A COMPARATIVE ANALYSES OF FINANCIAL STATEMENT OF A PUBLIC AND

PRIVATE BANK

A Project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce

Under the Faculty of Commerce

By

MISS. MONIKA ASHOK GAWAI

(Roll no. 34)

Under the Guidance of

Prof. Manya Hardwani

Kalyan wholesale merchant’ s

Laxman Devram Sonawane College
Opp. Fire Station, Near Durgadi Killa, Bhiwandi - Murbad Road,
Wadeghar, Kalyan (W) - 421 301,

December -2019
 Laxman Devram Sonawane College
Opp. Fire Station, Near Durgadi Killa, Bhiwandi - Murbad Road,

Wadeghar, Kalyan (W) - 421 301

Certificate
This is to certify that MISS. MONIKA ASHOK GAWAI, (Roll no 34)has worked and duly
completed her Project Work for the degree of Master in Commerce under the Faculty of
Commerce in the subject of Advanced Accountancy and her project is entitled,

A COMPARATIVE ANALYSES OF FINANCIAL STATEMENT OF A PUBLIC AND PRIVATE BANK

under my supervision. I further certify that the entire work has been done by the learner under
my guidance and that no part of it has been submitted previously for any degree of any
University.

It is his own work and facts reported by his personal findings and investigations.

Name and signature Name & Signature

Internal Guide External Examiner

Date of submission:
 Declaration by learner
I the undersigned MONIKA ASHOK GAWAI(Roll No.34)here by, declare that the work embodied in
this project work titled “A COMPARATIVE ANALYSIS OF FINANCIAL STATEMENT OF A PUBLIC AND
PRIVATE BANK , forms my own contribution to the research work carried out under the guidance
of Prof. Manya Hardwani is a result of my own research work and has not been previously
submitted to any other University for any other Degree to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

MONIKA GAWAI

Name and signature of the learner

Certified by

Prof. Manya Hardwani

Name and signature of the Guiding Teacher

 Acknowledgment
To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Prof. Annie Antonyfor providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator Prof. Kesar Lalchandani, for
her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Prof. Manya Hardwani whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.
 INDEX

CHAPTER TITLE OF THE CHAPTER PAGE

NO NO
1. INTODUCTION
07
1.1 Introduction of bank
1.2 History of Indian Banking System 13
1.3 Bank profile 19
1.4 Definition/Meaning of Bank
20
1.5 Characteristics of Bank

2. RESEARCH METHODOLOGY
2.1 Objective of study 2
23
2.2 Scope of study
23
2.3 Limitation of study
24
2.4 Significance of Study
25
2.5 Nature of Data 25
2.6 Tools and Techniques 25
2.7 Correlation 25
2.8 Period of study 25

3. LITERATURE REVIEW
3.1 Introduction of literature review 26
27
3.2 Review of literature

4. DATA ANALYSIS AND INTERPRETATION

4.1 Comparison of previous Ratios
figure with subsequent year 33

4.2 Analysis of Balance Sheet and Profit and Loss 74

account of subsequent year
 5. CONCLUSION AND SUGGESTIONS 80

LIST OF TABLE

SR NO TABLE NAME PAGE NO

01 Data Analysis And Interpretation 30

02 Debt - Equity Ratio 34

03 Advance To Aseets Ratio 37

04 G- Securities To Investment Ratio 39

05 Gross Npa To Net Advance Ratio 43

06 Net Npa To Net Advance Ratio 45

07 Total Investment to total asset Ratio 47

08 Net npa to total assets Ratio 50

09 Credit deposit Ratio 53

10 Business Per Employees Ratio 54

11 Profit per Branch Ratio 56

12 Business Per Branch Ratio 58

13 Gross Profit Per Employees Ratio 60

14 Net Interest Margin To Total Assets Ratio 63

15 Liquid Assets To Total Assets Ratio 66

16 Return On Net Worth Ratio 70

17 Return on Net Worth Ratio Financial Comparative Analysis 74

18 Profit And Loss Of State Bank Of India For the Year Ending On 76
March 2007-11
19 Balance sheet of HDFC For the Year Ending On March 2007-11 77

20 Profit And Loss Of HDFC For the Year Ending On March 2007-11 78
 CHAPTER 1
 INTRODUCTION

1.1 INTODUCTION OF BANK

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.
A banking system also referred as a system provided by the bank which offers cash
management services for customers, reporting the transactions of their accounts and
portfolios, throughout the day. The banking system in India, should not only be hassle
free but it should be able to meet the new challenges posed by the technology and any
other external and internal factors. For the past three decades, India‘s banking system
has several outstanding achievements to its credit. The Banks are the main
participants of the financial system in India.
The Banking sector offers several facilities and opportunities to their customers. All
the banks safeguards the money and valuables and provide loans, credit, and payment
services, such as checking accounts, money orders, and cashier‘s cheques. The banks
also offer investment and insurance products. As a variety of models for cooperation
and integration among finance industries have emerged, some of the traditional
distinctions between banks, insurance companies, and securities firms have
diminished. In spite of these changes, banks continue to maintain and perform their
primary role accepting deposits and lending funds from these deposits.
The improvement financial system is the key to the economic development of a
nation. The Banking sector is one of the vital components of the financial system. The
sector provides financial services not only to the industry but also to the agriculture
and household sectors. It also plays important role in formation of capital in the
economy. India Banking sector has a great contribution in the economic growth of the
nation. Reserve Bank of India (RBI) is the apex body of the Indian Banking sector. It
ensures the stability in the monetary system of the country. Since independence, RBI
has initiated several measures to improve more access to financial services through
financial education, awareness and technological up gradations in an affordable
manner. The performance of the banking sector is supposed to be a crucial economic
active of Indian economy. So, the reforms in banking sector are intended to make the
banks more efficient. However, the Banking sector is facing alarming challenges like
rising in competition, level of Non-Performing Assets and weakening asset quality.
These may have a negative impact on the economy of the nation.
This study deals with the analysis of the financial position and performance of public
sector bank (SBI) and private sector bank (HDFC) in India.
The article has been divided into eight sections. Section II covers literature review.
Research gap has been mentioned in section III. Section IV and V contain objective
and materials & methods of the study. Financial performance of SBI and HFDC bank
has been highlighted in the section VI. Analysis and discussion is made in section VII.
Finally, section VIII concludes the study along with findings.

A) Public Sector Bank:

Public sector in the banking industry emerged with the nationalization of Imperial
Bank of India (1921) and creating the State Bank of India (1955) as a part of
integrated scheme of rural credit proposed by the All India Rural Credit Survey
Commsittee (1951). The Bank is unique in several respects and it enjoys a position of
permanence as the agent of RBI wherever RBI has no branches.
It is the single largest bank in the country with large international presence, with a
network of 48 overseas offices spread over 28 countries covering all the time zones.
One of the objectives of establishing the SBI was to provide extensive banking
facilities in rural areas by opening as a first step 400 branches within a period of 5
years from July 1, 1955.
In 1959, eight banking companies functioning in formerly princely states were
acquired by the SBI, which later came to be known as Associate Banks. Later, two of
the subsidiary banks', viz., the State Bank of Bikaner and Jaipur were merged to form
the State Bank of Bikaner and Jaipur, thus form eight banks in the SBI group then
making banks in the state bank group.

B) Private sector banks:

The private-sector banks in India represent part of the Indian banking sector that is made
up of both private and public sector banks. The "private-sector banks" are banks where
greater parts of stake or equity are held by the private shareholders and not by
government.
Banking in India has been dominated by public sector banks since the 1969 when all
major banks were nationalised by the Indian government.
However since liberlisation in government banking policy in 1990s, old and new private
sector banks have re-emerged. They have grown faster and bigger over the two decades
since liberalisation using the latest technology, providing contemporary innovations and
monetary tools and techniques.
The private sector banks are split into two groups by financial regulators in India, old and
new. The old private sector banks existed prior to the nationalisation in 1969 and kept
their independence because they were either too small or specialist to be included in
nationalisation.
The new private sector banks are those that have gained their banking license since the
liberalisation in the 1990s.
 1.2 HISTORY OF INDIAN BANKING SYSYTEM

The Banking system of the country is the base of the economy and economic
development of the country. It is the most leading part of the financial sector of the
country as it is responsible for more than 70 % of the funds flowing through the
financial sector in the country.

The banking system in the country has three primary functions:

 Operations of Payment system

 Depositor and protector of people‘s savings
 Issue loans to individual and Companies

The Banking system in India can be categorised in two phases

 Pre-Independence Phase (1786-1947)

 Post- Independence Phase (1947 to till date)
The post-Independence period may further be divided into three phases-

 Pre-nationalisation Period (1947 to 1969)

 Post nationalisation Period (1969 to 1991)
 Liberalisation Period (1991 to till date)
  Pre-Independence Phase (1786-1947)

The origin of the Banking system in India can be traced with the foundation of Bank
of Calcutta in 1786. The Banking in India originates in the last decade in the
18th century with the foundation of the English Agency houses in Bombay and
Calcutta (now Kolkata).
 Three presidency banks Bank of Bengal, Bank of Bombay and Bank of
Madras established in the 19th Century under the charter of the British East India
Company.
 In 1935, the presidency banks merge together and formed a new bank named Imperial
Bank of India.
 The Imperial Bank of India subsequently named the State Bank of India.
 The first Indian-owned Allahabad Bank was set up in 1865 in Allahabad.
 In 1895, the Punjab National Bank was established in 1895.
 The Bank of India founded in 1906 in Mumbai.
 Many more commercial banks such as Canara Bank, Indian Bank, Central Bank of
India, Bank of Baroda and Bank of Mysore were established between 1906 and 1913
under Indian ownership.
 The central Bank of India, RBI establish in 1935 on the recommendation of Hilton-
Young Commission.
At that time, the Banking system was only covered the urban population and
need of rural and agriculture sector was totally neglected.

