CHAPTER 2

LITERATURE
REVIEW
 CQ
CHAfTER 2

LITEBTTURE REVlEtf

The content of this chapter is divided into the following sections.

2.1 Introduction
2.2 Literature Review
2.1 Introduction:-
The empirical studies conducted in India, as well as abroad, are presented to
differentiate present research and to form a theoretical base. In order to find out the
gaps in the studies, it is pertinent to review the available literature on the related
aspects of the present study. Literature review has been arranged by year wise started
from 1947 to 2016. 82 literatures have been done to covered objectives of the study.
2.2 Literature Review:-
C.H. Bhabha' (1956) in his research paper. "Better climate for expansion of Indian
Banking Needs", has highlighted banking was the kingpin of the chariot of economic
progress. As such its role in expanding economy of a country like India can neither be
underestimated nor overlooked. The success of our plan is dependent among other
things, on the smooth and satisfactory performance of the role by banking industry of
our country.
N.Shabbir^ (2016) in her research paper. "Banking in the early years of independent
India - 1947 to 1967", has analyzed the role of banking sector after independence in
economic development, prosperity and stability. Banks, through their spread and
mobilization of deposits, promote the banking habits and savings in the economy and
this provide resources for investment and development. The exercise of
nationalization of the Imperial bank was first implemented by the government of India
with the objective of "extension of banking facilities on a large scale, more
particularly in the rural and semi-urban areas, and for other public purposes. Wilh the
setting up of the State bank of India, a large nimiber of branches were opened in
unbanked centers. This period also witnessed several other controls such as credit
authorization scheme and selective credit controls to ensure that credit was not
concentrated in the hands of a few and that it was well disbursed.
J.C. Luther^ (1976) in his report. "Productivity, efficiency and profitability in

(page 15 of 48
commercial banks" he chaired the committee appointed by Reserve bank of India to
study the productivity, efficiency and profitability of commercial banks. The
committee analyzed the various issues related to the planning, budgeting and
marketing in commercial banks, bank management information system, criteria for
evaluation of bank performance, aimual accounts of banks, trends in earnings and
expenses of banks and profitability as well as pricing of banking services. The
committee recommended that; The capital base of banks needs to be improved. In the
light of social obligations cast on the banks, tax laws need to be revised. To improve
productivity, efficiency and profitability of banks, a systematic, prompt and regular
flow of information and its analysis is essential for banks to contemplate timely
corrective actions. Simplification of systems and procedures in banks is necessary to
bring economy in expenses and to provide better customer services.
Birla institute of scientific research. (1981) attempts to make comparative analysis
of performance of the public and the major private banks since nationalization.
Comparisons are made in terms of ratios and growth rates.
The study brings out that the profitability ratios have been higher for selected
group of the private sector banks than for the nationalized banks. Though public
sector banks have vast network of branches and wide coverage, yet the credit of taking
banking services to large mass of population goes to private sector banks.
R.N.Malhotra^ (1986) has highlighted the fact that nationalization of Indian
commercial banks has brought dramatic changes in the profile of Indian banking.
Banking has emerged as an effective catalytic agent of socio-economic change. It has
acquired a broad base and has also emerged as an agent of development in the rural
sector.
The study says that new phase of banking will be characterized by increasing
sophistication. Increased sophistication will be reflected in introduction of modem
technology and changes in the composition of bank business. Policies and specific
measures are being framed to bring about all round improvement in banking
operations.
M.Robert* (1991) The study attempts to analyze the trends in profitabihty, assess the
operational efficiency of public sector banks, estimated the behavioral function of
profit effecting for individual banks and for the banking industry as a whole. The
study covers 14 banks nationalized in 1969. These were classified as large scale

(page 16 of 48
banks, medium scale batiks and small scale banks in order to make inter-bank
comparisons. The study covers a period of 15 years from 1973 to 1987.
Herflndhal's index of concentration was used to study the performance of each
unit of the system with reference to the system as a whole. Bank-wise trend in
profitability showed that out of 14 banks, 12 showed decline in profitability during
this period. Operational efficiency based on manpower expenses and other expenses
to total staff revealed that CBI, UCB and DB were the highest cost effective banks
among large, medium and small banks.
K. W. Ketkar'' (1993) in her research paper. "Public sector banking, efficiency and
economic growth in India" has developed a framework that integrates Harrod-Domar
growth model and McKinnon-Shaw Hypothesis via Molho's dynamic adjustment
mechanism. The model was used to determine the impact of bank nationalization
through aggressive bank branch expansion programs and priority sector credit
allocation on India's financial savings, investment, productivity and GDP. She
indicated that the hank nationahzation pohcy has been a mixed blessing. The
aggressive bank branch program since 1969 resulted in an increased in savings,
investment, productivity of capital and GDP, however, the priority sector credit
allocation policy did not fully achieve its desired goals.
R.N. Agarwal* (1993) in his paper analyzed the profits of public sector banks since
their nationalization and discuss the determinants of profitability. The study covers
State bank group and nationalized bank group. Time series data for the period 1970-
1987 has been used. The profit equation was estimated by ordinary lease square
method.
Empirical results indicate that profitability of public sector banks have been
adversely affected by increasing statutory reserve ratios, lending to priority sectors at
lower rates of interest, expansion of bank branches in the rural and semi-urban regions
and rising wages of employees. Dechning labour productivity had also adversely
affected profitability. Time deposits were found important to encourage profitability.
The two banking groups were found significantly different in their financial
performance.
S. Miller, A. Noulas' (1996) in their research paper. "The technical efficiency of
large bank production" has considered the relative technical efficiency of 201 large
banks from 1984 to 1990. They found that bank technical inefficiency averages just

