FINANCIAL PERFORMANCE

ANALYSIS OF NEW GENERATION

PRIVATE SECTOR BANKS IN INDIA
A Summer Internship Project Report submitted in partial fulfillment of the
i i i i i i i i i i

requirements for the award of the degree of

i i i i i i i i

Post Graduate Diploma in Management

i i i i

By

KARTHIK SURESH i

2101030

Under the Guidance ofi i i

Dr. Abhay K Srivastava

i

IPE, Hyderabad i

Institute of Public Enterprise

i i i

Hyderabad, Telangana State, India-500101

i i i

(July, 2022) i

1
 Institute of Public Enterprise
i i i

Hyderabad, Telangana State, India-500101

i i i

DECLARATION

I ihereby ideclare ithat ithe iwork ipresented iin ithe iproject ientitled i“FINANCIAL
PERFORMANCE ANALYSIS OF NEW GENERATION PRIVATE SECTOR BANKS
IN INDIA”, iis ia iSummer iInternship iProject iReport isubmitted iin ipartial ifulfillment iof ithe
irequirements ifor ithe iaward iof ithe idegree iof iPost iGraduate iDiploma iin iManagement iis ian

iauthentic irecord iof imy iown iwork icarried iout iduring ia iperiod ifrom i29 June i2022 ito i15 iAugust
th
i
th

i2022 iunder ithe isuper- ivision iof iDr. iSyed iAzher iAli, imentor iand ifaculty iInstitute iof iPublic

iEnterprise, iHyderabad.

The imatter ipresented iin ithis iproject iwork ihas inot ibeen isubmitted iby iany ione ior iby ime ifor ithe
iaward iof iany iother idegree iof ithis ior iany iother iInstitute/University

DAKSHINESH ADITHYA K S

2101020

Post iGraduate iDiploma iin iManagement i

Batch iof i2021-2023

DATE: i30/08/2022

2
This iis ito icertify ithat ithe iabove istatement imade iby ithe icandidate iis itrue ito ithe ibest iof iour
iknowledge iand ibelief.

Dr. iAbhay K Srivastava

Place: iHyderabad i [Dept. iof i]

Date: i IPE, iHyderabad

3
 ACKNOWLEDGEMENT

It iis ia igreat ipleasure ifor ime ito iexpress imy irespect iand ideep isense iof igratitude ito imy imentor iand
iguide iDr. iAbhay K Srivastava, iProfessor, iInstitute iof iIPE, ifor ihis iwisdom, ivision, iexpertise,

iguidance, ienthusiastic iinvolvement iand ipersistent iencouragement iduring ithe iplanning iand

idevelopment iof ithis iresearch iwork. iI ialso igratefully iacknowledge ihis ipainstaking iefforts iin

ithoroughly igoing ithrough iand iimproving ithe imanuscripts iwithout iwhich ithis iwork icould inot

ihave ibeen icompleted.

I iam ihighly iobliged ito iProf iS iSreenivasa iMurthy, iDirector, iIPE, iDean iAcademic iand iChairman
iPlacements, iIPE iand iDr iC iV iSunil iKumar, icoordinator iof iPGDM, iIPE ifor iproviding iall ithe

ifacilities, ihelp iand iencouragement ifor icarrying iout ithe iproject iwork. iI iam iobliged ito imy iparents

iSambasivam k iand iSridevi S ifor itheir imoral isupport, ilove, iencouragement iand iblessings ito

icomplete ithis itask.

I iwish ito iexpress imy iappreciation ito imy ifriends iDayanesh iand iAbhimanyu iand igrateful ithanks
ito iproject ifellows iat idepartment ifor itheir ihelp iand imotivation ithroughout imy iproject iwork. iI

ialso iwould ilike ito iexpress imy ideep iand isincerely ithanks ito imy i[Anurag iSharma iand iMotilal

iOswal] ifor ihis iconstructive isuggestions, isupport iand iencouragement.

I iam ialso ithankful ito ithe ianonymous ireviewers iof imy iresearch iwork. iTheir icomments iand
isuggestions iwere ivery ihelpful iin ishaping imy iproject iwork. iI iwould ialso ilike ito ithank iI iwould

ialso ilike ito iextend imy ispecial ithanks ito i[Prof. iSIP iCoordinator iname], ifaculty iand iSIP

iCoordinator, iIPE iand iother istaff imembers iof iIPE, iHyderabad, ifor itheir itimely ihelp iand

icooperation iextended ithroughout ithe icourse iof iSummer iInternship iProgramme.

Finally, iI iam iindebted iand igrateful ito ithe iAlmighty ifor ihelping ime iin ithis iendeavor

DAKSHINESH ADITHYA K S

2101020

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 Abstract
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 non-
banking institutions which provide certain banking services without
meeting the legal definition of a banks are a subset of the financial
services industry. A banking system is also referred to 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. Indian banking system for the past
three decades has several outstanding achievement to its credit. The
most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking
system has reached even to the remote corners of the country. This
is one of the main reasons for India’s growth process. The banks are
the main participants of the financial system in India.

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6
CONTENTS

SR.NO TITLE PG.NO

1 Declaration 2

2 ACKNOWLEDGEMENT 4

3 ABSTRACT 5

4 CHAPTER i– i1 iINTRODUCTION 8-45

5 CHAPTER i-II iREVIEW OF LITERATURE 46-49

6 CHAPTER-III iRESEARCH METHODOLOGY 50-52

7 CHAPTER i– iIV I DATA ANALYSIS 53-56

8 CHAPTER i– iV I FINDINGS,SUGGESTIONS AND CONCLUSION 57-59

9 CHAPTER i– iVI I REFERANCES 60

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 CHAPTER – 1 i i

INTRODUCTION

ABOUT THE BANKS:

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 service, such as checking
accounts, money orders and cashier’s cheques. The banks also offer
8
investment and insurance products. In the early 1990’s the then
Narsimha Rao Government embarked on a policy of liberalization
and licensing a small number of private banks. On the suggestions of
Narsimhan committee, the banking Regulation Act was amended in
1993 and thus the gates from the new private sectors banks were
opened. This came to be known as the new generation tech-savvy
banks, and included Global Trust Bank ( the first of such new
generation banks to be set up), which later amalgamated with
oriental bank of commerce, Axis Bank (earlier as UTI Bank), ICICI
Bank, Development Credit Bank, IndusInd Bank, Kotak Mahindra
Bank, Yes Bank and HDFC Bank. the private sectors played a strategic
role in the growth of joint stock banks in India. The country is flooded
with foreign banks and their ATM stations. Efforts are being put to
give a satisfactory service to customers. Phone banking, Net banking
and machine deposit is introduced.[1] The private sector banks are
always trying to innovate new products avenues new schemes,
services and make the industries to achieve expertise in their
respective fields by offering quality service and guidance. They
introduce new technology in the banking service. Thus, they lead the
other banks in various new fields for example introduction of
computerized operations credit card business, ATM services. The
banks that were under the control of the private sector before the
Second World War have enormous experience and expertise under
their belt. Also there were many foreign banks which were
functioning under complete private ownership since the 1950s. The
prominent private sector banks had many unique characteristics
However, after the great depression, the government gave
permission for private entrepreneurs to set up private sector banks
on a massive scale. These private sector banks can be broadly
classified into two categories. They are follows;
 Old Private sectors banks
 New Private sector banks
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Old Private Sector Banks:
The old private sector banks were those banks which were working
in the private sector before the great depression. The old private
sector banks have been operating since a long time and may be
referred to those banks, which are in operation from before 1991.
These banks are more than 50 years old. The banks, which were not
nationalized at the time of bank nationalization that took place
during 1969 and 1980 are known to be the old private sector banks.
There are 14 old private sector commercial banks in India. They are:
S.N Name of the bank Year of Origin
o Establishmen (State)
t
1. City Union Bank 1904 Tamilnadu
2. South Indian Bank Ltd. 1905 Kerala
3. Nainitial Bank Ltd. 1912 Uttarakhand
4. Ratnakar Banks Ltd. 1912 Maharastra
5. The Karur Vysya Bank Ltd. 1916 Tamilnadu
6. Catholic Syrian Bank Ltd. 1920 Kerala
7. Tamilnadu Mercantile Bank 1921 Tamilnadu
Ltd.
8. Karnataka Bank Ltd. 1924 Karnataka
9. The Lakshmi Vilas Bank Ltd. 1926 Tamilnadu
10. Dhanalakshmi Bank Ltd. 1927 Kerala
11. ING Vysya Bank Ltd. 1930 Karnataka
12. Federal Bank Ltd. 1931 Kerala
13. SBI Commercial and 1955 Maharastra
International Bank Ltd.
14. Jammu and Kashmir Bank 1983 Jammu an
Ltd. Kashmir
New Private Sector Banks:
The new private sector banks are those that have come into
operation very recently. The banks, which came in operation