Post- Independence Phase (1947 to till)

 At the time independence, the entire Banking sector was under private ownership. The
rural population of the country had to dependent on small money lenders for their
requirements. To solve these issues and better development of the economy the
Government t of India nationalised the Reserve Bank of India in 1949.
 In 1955 the Imperial Bank of India was nationalised and named the State Bank of
India.
 The Banking Regulation Act enacted in 1949.

Nationalisation Period (1969 to 1991)

 In 1969, Government of India nationalised 14 major banks whose national deposits

were more than 50 crores.
1. Allahabad Bank
2. Bank of India
3. Punjab National Bank
4. Bank of Baroda
5. Bank of Maharashtra
6. Central Bank of India
7. Canara Bank
8. Dena Bank
9. Indian Overseas Bank
10. Indian Bank
11. United Bank
12. Syndicate Bank
13. Union Bank of India
14. UCO Bank
The Indian Banking system immensely developed after nationalisation but the rural
and weaker section of the society was still not covered under the system.

To solve these issues, the Narasimham Committee in 1974 recommended the

establishment of Regional Rural Banks (RRB). On 2nd October 1975, RRBs were
established with an objective to extend the amount of credit to the rural section of the
society.
 Six more banks further nationalised in the year 1980. With the second wave of
nationalisation, the target of priority sector lending was also raised to 40%.
1. Andhra Bank
2. Corporation Bank
3. New Bank of India
4. Oriental Bank of Commerce
5. Punjab & Sindh Bank
6. Vijaya Bank

 Liberalisation Phase (1990 to till)

In order to improve financial stability and profitability of Public Sector Banks, the
Government of India set up a committee under the chairmanship of Shri.
M. Narasimham. The committee recommended several measures to reform banking
system in the country.
 The major thrust of the recommendations was to make banks competitive and strong
and conducive to the stability of the financial system.
 The committee suggested for no more nationalisation of banks.
 Foreign banks would be allowed to open offices in India either as branches or as
subsidiaries.
 In order to make banks more competitive, the committee suggested that public sector
banks and private sector banks should be treated equally by the Government and RBI.
 It was emphasised that banks should be encouraged to abandon the conservative and
traditional system of banking and adopt progressive function such as merchant
banking and underwriting, retail banking, etc.
 Now, foreign banks and Indian banks permitted to set up joint ventures in these and
other newer forms of financial services.
 10 Privates players got a license from the RBI to entry in the Banking sector. These
were Global Trust Bank, ICICI Bank, HDFC Bank, Axis Bank, Bank of
Punjab, IndusInd Bank, Centurion Bank, IDBI Bank, Times Bank and Development
Credit Bank.
The Government of India accepted all the major recommendation of the committee.

Recent Development in Indian Banking Sector:

 Kotak Mahindra Bank and Yes Bank got a license from RBI to entry in the system in
the year 2003 and 2004.
 In 2014, RBI grants in-principle approval to IDFC and Bandhan Financial
Services to set up banks.
Today, Indian Banking industry is one of the most growing flourishing
industries. Banking systems of any country need to be effective, efficient as it plays
the active in the economic development of the country.
 1.3 BANK PROFILE

A) HDFC BANK LTD. (HDFC BANK)

HDFC Bank Ltd is one of India's premier banks. Headquartered in Mumbai HDFC
Bank is a new generation private sector bank providing a wide range of banking
services covering commercial and investment banking on the wholesale side and
transactional/branch banking on the retail side. As of 30 September 2017 the bank's
distribution network was at 4729 branches and 12259 ATMs across 2669 cities and
towns. HDFC Bank also has one overseas wholesale banking branch in Bahrain a
branch in Hong Kong and two representative offices in UAE and Kenya. The Bank
has two subsidiary companies namely HDFC Securities Ltd and HDB Financial
Services Ltd. The Bank has three primary business segments namely banking
wholesale banking and treasury. The retail banking segment serves retail customers
through a branch network and other delivery channels. This segment raises deposits
from customers and makes loans and provides other services with the help of
specialist product groups to such customers. The wholesale banking segment provides
loans non-fund facilities and transaction services to corporate public sector units
government bodies financial institutions and medium-scale enterprises. The treasury
segment includes net interest earnings on investments portfolio of the Bank. The
Bank's ATM network can be accessed by all domestic and international
Visa/MasterCard Visa Electron/Maestro Plus/Cirrus and American Express
Credit/Charge cardholders. The Bank's shares are listed on the Bombay Stock
Exchange Limited and The National Stock Exchange of India Ltd. The Bank's
American Depository Shares (ADS) are listed on the New York Stock Exchange
(NYSE) and the Bank's Global Depository Receipts (GDRs) are listed on
Luxembourg Stock Exchange. HDFC Bank Ltd Was incorporated on August 30 1994
by Housing Development Finance Corporation Ltd. In the year 1994 Housing
Development Finance Corporation Ltd was amongst the first to receive an 'in
principle' approval from the Reserve Bank of India to set up a bank in the private
sector as part of the RBI's liberalization of the Indian Banking Industry. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January 1995. Ramon
House Churchgate branch was inaugurated on 16 January 1995 as the first branch of
the bank. In March 1995 HDFC Bank launched Rs 50-crore initial public offer (IPO)
(5 crore equity shares at Rs 10 each at par) eliciting a record 55 times
oversubscription. HDFC Bank was listed on the Bombay Stock Exchange on 19 May
1995. The bank was listed on the National Stock Exchange on 8 November 1995.In
the year 1996 the Bank was appointed as the clearing bank by the NSCCL. In the year
1997 the launched retail investment advisory services. In the year 1998 they launched
their first retail lending product Loans against Shares. In the year 1999 the Bank
launched online real-time Net Banking. In February 2000 Times Bank Ltd owned by
Bennett Coleman & Co. / Times Group amalgamated with the Bank Ltd. This was the
first merger of two new generation private banks in India. The Bank was the first
Bank to launch an International Debit Card in association with VISA (Visa Electron).
In the year 2001 they started their Credit Card business. Also they became the first
private sector bank to be authorized by the Central Board of Direct Taxes (CBDT) as
well as the RBI to accept direct taxes. During the year the Bank made a strategic tie-
up with a Bangalore-based business solutions software developer Tally Solutions Pvt
Ltd for developing and offering products and services facilitating on-line accounting
and banking services to SMEs. On 20 July 2001 HDFC Bank's American depositary
receipt (ADR) was listed on the New York Stock Exchange under the symbol HDB.
Also they made the alliance with LIC for providing online payment of insurance
premium to the customers. During the year 2002-03 the Bank increased the number of
branches from 171 Nos to 231 Nos and the size of the Bank's ATM network expanded
from 479 Nos to 732 Nos. They also expanded their presence in the 'merchant
acquiring' business. During the year 2003-04 the Bank expanded the distribution
network with the number of branches increased from 231 Nos to 312 Nos and the size
of the Bank's ATM network increased from 732 Nos to 910 Nos. In September 2003
they entered the housing loan business through an arrangement with HDFC Ltd
whereby they sell HDFC Home Loan product. During the year 2004-05 the Bank
expanded the distribution network with the number of branches increased from 312
Nos to 467 Nos and the size of the Bank's ATM network increased from 910 Nos to
1147 Nos. During the year 2005-06 the Bank launched the 'no-frills account' a basic
savings account offering to the customer. Also the distribution network was expanded
with the number of branches increased from 467 Nos (in 211 cities) to 535 Nos (in
228 cities) and the number of ATMs from 1147 Nos to 1323 Nos. During the year
2006-07 the distribution network was expanded with the number of branches
increased from 535 Nos (in 228 cities) to 684 Nos (in 316 cities) and the number of
ATMs from 1323 Nos to 1605 Nos. They commenced direct lending to Self Help
Groups. Also they opened a dedicated branch for lending to SHGs in Thudiyalur
village (Tamil Nadu). In September 28 2005 the Bank increased their stake in HDFC
Securities Ltd from 29.5% to 55%. Consequently HDFC Securities Ltd became a
subsidiary of the Bank. During the year 2007-08 the Bank added 77 Nos new
branches take the total to 761 Nos branches. Also 372 Nos new ATMs were also
added taking the size of the ATM network from 1605 Nos to 1977 Nos. HDB
Financial Services Ltd became a subsidiary company with effect from August 31
2007. In June 2 2007 the Bank opened 19 branches in a day in Delhi and the National
Capital Region (NCR).During the year 2008-09 the Bank expanded their distribution
network from 761 branches in 327 cities to 1412 branches in 528 Indian cities. The
Bank's ATMs increased from 1977 to 3295 during the year. As per the scheme of
amalgamation Centurion Bank of Punjab Ltd was amalgamated with the Bank with
effect from May 23 2008. The appointed date for the merger was April 01 2008. The
amalgamation added significant value to HDFC Bank in terms of increased branch
network geographic reach and customer base and a bigger pool of skilled manpower.
In October 2008 the bank opened their first overseas commercial branch in Bahrain.
The branch offers the bank's suite of banking services including treasury and trade
finance products for corporate clients and wealth management products for Non-
resident Indians. During the year 2009-10 the Bank expanded their distribution
network from 1412 branches in 528 cities to 1725 branches in 779 cities. The Bank's
ATMs increased from 3295 Nos to 4232 Nos during the year. During the year 2010-
11 the Bank expanded their distribution network from 1725 branches in 779 cities to
1986 branches in 996 Indian cities. The Bank's ATMs increased from 4232 to 5471
Nos. In the year 2014 HDFC Bank lunched the missed call banking service allowing
customers to use banking services without having to visit the Bank or connect online.
On 16 June 2015 HDFC Bank launched the 10-second personal loan approval service
thereby becoming the first in the retail lending space to fully automate the process of
loan approval and disbursement. In 2016 HDFC Bank introduced loans at ATMs as
the country's first innovation to turn ATMs into Loan Dispensing Machines (LDMs)
further extending the functionality of the Bank's ATMs.