(page 17 of 48
over 5 percent, much lower than found in existing estimates. Larger and more
profitable banks have higher levels of technical efficiency. At the same time, however,
large banks were more likely to operate under decreasing returns to scale.
A.Bhattacharyya et al. (1996) in their research paper. "The impact of liberalization
on the productive efficiency of Indian commercial banks" has examined the
productive efficiency of 70 Indian commercial banks during the early stages (1986-
91) of the ongoing period of liberalization.
They have found publicly-owned Indian banks to have been the most efficient,
followed by foreign owned banks and privately-owned Indian banks. They have also
found a temporal improvement in the performance of foreign-owned banks, virtually
no trend in the performance of privately-owned Indian banks, and a temporal decline
in the performance of publicly-owned Indian banks.
Z. Thomas'^ (1997) in his Ph.D. thesis, "Performance effectiveness of nationalized
Banks- A case study of Syndicate Bank". This study was undertaken to review and
analyze the performance effectiveness of Syndicate bank and other nationalized banks
in India using an Economic managerial- efficiency evaluation model (EMEE Model)
developed by researcher. A period often years from 1984-85 to 1993-94 is taken for
the study.
Thomas in his study found that Syndicate bank got S'*' position in capital
adequacy and quality of assets, 15"" in profitability, 14"^ position in social banking, 8"*
in growth, 7"" in productivity and 15"" position in customer service among the
nationalized banks. Further he found that five nationalized banks showed low health
performance, seven low priority performance and eleven low efficiency performance
in comparison with Syndicate bank.
D. abhiman'^ (1997) in his paper examines the efficiency of Indian banking. Overall
efficiency was decomposed into allocative and technical efficiency. Technical
efficiency was further decomposed into pure technical efficiency and scale efficiency.
Comparison of the efficiency of banks prior to and after deregulation was done.
A non-parametric frontier methodology has been utilized to derive several efficiency
measures for public sector banks in India for the years 1970, 1978, 1984, 1990 and
1996. The results indicated that the State bank of India and its associates were more
efficient than other nationalized banks.
K.M.Shajahan^^ (1998) in their research article "Non-performing assets of banks.

^age 18 of 4 8
 Have they really declined? And on whose account", has analyzed for 1992-93 to
1996-97 found that NPAs of public sector banks were brought down by almost one-
half Almost one-half of all NPAs of public sector banks were accounted for the
priority sector.
D. Abhiman (1999) evaluates the inter-bank performance of public sector banks
during the reform period. By using sequential decomposition model for profitability
analysis. This study was carried out for a period of three years i.e. 1992, 1995, 1998
in order to study the changing pattern of profitability of public sector banks at various
points of time in the reform period.
Variables used for the profitability decomposition model were working fund,
operating profit, spread and burden. Public sector banks have recorded a reduction in
the burden of raising working funds in the post reform period. Profitability indicated
relatively high degree of variability. Banks need to concentrate on improving
customer services to become more profitable and efficient.
A. Prashanta^^ (2000) made an attempt to evaluate the performance of public sector
commercial banks with special emphasis on State bank of Hyderabad. The period of
the study for evaluation of performance was from 1980 to 1993-94. Trends in
deposits, various components of profits, trends in asset structure of SBH were
analyzed. It evaluated the level of customer satisfaction and compared the
performance of SBH with other PSBs and associate banks of SBI. Statistical
techniques like ratios, percentages, compound armual rate growth and averages were
commuted for the purpose of meaningful comparison and analysis.
A comparison of SBH performance in respect of resource mobilization with other
banks showed that the average growth of deposits of SBH was higher than any other
bank group. Profits of SBH showed an increasing trend 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.
A.Yener et al'** (2001) in their paper attempted to find whether the ownership
structure of banks influence their economic behavior. A variety of models were used
for evaluating cost and profit efficiencies as well as the impact of technical progress
for private commercial, pubhc savings and mutual cooperative banks operating in the
German banking market between 1989 to 1996.