10
after1991, with the introduction of economic reforms and financial
sector reforms are called as new private sector banks. Banking
regulation act was then amended in 1993, which permitted the entry
of new private sector banks in the Indian banking sector. However
there were certain criteria set for the establishment of the new
private sector banks.
 The bank should have a minimum net worth of 100 crores.
 The promoters holding should be a minimum of 25% of the paid up
capital.
 Within 3 years of the starting of the operations, the bank should
offer shares to public.
The new private sector banks that were established in the private
sector after the Second World War actually escaped from the
conditions of nationalisation. There are seven new generation
private sector banks in India. They are:
S.No Name of the bank Year of Origin
Establishment (State)
1. Axis Bank Ltd. 1995 Maharastra
2. HDFC Bank Ltd 1994 Maharastra
3. Indusland Bank Ltd. 1994 Maharastra
4. Development Credit Bank Ltd. 1995 Maharastra
5. ICICI Bank Ltd. 1996 Maharastra
6. Kotak Mahindra Bank Ltd. 2003 Maharastra
7. Yes Bank Ltd. 2005 Maharastra

EVOLUTION OF PRIVATE SECTOR BANKS:

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Historically, the development of joint stock banking in India was
greatly aided by the private sector banks. Private sector banks had
extraordinary expansion over the first half of the 20th century. As a
consequence, there were 566 private banks in 1951, of which 474
were non-scheduled and 92 were scheduled according to the
amount of capital they had. With the creation of State Bank of India
in 1955 and the subsequent two waves of bank nationalization—one
in July 1969 (14 large banks), and another in April 1980—the
influence of private sector banking began to wane (takeover of 6
banks). As a result, there are now more public sector banks.
There are now 32 private banks, of which 24 were formed before
1993–1994 and eight were founded after the RBI issued guidelines
for the creation of new banks in the private sector in January 1993 in
response to the recommendations of the Narasimham Committee–I.
(1991).
Compared to new private sector banks, old banks are small in size
because today’s growth of this sector has grown huge and the
technology are advanced. So, For example, the average net value of
the 24 Old Private Banks (OPBs) at the end of March 2000 was Rs.
179.67 crore per OPB as opposed to Rs. 479.88 crore each NPB.
Although some of them have sporadic presences outside of the
locations in and around which they originated, the OPBs are mostly
regional in nature. At the end of March 2003, there were 999 NPB
branches and 3491 OPB branches.
The Narasimham Committee-I, which supported competition in the
banking sector, unambiguously recommended allowing private and
foreign banks to operate in the sector. In response to the
committee's recommendations, the RBI established regulations for
the creation of private sector banks in January 1993. According to
the rules, private banks have to be incorporated as public limited
companies under the 1956 Indian Companies Act. The paid-up capital
must be at least $100 billion. The minimum paid-up capital was
12
increased to Rs. 200 crore under the new criteria published in 2001,
and it must be increased to Rs. 300 crore within three years of the
start of company. A shareholder's right to vote and the promoters'
stake must both be at least 40% and shall not exceed 10%.
It is preferable for banks to locate their primary offices in areas
without any other banks having similar offices. These banks must
follow the same priority sector lending goals as other domestic
banks. The rules are designed to make sure that new entrants are
both financially and technologically viable from the start. One of the
factors taken into account by the RBI while approving OPBs was that
the new banks would begin operating in a professional way, sending
out crystal-clear signals that would strengthen the reputation of the
commercial banking sector and inspire trust in the depositor public.

FINANCIAL PERFORMANCE:
Scheduled Commercial Banks significantly outperformed 1995-96 in
terms of their financial performance in 1996-97 (Tables 3.4). For each
segment, net profits rose. Either an improvement in operational
profitability, a reduction in the requirement for provisioning, or both
contributed to the increase. According to "mark-to-market"
standards, banks' provisioning obligations significantly decreased as
a result of the relative drop in yields on government assets.
This made it possible for public sector banks—particularly
nationalised banks—to boost their net earnings. The spread or net
interest income growth in 1996–1997 also led to increasing
profitability. In the case of public sector banks, the spread-to-total-
assets ratio climbed by 8 basis points, from 3.08 percent in 1995–
1996 to 3.16 percent in 1996–1997.
During the same period, the spread for the new private sector banks
increased by 7 basis points, from 2.84 to 2.91 percent, while it

13
decreased by 18 basis points for their older counterparts, from 3.14
to 2.96 percent. With respect to international banks, the spread
increased by 35 basis points, from 3.74 percent in 1995–1996 to 4.09
percent in 1996–1997, which was the largest rise.

THE IMPORTANCE OF THE STUDY:

The current New Generation of the best private sector banks of India
are taken to the current study.
The current study offers additional details regarding Indian private
sector banks in comparison. Customers have the opportunity to

14
choose their investment through the study's comparison analysis.
Consequently, the investigator measured the banks. 
Financial standing of India according to financial indices. The Federal
and HDFC banks are two of India's top private banking institutions.
Some of the Private sector Banks plays vital role in the Indian
economy are:
i) Offering high degree of Professional Management:
The private sector banks contribute to the introduction of a highly
skilled management and marketing idea into banking. It aids the
public sector banks in acquiring comparable expertise and
technology.
ii) Creates healthy competition:
The private sector banks provide the banking system's overall
efficiency levels some good competition.
iii) Promotes International Investment:
The private sector banks, particularly foreign banks, have a
significant impact on foreign investment in the nation.
iv) Promotes access to international capital markets:
Private sector foreign banks assist Indian businesses and government
organisations in obtaining the funding they need from global capital
markets. Because they have their main offices and other branches in
significant overseas cities, providing this service is made simpler for
them. They significantly contribute in this way to the development of
trade and industry in the nation.
NEW PRIVATE SECTOR BANKS: 
Of the 13 "in principle approvals" granted by the RBI, ten new private
sector banks have already begun operations. The RBI gave its
preliminary clearance to three regional private banks, one in each of

15
Andhra Pradesh, Maharashtra, and Karnataka. In 1996–1997, the
intermediation ratio—the ratio of operational expenses to total
assets—among new private sector banks was among the lowest. In
1996–1997, the new private sector banks' intermediation ratios were
1.92 percent, compared to 2.50 percent for the old private sector
banks and 2.88 percent for the public sector banks.
The highest equivalent ratio, 3.01 percent, was, however, recorded
for international banks in the same year. In 1996–1997, the new
private sector banks had the highest net profit-to-total-assets ratio
(1.77%), followed by foreign banks (1.41%), old private sector banks
(0.92%), and public sector banks (0.56%).

