in India and overseas. through the Imperial Bank of India. In 2008. market capitalization.State Bank of India is the largest banking and financial services company in India. assets. It has a market share among Indian commercial banks of about 20% in deposits and advances. The State Bank Group.000 branches. and SBI accounts for almost one-fifth of the nation's loans. has the largest banking branch network in India. to the founding in 1806 of the Bank of Calcutta. and renamed it the State Bank of India. with the Reserve Bank of India taking a 60% stake. including products aimed at NRIs.revenues. with over 16. it is a regional banking behemoth. The bank traces its ancestry to British India. SBI has tried to reduce over-staffing by computerizing operations and "golden handshake" schemes that led to a flight of its best and brightest managers. The Government of India nationalized the Imperial Bank of India in 1955. profits.2 State Bank of India 34 . by almost every parameter .

1. retail exposures grew at a slower pace.15 per cent seen in 2003-04.. National Insurance Company Ltd. the Bank had a total income of Rs 13. Branch Network At the end of March 2010. The Oriental Insurance Corporation and United India Insurance Company UTI-I holds a special position in the Indian capital markets and has promoted many leading financial institutions in the country. is a financial services firm that had begun operations in 1994.93 billion) and a net profit of Rs. The bank. along with ICICI Bank. Axis Bank is the first bank in the country to provide a secure debit card-based payment service over IVR. formally UTI Bank. after the Government of India allowed new private banks to be established. Axis Bank is one of the Big Four Banks of India. P. Even over a longer period. In the case of Axis Bank. a unique mobile payments solution using Axis Bank debit cards. 2010.04 crore (US$ 2.93 crore (US$ 386. State Bank of India and HDFC Bank. the Bank has a very wide network of more than 835 branch offices and Extension Counters.41..Axis Bank. Life Insurance Corporation of India (LIC). though. Interest margins. while the overall asset growth for Axis Bank has been quite high and has matched that of the other banks. The bank changed its name to Axis Bank in April 2007 to avoid confusion with other unrelated entities with similar name. Shikha Sharma was named as the bank's managing director and CEO on 20 April 2009. General Insurance Corporation Ltd.00.000 crore. retail loans have declined from 30 per cent of the total loan book of Rs 25. After the Retirement of Mr. Total number of ATMs went up to 3595.800 crore in June 2006 to around 23 per cent of loan book of Rs. while they have declined from the 3. Axis Bank announced the launch of 'AXIS CALL & PAY on atom'.745. appears to have insulated such pressures. J. As on the year ended March 31. The New India Assurance Company. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I). 35 . The Bank has loans now (as of June 2007) account for as much as 70 per cent of the bank¶s total loan book of Rs 2. 2010. On February 24. are still hovering close to the 3 per cent mark.15 million).280 crore (as of June 2007).812. Nayak.

PPF accounts etc. it promotes competition and encourages market forces to achieve higher operating standards for the benefit of customers. The Code applies to:  Current. operated as agents of RBI/Government  Collection and remittance services offered by the banks  Loans and overdrafts  Foreign-exchange services  Card products  Third party products offered through our network. which sets standards of fair banking practices for member banks of Indian Banks' Association to follow when they are dealing with individual customers. savings and all other deposit accounts  Pension. Figure 2.3 AXIS Bank 36 .Bankers Fair Practice Code This is a voluntary Code. It provides valuable guidance to you for your day-to-day operations. As a voluntary Code.

and IDBI BANK. in consonance with national plans and priorities. the Small Industries Development bank of India(SIDBI). 37 . the Stock Holding Corporation of India (SHCIL). the Export-Import Bank of India (EXIM Bank). 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. It is currently 10th largest development bank in the world in terms of reach with 1210 ATMs. though for a brief period it was a private scheduled bank.3%). In the wake of financial sector reforms unveiled by the government since 1992. promoting and developing industry in the country. IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth through financing of medium and long-term projects. Some of the institutions built by IDBI are the National Stock Exchange of India (NSE). for green-field projects as also for expansion. diversified and efficient industrial and institutional structure but also adding a qualitative dimension to the process of industrial development in the country. modernization and diversification purposes. both in rupee and foreign currencies. It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. 720 branches and 486 centers. Although Government shareholding in the Bank came down below 100% following IDBI¶s public issue in July 1995. IDBI provides financial assistance. During the four decades of its existence. the former continues to be the major shareholder (current shareholding: 52. RBI categorized IDBI as an "other public sector bank". the National Securities Depository Services Ltd (NSDL). including manufacturing and services. the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing. the Credit Analysis & Research Ltd. IDBI has enlarged its basket of products and services. In 16 February 1976. IDBI has been instrumental not only in establishing a well developed. covering almost the entire spectrum of industrial activities. The Industrial Development Bank of India (IDBI) was established on July 1. IDBI evolved an array of fund and feebased services with a view to providing an integrated solution to meet the entire demand of financial and corporate advisory requirements of its clients. the Entrepreneurship Development Institute of India. Over the years. which today is owned by the Indian Government.The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading public sector banks and 4th largest Bank in overall ratings.