(page 19 of 4 8
 D. Abhinian"(2002)inhis paper seeks to examine the interrelationships among risk,
capital and productivity change for the public sector banks in India. The paper studied
the public sector banks for the period 1995-96 to 2000-2001. The analysis revealed
that capital adequacy has a negative and significant effect on asset quality. The results
imply that inadequately capitalized banks have a lower productivity and are subject to
a higher degree of regulatory pressure than adequately capitalized ones. Poor
performers are more prone to risk taking than better performing banking
organizations. Finally, it has been laid that lowering government ownership tends to
improve productivity.
1 it

A.Mukherjee et al (2002) in their research paper study. "Performance

benchmarking and strategic homogeneity of Indian banks". They have explored the
linkage between performance benchmarking and strategic homogeneity of Indian
commercial banks, devised a method of benchmarking performance of Indian
commercial banks, using their published financial information, defined performance
by how a bank was able to utilize its resources to generate business transactions and
was measured by their ratio, which was then called the efficiency. The concept of
efficiency was criticalfi^oma marketing perspective.
Methodologically, in order to overcome some of the shortcomings of simple
efficiencies obtained through self-appraisal of individual banks, a more "democratic"
concept of cross-efficiency evaluated with the process of peer-appraisal has been
brought in to benchmark the banks. Clusters banks based on similarity in business
policy which offer a fi^amework for competitive positioning in the target market and
serves as a basis for long-term strategic focus. They have found that the public sector
banks generally outperform the private and foreign banks in this rapidly evolving and
liberalizing sector.
S. C. Kumbhakar, S. Sarkar" (2003) in their research paper. "Deregulation,
Ownership, and productivity growth in the banking industry: Evidence from India"
have focused the relationship between deregulation and total factor productivity (TFP)
growth in the Indian banking industry using a generalized shadow cost function
approach.
A disaggregated panel data analysis, using the population of pubhc and
private banks over 1985-96 that covers both pre- and post-deregulation periods,
Private sector banks have improved their performance mainly due to the freedom to

^age 20 of 48
expand output, pubiic sector banks have not responded well to the deregulation
measures.
N. Nathwani^" (2004) in his Ph.D. thesis. 'The study of financial performance of
banking sector of India", has stated on the financial performance of all the commercial
banks of the country for the period of five years from the year 1997-98 to 2001-02.
The aim of his study was to understand and to find out different types of efficiency
level of all the commercial banks in India. The operational efficiency revealed the
performance of banks regarding operational aspects.
M.Sathye^' (2005) in his research paper. "Privatization, performance and
efficiency: A study of Indian banks" has examined financial performance through
return on assets and efficiency of banks with accounting ratio e.g., deposits per
employee for fiver year that 1998-02. He found that financial performance of partially
privatized banks and their efficiency higher than that of the fiiUy public banks. On
comparing the strategies of privatization in India with the other countries, India was
found to adopt the strategy of initial public offerings like Poland. This strategy failed
in Poland but seems to have succeeded in India. Gradual privatization well-developed
financial market seems to have contributed to Indian success.
D. M. Sharma^^ (2005) in his Ph.D. thesis. "Critical evaluation of Indian banking
sector with reference to private sector banks and public sector banks", has described
four types of analytical aspects of performance of Indian banking sector i.e.,
productivity, profitability, various financial efficiency (Ratio) and comparative study
with common size statements. He stated that the existing banking institution has to
face the global competition. As a consequence, there has not only been rapid
expansion in the number of banking institutions in the country, but the banking
horizon of the country has also changed significantly with the entry of new private
sector and foreign banks. Nowadays, the country has (i) Public Sector Banks (ii) Old
Private sector banks (iii) New private sector banks and (iv) Foreign banks operating
side - by - side and giving cut - throat competitions to each other.
T.Mohan" (2005) in their special article "Banking reforms in India, charting a unique
course" has concluded that public sector banks shown a remarkable transformation in
the post-reform period. Profitability was comparable to international banks efficiency
and stability has improved and there was a convergence between PSBs and private
banks. But the PSBs will be severely tested as disintermediation proceeds apace on

<Page 21 of 48
both the asset and liabihty sides. Their survival depended on their abiUty to rise to the
challenges ahead. Both unions as well as government in its capacity as owner have an
important role to play in ensuring that PSBs are well prepared to meet these
challenges.
V.Varadi et al^"* (2006) in their research paper study. "Measurement of efficiency of
banks in India" has focused on to estimate the efficiency of commercial banks
including public, private and foreign banks operating in India for the period 1999-
2000 to 2002-2003 with four indicators i.e., productivity, profitability, financial
management and asset quality.
A. Das, S.Ghosh" (2006) in their research paper. "Financial deregulation and
efficiency: An empirical analysis of Indian banks during the post reform period" have
investigated the performance of Indian commercial banking sector during the post
reform period 1992-02.
They found that medium-sized public sector banks performed reasonably well
and are more likely to operate at higher levels of technical efficiency. A close
relationship was observed between efficiency and soundness as determined by bank's
capital adequacy ratio. The empirical results also showed that technically more
efficient banks were those that have, on an average, less non-performing loans.
M. Sharma, Y.Nikaido^* (2007) in their research paper. "Capital adequacy regime in
India: An overview" have presented an analytical review of the capital adequacy
regime and the present state of capital of risk-weighted asset ratio (CRAR) of the
banking sector in hidia. In the current regime of Basel I, Indian banking system was
performing reasonably well, with an average CRAR of about 12 percent, which was
higher than the internationally accepted level of 8 percent as well as India's own
minimum regulatory requirement of 9 percent.