NON-PERFORMING ASSETS (NPAs): 

A bank's loan portfolio's quality may be gauged by looking at the
ratio of NPAs to advances. There is sometimes a discrepancy
between gross and net NPA. Internationally, net non-performing
assets (NPA), which is produced by subtracting from gross non-
performing assets (NPA) factors like interest due but not recovered,
part payments received and held in suspense accounts, etc., is
recognised as the most pertinent indication of banks' financial
health.
According to NPAs during 1996–1997, the nationalised banks had the
greatest ratio of net NPAs to net advances (10.07%), followed by
public sector banks (9.18%), SBI and associate banks (7.07%), old
private sector Indian banks (5.99%), foreign banks (2.50%), and new
private sector Indian banks (2.07 per cent). Since there have been far
fewer new NPAs since the publication of new prudential rules, the
current level of NPAs mostly reflects the overhang of earlier NPAs
(i.e., NPAs that occurred before the guidelines were issued).

16
PRUDENTIAL REGULATIONS: 
In 1997–1998 the prudential regulations were adjusted and
modified. Loan defaults in any two quarters that have been rectified
prior to the balance sheet date by paying the past-due amount from
legitimate sources are not included as non-performing assets (NPA).
Agricultural advances that have interest or instalment payments that
are overdue by more than two quarters as of the due date of
repayment will be considered as NPA as of the accounting year
ending in March 1998.

RECENT TRENDS IN NEW GENERATION PRIVATE COMMERCIAL

BANKS:
There are ground-breaking reforms being implemented in the Indian
economic landscape. The banking industry is the major actor in the
financial sector, which has also been through a metamorphic
transition. The banking sector is now more resilient and able to resist
the stresses of the market. While more disclosures and openness
have been added to the internationally accepted prudential
requirements that have been enacted, the Indian banking industry is
progressively implementing the best practises in risk management,
corporate governance, and accounting. While interest rates are now
unregulated, the strictness of directed lending is being gradually
eased.
Today, there is a very well-developed banking system with many
classes of banks, including co-operative banks, regional rural banks,
old and new generation private sector banks, public sector banks,
and foreign banks. The Reserve Bank of India serves as the system's
founding head. The banking business has seen tremendous
expansion, and its diversity has been so astounding that it has never
before been seen in the history of banking anywhere in the world.
The banking business has seen enormous development during the
17
previous 41 years from 1969. The banks have abandoned their old
roles and have been developing, enhancing, and releasing new kinds
of services to cater to the emerging needs of their customers.
Massive branch expansion in rural and underdeveloped areas, the
mobilisation of savings, and the diversification of credit facilities to
neglected sectors like small-scale industry, agriculture, and other
preferred sectors like export sector, etc. have led to the widening
and deepening of the financial infrastructure and transferred the
fundamental characteristics of class banking into mass banking.
Many more banks are in the process of setting up subsidiaries for
merchant banking into mass banking, leasing, and mutual funds. A
few banks have started offering factoring services.

The following criteria were used to assess the effectiveness of PBs:

1) Business per branch, 
2) Operating costs per branch, 
3) Profit per branch, 
4) Profit per employee, 
5) Business per employee, 
6) Establishment expenditures per employee, and 
7) Business per branch are the first three metrics.

1) Business per branch:

A key metric to assess the effectiveness of banks is the Business per
branch, which is often where profitability resides. If business at each
branch increases year over year, it is safe to infer that the bank's
position in the market has been improving.

18
Business per branch, which traditionally determines profitability, is a
critical factor in determining how well banks operate. If business at
each branch increases year over year, it is safe to infer that the
bank's position in the market has been improving. The business per
branch for 24 PBs, including eight new private sector banks, is shown
in Table 6.4 during the research period. Data for NPBs are available
for the years 1995 to 1996. The pace of expansion was moderate in
the first two years, 1992–93 and 1993–94, but picked up in 1994–95
and increased from 1997–98 when the growth of business per
branch of OPBs is taken into account.
According to an interbank analysis, IDBI, PBL, and LKBL, which hold
the top three spots, had the highest growth rates among PBs in
terms of business per branch, while GTB, UTI, and HDFC, which
occupy the bottom three spots, had the lowest growth rates.
Regarding Business per branch, differences in CV among various PBs
are not substantial.

2) OPERATING EXPENSES PER BRANCH:

The average operating costs per branch for OPBs were Rs. 30.08 lac,
compared to Rs. 225.64 lac for NPBs. Because of their extensive
experience in credit evaluation and disbursal, the NPBs have hired
personnel from public sector banks that give them enormous
salaries. As a result, NPB operating costs were greater than OPB
operating costs. Operating costs for each OPB branch were Rs. 16.64
lac in 1992–1993 and Rs. 56.05 lac in 2002–2003, an increase of
more than 3.5 times. Operating costs per branch for the New Private
Sector Banks began at Rs. 262,67 lakh in 1995–1996 and fell to Rs.
243,40 lac in 2002–2003.

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3) PROFIT PER BRANCH:
The data relating to profit per branch for the study period are
presented in Table 1.1. With the exception of two new and two
existing private sector banks, every other bank has generated profits
per branch during the course of the time. Among the OPBs, BORI
made losses per branch in the years 1997–1998 and 1998–1999, as
well as UWBL for one year, 2001–2002. Among the NPBs, CBL during
the years 2001–2002 and 2002–2003, as well as GTB in 2002–2003,
both experienced branch losses.
By 2002–2003, GTB's condition had gotten so terrible that RBI issued
a moratorium in 2004 and it was later amalgamated with OBOC.
Throughout the research period, there is no consistency in the profit
per branch from year to year.

Table 1.1

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The co-efficient of variance amongst banks demonstrates that there
is a loge variation in the profit per branch of PBs. As a result, profit
stability varies greatly from bank to bank and year to year.

EFFICIENCY AT EMPLOYEE LEVEL:

4) BUSINESS PER EMPLOYEE:
In the domestic private sector banks, average annual business
increased from Rs. 43.18 lac in 1992–1993 to Rs. 257.15 lac in 2002–
2003. (Table 1.2). Particularly, it started to soar upward in the years
after 1994–1995. It increased by roughly five times during the course
of the research period, growing at a pace of 15%.
The top three banks overall according to an examination of their
mean values were IIBL (1827.91 lac), UTI (1014.73 lac), and GTB
(873.13 lac), whereas the worst three were SBL (72.6 lac), CSBL
(85.79 lac), and BORL (99.75 lac). When compared to OPBs, it
demonstrates that NPBs are at the top of the list.

