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Financial Performance of Bank: A Study on IDBI Bank Introduction

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 International Research Journal of Management
Science & Technology
ISSN 2250 – 1959(0nline)
2348 – 9367 (Print)
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Shri Param Hans Education &

Research Foundation Trust

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IRJMST Vol 12 Issue 10 [Year 2021] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

Financial Performance of Bank: A Study on IDBI Bank

Shaffali Agarwal
shaffaliagarwal11@gmail.com
Assistant Professor
IFTM University

Prof Nisha Agarwal

dr.nishaagarwal123@gmail.com
Director, School of Business Management
IFTM University
Abstract
IDBI Bank was developed for the industrial development, as a vast history bank is now a private
bank and 51% shares now acquired by LIC. In 2019, the bank was announced as private sector bank
for regulatory purpose. In this paper, the researcher tries to find out the trend of some parameters like
ROA, ROE, CAR, Borrowings, Gross NPAs and categorisation of assets like standard, doubtful and
loss assets. All the parameters are analysed from 2016-2021 i.e. 6 years’ period. Bank was not in the
strong position till 2020 might be get effected due to Covid 19, But now bank is in good position and
recovered itself from the losses bore earlier, so in this paper researcher has analysed the selected
parameters from 2016 to 2021.
Key word: IDBI Bank, Private, Financial Performance, NPAs
Introduction:
Industrial Development bank of India was developed by Industrial Development Bank Act, 1964 as a
development financial institution (DIF) for 40 years till the year 2004 when it was transformed into a
bank, as the need for commercial prudence. In 2006, the United Western Bank ltd, a Satara based
private sector Bank was amalgamated with IDBI ltd. In 2008, a name of IDBI ltd has changed with
IDBI Bank ltd.
In 2019, the IDBI Bank ltd was announced as private sector bank for regulatory purposes by RBI and
Life Insurance Corporation acquired its 51% share of its total paid up equity share capital of the
bank. [Press Release: 2018-2019/2194 Dated March 14, 2019]
Board of Directors: Mr. M.K Kumar- Chairman and its team or board of directors of IDBI Bank,
these are: Mr. Rakesh Sharma, Mr Samuel Joseph Jeberaj, Mr. Suresh Khatnahar, Ms Meera Swarup,
Mr. Anshuman Sharma, Mr. Rajesh Khandwal, Mr. Gyan Prakash Joshi, Mr. B.B. joshi, Mr.
Samaresh Parida, Mr. N Jambhunathan and Mr. Deepak Sindhal.
Development Bank: Development Bank have been set up for industrial infrastructural growth of the
country. They provide funds and financial assistance to both public and private sector banks.
Objectives of Development Banks: The main objectives of development banks are as follows:
1. To help in Industrial and backward areas growth
2. To Generate employment opportunity
3. To generate export
4. To help in self-employment projects
There are two types of need, which one can demand for these are short term and long term, short
term may be resolved and fulfilled by ingenuous banks and money lenders but for long term they

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demand higher interest rate, so development banks took place to fulfil these kinds of requirements.
Development banks are as follows:
1. Industrial Finance Corporation of India (IFCI), 1948
2. Industrial Credit and Investment Corporation of India (ICICI), 1955
3. Industrial Development of Bank of India (IDBI), 1964
4. State Finance Corporation (SFC), 1951
5. Small Industries Development Bank of India (SIDBI), 1990
6. Export Import Bank (EXIM)
7. Small Industries Development Corporation (SIDCO)
8. National Bank for Agriculture and Rural Development (NABARD).
In addition to these institutions, there are also institutions such as Life Insurance Corporation of
India, General Insurance Corporation of India, National Housing Bank, Unit Trust of India, etc.,
which are providing investment funds.
Objectives of the study
1. To know the profitability of IDBI bank during the selected period
2. To know the trend of return on equity of IDBI bank during the selected period
3. To know the relation between borrowings and Gross NPAs of the IDBI bank during the selected
period
4. To know the capacity of bank to deal with the losses
5. To know the trend of categorisation of assets.
Research Methodology
I. Research Design: This study is to examine and analyse the profitability and returns of the
IDBI Bank during 2016-2021.
II. Nature of the study: The Descriptive study has been used here, for the existing facts trying to
find new insights into it.
III. Scope of the study: The scope of the study is aimed at the financial aspects only. The study is
mainly focuses on the role of IDBI.
IV. Data collected: Data were collected from the secondary source, these were collected from
IDBI financial report, newspaper, journals and internet.
V. Statistical Tools and Techniques: In this study the collected data was analysed through tools
of excel, t-test and Annova.
VI. Period of the study: The period of the present study is taken to be for 6 years (2016-2021).
Analysis & Interpretation:
Return on Assets Ratio
Year ROA
2021 0.45
2020 -4.29
2019 -4.71
2018 -2.35
2017 -1.42
2016 -0.97
Table1: ROA year wise

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Return on Asset, which tells us the return on the invested capital. Higher ROA is better as, shows the
true picture of returns and tells the customer about the company’s earning capacity. In the above
table of IDBI bank showed ROA from 2016-2021, All the figures from 2016-2020 showing negative
means the banks is not having good earning capacity. But in 2021, the bank has showed a positive
return, so bank is improving in the year 2021.
Return on Equity Ratio
Year ROE
2021 3.69
2020 -46.82
2019 -48.94
2018 -50.99
2017 -30.08
2016 -16.57
Table 2: IDBI ROE Year wise