B. S. Bodla et al" (2007) in their research paper. "Determinants of profitability of

banks in India: A multivariate analysis" have made an attempt to identify the key
determinants of profitabihty of Public Sector Banks in India. The analysis was based
on step-wise multivariate regression model used on temporal data fi^om 1991-92 to
2003-04. The study has indicated that the variables such as non-interest income,
operating expenses, provision and contingencies and spread have significant
relationship with net profits.
R.K.Uppal, R.Kaur^* (2007) in their research paper. "Indian banking: Non-interest

(Bage 22 of 48
income - trends, issues and strategies in the liberalized and globalized world". They
examined the correlation of non-interest income with profitability of bank group for
the years 1998-99 to 2003-04. They concludes that in the post banking sector reforms
period, the share of interest income was declining whereas, the share of non-interest
income was increasing in almost all the bank groups. In non-interest income, the
share of commission, exchange and brokerage income was the highest as compared to
other components of non-interest income.
S. Cole^' (2007) in his research paper. "Financial development, bank ownership and
growth. Or, does quantity imply quality?" has studied uses a policy experiment in
India to evaluate the effect of government ownership of banks on financial and
economic development.
T. Mohan"'*' (2008) in their article "Reforming the banking sector" has reviewed the
Raghuram rajan committee report about financial deepening, inadequate competition,
lack of scale, high spreads banking, the low usage of new technologies, the decline in
market share of public sector banks, concern was also expressed about social
obligations, delinking the government from banks and greater freedom to private
banks, these too were not vahd concerned, Indian banking was in a reasonably healthy
state and was evolving in the right direction.
M. Sathye^' (2010) in his research paper. "Efficiency of banks in a developing
economy, the case of India" has worked on to measure the productive efficiency of
banks in a developing country, that was, India. The measurement of efficiency was
done using data envelopment analysis. Two models have been constructed to show
how efficiency scores vary with change in inputs and outputs. The efficiency scores,
for three groups of banks, that were, publicly owned, privately owned and foreign
owned, are measured.
The efficiency of private sector commercial banks as a group was found to be
paradoxically lower than that of public sector banks and foreign banks in India. The
study recommended that the existing policy of reducing non-performing assets and
rationalization of staff and branches may be continued to obtain efficiency gains and
make the Indian banks internationally competitive which was declared objective of the
Government of India.
D. Nandy^^ (2010) in his research paper. "Banking sector reforms in India and
performance evaluation of commercial banks" has studied the need and relevance of

<Page 23 of 48
reforms in Indian banks. The efficiency and profitability of Indian banks during
reforms from different perspectives was assessed. Various issues of NPA management
in the light of reforms were discussed. The role of information technology and its
relevancy in Indian banks in the era of reforms was analyzed.
V. Choudhary, S.Tandon^^ (2011) in their research paper. "Performance of
commercial banks in India during post-hberalization" has analyzed the performance
of commercial banks after financial reforms. To compare the performance of public
sector, private sector and foreign banks selective indicators were taken into
considerations. These indicators were; share in aggregate deposits of various banks,
distribution of branches region wise, share of various banks in financial indictors like
net profit, gross profit etc., non-performing assets and capital adequacy ratio.
They concluded that share of private sector banks in aggregate deposits was
increasing and share of public sector banks were maximum in aggregate deposits,
whereas SBI group was having maximum branches in rural areas. All the banks have
shown decline in NPA's where increase has been depicted in Capital adequacy ratio.
B. V. Singh'''* (2011) in his Ph.D. thesis. "Analytical study of labour productivity and
its impact on banking sector', has stated that since 1991, public and private sector
banks were co-exituig and providing banking service to the customers. They were
playing very important role for overall economy development. In service sector,
involvement of human element was of very high and this was application in banking
service too. Attitude, interest, motivation, skills and knowledge, behaviour,
prompmess, response to call etc. all were related to employees. These factors affect
the individual and organizational performance.

A. Ahooja"*^ (2011) in his Ph.D. thesis. "A study of Indian banking sector
performance analysis since liberalization" has examined the comparison of the
performances of public sector and private sector banks in India since liberalization
era. The data used for the study was entirely secondary in nature. The period of study
taken was from the year 1991-1992 to 2008-2009.
The profitability ratio analysis conducted in the study revealed that public
sector banks like: Bank of Maharashtra, UCO Bank and Bank of India have shown the
downbeat tendency during 1992-97. State Bank of India has shown the positive trend
in the performance of profitability ratios. The capital adequacy ratios showed the
moderate level of ratio maintained by the private sector and public sector banks. It

(Page 24 of 48
was also seen from the study that the private sector and pubHc sector banks did not
have escape from non- performing assets (NPA). Non- performing assets have been
the major reasons which have given the dent on the profitabiUty of the banks. Further,
the analyses showed that most of the public sector banks were facing the problem of
overstaffing up to 20 percent which was affecting the liquidity of the banks.
S. Das, I. Drine^* (2011) in their research paper. "Financial liberalization and banking
sector efficiency in India: A Fourier flexible functional form and stochastic frontier
approach" have analyzed the cost efficiency of the Indian banking, the study found
that public sector banks were the most efficient banks followed by the domestic
private sector and foreign banks.