21
 Table 1.2

5) ESTABLISHMENT EXPENSES PER EMPLOYEE:

Information on Establishment costs per employee is provided in
Table 1.3. Establishment costs for PBs grew three times between
1992–1993 and 2002–2003, from Rs. 0.64 lac to Rs. 2.61 lac per
employee. Throughout the research period, there was a progressive
rise in the startup costs of various banks. Due to the implementation
of cutting-edge technology and a higher level of computerization,
these banks' growth rates are similarly modest.
The growth rates in various private sector banks have been analysed,
and the results show that there are significant variances in setup
expenditures per employee. The establishment expenditures per
employee increased more quickly in certain banks (such as CSBL,
DBL, and GTB) than in others (such as BPL, IOBI, and HDFC), while
they increased more slowly in a few other banks (such as CSBL, DBL,
and HDFC).

22
 Table 1.3

6) PROFIT PER EMPLOYEE:

Table 1.4 shows that, on average, profit per employee for PBs
increased from Rs. 0.18 lac in 1992–1993 to Rs. 2.08 lac in 2002–
2003. The profit per employee increased significantly in the years
1994–1995, perhaps as a result of the first shock of changes having
nearly passed and revenue beginning to increase at that point. Even
while profit per employee has grown by more than nine times on
average, it still lacks stability.
Comparatively speaking, the PBs have continuously generated profits
during the period as opposed to the nationalised banks, which saw
losses per employee for a significant number of years. While PBs had
an average profit per employee of Rs. 2.5 lac, PSBs had a profit per
employee of Rs. 0.39 lakh.

23
 Table 1.4

List of New Generation Private Sector Banks: 

New generation private sector banks are those that were founded
following the nationalisation of commercial banks or after 1991. The
following banks were chosen for the study purposes from among
those private banks.
S. No Name of the bank Year of
Establishment

1. Axis Bank Ltd 1995

2. HDFC Bank Ltd 1994

3. ICICI Bank Ltd 1996

4. Kotak Mahindra Bank Ltd 2003

24
 5. Yes Bank Ltd 2005

Table 2

1) AXIS BANK LTD:

The banking industry, which holds a special role in a country's
economy, is one of the most crucial instruments of national growth.
The strength of the banking sector demonstrates the nation's
economic progress. The banking business has seen significant
changes as a result of financial market deregulation, market
liberalisation, and economic reforms, which have increased
competition and advanced technology and ushered in a new era of
banking.
The income statement and balance sheet's financial data are used to
determine the ratios. You should bear in mind the concepts and
procedures that accountants use when creating financial statements
in order to analyse a company's financial situation and preferences
when you analyse the financial statements.
CONCERN STATEMENT:
The banking system serves as the foundation of any nation's
economy. Everyone agrees that a robust and healthy financial sector
is a requirement for long-term economic development. The Indian
banking system is characterised by a vast network of banks that cater
to a variety of consumer financial demands. The Axis Bank is a well-
known Indian bank that offers a wide range of goods and a large
number of branches.

IMPORTANCE OF THE STUDY:

25
In the majority of the nations, government regulation protected
banks from the forces of competition. This also applies to India.
Restrictions on the admission and growth of private and foreign
banks were increasingly tightened after the majority of the major
commercial banks were nationalised in 1969. Additionally, the
Reserve Bank of India started requiring nationalised banks to adhere
to standardised interest rates, spreads, and service adjustments.
Lack of free market rivalry among public and private banks is the
source of this.
The banking industry's competitive pressure is continuing to grow
over time. The viability of commercial banks was also threatened by
other areas of concern, such as the rise in non-performing assets and
the decline in profitability and efficiency. Commercial banks have had
a crucial role.
This makes the function of commercial banks in developing nations
and planned economies like India particularly crucial. The goal of the
current study is to look at developments in one of the country's top
banking sectors' financial performances (Axis Bank).

COMPONENTS OF THE CURRENT TRENDS:

 The bank's liquidity situation is poor. If the bank's current ratio
during the study period is less than 1 (current liabilities exceed
current assets), it may have trouble making timely payments to
its creditors. Low results, however, should worry the
management even if they may not always signal a serious issue.
 The bank's debt is relatively substantial, as seen by its debt
ratio. Leverage risk exists. In order to solve this issue, the bank
might also examine the company's interest coverage ratio,
which is calculated by dividing operational revenue by debt

26
 servicing expenses. Even a company with a lot of debt will be
able to satisfy its commitments with a strong operational
income.
 The fact that the bank's earning power has increased
consistently every year between 2010 and 2015 is proof of this.
A dependable company to invest money in has a growing EPS,
which indicates good profits and a strong financial situation.

2) HDFC BANK LTD:

Incorporated in August 1994, HDFC Bank Limited (Housing
Development Finance Corporation) has its registered office in
Mumbai, India. In January 1995, HDFC Bank launched its regular
business banking activities. One of the first companies to gain "in
principle" authorisation from the Reserve Bank of India (RBI) to open
a bank in the private sector was HDFC. Currently, the bank has an
impressive network of more than 4,805 branches dispersed across
Indian cities. Online real-time connections exist between every
branch. Telephone banking is also used to serve customers in over
500 locations. Additionally, the bank has a network of 2,657
networked ATMs that spans over 12,860 locations across cities and
towns.

INDUSTRY PROFILE:
A bank is a financial institution that offers its customers banking and
other financial services. A bank is a financial institution that performs
basic banking functions such as receiving deposits and disbursing
loans. Money lenders conducted financial transactions prior to the
foundation of banks. Interest rates were extremely expensive at the
time, and there was no guarantee of public savings or loan

27
consistency. To address these issues, the government built an
organized banking system, which is strictly regulated.

OBJECTIVE OF THE BANK:

The mission of HDFC Bank is to elevate Indian banking to a global
level. It seeks to achieve two things: The primary goal is to become
the go-to provider of banking services for the targeted retail and
wholesale customer segments. The second objective is to provide
profitable growth that is consistent with the bank's tolerance for risk.
The bank is committed to following the highest moral principles,
professional honesty, good business practises, and legal compliance.
HDFC Bank's business philosophy is based on the following five core
principles:
• Operational excellence 
• People 
• Sustainability 
• Product leadership
• Customer focus

NEXT GEN PUBLISHING: 

Next Gen Publishing Ltd. was established in October 2004 and began
doing business in January 2005 with the aim of providing the best in
the publishing industry. It was founded by its parent firms, Forbes
Group, a division of the Shapoorji Pallonji Group, and HDFC Bank.
The following are some of its services:

28
• Print Magazines
• Awards properties
• Digital Publishing

STATEMENT OF PROBLEM:
The problem statement is centred on finance and seeks to analyse
the HDFC bank's financial performance during the last five years.
Outsiders and investors can assess past, present, and financial
condition in order to anticipate future success through the use of
financial performance analysis. With the use of financial statements
from the previous five years, the research is carried out to determine
whether or not the organization's financial performance is sound.

3) ICICI BANK LTD:

In 1994, ICICI Limited, an Indian financial corporation, established
ICICI Bank as a wholly owned subsidiary. When the company opened
up shares of ICICI Bank to the public four years later, ICICI's
ownership had dropped to 46%. As the first Indian company and the
first bank or financial institution from Asia that is not Japan to be
listed on the NYSE, ICICI Bank conducted a stock offering in the form
of ADRs on the New York Stock Exchange (NYSE) in the year 2000.
The management of each ICICI and ICICI Bank has been of the belief
that a merger between the two organisations would prove to be
beneficial due to changes in the firm structure and emerging
competition in the Indian banking market.
The merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank was approved by the boards
of directors of both ICICI and ICICI Bank in 2001. (Redyy, 2020).