A) STATE BANK OF INDIA

The roots of the State Bank of India lie in the first decade of the 19th century when
the Bank of Calcutta later renamed the Bank of Bengal, was established on 2 June
1806. The Bank of Bengal was one of three Presidency banks, the other two being
the Bank of Bombay (incorporated on 15 April 1840) and the Bank of
Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated
as joint stock companies and were the result of royal charters. These three banks
received the exclusive right to issue paper currency till 1861 when, with the Paper
Currency Act, the right was taken over by the Government of India. The Presidency
banks amalgamated on 27 January 1921, and the re-organised banking entity took as
its name Imperial Bank of India. The Imperial Bank of India remained a joint stock
company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank
of India, which is India's central bank, acquired a controlling interest in the Imperial
Bank of India. On 1 July 1955, the Imperial Bank of India became the State Bank of
India. In 2008, the Government of India acquired the Reserve Bank of India's stake in
SBI so as to remove any conflict of interest because the RBI is the country's banking
regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This
made eight banks that had belonged to princely states into subsidiaries of SBI. This
was at the time of the first Five Year Plan, which prioritised the development of rural
India. The government integrated these banks into the State Bank of India system to
expand its rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and
State Bank of Bikaner (est.1944).
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911),
which SBI acquired in 1969, together with its 28 branches. The next year SBI
acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years
later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in
1916 in Gwalior State, under the patronage of Maharaja Madho Rao Scindia. The
bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The
new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the
Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its
affiliate, the State Bank of Travancore, already had an extensive network in Kerala.
There was, even before it actually happened, a proposal to merge all the associate
banks into SBI to create a single very large bank and streamline operations.

The first step towards unification occurred on 13 August 2008 when State Bank of
Saurashtra merged with SBI, reducing the number of associate state banks from seven
to six. On 19 June 2009, the SBI board approved the absorption of State Bank of
Indore, in which SBI held 98.3%. (Individuals who held the shares prior to its
takeover by the government held the balance of 1.7%.)
The acquisition of State Bank of Indore added 470 branches to SBI's existing network
of branches. Also, following the acquisition, SBI's total assets approached 10 trillion.
The total assets of SBI and the State Bank of Indore were 9,981,190 million as of
March 2009. The process of merging of State Bank of Indore was completed by April
2010, and the SBIndore branches started functioning as SBI branches on 26 August
2010.
On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed
Chairperson of the bank. Mrs. Bhattacharya received an extension of two years of
service to merge into SBI the five remaining associate banks.
The State Bank of India (SBI) is an Indian multinational, public sector banking
and financial services statutory body. It is a government corporation statutory body
headquartered in Mumbai, Maharashtra. SBI is ranked as 236th in the Fortune Global
500 list of the world's biggest corporations of 2019. It is the largest bank in India with
a 23% market share in assets, besides a share of one-fourth of the total loan and
deposits market.
The bank descends from the Bank of Calcutta, founded in 1806, via the Imperial Bank
of India, making it the oldest commercial bank in the Indian subcontinent. The Bank
of Madras merged into the other two "presidency banks" in British India, the Bank of
Calcutta and the Bank of Bombay, to form the Imperial Bank of India, which in turn
became the State Bank of India in 1955.The Government of India took control of the
Imperial Bank of India in 1955, with Reserve Bank of India (India's central bank)
taking a 60% stake, renaming it the State Bank of India.

1.4 DEFINATION / MEANING OF BANK

  Defination:
Oxford Dictionary defines a bank as "an establishment for custody of money, which
it pays out on customer's order.

In 1899, the United States Supreme Court (Austen) used these words to define a
bank:
"A bank is an institution, usually incorporated with power to issue its promissory
notes intended to circulate as money (known as bank notes); or to receive the money
of others on general deposit, to form a joint fund that shall be used by the institution,
for its own benefit, for one or more of the purposes of making temporary loans and
discounts; of dealing in notes, foreign and domestic bills of exchange, coin, bullion,
credits, and the remission of money; or with both these powers, and with the
privileges, in addition to these basic powers, of receiving special deposits and making
collections for the holders of negotiable paper, if the institution sees fit to engage in
such business."

 Meaning:
A bank is a financial institution licensed to receive deposits and make loans. Banks
may also provide financial services, such as wealth management, currency exchange,
and safe deposit boxes. There are two types of banks: commercial/retail banks and
investment banks. In most countries, banks are regulated by the national government
or central bank

1.5 CHARACTERSITICS OF BANK

1. Dealing in Money

Bank is a financial institution which deals with other people's money i.e. money given
by depositors.

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company means a company

which is in the business of banking.

3. Acceptance of Deposit

A bank accepts money from the people in the form of deposits which are usually
repayable on demand or after the expiry of a fixed period. It gives safety to the
deposits of its customers. It also acts as a custodian of funds of its customers.

4. Giving Advances

A bank lends out money in the form of loans to those who require it for different
purposes.

5. Payment and Withdrawal

A bank provides easy payment and withdrawal facility to its customers in the form of
cheques and drafts, It also brings bank money in circulation. This money is in the
form of cheques, drafts, etc.
6. Agency and Utility Services

A bank provides various banking facilities to its customers. They include general
utility services and agency services.

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions

Banking is an evolutionary concept. There is continuous expansion and diversification

as regards the functions, services and activities of a bank.

9. Connecting Link

A bank acts as a connecting link between borrowers and lenders of money. Banks
collect money from those who have surplus money and give the same to those who
are in need of money.

10. Banking Business

A bank's main activity should be to do business of banking which should not be

subsidiary to any other business.

CHAPTER 2
  RESEARCH METHODOLOGY

2.1 OBJECTIVE OF STUDY

The objective of the study is to analyze and compare the financial position and
performance of public sector bank (SBI) and private sector bank (HDFC) in India.For
the purpose of this study, SBI from public sector banks and HDFC bank from private
sector banks have been selected as they have the largest market capitalization at
present.

Secondary objective:

 To Study the ratios of selected bank

 To Study the financial performance of bank
 To Compare and Study the profitability of bank
 To offer the suggestions in order to improve the financial performance of both
banks selected for the purpose of the study .

 To analyze the actual result of the bank

 Explain the nature and scope of banking activities
 Enumerate the Disadvantages of banks;
 To study the Capital adequacy of select bank
.
 To study the Asset quality of select bank.

 To study the Management quality of select bank

.
 To study the Earning ability of select bank.

 To study the Liquidity of select bank.

2.2 SCOPE OF STUDY

 The scope of the study is as given below:

 Banks can improve their financial position or can

increase their income from credits with the help of
this study.

 This study can be used for comparing the

Performance of the Bank with other Bank.

 This study also gives light upon impact on

performance and profit of Banks.

2.3 LIMITATION OF STUDY

This study is subject to the following limitations:

 The study was limited to seven banks only.

 Foreign bank, regional rural bank, Schedule Co-operative Bank are not taken
for the study.

 Time and resource constrains.

 The analysis made in this study is based on the published accounting date of
the banks therefore limited number of seen data are applicable to the study

2.4 SIGNIFICACNE OF STUDY

This study is useful and important for the major aspects such as,

 Acceptance of deposit and advancing the loans is the basic function of

commercial banks. On this function, all other functions depend accordingly.
Bank operates different types of accounts for their customers.

 Banks perform an invaluable service by encouraging savings among the

people. They induce them to save for profitable investment for themselves and
for national interest. These savings help in capital formation.

 Bank transfer the savings collected from the people into investment and thus
increase the amount of effective capital, which helps the process of economic
growth.

 Importance of banks can be seen through the facility of discounting bill of

exchange. Banks discount their bill of exchange of consumers and help them
in the financial difficulties. By discounting bill of exchange, they able to get
the desire amount for investment they want.

2.5 NATURE OF DATA

The entire study is based on the audited annual reports of selected bank. Thus
the study is carried out from the collected secondary data. By applying the
management
tool such as ratio analysis, comparative CAMEL rating to know the financial health of
the bank has been examined. A clear and appropriate understanding has been
promoted
through the graphical charts and their representations.

2.6 TOOLS AND TECHNIQUES

The entire study undertaken uses the ratio analysis and comparative financial
statements. Graphical charts further support the ratio analysis and comparative
CAMEL
rating, which gives a pictorial presentation of the bank entire financial performance
for
the year taken into consideration.

2.7 Correlation

The degree of relationship between the variable under consideration is measured

through the correlation analysis and it refers to the techniques used in measuring the
looseness of the relationship between the variables.

2.8 Period of study

The period covered by the present study extent over 7 year from 2008-2009 to
2013-2014. This period has been selected mainly to study the financial performance
pattern and its impact on CAMEL rating.
 CHAPTER 3
 LITERATURE REVIEW

3.1 INNTRODUCTION OF LITERATURE REVIEW

A literature review is an evaluative report of information found in the

literature related to your selected areas of study .The review should describe,
summarize, evaluate and clarify this literature .It should give a theoretical base
for research and help you (the author) determine the nature of your research .

1. Review of Literature is one of the most important steps in the research

process.

2. It is an account of what is already known about a particular phenomenon.

3. The main purpose of literature review is to convey to the readers about the
work already done & the knowledge & ideas that have been already
established on particular topic of research.

4. Literature review is laborious task, but it is essential if the research process is

to be successful.
 3.2 REVIEW OF LITERATURE

“Comparative study of promotional studies adopted by public and private sector

banks in India” published in Asia- pacific business review, July September (2008)
by SL Gupta, arunmittal. The study concluded that public sector is more reliable that
but not so good in quality and innovativeness, a private sector bank is not so reliable
but they are better in services quality and innovation.

For this study, Researcher has reviewed various available publications of the
existing literature to get the proper information and knowledge regarding the
research topic. According to the survey and review of these literature clears that
banking is a developing concept and why certain studies conducted in context to the
performance based value added reporting to the Indian bank sector.