The finding of the study was quite contrary to the international evidence. First,
the natural monopoly argument- the public sector banks got the advantage of the first
mover and also the economies of scale. Second, the time period of the study was the
period of consolidation for the foreign banks and the new private banks.
K.A.Chishty^^ (20U) in his research paper. "The impact of capital adequacy
requirements on profitability of private banks in India (A case smdy of J&K, ICICI,
HDFC and YES bank)" has studied the impact of capital adequacy norms on
performance and also compares the performance measured in terms of return on assets
of different private sector banks in India. The study was based on secondary data and
covered a period often years ft-om 1996-97 to 2006-07.
The aim of the study was to quantify the impact and simultaneously, the result
was corroborating with the hypothesis that there was no significant impact of capital
to risk weighted assets ratio, non interest income and net interest margin on
profitability of PSBs. various financial ratios employed along with multiple regression
suggest that the null hypothesis stand committed.
A. Dwivedi, D.K.CharyuIu^* (2011) in their research paper. "Efficiency of Indian
banking industry in the post-reform era" has determined the impact of various market
and regulatory initiatives on efficiency improvements of Indian banks. Efficiency of
firm was measured in terms of its relative performance that was, efficiency of a firm
relative to the efficiencies of firms in a sample. The present study was confined only
to the constant -retum-to-scale (CRS) assumption of decision making units (DMUs).
Variable returns to scale (VRS) assumption for estimating the efficiency was not
attempted. They found the results that national banks, new private banks and foreign

Q>age 25 of 48
banks have showed high efficiency over a period time than remaining banks.
S. S. Rajan et al^^ (2011) in their research paper. "Efficiency and productivity growth
in Indian banking" have attempted to examine technical efficiency and productivity
performance of Indian scheduled commercial banks, for the period 1979-2008. It
turns out that the public sector banks (PSB) i.e. the nationalized banks (NB) and slate
bank of India and its associates (SBI&A) were more efficient compared to domestic
private banks and foreign banks. Rather surprisingly, foreign banks were considerably
less efficient than PSBs possibly because of their relatively smaller scale. However,
the foreign banks have higher efficiency compared to the domestic private banks, due
to their specialized activities.
J. Nandi'*** (2012) in his Ph.D. thesis. "Performance evaluation of selected banking
companies in India: A study" has focused on the evaluation of comparative financial
performance of the banking institutions in the selected public and private sector banks
in India. The data of the selected banking companies for the period 2001-02 to 2010-
11 used in this study have been collected from the secondary sources. The techruque
of ratio analysis, simple mathematical and statistical techniques like measure of
central tendency, correlation analysis, regression analysis, trend analysis, 'F'-test will
be used at appropriate places.
There were some factors responsible for the decrease in profits in banks especially
private sector banks due to their sheer dependence on interest income, escalating
operating cost, growing incidence of financial disintermediation, emphasis on social
goals, rapid branch expansion particularly in the unbanked and under-banked areas. It
has been also observed from the present study that the performance of all the selected
banks improved in the later part of the study period.
N. Kavitha'*' (2012) in his research paper. 'The impact of non-performing assets on
the profitability of Indian scheduled commercial banks: empirical evidence" has
analyzed the impact of non-performing assets on the profitability of banks. The study
was analytical in nature, and the present study used secondary data for the years 2000-
10 compiledfi"omreport on trends and progress of banking in India. The data has been
analyzed using ratio. The smdy was related to SBI group, nationalized banks group
and private banks group.
Researcher found that the ratios gross NPA to gross advances and net NPA to
net advances were seen least variabihty in the ratio in terms dispersion. Thus, it can

(Page 26 of 48
be inferred that SBI group, private banks group and nationalized banks group in that
order have government securities to investment during the period under study.
K.M.Rao'*^ (2012) in his research paper. "An analysis of the performance of private
and public sector banking systems" has examined the financial performance of SBI
and HDFC bank, public sector and private sector respectively. The research was
descriptive and analytical in nature. The data used for the study was entirely
secondary in namre. The period of study taken was from the year 2008-09 to 2012-
13. Researcher found that HDFC bank was performing well and financially sound
than SBI but in context of deposits and expenditure both were SBI and HDFC bank
has better managing efficiency.

A.B,Singh, P. Tandon'*^ (2012) in their research paper. "A study of financial

performance: A comparative analysis of SBI and ICICI bank". The period of study
was taken from the year 2007-08 to 2011-12. They found that SBI was perfomimg
well and financially sound than ICICI bank but in context of deposits and expenditure
ICICI bank has better managing efficiency than SBI.
A. Kaur'*'* (2012) in his research Paper. "An empirical study on the performance
evaluation of public sector banks in India" has studied the income and expenditure
pattern, analyzed the profitability performance and the non-performing assets of
PSCBs in India. The study was based on secondary data and covered a period of ten
years from 2000-01 to 2009-10. The researcher has used growth rate, compound
growth rate, co-efficient of correlation, ratio analysis, and median test.
He found interest income was around 83 percent except in the year 2004 in all
the years of study which inferred that the PSCBs in India were concentrating on
interest income rather than on other incomes, whereas interest paid to the total
expenditure of the PSCBs showed a fluctuating trend under the smdy period.
S. Chaudhary, S. Singh'*^(2012) in their research paper. "Impact of reforms on the
asset quality in Indian banking" has stated that to test the statistical significance,
ANOVA technique was used. The analysis clearly showed that there was a significant
difference in the group-wise asset quality of Indian banks. Nevertheless, reforms have
indeed transformed Indian banks into strong, stable and prosperous entities.