29
In terms of market capitalization, ICICI Bank ranks third among all the
corporations listed on Indian stock markets and is the most valuable
bank in the country. The ICICI Bank's financial analysis will support
shareholders' and investors' upcoming investments in the business.

STATEMENT OF THE PROBLEM:

The performance and effectiveness of commercial banks are crucial
components of a nation's financial system. Increased efficiency and
bank profitability have been the overarching goals of India's banking
sector reforms. Prior to banking reforms, public sector banks held a
near-monopoly in the sector. However, a number of private and
international banks have expanded the market with more autonomy
thanks to the banking reforms.

RESEARCH METHODOLOGY:
The financial performance of ICICI Bank, which was connected to the
private sector, has been measured and evaluated in the current
study.
The study's foundation is secondary data, which was gathered from
annual reports of the relevant banks, periodicals, journals, papers,
and other public sources.
The research spans a five-year period, from the years 2014–15 to
2018–2019. To examine and contrast the trends in banking business
and financial performance, ratio analysis was used.

MISSION OF THE BANK:

 Deliver premium, world-class goods and services to become the
bank of choice for their clients.

30
  Globalise the boundaries of their business.
 Be proactive in assisting India in achieving its greatest potential.
 To keep a sound financial position, one should diversify one's
income across industries and regions.

DIGITAL GROWTH:
The Bank had upgraded I Mobile, its mobile banking app, to I Mobile
Pay in December 2020, providing payment and banking services to
users of any bank. As of the end of December 2021, there were 53
lakh activations from non-ICICI Bank account holders. Non-ICICI Bank
account holders' transaction value climbed by 73% sequentially in
Q3-2022.
At Rs. 4,55,326 crore (US$ 61.3 billion), the value of mobile banking
transactions surged by 50% year over year in Q3-2022. Over 90% of
transactions involving savings accounts were made using digital
channels such the internet, mobile banking, point of sale, and others
in 9M-2022. Through FASTag, The Bank dominates the market for
electronic toll collection. In Q3-2022, the Bank had a market share of
39% by value in electronic toll collections through FASTag, with a
42% increase in collections year over year.

4) KOTAK Mahindra Bank Ltd:

One of the largest financial services companies in India was founded
in 1985 and is called Kotak Mahindra. The group's flagship firm,
Kotak Mahindra Financing Ltd. (KMFL), obtained a banking licence
from the Reserve Bank of India (RBI) in February 2003, transforming
it into the country's first non-banking finance company, Kotak
Mahindra Bank Ltd. (KMBL).

31
Small and Medium Enterprises (SMEs) engaged in manufacturing,
trading services, and exporting can choose from a wide range of
banking products and services offered by the commercial banking
division. It features specialised divisions that offer financing to the
agricultural industry, operators of commercial vehicles, and
infrastructure companies. By offering term loans for the purchase of
tractors, it assists farmers all throughout India. Additionally, the Bank
provides company loans and small ticket gold loans.

EQUITY MARKET IN INDIA:

128 years of experience appears to be a proud milestone for the
prestigious Stock Exchange that established the stock broking
industry in India. Since 318 people joined what is now known as "The
Stock Exchange, Mumbai" in 1875 by paying a regal fee of Re1, a lot
has changed.
In addition to being scientifically created, SENSEX is built using widely
recognised construction and review methodologies. SENSEX, a basket
of 30 component stocks reflecting a sample of sizable, liquid, and
representative firms, was first established in 1986. SENSEX's base
year is 1978–1979, and its base value is 100. The index is frequently
covered by print and electronic media in both local and foreign
markets.

METHODS OF FINANCIAL ANALYSIS:

A) ANALYSIS OF COMPARATIVE STATEMENTS: 
This type of analysis is also known as a horizontal analysis. These are
percentage-formatted statements of the financial situation at various
points in time. To provide an understanding of the financial situation
at two or more times, the components of financial position are
presented in a comparison format. These financial and operations
32
performance may be thoroughly examined thanks to these
statements. Two varieties of comparative statement analysis exist: -
 Comparative Income Statement and
 Comparative Balance Sheet.

B) THE ANALYSIS OF COMMON SIZE STATEMENTS: 

The analysis of common size statements, also known as vertical
analysis, entails assessing financial statements in which the financial
statements' components are translated into percentages of a
common basis. It aids analysts in comparing firms of various sizes
operating in various sectors.
 Common size balance sheet and
 Common size income statement analyses.

C) TREND ANALYSIS: 
Trend analysis aids in the forecasting of diverse objects' future
trajectories. The base year is considered to be equal to 100 for the
purposes of calculating the trend, and the percentage of each item is
then determined.
It has 1600 branches and 2519 ATMs, making it the second-largest
private sector bank in India as of April 2019.
5) YES BANK LTD:
In 2004, YES BANK Limited, a private sector bank, was established.
Mr. Rana Kapoor took over as the bank's managing director and chief
executive officer when Mr. Ashok Kapur, one of the bank's founders,
passed away. With the passing of time, this bank has developed into
a "Full Service Commercial Bank," delivering a broad range of goods,

33
services, and technology-driven digital solutions to corporate, MSME,
and retail clients.
Following the central bank's asset quality examinations in 2017 and
2018, which sharply increased its bad loans ratio and exposed
serious governance flaws that necessitated a full change of
management, YES BANK encountered problems. The bank then had
trouble fixing its capitalization problems. After IL&FS's demise in
2018, the YES BANK essentially lacked the resources to revive. How
could the bank increase its loan book by 80% between March 31,
2017, and March 31, 2019, despite a weak economy, exceptionally
low demand for credit, and a lack of indicators of a rebound in
private investment? According to M. K. Venu (7 March 2020), the
collapse of YES BANK raises a lot of questions.

OBJECTIVE OF THE BANK:

Every economy needs an efficient and healthy financial system since
it is so important to progress. The purpose of the current study is to
evaluate YES BANK's financial performance. In order to present the
academics and stakeholders with the true historical reality, this bank
has been specifically picked. Additionally, the research period from
2011 to 2020 is included in the analysis since it is exactly a decade
prior to the implementation of the RBI's restructuring plan in March
2020 to save the failing bank.

ANALYZING PERFORMANCE:
In the first four years of our analysis, the capital adequacy of the YES
bank was good; nevertheless, the last year was poor. This is how it
may be explained:

34
  The capital adequacy ratio is positive for the first three years,
growing, then declining, but it is disastrous in 2020, sharply
declining.
 Although the debt-to-equity ratio varies, overall performance
during the study period has been strong.
 Until 2019, advances to assets are rising. Liquidity issues arise
when this ratio is excessively raised.
Although YES Bank's earnings have been declining during the study
period, they were particularly poor last year. Here are some
explanations that should help.
 Except for 2018, the net profit margin has been declining
throughout the research period, but in 2020 it dropped
significantly and reached a loss-making level. Net profit margin
declines are a bad sign for banks.
 The net interest margin was stable for the first two years,
slightly improved the following year, but has been declining for
the past two years. Net interest margin declines are a bad sign
for banks.
Yes Bank is one of the best performing banks in the private banking
sector. This study looked at the performance analysis of the YES Bank
from 2016 to 2020. It has been determined that Yes Bank's
performance has improved relative to the criteria, but not overall.
In a word, the loans made to deserving businesses with bad credit
continue to be the root of the issue that Yes Bank is currently
experiencing. Both the bank's management and its oversight agency,
the RBI, are at fault for this because they have the authority to
determine and control the bank's activities.
BANKING POLICY:
1) BANK SUPERVISION:

35
Bank Supervision: Starting with the inspection cycle that began in
July 1997, a new method has been implemented in the yearly
financial inspection of banks as advised by the Working Group on the
On-site Supervision of Banks by RBI (The Padmanabhan Working
Group—1995). Based on a modified version of the CAMEL model
called CAMELS, which assesses banks' capital adequacy, asset quality,
management, earning, liquidity, and systems and control, it adds the
statutorily required characteristics of solvency, liquidity, financial,
and operational health.