The researcher has studied out the works had been done under these sorts of
research. Some of these areas under

 Meyer C., (2007) Accounting plays a significant role within the concept of
generating and communicating wealth of the companies. Financial statements
still remain the most important source of externally feasible information on
banks. Regardless of their extensive use and enduring advance, there is some
concern that accounting theory and practice have not kept pace with rapid
economic changes and high technology changes.

 Wahab (2001) has analyzed the performance of the commercial banks under
reforms. He also highlighted the major issues need to be considered for further
improvement. He concluded that reforms have produced favorable effects on
performance of commercial banks in general but still there are some
distortions like low priority sector advances, low profitability etc. that needs to
be reformed again.

 Kaveri (2001) studied the non-performance assets of the various banks and
suggested various strategies to reduce the extent of NPAs. In view of the steep
rise in fresh NPA advances, credit should be strengthening. RBI should use
some new policies/strategies to prevent NPAs.

 Haslem (1968, 1969) computed balance sheet and income statement ratios for
all the member banks of the banks in a two-year study. His results indicated
that most of the ratios were significantly related to profitability, particularly
capital ratios, interest paid and received, salaries and wages. He also stated
that a guide for improved management should first emphasis expense
management, fund source management and lastly funds use management.
Wall (1985) concludes that a bank‘s asset and liability management, its
funding management and the non-interest cost controls all have a significant
effect on the profitability record.

 Molyneux (1993) found a positive relationship between staff expenses and

total profits. As he suggests high profits earned by firms in a regulated
 industry may be appropriated in the form of higher payroll expenditures.
External determinants of bank profitability are concerned with those factors
which are not influenced by specific banks decisions and policies, but by
events outside the influence of the bank. Several external determinants are
included separately in the performance examination to isolate their influence
from that of bank structure so the impact of the formers on profitability may
be more clearly discerned.

 Germon and Meek (2001). For financial reporting to be effective, accounting

information to be relevant, complete and reliable. (Hendricks, 1976) The
primary purpose of the financial statements is to provide information about a
company in order to make better decisions for users particularly the investors.

 Oyerinde D.T., (2009), Number of previous studies explored that accounting

information decreased their relevance over the period of time. In the same
time a number of researchers claim that accounting information has not lost its
relevance. It should also increase the knowledge of the users and give a
decision maker the capacity to predict future actions.

 Bernanke, (2007).The banking supervision mainly ensures that the

commercial banks operate in a safe and sound manner, and do not take the
excessive risks. It also makes sure that those banks operate in accordance with
federal banking regulations. The Fed examines the safe and sound of financial
stability in banks through the onsite bank examination with the support of the
CAMEL rating, and in complement with the off-site monitoring.

 Prashanta Athma (2000), in his Ph D research submitted at Usmania

University Hyderabad, ―Performance of Public Sector Banks – A Case Study
of State Bank of Hyderabad, made an attempt to evaluate the performance of
Public Sector Commercial Banks with special emphasis on State Bank of
Hyderabad. Statistical techniques like Ratios, Percentages, Compound Annual
rate of growth and averages are computed for the purpose of meaningful
comparison and analysis. Profits of SBH showed an increasing trend
indicating a more than proportionate increase in spread than in burden.
Finally, majority of the customers have given a very positive opinion about the
various statements relating to counter service offered by SBH.

 Singh R (2003), in his paper Profitability management in banks under

deregulate environment, IBA bulletin, No25, has analyzed profitability
management of banks under the deregulated environment with some financial
parameters of the major four bank groups i.e. public sector banks, old private
sector banks, new private sector banks and foreign banks, profitability has
declined in the deregulated environment. He emphasized to make the banking
sector competitive in the deregulated environment. They should prefer non-
interest income sources.

 The Financial Express (2004), titled ―India‘s Best Banks‖ has been doing for
several years through its annual exercise to evaluate and rate Indian banks.
With the objective of making the comparison more meaningful, Banks were
categorized into Public Sector Banks, New Private Sector Banks and Foreign
 Banks. Five major criteria were identified against which the banks were
ranked. 'These criteria are (1) Strength and soundness (ii) Growth, (iii)
Profitability, (iv) Efficiency/Productivity, and (v) Credit quality. Considering
the current banking, industrial and over-all economic scenario, pertinent
weights were assigned to each of the major criteria. In the first category of"
State-Run" or Public Sector Banks, State Bank of Patiala and Andhra Bank is
the top two. In the category of best old private sector banks, the magazine
ranks the Jammu and Kashmir Bank and Karur Vysya Bank as the first best
and second best. In the category of 'New' Private Banks, HDFC as number one
and at number two. Finally, in the category of Foreign Banks, the magazine
ranks Standard Chartered Bank and Citi Bank at the top two slots.

 Singla HK (2008), in his paper,‘ financial performance of banks in India,‘ in

ICFAI Journal of Bank Management No 7, has examined that how financial
management plays a crucial role in the growth of banking. It is concerned with
examining the profitability position of the selected sixteen banks of banker
index for a period of six years (2001-06). The study reveals that the
profitability position was reasonable during the period of study when
compared with the previous years. Strong capital position and balance sheet
place, Banks in better position to deal with and absorb the economic constant
over a period of time.

 Bodla & Verma (2006) examined the performance of SBI through CAMEL
model. Data set for the period of 2000-01 to 2004-05 were used for the
purpose of the study. With the reference to the Capital Adequacy, it concluded
that SBI has an advantage . Regarding to assets quality, earning quality and
management quality, it can be said that has an edge upon SBI. Therefore the
liquidity position of both banks was sound and did not differ much.

 Cinko & Avci (2008) noticed that globally all the banking supervisory
authorities are using CAMEL rating system for many years. In this synthesis
financial ratios were applied to calculate components of CAMEL ratings for
the period of 1996-2000. The financial ratios were also employed to anticipate
the delegation of commercial banks in 2001 to the SDIF by adopting
discriminant analysis, logistic regression and neural network models. However
the conclusion revealed that it was impossible to predict the transfer of a bank
to SDIF by mode of CAMEL ratios.

 Agarwal & Sihna (2010) have analyzed the financial performance and
thereby the sustainability of micro finance institutions (MFIs) in India by
employing the CAMEL model.

 Hays, Lurgio & Arthur (2009) have utilized CAMEL model to examine the
performance of low efficiency vs. high efficiency community banks in
conjunction with the logistical regression analysis. The analysis used data
which are based on quarterly reports by commercial banks. The discriminated
model derived from the CAMEL parameters is tested among data for 2006,
2007, 2008. Its results concluded that the model accuracy floats from
approximately 88% to 96% for both original and cross-validations data sets.
 Gupta and Kaur (2008) conducted a research on the sole aim of examining
the performance of Indian private Sector banks by using CAMEL model and
by assigning rating to the top five and bottom five banks. They rated 20 old
and 10 new private sector banks based on CAMEL framework. The study
covered financial data for the period of 5 years i.e. from 2003-07. The research
as determined by CAMEL Model revealed that HDFC was at its higher
position of all private sectors banks in India succeeded. However the Gobal
Trust Bank and the Nedungradi Banks was considered as bad management.

 Barth and Landsman (2010) discuss the role of financial reporting by banks
in the financial crisis. They discuss such financial reporting features as fair
values, asset securitisations, derivatives and loan loss provisioning. They
conclude that a lack of transparency on derivative financial instruments and
the pooling of debt resulted in problems in determining the real financial
position of a bank. Determining the real position of a bank through financial
reports is the key to reliability, which in turn affects the usefulness of the
reports in decision making.

 Chander and Chandel (2010) studied financial viability and performance of

cooperative credit institutions in Haryana for the period from 1997-98 to
2008-09 using Financial Analysis and Z-score Analysis. They used five key
financial parameters namely profitability, liquidity, solvency, efficiency and
risk. Under each of these five categories four different ratios were calculated
and analyzed. The results revealed that four District Central Cooperative
Banks, with approximately fifty branches, had not been performing well on all
financial parameters used in the study.

 Bhallabh(2002) analyzes challenges in the post banking sector reforms. With

globalization and changes in technology, financial markets, world over, have
become closely integrated. For the survival of the banks, they should adopt
new policies/ strategies according to the changing environment.

 Kumar (2006) studied the bank nationalization in India marked a paradigm

shift in the focus of banking as it was intended to shift the focus from class
banking to mass banking. Internationally also efforts are being to study causes
of financial inclusion of low income group treating it both a business
opportunity as well as a corporate social responsibility. Financial inclusion can
emerge as commercial profitable business.

 Laxman, deen and Badiger (2008) examined that Banking Industry is

undergoing paradigm shift in scope, content, structure, functions and
governance. The information and communication technology revolution is
radically perceptible changing the operational environment of the banks.

 Nair(2006) discussed the future challenges of technology in banking. The

author also point out how IT possesses a bright future in rural banking, but is
neglected as it is traditionally considered unviable in the rural segment. A
successful bank has to be nimble and agile enough to respond to the new
market paradigm and ineffectively controlling risk. Innovation will be the key
 extending the banking services to the untapped vast potential at the bottom of
the pyramid.

 Singh(2003) analyzed profitability management of banks under the

deregulated environment with some financial parameters of the managers for
bank group that is public sector banks, old private sector banks, new private
sector banks and foreign banks, profitability has declined in the deregulated
environment. He emphasized to make the banking sector competitive in the
deregulated environment. They should prefer non-interest income sources.