3.4 IDBI 38 . each focusing on distinct customer segments and three business verticals. Figure 2. Going forward.34 lakh crore and business size (deposits plus advances) of Rs. has an established presence in associated financial sector businesses like Capital Market and Investment Banking. the Bank has reorganized its businesses around nine verticals out of which six customer verticals. As a step towards taking the organization on a accelerated growth path. Home Finance. the Life Insurance Business. As an Universal Bank. IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate'. besides its core Banking and project finance domain. 2010. Primary Dealership area and more recently. IDBI Bank has a balance sheet of Rs 2.As on March 31. besides generating wealth and value to all its stakeholders. IDBI Bank.06 lakh crore.

Thailand. Russia and the UK (the subsidiary through which the Hi SAVE savings brand is operated). ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and specialization subsidiaries and affiliates in the areas of investment banking. 9. as well as some 24 million customers (at the end of July 2007).15% rise in net profit to Rs. The bank's CASA ratio increased to 30% in 2008 from 25% in 2007.29% increase in total income to Rs.700+ branches (as on 31 March 2010) and about 4.ICICI Bank (formerly Industrial Credit and Investment Corporation of India) is a major banking and financial services¶ organization in India. ICICI Bank's shares are listed on the stock exchanges at Kolkata and Vadodara. South Africa. life and non-life insurance.712. the United Arab Emirates and USA.31 crore in Q2 September 2008 over Q2 September 2007. Indonesia. an advisory branch in Dubai.014. Malaysia. (These data are dynamic. offshore banking units in Bahrain and Singapore. It is the 4th largest bank in India and the largest private sector bank in India by market capitalization. ICICI Bank now has wholly-owned subsidiaries.21 crore on a 1.5 ICICI Bank 39 . ICICI reported a 1. China. its ADRs trade on the New York Stock Exchange (NYSE). branches in Belgium. Hong Kong and Sri Lanka. 1. Figure 2. The bank also has a network of 1. The Bank is expanding in overseas markets and has the largest international balance sheet among Indian banks. including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada. Mumbai and the National Stock Exchange of India Limited.) ICICI Bank is also the largest issuer of credit cards in India. and representative offices in Bangladesh.721 ATMs in India and presence in 19 countries. venture capital and asset management. branches and representatives offices in 19 countries.

2.3 Data Analysis 40 .

39% 15.2.6 CAR 41 . Particular HDFC SBI AXIS IDBI ICICI 2005-06 2006-07 2007-08 2008-09 2009-10 11.88% 11. HDFC Bank¶s total Capital Adequacy stood at 15. CAR of HDFC bank is below the ratio of ICICI bank.95% 13.97% t.97% 15.69% 13. Higher the ratio the banks are in a comfortable position to absorb losses. market risk and operational risk on an ongoing basis.57% 15.08% 14.26% as of March 31.69% 11. as against 8 percent prescribed in Basel Documents. But IDBI should reconsider their business as its CAR is falling YOY.25% 13.57% 13. HDFC CAR is gradually increased over the last 5 year and the capital adequacy ratio of Axis bank is the increasing by every 2 year. 2010.41% Table 2.35% 13.80% 11.73% 11.3.10% 12.40% 11.47% 13. So ICICI and HDFC are the strong one to absorb their losses.1 Capital Adequacy Ratio Reserve Bank of India prescribes Banks to maintain a minimum Capital to risk weighted Assets Ratio (CRAR) of 9 percent with regard to credit risk.73% 11.60% 13.31% 19.1 CAR Figure 2.80% 13. SBI has maintained its CAR around in the range of 11 % to 14 %.40% 13.10% 14.34% 11.53% 17. Capital adequacy ratio of the ICICI Bank was well above the industry average of 13.

06% 39.78% 14.45% 7.90% 83. Particular HDFC SBI AXIS IDBI ICICI 2005-06 27.49% 2006-07 36.70% 34. a share buyback).85% 33.41% Table 2.84% 2007-08 46. Otherwise. A money losing business will eventually go bankrupt.2 Earning Per Share To calculate earning per share ratio.3.30% 86.29% 23. Earnings per share allow us to compare different companies¶ power to make money. When we do our analysis. simply divide the company¶s net income by the number of shares outstanding during the same period.73% 17. It is also a major component of another important metric.20% 126.39% 2008-09 52.90% 143.2 EPS Figure 2.15% 10.60% 144.7 EPS 42 .2.61% 11. the company is not growing and thus should be considered only if you are confident that it can at least sustain its income. price per earnings ratio (P/E).23% 36. as the viability of any business depends on the income it can generate.62% 32. the higher each share should be worth.50% 8. a weighted average of the quantity of shares is used. Importance of EPS The significance of EPS is obvious.37% 65. we should look for a positive trend of EPS in order to make sure that the company is finding more ways to make more money.76% 2009-10 67. If the number of shares out in the market has changed during that period (ex. so the only way for long term survival is to make money.77% 50. EPS is often considered the single most important metric to determine a company¶s profitability. The higher the earnings per share with all else equal.76% 32.