2) CREDIT DELIVERY SYSTEM:

The RBI kept up its attempts to improve the level of restraint in how
bank credit is used by getting closer to a loan system.
As a result, from October 21, 1997, the minimum "loan component"
requirement for borrowers with working capital (fund-based) credit
limits of Rs. 10 crore and higher from the banking system was
imposed at the uniform level of 80%.
Several steps were done in 1997–1998 to provide banks more
flexibility and independence in the provision of loans. The ability to
develop their own techniques for determining a borrower's need for
working capital was granted to banks. Additionally, the Bank Boards
were granted the flexibility to omit from the loan system any
operations that are cyclical, seasonal, or otherwise inappropriate for
the transmission of credit through the loan system.

3) CONSORTIUM FINANCE: 

36
Borrowers are now entirely free to offer credit on their own when
the loan ceiling exceeds Rs. 50 crore per borrower without being
required to participate into consortium arrangements. In
collaboration with the borrower and the funding institutions, banks
are now free to select any other option, including syndication.

4) REFINANCE FACILITY:
The RBI has created a General Refinance Facility in place of the
sector-specific refinance Facilities that were either deleted or
rationalised as a result of the process of CRR and refinance facilities
rationalisation.
In 1996, the refinancing option using government securities was
discontinued. With effect from April 26, 1997, banks are given export
credit refinancing at bank rates to the extent of 100% of the increase
in outstanding export credit eligible for refinancing over the level of
such credit as of February 16, 1996. Previously, export credit
refinancing to scheduled commercial banks was based on
outstanding level of export credit.

Comparison between Private and Public Sector Banks:

Online banking was first popularised in India by the private sector
banks. This was mostly a result of the private banks' advanced
technical capabilities. Nowadays, online banking is very popular since
it allows you to do financial activities while sitting anywhere. You are
not required to go to your bank in person. Since they first entered
the Indian market, private sector banks have utilised cutting-edge
technology and completely automated processes, in contrast to
public sector banks (PSB), which do not.

37
The public sector banks in India continue to be many people's chosen
locations despite the technical obstacles since they are thought of as
safer possibilities for money deposit.

Private Bank Statistics:

Compared to FY11, private banks had growth of 20% in FY12. At 18%
of total deposits, private banks were represented. Private Banks saw
a slower pace of increase in deposits in FY12 compared to FY11
(17.1% vs. 21.9%).
Private banks made up 19% of total loans and advances in terms of
assets. Credit to industry and services, which makes up more than
two-thirds of all bank credit, witnessed muted expansion.
A slower rise in deposits translated into a slower expansion of bank
lending because deposits are the primary source of funding for
banks. As a result, all bank groups had reduced increase in advances
in FY12 compared to the prior year. Private banks had slower growth
in FY12 (21.2%) compared to FY11 (26.1%).

38
The total amount of bank credit as of January 2013 was Rs. 50,427.9
billion. Private bank advances totaled Rs 9,928.6 billion. In
comparison to FY11, the credit-deposit (C-D) ratio increased to 78.6%
in FY12. In FY12, private banks' C-D ratio was 82.27%. Return on
Assets (RoA) for private banks increased from 1.43% in FY11 to 1.53%
in FY12.

Private Banks Role:

Over the past 15 years, the private sector has become increasingly
significant to the Indian economy. The unfettered influx of new
cutting-edge technology and Foreign Direct Investment (FDI) brought
about by India's economic liberalisation has greatly expanded the
significance of the private sector in the Indian economy. Banks are
important in this. Over the years, private Indian banks have
demonstrated increased profitability, better asset quality trends,
lower loan costs, and healthy capital levels.

39
Private Sector Indian banks have asset quality concerns under
control.

Private Sector Banks in the Recent Few Years:

In recent years, private sector banks have outperformed their public
sector counterparts in terms of growth, while the latter have
continued to struggle with issues related to asset quality. Private
sector banks have been able to take greater market share away from
government lenders in 2015. According to the Reserve Bank of
India's Financial Stability Report, PSBs with a predominately high
percentage of infrastructure financing are now under the most stress
regarding their asset quality and profitability. Regarding asset

40
quality, profitability, and lending growth, among other things, PSBs
appeared to underperform private banks in 2015.
The PSBs, for instance, had the greatest percentage of stressed
assets at 14.1%, followed by private banks at 4.6% and international
banks at 3.4%. The PSBs have been lending more carefully due to the
strain on asset quality, which has resulted in sluggish loan growth for
them.
GEOGRAPHICAL DISTRIBUTION :
The major cities served as the foundation for the private banks.
Private sector banks are growing their network into urban, semi
urban, and rural areas after seeing expansion in metro areas. The
network distribution of private banks across various sorts of
demographic groups is shown in the table. Private banks are not only
mostly concentrated in urban areas; they have also begun to enter
the rural sector. The establishment of private sector banks has
greatly benefited the semi-urban areas. Private bank branches are
located in semi-urban regions in proportion of 30%.

TABLE 1

41
 STATE WISE DISTRIBUTION OF PRIVATE SECTOR BANKS

TABLE 2
STATE WISE DISTRIBUTION OF PRIVATE SECTOR BANK

Private bank branches were primarily found in the southern and

western states at first. The trend of new branches, however,
suggests that there is a growth in branches in other regions as well,
such as Uttar Pradesh, which added 265 new branches over 91 old
branches, Rajasthan, which added 141 new branches, Madhya
Pradesh, which added 117, and Assam, which added 46. The
increased quality of governance in Bihar is also seen in the expansion
of branch locations. 40 new branches were added in Bihar.

42
COMPARATIVE ANALYSIS OF FEW BANKS:
Total loans and advances:
The table above shows the total advances made by private sector
banks between 2011 and 2020. All loan kinds, both secured and
unsecured, are included in advances. Regarding advances, there has
been a varied rise among all banks. In terms of total advances in
2020, HDFC showed off the most with Rs 10,43,670.88 crores. The
two years with the highest growth rates are 2014 (27.57%) and 2018
(19.57%). ICICI had the highest growth rate in 2014 (17.39%) and the
lowest growth rate in 2017 (4.37%).
The KMB growth rate ranged from 2.64% in 2020 to 63.36% in 2016,
with the former being the greatest. KMB has the highest Annual
Average Growth Rate (AAGR), with HDFC coming in second and ICICI
coming in third. KMB has a low Standard Deviation of Advances,
followed by ICICI, while HDFC has a high Standard Deviation of
Advances.
Three banks are taken for the comparative analysis, they are HDFC
Bank, ICICI Bank and Kotak Mahindra Banks.