Return on equity, which tells the earning capacity of the bank towards the invested capital by its
shareholders. Again, in 2016-21 the figure was showing in negative figure which means banks not in
the position to earn from the invested capital by shareholders. In the year 2021, the banks are earning
positive return.
Relationship between Borrowings & Gross NPAs
Year Borrowings Gross NPAs
2021 15908.05 36211.95
2020 36748.86 47272.37
2019 45287.72 50027.94
2018 63185.53 55588.25
2017 56363.98 44752.59
2016 69573.94 24875.07
Table 3: IDBI Borrowings & Gross NPAs
The relation between Borrowings and Gross NPAs, as shown in the above table 2016-2021, the trend
of borrowings has showed a downward trend from 2016 to 2021 and gross NPAs has showed a
mixed trend like highest gross NPAs is in the year 2018 and lowest in 2016. If we talk about higher
borrowings leads to higher gross NPAs, but the result does not accept the fact that higher borrowings
leads to higher NPAs.
Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
Column 1 6 287068.1 47844.68 3.86E+08
Column 2 6 258728.2 43121.36 1.21E+08

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ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 66929208 1 66929208 0.264191 0.618422 4.964603
Within Groups 2.53E+09 10 2.53E+08

Total 2.6E+09 11

As per the result, p value > the level of significance i.e. .61>.05, which means the two variables (Gross NPAs
and Borrowings) are not significant.
Capital Adequacy Ratio
Year CAR
2021 15.6
2020 13
2019 12
2018 10
2017 11
2016 12
Table 4: Capital Adequacy Ratio
CAR helps to know the financial stability and how much capital one is having, higher the CAR
higher will be the risk and chances of losses. As per the table 4 has shown the CAR from 2016-2020.
Highest CAR is in 2021.
Asset Classification of IDBI Bank
Amount Rs.in million

IDBI Asset Classification (December 31, 2020)

Standard Assets 2495.5
Doubtful Assets 1 31377
Doubtful Assets 2 123972.7
Doubtful Assets 3 75883.9
Loss Assets 141864.8
Total 375593.9
Table 5: Asset Classification of IDBI Bank
Asset classification has shown in 5 categories, Standard Assets, Doubtful Assets 1, Doubtful Assets
2, Doubtful Assets 3 and Loss Assets on December 31, 2020.
Findings of the Study
As per the data collected and data analysed, these are the following findings:
1. Bank was earning losses from 2016-2020 further, start earning profit on ROA from 2021.
2. Bank was earning losses from 2016-2020 further, start earning profit on ROE from 2021.
3. Borrowing from the bank is in upward trend from 2016-2021.
4. The borrowing from bank does not affect the gross NPAs of the bank.
5. As per CAR, Bank is at high risk at 2021.
6. The total loss on NPAs of the bank is Rs. 141864.8 million in 2020.

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IRJMST Vol 12 Issue 10 [Year 2021] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

Conclusion: Almost after four years’ bank was in PCA framework, but as Bank earn positive
figure in ROA and ROE in 2021, it recovered itself from the losses and withdrawn itself from PCA
framework. As per RBI notification, Bank has fulfilled all the parameters of PCA framework. As a
progression of work bank will definitely achieve its desired goals.
References
1. Dr. O.P. Gupta, Sandeep Vyas, ‘A Financial Analysis of IDBI Bank’ 2014, IOSR Journal of
Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 5,
Issue 6. Ver. II (Nov.-Dec. 2014), PP 01-05
2. Dr. Partap Singh Chahal, ‘Application of Financial Analysis in evaluation of financial
position of IDBI’ 2017, IAETSD JOURNAL FOR ADVANCED RESEARCH IN APPLIED
SCIENCES.
3. Dr. Suman Kalyan Chaudhury, Prof. D.P. Mishra, Mr. Priyabrata Mohanty, ‘FINANCIAL
APPRAISAL OF THE IDBI BANK: EMPIRICAL EVIDENCE FROM IDBI CAPITAL’,
International Journal of Management and Social Science Research Review, Vol.1, Issue.2,
Aug – 2014.
4. K.P. Venugopala Rao, Farha Ibrahim, ‘Financial Performance Analysis of Banks – A Study
of IDBI Bank’ 2017, International Journal of Research in IT and Management (IJRIM) Vol.
7, Issue 1, January - 2017, pp. 64~72
5. Professor (Dr.) N.C. Jain, Sanjay Payasi and Prashant Dubey, ‘A study on the Environmental
Factors Responsible for IDBI Bank's Performance’ 2011, International Journal on Emerging
Technologies
6. https://www.business-standard.com/article/finance/idbi-bank-takes-prompt-corrective-action-
all-eyes-now-on-q3-results-121012101636_1.html
7. https://www.newindianexpress.com/business/2021/mar/11/idbi-bank-sheds-prompt-
corrective-action-tag-but-conditions-apply-2275076.html
8. https://www.idbibank.in/idbi-bank-about-us.aspx#our-journey
9. https://accountlearning.com/development-banks-meaning-objectives-commercial-vs-
development-banks/

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