3.72 13. Net Profit Margin = Net Income ÷ Net Sales.29 9.09 13.45 9. If. It can be interpreted as the amount of money the company gets to keep for every dollar of revenue.61 6.93 13.3 Net Profit Margin Net Profit margin is a key method of measuring profitability.42 18.09 2009-10 18. If A and B are in the same industry and.66 Figure 2. Profit margins can be useful metrics. however.38 12.75 7.57 11. Suppose A is in an industry where profit margins are typically less than 10%.75 15. Suppose we have Company A from above (15% profit margins) and Company B (with 20% profit margins).5 Table 2.23 12.3 16. Particular HDFC SBI AXIS IDBI ICICI 2005-06 19.43 2006-07 16. and B is in an industry where margins are typically greater than 25%.53 2007-08 15.46 12. then B may be a more intelligent investment.79 10.2.75 15.8 NPM 43 . then A is probably a higher quality candidate. then the differences in profit margins may not be so insightful.91 21.3 NPM 2008-09 13. companies A and B are not in the same space.31 16. but typically require some specific circumstances to really have significance. are competitors. indeed.75 14. That is.5 14.

12% Table 2.88% 1. reason is the SBI has highest assets in Indian bank industry that¶s why its ROA is low as compared to AXIS bank and HDFC bank.04% 1.45% 0.4 Return on Assets Where asset turnover tells an investor the total sales for each $1 of assets. The return on assets figure is also a sure-fire way to gauge the asset intensity of a business. Thus.98% 1.3.42% 1. Particular HDFC SBI AXIS IDBI ICICI 2005-06 1.53% 1.67% 1.66% 1. SBI¶s ROA is slightly low as compared to HDFC.42% 1.98% 2009-10 1.62% 0.21% 2006-07 1. IDBI is out performed in ROA but ICICI¶s ROA is quite enough to attract investors.9 ROA 44 .39% 0.24% 0.44% 0.07% 0.11% 0. the return on assets and return on equity figures will be the same. it is the most stringent and excessive test of return to shareholders.01% 1.13% Figure 2.4 ROA 2008-09 1.39% 0. HDFC has shown remarkable ROA over 5 years but AXIS bank will attract more eyes as its ROA increases for last 5 year. If a company has no debt. ROA measures a company¶s earnings in relation to all of the resources it had at its disposal (the shareholders¶ capital plus short and long-term borrowed funds). tells an investor how much profit a company generated for each $1 in assets.66% 1. or ROA for short.2.04% 2007-08 1. return on assets.92% 1.67% 0.

89 100.10 CDR 45 .28 77. This would prompt investors to demand higher returns on debt instruments.13 91. the Indian government is the largest borrower in the domestic credit market.59 2006-07 66.79 62. Banks. the higher the loan-assets created from deposits. it needs to raise money to meet its expenditure. The higher the ratio. ``too much money will chase too few goods'' in the economy resulting in higher inflation levels. 40 crores to invest in G-secs.44 75.28 90. Consider Bank X which has deposits worth Rs.12 83.96 71. Now.3. That means Bank X has used deposits worth Rs.64 74. 100 crores and a credit-deposit ratio of 60 per cent. lend to the government by investing in these Gsecs. what will the government do? After all.83 Table 2. thus.44 59.51 65.97 68. 60 crores to create loan-assets.08 73. If the money so released is large. 40 crores is available for other investments.04 Figure 2.2.94 124.44 2009-10 72.11 52.87 86. If more banks like X have lesser money to invest in G-Secs. Particular HDFC SBI AXIS IDBI ICICI 2005-06 65. And Bank X has only Rs.5 CDR 2007-08 65.85 166. Only Rs. The government borrows by issuing securities (G-secs) through auctions held by the RBI.79 87.79 238.5 Credit Deposit Ratio It is the proportion of loan-assets created by banks from the deposits received.99 2008-09 66.35 84.