43
YEAR HDFC Annua ICICI (Rs in Annua KMB Annua
(Rs in cr.) l cr.) l (Rs in cr.) l
growt growt growt
h rate h rate h rate
(%) (%) (%)
2011 2.08,287.21 - 2,59,106.0 - 27,312.98 -
0
2012 2,46,539.58 18.37 2,81,950.4 8.82 36,460.73 33.49
7
2013 2,96,091.77 20.10 3,14,770.5 11.64 49,389.14 35.46
4
2014 3,67,080.33 23.98 3,59,512.6 14.21 56,929.75 15.27
8
2015 4,50,283.65 22.67 3,85,955.2 7.36 72,843.46 27.95
5
2016 5,45,873.29 21.23 4,51,077.3 16.87 1,35,948.7 86.63
9 6
2017 6,43,134.25 17.28 5,12,587.2 13.64 1,55,540.0 14.41
0
2018 7,88,375.14 22.58 5,85,796.1 14.28 1,91,235.8 22.95
1 0
2019 9,22,502.68 17.01 6,81,316.9 16.31 2,24,824.2 17.56
4 6
2020 11,46,207.1 24.25 8,00,784.4 17.53 2,60,400.2 15.82
3 6 1
AAGR 20.89 13.41 29.95
MEA 5,61,437.50 4,63,285.7 1,21,08851
N 1
SD 2,95,830.18 1,70,999.6 80,023.54
9
Total deposit Total Advance
YEAR HDFC Annual ICICI (Rs in Annual KMB Annual
(Rs in cr.) growth cr.) growth (Rs in cr.) growth
rate rate rate

44
 (%) (%) (%)
2011 1,60,831.42 - 2,56,019.31 - 41,241.95 -
2012 1,98,837.53 23.63 2,92,125.42 14.10 53,143.61 28.86
2013 2,47,245.12 24.35 3,29,974.13 12.96 66,257.65 24.6
2014 3,15,418.86 27.57 3,87,341.78 17.39 71,692.52 8.20
2015 3,83,407.97 21.56 4,38,490.10 13.20 88,632.21 23.63
2016 4,87,290.42 27.09 4,93,729.11 12.60 1,44,792.82 63.36
2017 5,85,480.99 20.15 5,15,317.31 4.37 1,67,124.91 15.42
2018 7,00,033.84 19.57 5,66,854.22 10.00 2,05,997.32 23.26
2019 8,69,222.66 24.17 6,46,961.68 14.13 2,43,461.99 18.19
2020 10,43,670.88 20.07 7,06,246.11 9.16 2,49,878.96 2.64
AAGR 23.13 11.99 23.14
MEAN 4,99,143.97 4,63,305.9 1,33,222.39
2
SD 2,82,251.88 1,42,666.2 75,810.60
6

45
 Chapter -II
i

Review Of Literature

46
OBJECTIVE OF THE STUDY:
This section covers a review of the literature that includes some of
the most significant studies, research papers, publications in various
national and international magazines, official standard books, and
websites on the internet. It also discusses how to analyse financial
statements of companies.
The problem of changing the value of the monetary unit and its
effects on financial statements were discussed by the researchers Al-
tamimi and Hussain (2016) because accountants were preparing
these statements based on the monetary unit stability assumption
without taking into account how prices were changing as a result of
the inflation phenomenon. Their article comes to the conclusion that
continuing to use the historical cost principle when prices are
changing would result in deceptive financial statements, and the
outcomes of financial analysis won't accurately reflect the company's
true status.

47
Since the financial analysis process occurs after the disclosure of
accounting system output, Yaseen (2011) looks at the effects of
accounting principles and accounting assumptions.
The results of the search show that accounting principles and
assumptions have an impact on the accounting measurement
process both positively and negatively. In order to make the findings
of the financial analysis more precise and realistic, research is looking
for ways to reduce the negative consequences of these principles.
According to the study's findings, the historical cost principle was
inconvenient, and the organisation must now use methods like fair
value and work to develop financial management and analysis
approaches in order to reach a compromise between the accounting
and economics concepts of the organization's value.

K. Dinesh Kumar and G.

Venugopal (2018) revealed
that ICICI Bank good
performance of
balance sheet ratios and Debt
coverage ratios and next
position of HDFC Bank. SBI
andKotak

48
Mahindra Bank performance is
good in profitability ratios.
According to K. Dinesh Kumar and G. Venugopal (2018), ICICI Bank
performed well in terms of balance sheet ratios and debt coverage
ratios, coming in second place to HDFC Bank. The profitability ratio
performance of SBI and Kotak Mahindra Bank is strong.
Through ratio analysis, Tirkeyi and Salem (2013) compared the
financial statements of ICICI and HDFC and looked at the financial
status using various ratios. It was discovered that ICICI's financial
situation is substantially better than HDFC's.
Pandya (2015) examined the effects of priority sector advances made
by Indian scheduled commercial banks on their profitability. The
author took into account all the scheduled commercial banks
currently active in India for this. Ratios of Priority Sector Advances to
Total Advances (PSATA) of all Commercial Banks were taken during
the study period as an independent variable, whereas Return on
Assets (ROA), Return on Investment (ROI), Return on Equity (ROE),
Ratio of Operating Profit to Total Assets (OPTA), and Ratio of Interest
Income to Total Assets (INTTA) were taken as dependent variables.
The link between the independent and dependent variables was
investigated using linear regression models. The study finds a
statistically significant association between PSATA and ROI, ROA,
OPTA, and INTTA.
According to the findings, bank profitability is influenced by
developments in key sectors. Additionally, the study demonstrates
that bank ROA and ROI are impacted by priority sector advances. In
order to avoid harming their profitability, the author advises banks to
be cautious when providing loans to priority sectors.

49
Sharifi and Akhter (2016) used the credit deposit ratio as a gauge of
how well a financial institution like a commercial bank is doing. They
claim that it shows the amount of credit that banks have deployed in
relation to the deposits that they have raised. A high credit deposit
ratio shows that banks are creating more credit from their deposits,
and vice versa. Additionally, they claim that the result of this ratio
shows how well the bank is able to utilise its resources. They
conducted a research to illustrate the performance of public sector
banks through the credit-deposit ratio using secondary data
gathered from 26 public sector banks over a 7-year period (2008-
2015). Using descriptive statistics and model for panel data
regression. Their research and analysis shows that the CDR has a
favourable influence on the financial health of public sector banks.
In their study, Jilkova and Stranska (2017) used a few key drivers to
analyse how the Czech Republic's economic environment affected
the functionality and profitability of the banking industry. Using a
"Multiple Linear Regression Model," they have concentrated on
assessing the effectiveness and profitability of the banking industry.
They looked at the model's overall fitness as well as which
independent factors affected the dependent variables' dispersion the
most and least. In addition to focusing on the performance and
profitability over the specified time period, their article also
compares the Czech banking sector's structure to other nations'
banking sectors and indicators in addition to focusing on the
performance and profitability over the specified time period.
Through the use of financial ratios, Karim and Alam (2013) evaluated
the performance of a sample of private sector banks in Bangladesh.
These ratios primarily reflect the sufficiency of risk-based capital,
credit growth, credit concentration, non-performing loan position,
liquidity gap analysis, liquidity ratio, return on assets (ROA), return
on equity (ROE), and net interest margin (NIM). The effects on credit
risk, operational effectiveness, and asset management were

50
examined using multiple regression analysis, and a well-fit regression
model was developed to forecast the future financial performance of
these institutions.