 Singla(2008) examines that how financial management plays a crucial role

industrialist growth of banking. It is concerned with examined the profitability
position of selected sixteen banks of banker index for a period of six years(2001-
2006) the study reveals that the profitability position was reasonable during the
period of study when compared with the previous year. Strong capital position
and balance sheet place. Banks in batter position to deal with and absorb the
economic constant over a period of time.
 CHAPTER 4
 DATA ANALYSIS AND INTERPRETATION
4.1 RATIO ANALYSIS
C: Capital adequacy
A: Asset quality
M:Management quality
E: Earning ability
L: Liquidity
 DEBT - EQUITY RATIO
 ADVANCE TO ASSETS RATIO
 G-SECURITIES TO
INVESTMENT RATIO
 GROSS NPA TO NET
ADVANCE RATIO
 NET NPA TO NET ADVANCE
RATIO
 TOTAL INVESTMENT TO
TOTAL ASSETS RATIO
 NET NPA TO TOTAL ASSETS
RATIO
 CREDIT DEPOSIT RATIO
 BUSINESS PER EMPLOYEES
RATIO
 PROFIT PER EMPLOYEES
RATIO
 BUSINESS PER BRANCH
RATIO
 GROSS PROFIT PER
EMPLOYEES RATIO
 NET INTEREST MARGIN TO
TOTAL ASSETS RATIO
 INTEREST INCOME TO
TOTAL INCOME RATIO
 NON -INTEREST TO TOTAL
INCOME RATIO
 LIQUID ASSETS TO TOTAL
ASSETS RATIO
 G- SECURITIES TO TOTAL
ASSETS RATIO
 LIQUID ASSETS TO DEMAND
DEPOSITS RATIO
  LIQUID ASSETS TO TOTAL
DEPOSITS RATIO
 RETURN ON NET WORTH
RATIO

CAMEL MODEL
  CAPITAL ADEQUACY:

Capital adequacy is the capital expected to maintain balance with the risks
exposure of the financial institution such as credit risk, market risk and operational
risk, in order to absorb the potential losses and protect the financial institution‗s
debt holder. ―Meeting statutory minimum capital requirement is the key factor in
deciding the capital adequacy, and maintaining an adequate level of capital is a
critical element‖ the ratio are Capital Adequacy ratio.

Capital base of financial institutions facilitates depositors in forming their risk

perception about the institutions. Also, it is the key parameter for financial managers
to maintain adequate levels of capitalization. Moreover, besides absorbing
unanticipated shocks, it signals that the institution will continue to honor its
obligations. The most widely used indicator of capital adequacy is capital to
riskweighted assets ratio (CRWA). According to Bank Supervision Regulation
Committee (The Basle Committee) of Bank for International Settlements, a minimum
8 percent CRWA is required. Capital adequacy ultimately determines how well
financial institutions can cope with shocks to their balance sheets.

Thus, it is useful to track capital-adequacy ratios that take into account the most
important financial risks—foreign exchange, credit, and interest rate risks—by
assigning risk weightings to the institution‘s assets. Capital cushions fluctuations in
earnings so that credit unions can continue to operate in periods of loss or negligible
earnings. It also provides a measure of reassurance to the members that the
organization will continue to provide financial services. It serves to support growth as
a free source of funds and provides protection against insolvency. While meeting
statutory capital requirements is a key factor in determining capital adequacy, the
credit union‘s operations and risk position may warrant additional capital beyond the
statutory requirements. Maintaining an adequate level of capital is a critical element.
Determining the adequacy of a credit union's capital begins with a qualitative
evaluation of critical variables that directly bear on the institution's overall financial
condition.
  DEBT - EQUITY RATIO:-

Debt – Equity ratio also known as external – internal equity ratio is calculated to
measure the relative claims of outsider and the owners against the firm‘s assets. It
indicates the degree of leverage of a bank and how much of the bank business is
financed through debt and how much through equity. This ratio includes outsiders
fund as total liabilities a shareholder funds as net assets. Higher ratio indicates less
protection for the creditors and depositors in the banking system.

Debt-equity ratio = Outsiders’ fund / Shareholder fund *100

YEAR SBI HDFC

2007-2008 14.71 12

2008-2009 16.64 12

2009-2010 15.97 10

2010-2011 18.83 11

2011-2012 15.9 11

2012-2013 15.83 11

2013-2014 15.15 11

Mean 16.1471 11.25

SD 1.335 0.571

MAX 18.83 12.18

MIN 14.71 10.34

SOURCE: ANNUAL REPORT

INTERPRETATION:

A high debt/equity ratio generally means that a company has been

aggressive in financing its growth with debt. This can result in
fluctuations in the earnings of the company.

EXHIBIT-1

DEBT-EQUITY RATIO
35

30

25

20

15

10

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC

A low advance to asset ratio (this case HDFC bank with an average of 55.86)
indicated less efficient capital managed compared to other banks but there is
tremendous increase in every year which shows gradual increase in the ratio. The
other bank are also performing well in capital management, SIB and IOB are next
best in performance.
  ADVANCE TO ASSETS RATIO:-

All banks was to recognize and take credit for interest accrued on all
loans, overdraft it while closing books for an accounting year. Advance is
broadly classified into ‗Advance in India‘ and ‗Advance outside India‘. Total advance
also include receivable. An asset includes fixed assets and other assets and excluding
the revaluation of all the assets. Higher the ratio is preferred to analyses the
aggressiveness in lending.

Advance to asset ratio = Total advances / Total assets * 100

TABLE – 2

YEAR SBI HDFC

2007-2008 57 47

2008-2009 56 53

2009-2010 59 56

2010-2011 61 57

2011-2012 64 57

2012-2013 66 59

2013-2014 67 62

Mean 61.429 55.86

SD 4.3534 4.776

MAX 67 62

MIN 56 47

SOURCE: ANNUAL REPORT

INTERPRETATION:

The above table shows the advance to asset ratio of the seven banks taken for the study.

EXHIBIT-2

ADVANCE TO ASSETS RATIO

70
60
50
40
30
20
10
0
2007-2008 HDFC
2008-2009
2009-2010 SBI
2010-2011
2011-2012
2012-2013
2013-2014

SBI HDFC

A low advance to asset ratio (this case HDFC bank with an average of 55.86)
indicated less efficient capital managed compared to other banks but there is
tremendous increase in every year which shows gradual increase in the ratio. The
other bank are also performing well in capital management, SIB and IOB are next
best in performance.
  G- SECURITIES TO INVESTMENT RATIO:-

Investments include securities of the central and state Government and other
trustee securities including treasury bills of the Central State Government.
While Government securities stand first in the order of safety, investments in
commercial securities yield higher earnings to the banks. It indicates a bank
strategy as high profit - high risk or low profit - low risk. It also gives a view to the
availability of alternative investment opportunity. Since government securities are risk
–free, the higher the G-sec to investment ratio, the lower the risk involved in a bank‘s
investments.

G-Securities to total investment ratio = G-Securities / Total investment *100

TABLE – 3

YEAR SBI HDFC

2007-2008 74 64

2008-2009 82 88

2009-2010 80 87

2010-2011 78 75

2011-2012 82 78

2012-2013 77 76

2013-2014 78 79

Mean 78.714 78.14

SD 2.8702 8.071

MAX 82 88

MIN 74 64
 EXHIBIT-3

G- SECURITIES TO INVESTMENT RATIO

100

90

80

70

60

50

40

30

20

10

0
0 1 2 3 4 5 6 7 8

SBI HDFC
  ASSET QUALITY:

A most important asset category is the loan portfolio; the greatest risk facing
the bank is the risk of loan losses derived from the delinquent loans. The credit
analyst should carry out the asset quality assessment by performing the credit risk
management and evaluating the quality of loan portfolio using trend analysis and peer
comparison. Measuring the asset quality is difficult because it is mostly derived from
the analyst‘s subjectivity. Asset quality determines the robustness of financial
institutions against loss of value in the assets. Popular indicators include
nonperforming loans to advances, loan default to total advances, and recoveries to
loan default ratios. In most emerging markets, banking sector assets comprise well
over 80 per cent of total financial sector assets, whereas these figures are much lower
in the developed economies. One of the indicators for asset quality is the ratio of
nonperforming loans to total loans (GNPA). The gross non-performing loans to gross
advances ratio is more indicative of the quality of credit decisions made by bankers.
Higher GNPA is indicative of poor credit decision-making. The ratio is Gross
Nonperforming Assets, Net Non-performing Assets, and Net Non-performing Assets to
Total Advances Ratio of banks.
  NPA: Non-Performing Assets

Advances are classified into performing and non-performing advances (NPAs)

as per RBI guidelines. NPAs are further classified into sub-standard, doubtful and loss
assets based on the criteria stipulated by RBI. An NPA is a loan or an advance
where:1.Interest and/or installment of principal remains overdue for a period of more
than90 days in respect of a term loan.2.The account remains "out-of-order'' in respect
of an Overdraft or Cash Credit(OD/CC).3.The bill remains overdue for a period of
more than 90 days in case of bills purchased and discounted.4.A loan granted for short
duration crops will be treated as an NPA if the installments of principal or interest
thereon remain overdue for two crop seasons.5.A loan granted for long duration crops
will be treated as an NPA if the installments of principal or interest thereon remain
overdue for one crop season. The Bank classifies an account as an NPA only if the
interest imposed during any quarter is not fully repaid within 90 days from the end of
the relevant quarter. This is a key to the stability of the banking sector.
  GROSS NPA TO NET ADVANCE RATIO:-

A Non-performing asset (NPA) is defined as credit facility in respect

of which the interest and / or installment of principal has remained ‗past due‘
for a specified period of time. A classification used by financial institutions
that refer to loans that are in jeopardy of default. Once the borrower has
failed to make interest or principal payments for 90 days the loan is considered
to be a non-performing asset or ―non-performing loan‖. Gross NPA is the amount
which is outstanding in the books, regardless of any interest recorded and debited.
The lower the ratio better is the quality of advance. This ratio can be calculated by
dividing gross non-performing asset to net advance.

Gross NPA to Net Advance Ratio = Gross NPA / Net Advance * 100

TABLE – 4

YEAR SBI HDFC

2007-2008 3.08 1.53

2008-2009 2.87 1.98

2009-2010 1.53 1.43

2010-2011 4.15 1.05

2011-2012 4.44 1

2012-2013 4.75 0.97

2013-2014 4.95 0.98

Mean 3.681 1.277

SD 1.238 0.386

MAX 4.95 1.98

MIN 1.53 0.97

INTERPRETATIN:

The above table shows the Gross NPA to Net Advance Ratio of the
banks taken for the study. It is very evident from the table that HDFC bank has less
ratio (average being 1.277). Gross NPA to Net Advance ratio generally means that
lower the ratio, better the quality of advances; here HDFC bank has less
nonperforming asset, there is only less borrower has failed to make interest or
principal compare to other banks.