Indian banking system can now claim that their level of NPAs have registered
a declining trend over a period of time and was of international standards, with
prudential provisioning, classification. But effective cost management, recovery

(Page 27 of 48
management, technological intensity of banking, governance and risk management,
financial inclusion were the areas, which will have a key bearing on the ability of
Indian banks to remain competitive and enhance soundness.
S. Banerjee'** (2012) in her research paper. "Basel 1 and Basel II Compliance: Issues
for Banks in India" Random effects panel data analysis was applied to identify
financial parameters that influence banks in India in complying with Basel I. The
private sector and foreign banks were affected by credit risk weighted assets; they
were guided by the risk in their loan portfolio. The public sector banks were
influenced by credit deposit ratio, capital and return on asset. Tobit censored
regression model for Basel II showed that business per employee and profit per
employee influence CRAR of banks belonging to different ownership in India. In
Basel II phase, the net non-performing assets influence foreign banks operating in
India.

R. Agrawal'*^ (2012) in her research paper. "Impact of financial reforms of the

competitive scenario in the Indian banking, sector" has studied the presence of
competitions, firms adjust operations to raise efficiency and thus maintain
profitability, and less efficient firms exit the industry. The objective of this paper was
to analyze the performance of the scheduled commercial banks in the context of
changed competitive environment, on account of the financial deregulation in the
economy.
R. Kant, S.C. Jain''* (2013) in their research paper. "Critical Assessment of Capital
Buffers Under Basel III" has stated that the recent sub-prime crisis gave birth to Basel
III, which stipulates the setting up of two capital buffers of 2.5% each to increase the
banks' equity in their lending business. The capital conservation buffer was simply a
top up over and above the stipulated capital levels of 8%. And, the discretionary
Counter-Cyclical Buffer aims to dampen the credit cycle in a booming economy to
reduce the systemic risks.
This paper argued that on the one hand, the recoup of capital conservation buffer
would be difficult once it gets depleted and on the other, the banks would find it
attracfive to further boost up the credit growth plans of the industry, caution among
investors and effect on banks' asset quality. On the contrary, the release of
discretionary buffers was only leverage enhancing enabling factor and was not by
itself amount to increase in cash flows and liquidity for credit growth. And, it would

<Page 28 of 48
not positively impact the banking profitability either.
B.U.Pandya, K.P.Prajapati'*^ (2013) in their research paper. "Awareness and
perception of Basel-II norms across Indian banks: An empirical study" have found the
awareness level, as well as the perception among bank employees about the Basel-II
norms, and also examines the efforts made by them for implementing in their banks.
The major findings of the study were. A majority of the respondents were aware
about the importance of Capital adequacy followed by supervisory review and market
disciphne to be the three pillars of Basel-II. Technology and credit policy were the
most important parameters for implementation of Basel-II. It was found that a
majority of the banks gave high priority to the implementation of Basel-II.
N. Maheshwari, N. Agarwal^" (2013) in their research paper. "Evaluating Financial
Performance of SBl through financial ratios" has analyzed the financial performance
of SBI (State Bank of India) over a period of eleven year (2002-2012).
For this analysis, investment valuation ratio, profitability ratio, management
efficiency ratio, balance sheet ratio, and cash flow indicators were used. Results
indicate that the performance of SBI in the study period has been excellent. SBI's
excellent performance can be attributed to the adoption of modem technology,
banking reforms, and good recovery mechanisms. However it was concluded that SBI
needs to improve its position with regards to a few parameters including debut-equity,
operating profit, and non-interest income to total income.
V. Sharma, Anuj kuniar^' (2013) in their research paper. "Assessment of
performance of commercial banks in India", have investigated the impact of banking
reforms on the performance of public, private and foreign banks. The performance of
a bank can be measured by a number of indicators. Profitability was the most
important indicator which assumes a greater importance in the ever-changing scenario
of financial sector reforms.
The viability of banks depends largely on the adequacy of profits and profitability.
The study has analyzed the impact of banking sector reforms on the performance of
all bank groups in India in the pre and post reform period. The undertaken repressors'
showed a significant impact on total income in the post-reform period for all bank
groups.
V. Singla^^ (2013) in his research paper. "Analysis of productivity of Indian banks: A
comparative study of selected private banks" has analyzed the published five year data

(Page 29 of 48
 from 2007-08 to 2011-12 for the three private sector banks, i.e., ICICI bank, HDFC
bank and AXIS bank. He concluded that through the per employee productivity of
ICICI bank was far better than following transaction deposits, non-transaction
deposits, equity, labour and capital (measured by non-labour, non-interest expense).
V.K.Narasimhan, M. Goel" (2013) in their research paper. "Capital adequacy and
its relevance to the Indian banking sector: A study of four Indian banks" has
highlighted the Indian banking sector has thus far been reasonably well shielded by
central banking regulations. They analyzed the performance of the top Indian banks,
both private and public sector for the period FY 2008-12, the years since the last
world recession. Their report attempts to demonstrate that the hidian banks exhibit
stability in such times of crisis due to their capital structure and regulatory
environment.