Chapter-III
Research Methodology

51
DATA COLLECTED FOR THE STUDY:
As an academic activity, research should only be used in a technical
meaning. The study includes gathering, organising, and analysing
secondary material as well as redefining a few major concerns. The
audited annual reports of Federal Bank and HDFC Bank served as the
foundation for the whole study.
The secondary data that have been gathered are used to conduct
this research. The analysis of the financial performance of HDFC and
Federal Banks is limited to two years' worth of audited annual
reports, starting in 2013-2014 and ending in 2017-2018. The ratio
analysis, one of the management methods with a larger range of
applications nowadays, was used throughout the entire project.
Current ratio, liquid ratio, debt-to-equity ratio, net profit margin,
return on net worth, and CRAR are the ratios that are being used.
The current work made use of analytical methods including mean,
SD, CAGR, ANOVA, and CAGR.
There are few important factors for the private banks:
1) SMALL SAMPLE:
The best way to find the sample how effective is it in the banks.
380 people are chosen as the sample size. Since the population is
unknown, a 5% confidence interval and confidence level
calculation model are used to estimate the sample size. To gather
sample responders, a practical sampling technique was used.
Although the intention was to choose 380 consumers, the
researcher was unable to reach 20 respondents owing to
respondents' unavailability and some customers' failure to

52
 answer. When the sample was finally reduced to 360, it was
agreed to include a sample of 40 clients from each of the chosen
banks.

2) STATISTICAL TECHNIQUES:
With the use of a computer, the gathered data were coded,
categorised, and then tallied. Henry Garrett Ranking analysis and
the Chi-Square Test were the only statistical tools employed.
III. IMPORTANCE OF THE STUDY:
In the majority of the nations, government regulation protected
banks from the forces of competition. This also applies to India.
Restrictions on the admission and growth of private and foreign
banks were increasingly tightened after the majority of the major
commercial banks were nationalised in 1969. Additionally, the
Reserve Bank of India started requiring nationalised banks to adhere
to standardised interest rates, spreads, and service adjustments.
Lack of free market rivalry among public and private banks is the
source of this.
The banking industry's competitive pressure is continuing to grow
over time. The viability of commercial banks was also threatened by
other areas of concern, such as the rise in non-performing assets and
the decline in profitability and efficiency. Commercial banks have had
a crucial role in giving direction to economic development by
catering the financial requirement of trade and industry in the
country.
The primary source of funding for banks is deposits, and when
deposit growth is muted, bank credit expansion also slows. As a
result, all bank groups had reduced increase in advances in FY12

53
compared to the prior year. Private banks had slower growth in FY12
(21.2%) compared to FY11 (26.1%).

Chapter-IV
Data Analysis

54
1. RATIO ANALYSIS:
Table-1:
Financial Performance of Private Sector Banks with Reference to ICICI
Bank and Selected Private Banks.

55
 GRAPH 1

Interpretation:
According to the data, ICICI Bank has a higher average net profit
margin than the other private banks, with Kotak Mahindra Bank,
Axis, and HDFC Bank following closely behind. The HDFC Bank has
the greatest average return on net worth when compared to other
banks, followed by Axis Bank, ICICI Bank, and Kotak Mahindra Bank,
in that order. From the table. Kotak Mahindra Bank clearly has the
greatest average return on assets when compared to other banks,
followed by HDFC Bank, Axis Bank, and ICICI Bank, in that order. It
shows the ICICI bank's poor performance in terms of return on total
assets. When compared to other banks, it is obvious that Kotak
Mahindra Bank has the greatest average interest spread, followed by
HDFC Bank, ICICI Bank, and Axis Bank, in that order. It shows that
ICICI Bank's overall interest income and costs are more than its
typical working fund, which is a vulnerability.

2. ANALYSIS OF VARIANCES:
Table-2:
Analysis of mean Standard deviation, Coefficient of Variance of Net
profit margin.
PARTICULAR ICICI HDFC AXIS KMB
MEAN 20.65 19.93 19.99 20.438
SD 2.147 1.022 0.752 2.210
CV 0.104 0.051 0.038 0.108

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Interpretation:
It is clear from the data that, in comparison to other banks, ICICI has
the greatest mean net profit margin (20.65). When compared to
other banks, Kotak Mahindra Bank has the largest standard deviation
of net profit margin (2.210) and coefficient of variation (0.108),
followed by ICICI Bank, HDFC Bank, and Axis Bank, in that order. On
Net Profit Margin, ICICI Bank has the highest Mean value (20.65), a
moderate standard deviation (2.147), and a low covariance
coefficient (0.104).

3) RETURN ON NET WORTH:

Table-3:
Analysis of mean, standard deviation, coefficient of variance of
Return on net worth.
PARTICULAR ICICI HDFC AXIS KMB
MEAN 13.294 18.006 16.59 13.116
SD 1.446 1.218 1.198 1.638
CV 10.877 6.764 7.221 12.488

Interpretation:
The table shows that, when compared to other banks, Axis Bank has
the highest Mean value of returns on net worth. Kotak Mahindra
Bank's fund Return on Net Worth has a larger standard deviation and
coefficient variance than that of other banks. On Return on Net
Worth, ICICI Bank has a moderate Mean Value (13.294) that is lower
than HDFC and AXIS Banks, a moderate Standard Deviation (1.446),

57
and a moderate Coefficient Variance (10.877) that is lower than
Kotak Mahindra Bank. AXIS and HDFC Bank follow, respectively.

Chapter-V
Findings, Suggestions and
Conclusion

58
FINDING:
The Indian banking sector has developed over time to provide clients
with excellent and transparent financial services. It contains
information on the country's various social strata' financial
circumstances.
India's public and commercial banks are becoming more flexible with
their services and programmes. However, private banks are now
better positioned to be customers' top options. In terms of
operational effectiveness and degree of innovation, private banks in
India do better. Because they are profit-driven, they offer a higher
calibre of service.
After the LPG policy was established in the 1990s, private banks were
acknowledged. Axis Bank and IndusInd Bank are two of the oldest
and most well-known private banks in India, having opened its doors
in 1993 or 1994 after receiving permission from the government to
do so.
SUGGESTIONS:
New generation banks will play an unavoidable part in the Indian
economy, but they will have a long way to go before they catch up to
public sector banks. In order to provide their consumers with
superior service, all Indian new generation banks develop their own
strategies and use cutting-edge programmes.

59
A new platform for the next generation of banks to discuss their
issues and challenges is advised.
The expansion of branch locations across India, especially in rural
areas, should be a priority for all banks.
They should step up and raise their cash to cover any market
unforeseen circumstances.
CONCLUSION:
Due to their extensive influence over the amount of money in
circulation and their function as the primary drivers of economic
growth, banks play crucial roles in the economic development of
nations. Economic development is a dynamic, ongoing process that
heavily depends on resource mobilisation, investment, and the
operational effectiveness of the many economic sectors. Because it is
defined as the reflection of how a bank's resources are employed in a
way that enables it to achieve its objectives, the performance of
bank institutions and other financial institutions has to be assessed.
Since the banking industry is seen as a crucial component of the
modern economy, efficiency is of utmost significance. Banks and
other financial institutions need to be thoroughly analysed if a sound
financial system and a productive economy are to be ensured. While
offering a variety of goods and services, banks and other financial
institutions assist commercial organisations. However, these
products and services are mostly the same from one bank to the
next, leaving little room for differentiation.

60
Chapter-VI
References

61
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