EXHIBIT-4

GROSS NPA TO NET ADVANCE RATIO

5
4
3
2
1
0
HDFC
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012 SBI
2012-2013
2013-2014

0-1 1-2 2-3 3-4 4-5

  NET NPA TO NET ADVANCE RATIO:-

Net NPA is Gross NPA less interest debited to borrow account and not recovered
or recognized as income. The assets of the Banks which don‘t perform (means don‘t
bring any return) are called Non Performing Assets. This ratio is the most standard
measure of asset quality. In this, net non -performing assets are measured as a
percentage of net advance. The lower the ratio better is the quality of advance.

Net NPA to Net Advance Ratio = Net NPA/ Net Advance *100

TABLE – 5

YEAR SBI HDFC

2007-2008 1.78 0.47

2008-2009 1.79 0.63

2009-2010 1.72 0.31

2010-2011 1.63 0.19

2011-2012 1.82 0.18

2012-2013 2.1 0.2

2013-2014 2.57 0.27

Mean 1.9157 0.32143

SD 0.3228 0.16936

MAX 2.57 0.63

MIN 1.63 0.18

INTERPRETATION:

The above table shows the Net NPA to Net Advance Ratio of the seven banks
taken for the study. It is very evident from the table that HDFC bank has less ratio
(average being 0.321429). Net NPA to Net Advance Ratio means that is used to
measure of the overall quality of bank loan, here HDFC bank has less net
nonperforming asset, which show bank is performing well and it is able to recover its
debt. Here as compared to its peers it has lowest ratio which is better.

The NPA is high in SBI were there have to maintain high standard in asset
quality through appropriate risk management measure and recovered measures as
lower NPA level.

EXHIBIT-5

NET NPA TO NET ADVANCE RATIO

3

2.5

1.5

0.5

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC
  TOTAL INVESTMENT TO TOTAL ASSET RATIO:-

Banking investments among individual investors are increasing and a basic

CAMEL rating knowledge can help them gain better understanding about their
investment on their own rather than seeking the investment agencies. This ratio is
used as tool to measure the percentage of total assets locked up in the investments
which by conventional definition does not form part of the core income of the bank. A
higher ratio means that the bank has conservatively kept a high cushion of investment
to guard against NPA‘s. However, this affects its profitability adversely.

Total investment to total asset ratio = Total investment / Total asset *100

TABLE – 6

YEAR SBI HDFC

2007-2008 2.6 3.7

2008-2009 2.8 3.2

2009-2010 2.7 2.6

2010-2011 2.4 2.5

2011-2012 2.3 2.8

2012-2013 2.2 2.7

2013-2014 2.2 2.3

Mean 2.45714 2.829

SD 0.24398 0.475

MAX 2.8 3.7

MIN 2.2 2.3

INTERPRETATION:

The above table shows the Total investment to total asset ratio of the seven
banks taken for the study. It is very evident from the table that HDFC bank has higher
ratio (average being 0.475). Total investment to total asset higher ratio means that the
bank has conservatively kept a high cushion of investment to guard against NPA‘s.
However, this affects its profitability adversely.

A low ratio is found in SIB, where the investment is less and its risk managing
the non-performing assets. The private bank has more investment to safeguard the
risks.

EXHIBIT-6

TOTAL INVESTMENT TO TOTAL ASSET RATIO

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

0 0.5 1 1.5 2 2.5 3 3.5 4

HDFC SBI
  NET NPA TO TOTAL ASSETS RATIO
 :-

The ratio indicates the efficiency of the bank is assessing credit risk and to an
extent, recovering the debts. Total assets considered are net of revaluation reserves
Lower the ratio better is the performance of the bank. This ratio can be calculated by
dividing net NPA to total assets of the bank.

Net NPA to Total Assets Ratio = Net NPA / Total Assets * 10

 TABLE – 7

YEAR SBI HDFC

2007-2008 0.1 0.22

2008-2009 0.09 0.34

2009-2010 0.05 0.17

2010-2011 0.07 0.1

2011-2012 0.11 0.1

2012-2013 0.14 0.11

2013-2014 0.21 0.16

Mean 0.11 0.171

SD 0.0526 0.086

MAX 0.21 0.34

MIN 0.05 0.1

INTERPRETATION:

The above table shows the Net NPA to Total Assets Ratio of the seven banks
taken for the study. It is very evident from the table that SBI bank has lower ratio
(average being 0.11). Net NPA to Total Assets Ratio means that the bank is assessing
credit risk and to an extent recovering the debts. Total assets considered are net of
revaluation reserves lower the ratio better is the performance of the bank.

EXHIBIT-7

NET NPA TO TOTAL ASSETS RATIO

0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC
  MANAGEMENT QUALITY:

Management quality is basically the capability of the board of directors and

management, to identify, measure, and control the risks of an institution‗s activities
and to ensure the safe, sound, and efficient operation in compliance with applicable
laws and regulations Uniform Financial Institutions Rating System suggests that
management is considered to be the single most important element in the CAMEL
rating system because it plays a substantial role in a bank‘s success; however, it is
subject to measure as the asset quality examination. The ratio is Total Investments to
Total Assets Ratio, Total Advances to Total Deposits Ratio, Sales per Employee, and
Profit after Tax per Employee of banks.

 CREDIT DEPOSIT RATIO:-

It is the ratio of how much a bank lends out of the deposits it has mobilized.
It indicates how much of a bank's core funds are being used for lending, the main
banking activity. A higher ratio indicates more reliance on deposits for lending. A
ratio of 60% in this respect is considered to be desirable norms.

Credit deposit ratio = Total advance/ Total deposits * 100

 TABLE – 8

YEAR SBI HDFC

2007-2008 77.5 62.94
2008-2009 73.1 69.24
2009-2010 78.58 75.21
2010-2011 81.02 76.69
2011-2012 83.12 79.26
2012-2013 86.93 80.96
2013-2014 86.76 85.92
Mean 81.001 75.75
SD 5.0556 7.644
MAX 86.93 85.92
MIN 73.1 62.94

EXHIBIT-8

200
180
160
140
120
100
80
60
40
20
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC
  BUSINESS PER EMPLOYEES RATIO:-

Business per employee‘s ratio shows productivity of human forces of the

bank. It is used as tool to measure the efficiency of all the employees of a bank in
generating business for the bank. Higher the ratio better it is for the bank. This ratio
can be calculated by dividing total business by total number of employees.

Business employee ratio = Total Business / Total no. of employees *100

TABLE – 9

YEAR SBI HDFC

2007-2008 635.2 434

2008-2009 731.9 458.7

2009-2010 841.4 564.9

2010-2011 888.4 661.1

2011-2012 1022 668.9

2012-2013 1144 775.8

2013-2014 1352 1001

Mean 945.1 652.1

SD 247.2 195.8

MAX 1352 1001

MIN 635.2 434

 EXHIBIT-9

BUSINESS PER EMPLOYEES RATIO

1500

1000

500

0
HDFC
SBI

SBI HDFC
  PROFIT PER EMPLOYEES RATIO:-

Profit is the main indicator to determine the financial soundness of an

enterprise. It represents the revenue in excess of expenditure. This ratio show that
surplus earned per employees. The higher the ratio, the higher is the efficiency of the
management. The ratio can be calculated by dividing profit eared after tax to total
number of employees in the bank.

Profit per employees ratio = Profit after Tax / Total no of Employees * 100

TABLE – 10

YEAR SBI HDFC

2007-2008 3.7552 9.30915

2008-2009 4.4301 9.1475

2009-2010 4.5763 12.5214

2010-2011 3.7073 15.1729

2011-2012 5.4359 17.5161

2012-2013 6.1785 22.4296

2013-2014 4.9053 29.6624

Mean 4.7127 16.53701

SD 0.8883 7.447481

MAX 6.1785 29.6624

MIN 3.7073 9.1475

 EXHIBIT-10

SBI
8

6 6.1785

5.4359
5 4.9053
4.4301 4.5763
4
3.7552 3.7073

0
-1 0 1 2 3 4 5 6 7 8 9

INTERPRETATION:

The above table shows the Profit per employee ratio of the seven banks taken
for the study. It is very evident from the table that HDFC bank has higher ratio
(average being 16.53701). Profit per employee ratio means that the bank has more
productivity level of the bank employees with profit.
  BUSINESS PER BRANCH RATIO:-

Banks total business contribution both deposits and advances. Financial viability
of the banks is ascertained based on the volume of their business. The ratio indicates
the productivity of different branches of the bank. It is used as tool to measure the
efficiency of all the branches of a bank in generating business for the bank. Higher the
ratio better is the efficiency of the bank.

Business per Branch ratio = Total Business / Total no of Branches * 100

TABLE – 12

YEAR SBI HDFC

2007-2008 1117.51 2158

2008-2009 1316.33 1712

2009-2010 1348.69 1699

2010-2011 1462.45 1856

2011-2012 1562.81 1737

2012-2013 1762.84 1750

2013-2014 1891.78 2006

Mean 1494.63 1845

SD 267.911 174.8
MAX 1891.78 2158
MIN 1117.51 1699
 EXHIBIT-11

BUSINESS PER BRANCH RATIO

4000

3500

3000

2500

2000

1500

1000

500

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC

INTERPRETATION:

The above table shows the Business per Branch ratio of the seven banks taken
for the study. It is very evident from the table that HDFC bank has higher ratio
(average being 1845). Business per Branch ratio means that to measure the efficiency
of all the branches of a bank in generating business for the bank. Higher the ratio
better is the efficiency of the bank.
  GROSS PROFIT PER EMPLOYEES RATIO:-

Gross profit per employee‘s ratio shows the surplus earned before tax per
employees. The higher the ratio, the higher is the efficiency of the management. This
ratio can be calculated by dividing gross profit earned to total a number of employees
of the bank.