M.A.Pasha^''(2013) in his Ph.D. thesis. "Basel norms and Indian banking sector" has
outlined of the basics of Basel II norms and its impact on CAR was provided. Indian
banks have adhered to a de facto CAR of above 9% to ensure a better safety cushion.
In fact most of the banks have maintained their CAR at various levels over the years
depending on the risk weight assigned to each type of loan. Since all the commercial
banks in India have ensured a CAR which was above the minimum set by the
regulator, they were in a position to comfortably withstand the shock arising from a
possible emergency.
Report for G20 Leaders^^ (2013). The role of banks, equity markets and institutional
investors in long-term financing for growth and development made an attempt
traditionally; banks have been a key player in the financial system, transforming
savings into long-term capital to finance private sector investment. Over time, two
main changes have taken place in the structure of the financial system. First, the
banking model has evolved, becoming increasingly dominated by wholesale markets
and in particular derivatives, to the detriment of the more traditional deposit-taking
and lending activities. Second, disintermediation and the growth of capital markets
had led to a shift in the structure of the financial sector, with institutional investors
such as pension funds, insurance companies, mutual fimds, and most recently,
sovereign wealth funds, also becoming central players as providers of long-term
capital.

Structural weaknesses in the banking sector were leading to 'bad' deleveraging,

VaQC 30 of 48
particularly in Europe, in the form of restrained credit growth. This was causing a
growing mismatch between the amount and time horizon of available capital and the
demand for long-term finance. New banking regulations (Basle III) could also affect
negatively the ability of banks to provide long-term financing. The emerging long-
term financing gap was particularly acute in the infrastructure sector and could slow
down the world economy for years to come and abort attempts by emerging and
developing economies (EMDEs) to set themselves on a high-growth path.
N.A. Khan, Ms. Fozia^'' (2013) in their research paper. "Growth and development in
Indian banking sector" have showed the growth and technological development in
Indian banking sector. The objectives of this research article were to show the growth
in Indian banking sector; the technological development in Indian banking sector and
computerization in the banking sector.

Technology enables increased access of the banking system, increases cost

effectiveness and makes small value transactions possible. Technology allows
transactions to take place faster and offers unparallel convenience through various
delivery channels. Technology enhances choices, creates new markets, and improves
productivity and efficiency. Effective use of technology has a multiplier effect on
growth and development.
S.Gavade^^ (2013) in their research paper. "A comparative trend analysis of non-
performing assets of commercial banks in India", has analyzed for the period of
sixteen years i.e., from 1997-2012. The data has been analyzed by statistical tools
such as percentages and compound annual growth rate. The trend values have been
calculated with the help of'least square method' of'time series analyses. The study
observed improvement in the asset quality of SCBs till 2010-11 and categorically
noticed sudden change in the asset quality in the year 2011-12.
Brindadevi.V,^* (2013) in their research paper "A study on profitability analysis of
private sector banks in India" has covered a period of 10 years from 2002-03 to 2011-
12 for private sector banks i.e.. Axis, ICICI, Karur vysya bank and South India bank.
There was difference among the mean value of interest spread, net profit margin,
return on long term fund and return on net worth and there was no difference among
the mean value of return on asset of private banks.
T. Nagaraju^' (2014) in his research paper. "An analysis of profitability and
marketability efficiencies of Indian public and private banks" has analyzed the

(Page 31 of 48
perfoimance of Indian public and private banks by applying the data envelopment
analysis (DEA) on a sample of 34 banks by considering the time period from 2006 to
2010.
This study revealed that Indian public (nationalized and state bank group) and
private banks underperfonned in terms of marketability and profitability efficiency.
However, they were performing relatively better in terms of profitability efficiency as
compared to the stock market performance (marketability efficiency). Specifically,
these inefficiencies were explained by the ownership of the banks, and not by their
size. Furthermore, there was httle evidence of any impact of the financial crises on
the Indian banking system as evident from the sudden drop of marketability efficiency
levels. However, it got recovered by the end of the study period.
Babitakumar et al.**^ (2014) in their research paper. ''Compliance of Basel II norms:
Comparison of selected Public, Private and Foreign banks" have compared the
compliance of BASEL II norms (as given by RBI) by selected nationalized, private
and foreign banks.