SBI maintained its GNPA to 3% which is very good sign of performances as SBI is the largest lender in INDIA.43% 3.32% 2009-10 1. ICICI has the highest GNPA in banking industry and rising YOY.2. Particular HDFC SBI AXIS IDBI ICICI 2007-08 1.30% 3.87% 3.13% Figure 2.13% 1.05% 1.04% 0.72% 1. doubtful.96% 1. and loss assets. Gross NPA reflects the quality of the loans made by banks.53% 1. It consists of all the non standard assets like as substandard.30% Table 2. HDFC¶s GNPA is quite good as it is low with compared to ICICI and SBI but in 2008-09 GNPA rises.84% 0.6 GNPA 2008-09 1. The reason may be economic crises. AXIS bank has lowest GNPA which shown its management ability.3.6 Gross Non performing Assets Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date.98% 2.38% 4.11: Gross NPA 46 .

bank balance sheets contain a huge amount of NPAs and the process of recovery and write off of loans is very time consuming. Particular HDFC SBI AXIS IDBI ICICI 2007-08 0.50% 1.72% 0.92% 2.12 Net NPA 47 .50% 1. SBI has to keep NNPA below.3. That is why the difference between gross and net NPA is quite high.02% 2.7 Net NPA 2009-10 0. Net NPA shows the actual burden of banks.12% Figure 2. are quite significant.60% 1.12% 2008-09 0.78% 0.35% 0.09% Table 2.2. It can be calculated by following: •   Net NPAs ”‘••   AXIS Bank has least Net NPA and ICICI has highest NNPA among group. the provisions the banks have to make against the NPAs according to the central bank guidelines.36% 1.76% 0.36% 1. Since in India. IDBI has successful to control NNPA YOY. HDFC shown its management quality as it maintained its NNPA YOY.7 Net Non Performing Assets Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs.30% 1.

2.4 Findings & Recommendations 48 .

IDBI should reconsider their business tactics. SBI has rise in NNPA over the GNPA.1 Findings  Capital Adequacy: HDFC BANK has shown best performance in CAR as it¶s gradually rising YOY and IDBI¶s decreasing YOY. IDBI has least EPS.  Credit Deposit Ratio: HDFC maintains its CDR and tops the group.  Net Profit Margin: AXIS Bank has highest NPM in 2009-10 and rising YOY.2.  Earnings Per Share: SBI¶s EPS is highest among group. IDBI¶s NPM is decreasing YOY.4. Investors will choice SBI over all banks and IDBI at last.  Return on Assets: HDFC tops the group and IDBI again at last but this tie IDBI shown consistent performance as compared to ICICI having higher ROA.  Gross NPA: AXIS bank has least GNPA and ICICI has highest among peers.  Net NPA: AXIS Bank again performed better than others and ICICI has maintained its position. 49 . IDBI again on worst side but good thing is that it¶s decreasing YOY.

and proper follow up to ensure that banks are above the risk. system.  The banks should find more avenues to hedge risks as the market is very sensitive to risk of any type.  Have good appraisal skills.  The system is getting internationally standardized with the coming of BASELL II accords so the Indian banks should strengthen internal processes so as to cope with the standards.2 Recommendations  The banks should adapt themselves quickly to the changing norms. 50 .  The banks should maintain a 0% NPA by always lending and investing or creating quality assets which earn returns by way of interest and profits.4.2.

Challenges and Opportunities exist for both the public sector as well as the private sector banks. their nature however differs. self-correcting and self-adjusting entity. private sector banks are busy consolidating through mergers and acquisitions (the sector has been recently opened up for foreign investments).can survive unless it continuously strives to transform its organization into a self-governing. They lack behind in providing facilities like loans and other accounts. we have identified 3 areas of challenges separately for private and public sector banks. In case of Private sector banks customers are not aware of the facts and hidden costs in view. no bank -. as there are various products and facilities provided by the banks. For banks to grapple with these problems and manage the future.  The Credit Deposit Ratio of Private sector banks is better compared to PSB¶s  The Capital Adequacy Ratio of PSB¶s is satisfactory compared to that of Private Banks  The Net Profit of PSB¶s is better than Private Sector 51 . PSB¶s need to improve in services like ATMs. While public sector banks are in the process of restructuring. From the 11 parameters. Credit and Debit cards. The charges that are been taken are also too high.Conclusion In any banking system. These branches are not interlinked with each other and working hours are less. structural and institutional rigidities need to be eased in two critical areas: comprehensive legal support for recovery of bad debts and a fundamental change in the pattern of governance for the PSBs.public or private -.

com  www.rbi. Pearson Education Pvt. Indian Financial System.idbi.hdfcbank.Bibliography  Publications.com  www.com  www.rbi. Ltd.in/rdocs/Publications/PDFs/04CPT081110.bseindia.com 52 .sify.business.Operations and Performance of Commercial Banks: www.com  www.com  www. Trends and Progress in India.com  www.org. Pathak.com  www.statebankofindia.org.icicibank.pdf  Bharati V.scribd.axisbank.  www.in http://rbidocs.

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