Gross profit per employees ratio = Gross profit / Total no of employees *

TABLE – 13

YEAR SBI HDFC

2007-2008 7.314 4.203

2008-2009 8.701 4.261

2009-2010 9.147 5.845

2010-2011 11.37 7.043

2011-2012 14.65 7.981

2012-2013 13.62 9.991

2013-2014 14.46 12.86

Mean 11.32 7.454

SD 2.996 3.147

MAX 14.65 12.86

MIN 7.314 4.203

 EXHIBIT-13

30

25

20

15

10

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

SBI HDFC
  EARNINGS AND PROFITABILITY:

The rating reflects not only the quantity and trend in earning, but also the factors
that may affect the sustainability of earnings. Inadequate management may result in
loan losses and in return require higher loan allowance or pose high level of market
risks. The future performance in earning should be given equal or greater value than
past and present performance. A consistent profit not only builds the public
confidence in the bank but absorbs loan losses and provides sufficient provisions. It is
also necessary for a balanced financial structure and helps provide shareholder
reward. Thus consistently healthy earnings are essential to the sustainability of
banking institutions. Profitability ratios measure the ability of a company to generate
profits from revenue and assets. The ratio is Return on Net Worth, Operating Profit to
Average Working Fund Ratio, and Profit after Tax to Total Assets Ratio of banks.

 NET INTEREST MARGIN TO TOTAL ASSETS RATIO:-

Net interest margin (NIM) is a measure of the difference between the interest
income generated by banks or other financial institutions and the amount of interest
paid out to their lenders (for example, deposits), relative to the amount of their
(interest-earning) assets. It is similar to the gross margin of non-financial companies.
It is usually expressed as a percentage of what the financial institution earns on loans
in a time period and other assets minus the interest paid on borrowed funds divided by
the average amount of the assets on which it earned income in that time period.

Net interest margin to total assets ratio = Net Interest Margin / Total Assets *
100
 TABLE – 13
YEAR SBI HDFC
2007-2008 23.591 39.26
2008-2009 21.643 46.03
2009-2010 22.471 33.36
2010-2011 26.58 38.01
2011-2012 32.415 36.99
2012-2013 28.304 40.38
2013-2014 27.498 37.94
Mean 26.072 38.85
SD 3.7913 3.854
MAX 32.415 46.03
MIN 21.643 33.36
INTEREST INCOME TO TOTAL INCOME RATIO

Bank‘s interest income comes from various types of loans and advances granted
to individual and institutional borrowers. It is a basic source of revenue for bank. The
ratio shows the ability of the bank to interest on deposits low and interest on advance
high. It is an important measure of a bank core income. A higher spread indicates the
better earning given to total assets.

Interest to Total Income Ratio = Interest / Total Income * 100

 NON -INTEREST TO TOTAL INCOME RATIO:-

Fee based income accounts for major portion of bank other incomes. The bank
generates higher fee income through innovative products and adapting the technology
for sustained service levels. The higher ratio of non-interest income to total income
indicates the increasing portion of fee based income. This ratio measures the income
from operation other than lending as a percentage of total income.

Non- Interest to Total Income Ratio = Non- Interest / Total Income * 100
  LIQUIDITY:

Liquidity sources compared to present and future needs, and availability of

assets readily convertible to cask without undue loss. The fund management practices
should ensure an institution is able to maintain a level of liquidity sufficient to meet
its financial obligations in a timely manner; and capable of quickly liquidating assets
with minimal loss. ―The liquidity expresses the degree to which a bank is capable of
fulfilling its respective obligations‖. An adequate liquidity position refers to a
situation, where institution can obtain sufficient funds, either by increasing liabilities
or by converting its assets quickly at a reasonable cost. It is, therefore, generally
assessed in terms of overall assets and liability management, as mismatching gives
rise to liquidity risk. In general, banks with a larger volume of liquid assets are
perceived safe, since these assets would allow banks to meet unexpected withdrawals.
The ratio is Government Securities to Total Investments Ratio and Government
Securities to Total Assets Ratio of banks.

 LIQUID ASSETS TO TOTAL ASSETS RATIO:-

Liquid assets to total assets ratio indicates the overall liquidity position of the
bank. This ratio is calculated by dividing liquid assets by the bank to total assets of
the bank.

Liquid Assets to Total Assets ratio = Liquid Assets / Total Assets *100
 TABLE- 14

YEAR SBI HDFC

2007-2008 9.95325 9.912

2008-2009 9.96021 9.906

2009-2010 9.95811 9.905

2010-2011 9.96107 9.9

2011-2012 9.95907 9.931

2012-2013 9.95559 9.932

2013-2014 9.95535 9.94

Mean 9.95752 9.918

SD 0.00265 0.015

MAX 9.96107 9.94

MIN 9.95325 9.9

 EXHIBIT-14

LIQUID ASSETS TO TOTAL ASSETS RATIO

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

9.86 9.87 9.88 9.89 9.9 9.91 9.92 9.93 9.94 9.95 9.96 9.97

HDFC SBI
  G- SECURITIES TO TOTAL ASSETS RATIO:-

Government securities are liquid and safe investments. This ratio measure the
government securities as a securities as a proportion of total assets. Banks invest in
Government securities primarily to meet their statutory liquidity rate requirements
which are around 25% of net demand and time liabilities. This ratio measure the risk
involved in the asses held by the bank.

G-Securities to Total Assets Ratio = G-Securities / Total Assets * 100

 LIQUID ASSETS TO DEMAND DEPOSITS RATIO:-

The ratio measures the ability of a bank to meet the demand from deposits in a
particular year. Demand deposits offer high liquidity to the depositor and hence bank
has to invest these assets in a highly liquid form. This ratio can be calculated by
dividing liquid assets held by the bank to demand deposits of the bank.

Liquid Assets to Demand Deposits ratio = Liquid Assets / Demand Deposits *100
  LIQUID ASSETS TO TOTAL DEPOSITS RATIO:-

The ratio measures the liquidity available to the depositors of a bank. It indicated
the capacity of the bank to pay out the deposits when claimed by the depositors. The
ratio can be calculates by dividing liquid assets held by the bank to total of deposits
that bank is liable to pay out to its depositors.

Liquid Assets to Total Deposits Ratio = Liquid Assets / Total Deposits * 100

 RETURN ON NET WORTH RATIO:-

The ratio is of the most important ratios used for measuring the overall efficiency.
It reveals how well the resources of a firm are being utilized. Higher the ratio, better
are the result. The ratio can be calculated by dividing net profit earned by the bank to
net worth of the ratio.

Return on Net worth Ratio = Net Profit / Net worth * 100

 TABLE – 15

YEAR SBI HDFC

2007-2008 9.3268 2.64477

2008-2009 9.458 2.62976

2009-2010 8.7016 2.92061

2010-2011 6.7538 3.04998

2011-2012 8.7706 3.42517

2012-2013 9.006 3.86955

2013-2014 6.0771 4.01482

Mean 8.2991 3.22209

SD 1.2311 0.5201

MAX 9.458 4.01482

MIN 6.0771 2.62976

 EXHIBIT-15

RETURN ON NET WORTH RATIO

HDFC

SBI
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

0-2 2-4 4-6 6-8 8-10

INTERPRETATION:

The low Return on Net worth Ratio (in this case HDFC bank with an average
of 3.222091) indicate less utilization of resource compare to other bank but there is
gradual increase in every year so there is an expectation of better utilization of
resource.
  ARITHMETIC MEAN

Arithmetic mean is commonly called as average .Mean or Average is defined

as the sum of all the given elements divided by the total num

Mean = sum of elements / number of elements = a1+a2+a3+.....+an/n

 CORRELATION

Pearson's correlation coefficient between two variables is defined as the covariance of

the two variables divided by the product of their standard deviations. The form of the
definition involves a "product moment", that is, the mean (the first moment about the
origin) of the product of the mean-adjusted random variables; hence the modifier
product-moment in the name. Pearson's correlation coefficient when applied to a
sample is commonly represented by the letter r and may be referred to as the sample
correlation coefficient or the sample Pearson correlation coefficient. We can obtain a
formula for r by substituting estimates of the covariance and variances based on a
sample into the formula above. That formula for r is:
  STANDARD DEVIATION

The standard deviation is a numerical value used to indicate how widely in a group
vary. If individual observations vary greatly from the group mean, the standard
deviation is big; and vice versa. It is important to distinguish between the standard
deviation of a population and the standard deviation of a sample. They have different
notation, and they are computed differently. The standard deviation of a
population is denoted by σ and the standard deviation of a sample, by s. The standard
deviation of a population is defined by the following formula.

σ = √ [ Σ ( Xi - X )2 / N ]

where σ is the population standard deviation, X is the population mean, Xi is the ith
element from the population, and N is the number of elements in the population.

The standard deviation of a sample is defined by slightly different formula:

s = √ [ Σ ( x i - x )2 / ( n - 1 ) ]
 4.2 FINANCIAL COMPARATIVE ANALYSIS

BALANCE SHEET FOR THE YEAR ENDING ON MARCH 2007-

2011 OF STATE BANK OF INDIA

2007- 2008- 2009- 2010-

2008 2009 2010 2011
Absolute % Absolute % Absolute % Absolute %
change chang change chang change chang change chang
e e e e
Capital &
Liabilities
Capital 105.17 19.98 3.41 0.005 0.00 0.00 0.12 0.018
4
Reserve& 17628.83 57.28 8910.91 18.41 8001.5 13.96 (963.28) (1.47)
surplus
deposits 101882.8 23.39 204669.1 38.08 62043.1 8.36 129816.5 16.14
5 9 8
borrowings 12024.07 30.28 1986.27 3.83 49297.92 91.77 16557.36 16.07
Other 23320.04 38.83 27335.27 32.79 (30360.3 (27.42 24911.69 31.00
liabilities and 0) ) 9
provisions

TOTAL 154961.0 27.35 242905.7 33.66 88981.65 9.226 170322.4 16.16

CAPITAL 6 7 7
AND
LIABILITI
ES
2007-08 2008-09 2009-10 2010-11
Absolute % Absolute % Absolute % Absolute %
change chang change chang change chang change chang
e e e e
Assets:
Investments 40352.39 27.05 86452.69 45.62 9836.11 3.56 9810.5 3.43
5
Advances 79431.71 23.54 125735 30.16 89410.95 16.48 124805.3 19.75
Fixed assets (314.22) (0.070 (543.32) (0.13) 543.32 0.15 314.22 0.076
)
Capital Work (37.05) (0.11) (31.74) (0.107 31.74 0.120 37.05 0.125
In Progress ) 4 5
Current (8665.09 (0.19) 2620.51 0.074 (2620.51) (0.069 8665.09 0.24
assets ) )
TOTAL 154961.0 27.35 242905.7 33.66 88981.65 9.226 170322.4 16.16
ASSETS: 6 7 7

Interpretation :

The capital of bank increased by 19.98%in 07-08, 0.0054% in 08-09, 0.018% in 10-
11.

There is no change in capital of the bank in the year 09-10

There is a huge fluctuation in the rate of increasing in reserves& surplus .

The bank is utilizing its reserves &surplus in an effective manner.

In 07-08 deposits increase by 23.39%, 08-09 it increase by 38.08%, 8.36% in 09-

10,16.14% in 10-11.

There is a huge fluctuating rate of increase . in 08-09 it had fluctuate to 3.83%.

The investment in 10-11 has increased with a low rate as compared to the preceding
years .27.55% in 07-08,45.62% in 08-09,3.56% in 09-10,3.43% in 10-11.

The advances rose by 23.54% in 07-08,30.16% in 08-09,16.48% in 09-10, 19.75% in

10-11.

There has been a consistent decline in fixed assets in 07-08 and 08-09 0.070% ,0.13%
respectively. Increased by 0.15% in 09-10, 0.076% in 10-11.

There is a fall of current assets 0.19% in 07-08 mainly due to the repayment of
deposits.0.074% in 08-09, subsequent fall of current assets 0.069% in 09-10, and
increase of 0.24% in 10-11.
 PROFIT AND LOSS OF STATE BANK OF INDIA FOR THE
YEAR ENDING ON MARCH 2007-2011 IN RS CR.

Particulars 2007-08 2008-09 2009-10 2010-11

% % %
absolute chang absolute chang absolute % absolute chang
change e change e change change change e

INCOME:
operating 11410.9 18131.0
income 5 0.24 4 0.31 9482.29 0.12 10367.38 0.12
EXPENDITUR
E:
interest 10986.2
expended 8492.26 0.36 1 0.18 4407.19 0.10 1545.48 0.032
3514.11
operating
expenses 1357.77 0.10 0.24 6817.35 0.37 6489.87 0.26
9223.14
15738.9
total expenses 0.21 3 0.30 9437.47 0.14 12163.1 0.15
provision and
contingencies -626.89 -0.10 1238.61 0.24 -1787.07 0.14 12163.1 0.15
net profit of the 0.00491
year 2187.81 0.48 2392.11 0.35 44.82 4 -1795.68 -0.19
extraordinary
items 0 0 0 0 0 0 0 0
profit brought
forward 0 0 0 0 0 0 0 0
total 0.00491
profit/(loss): 2187.81 0.48 2392.11 0.35 44.82 4 -1795.68 -0.19

INTERPRETATION:
Net Profit Of The Year: it shows a fluctuating trend i.e., increased by 48% in2007-
08,35% in 2008-09,0.49% in 2009-10 and decline by 19% in 2010-11due to increased
tax liability. Interest Expended: it increases from 36% in 2007-08,18% in 2008-
09, 10% in 2009-10 and 3.20% in 2010-11.
 BALANCE SHEET OF HDFC FOR THE YEAR ENDING ON
MARCH 2007-2011 IN RS CR.

2007- 2008- 2009- 2010-

2008 2009 2010 2011
absolu absolu absolu absolu
te % te % te % te %
chang chang chang chang chang chang chang chang
e e e e e e e e
capital &
liabilities:
0.0746
Capital 0 0 0 0 0 0 27.28 31
reserves& 2393.9 0.2889 1791.6 0.1677 2270.8 0.1821 5859.4 0.3974
surplus 9 75 1 79 5 05 4 96
27118. 0.2170 40362. 0.2654 48647. 0.2528 64395. 0.2671
Deposits 15 91 82 85 31 49 22 51
2784.4 2.4370 1709.0 0.4351 1.3686 8957.7 0.6709
Borrowings 9 62 4 97 7714 79 6 89
- -
other 4156.7 0.4926 3943.7 0.3131 7722.1 0.4669 0.0953
liabilities 1 35 4 34 8 3 840.76 68
TOTAL
LIABILIT 36453. 0.2546 47807. 0.2661 50909. 0.2238 80080. 0.2877
IES: 34 58 21 88 98 72 46 31
2007- 2008- 2009- 2010-
08 09 10 11
absolu absolu absolu absolu
te % te % te % te %
chang chang chang chang chang chang chang chang
e e e e e e e e
ASSETS
8926.4 0.2554 8575.8 0.1954 0.1665 10078. 0.1647
Investments 4 53 1 82 8736.5 81 25 25
23080. 0.2760 37284. 0.3494 31049. 0.2156 53641. 0.3064
Advances 45 13 58 29 39 42 07 59
fixed assets 1338 1.2 (117) (0.05) (25) (0.01) 15 0.01
capital
work in
progress 0 0 0 0 0 0 0 0
36453. 0.2546 47807. 0.2661 50909. 0.2238 80080. 0.2877
Total assets 32 58 23 88 98 72 47 31

INTERPRETATION:
 The capital of the bank shows no change till 2009-10 but it increases by 7.40% in
2010-11.
There is a huge fluctuation in the increase of reserves and surplus. It increases by 28%
in 2007-08,16%in 2008-09,18% in 2009-10 and 39% in 2010-11.
The investments has increased with a low rate . 2007-08- 25%,2008-09 – 19%, 2009-
10 – 16.6%, 2010-11-16.47%
There is a fluctuating in increase in advances 27% in 2007-08,34.9% in 2008-09,
21.5%in 2009-10, 30.64% in 2010-11.
There is decline of fixed assets in 2008-09 and 2009-10 with 5% and 1% respectively.
The reason may be the increase in the rate of depreciation in the subsequent years.
There has been an increase in borrowings. 243% in 2007-08, 43.5% in 2008-09, 136%
in 2009-10,67% in 2010-11.

PROFIT AND LOSS OF HDFC FOR THE YEAR ENDING ON

MARCH 2007-11

absolute absolute absolute absolute

change % change % change % change %

2007-08 2008-09 2009-10 2010-11

particulars

income:

total income 3,270.1 30.87% 3,984.7 28.74% 1,655.5 9.27% 5,190.4 26.61%

expenditure:

interest expended 2,475.11 45.61% 2,066.50 26.15% 791 7.93% 2,324.8 21.61%

operating expenses 598.82 21.61% 474.39 14.08% 866.57 22.54% 958.65 20.35%
other provisions and - -
contingencies -212.90 15.54% 652.15 56.36% -832.92 46.04% 723.60 74.12%

total expenses 2,861.0 29.90% 3,193.0 25.69% 824.3 5.28% 4,007.1 24.36%
net profit of the
year 409.06 39.85% 791.68 55.15% 831.13 37.32% 1,183.35 38.69%

extra ordinary items 0 0.00% 0 0.00% 0 0.00% 0 0.00%

profit brought
forward 0 0.00% 0 0.00% 0 0.00% 0 0.00%

total 409.06 39.85% 791.68 55.15% 831.13 37.32% 1,183.35 38.69%

 INTERPRETATION:

The net profit of the year shows a fluctuating trend i.e., 39.85% in 2007-08,55.15%
in2008-09,37.32% in 2009-10and 38.69% in 2010-11.

The interest expended shows a fluctuating trend in 2007-08 to 2010-11

2007-08-45.61%,2008-2009-26.51% ,
 CHAPTER 5

 CONCLUSION

In the study, it has been that the performance measurement of a bank

under traditional measures as CAMELS rating techniques. Hence the concept
of CAMELS rating for performance evaluation of a bank. CAMELS rating
system basically quantitative technique, is widely used for measuring
performance of banks in India. Due to radical changes in the banking sector
in the recent years, the central banks all around the world have improved their
supervision quality and techniques. In evaluating the function of the banks,
many of the developed countries are now following uniform financial rating
system (CAMEL RATING) along with other existing procedures and
techniques. Various studies have been conducted in India as well on various
banks using CAMEL framework. Different banks are ranked according to
the ratings obtained by them on the five parameters.
The study shows all the public sector bank has efficient performance in
the rating then the private sector bank. As private sector have slight adverse
effect in rating, they to maintain good performance by keeping good
investment to overtake the non – performing assets. The banks do not have a
huge variation because they are top banks in each sector. The public banks
have to maintain the non-performing asset in lower ratio. The basis of the
study or analysis banking customer has more trust on the public sector
banks as compared to private sector banks.
  SUGGESTION

As discussed above, it has been witnessed that the major area of concern for any bank
is the customer service and customer satisfaction, thus just like the private sector
banks, it is high time that the public sector banks also start concentrating more on the
customers and the services provided to them. Top most rank held by a private bank is
a clear indicator of the better performance of the private banks due to their higher
concern towards customer feedback, their efficient management and thus yielding to
higher productivity and networks throughout India. To strive the cut throat
competition given to the public sector banks by the private sector banks, the public
sector will have to pull up their shoes to be at the better half part of the race else the
time is very near which can make these public sector banks just a memory or a history
for everyone.