It was observed that the tier 1 capital of the selected banks after adoption of Basel
II norms varied from each other because the capital of the banks had to be raised in
order to meet the requirements of the new capital adequacy norms. Total capital
adequacy ratio of the banks was mainly affected by the risk weighted assets of the
banks. The more were the risk weighted assets of the banks, the higher was the capital
to risk weighted assets ratio (CRAR). It has been observed that the nationalized banks,
which were not able to comply with the new capital adequacy norms, were
recapitalized.
B. Pandya/^ (2014) in his research paper. "Market value added: An empirical
analysis of Indian banks" has found that Indian banks recorded statistically
significantly positive market value added (MVA) during the period 2000-01 to 2009-
10. In the study, HDFC bank emerged as the biggest wealth creator followed by State
bank of India and ICICI bank.
IDBI bank. Federal banks, Dena bank. Syndicate bank and South Indian bank
were the greatest wealth destroyers as these banks recorded negative mean MVA
during the study period. It was also found that market value added was statistically
significantly higher for private sector banks than public sector banks.
M. Tandon et al^^ (2014) in their research paper. "A study of financial performance

(Page 32 of 48
of selected Indian banks'" has objective that to knows profitability and financial
position of selected banks for a period of five year from 2009-2013. They analyzed
that PNB has the highest return on Net Worth which was a sign that management of
PNB was at using leverage to increase profits and profit margins. It was also
indicating a sign of good management. SBI and PNB have the highest return on
capital employed which indicates that SBI and PNB are realizing highest return from
its capital employed. Bank of Baroda has the highest return on assets which was sign
that management of bank was using assets fund more efficiently to increase earning
capacity. It was also suggested that Bank of India has lowest dividend per share and
earnings per share so bank has improved its profit accordingly increase in its DPS,
EPS.
P. Aspal, A. Nazneen*^ (2014) in their research paper. "An empirical analysis of
capital adequacy in the Indian private sector banks" has investigated the determinants
of capital adequacy ratio in Indian private sector banks. The secondary data from the
annual reports of relevant banks for a period of 5 years (2008-12) have been analyzed.
They have found that capital adequacy ratio was negatively correlated with proxy
variables of lending, asset quality and management efficiency. However, liquidity
and sensitivity were positively correlated. The regression results have revealed that
loans, management efficiency, liquidity and sensitivity have statistically significant
influence on the capital adequacy of private sector banks.

N.Fatima'*'* (2014) in her research paper. "Capital adequacy: A financial soundness

indicator for banks" has highlighted the various components of regulatory capital and
outlines the basics of Basel's norms in respect to minimum capital requirements for
banks. Moreover, she analyzed the trend in CAR values for top 10 scheduled
commercial banks in India. She found out that ICICI bank maintained the highest
CAR while bank of India accounted the least position.
G. Chaudhary^* (2014) in his research article. "Performance comparison of private
sector banks with the public sector banks in India" has reviewed the performance of
the private and public sector banks individually. The study was analytical in natm"e,
and the present study used secondary data for the years 2009-11.
He found capital adequacy ratio (BASEL-Il) of new private sector banks was
always above RBI's minimum requirement of 9%. The public sector banks asset base
and income grew at an increasing rate in the last 2 years whereas new private sector

(Page 33 of 48
banks faced many fluctuations mainly due to recession. However there was huge
difference in asset qualities of public & new private sector banks because the public
sector banks have higher NPAs in services sector.
A.U. Shenoy et al*^ (2014) in their research paper. "Basel banking norms - A primer"
has reviewed the Indian banking system faces the challenge of complying with the
stringent requirements of Basel III framework, while at the same time maintaining
growth and profitability. The RBI prescribed a minimum Capital to Risk Weighted
Asset Ratio (CRAR) at 9 percent, higher than 8 percent prescription of Basel III
accord. Even though the Indian banks look well-capitalized at 13 percent CRAR
(overall as on June 2013), it still faced immense challenges to adopt Basel III.
Declining capital adequacy of public sector banks was a matter of great concern for
the government, considering the fiscal implications of further capital infusion.
T. Narayanaswamy, A.P.Muthulakshmi.^^ (2014) in their research paper.
"Efficiency of private sector banks in India" has examined the relative efficiency of
all the private sector banks in India from 2008 to 2013 using the data envelopment
analysis (DEA) methodology. Axis bank, Kotak Mahindra bank, and ICICI bank
were relatively efficient in terms of technical efficiency, pure technical efficiency, and
scale efficiency. The average (overall) technical inefficiency score during the study
period was found to be 6%. In terms of pure technical efficiency, apart from the
above three banks, HDFC bank and Nainital bank were also relatively efficient.
R. Bansal^^ (2014) in his research paper. "A comparative analysis of the financial
ratios of selected banks in the India for the period of 2001-2014", has found that
Federal bank has the ideal position in liquidity ratio, whereas HDFC and Federal bank
has fairly stable asset utilization ratio. It was inferred that overall Federal bank was
the most financially, stable company in comparisons to others.
A. Joseph, M.Prakash*''* (2014) in their research paper "A study of analyzing the
trend of NPA level in private sector banks and public sector banks" compared to
private sector banks, public sector banks NPAs level was more in case of sub standard
asset and doubtful asset. But in case of standard asset private sector banks remain
high which shows a good position of private sector banks and also it show that they
have adopted all necessary measures in order to avoid any accoimt becoming NPAs.
M. Jain'** (2015) in his research paper. "A critical review of Basel-Ill norms for
Indian PSU banks" The norms aimed to toughen up the banking system in every

(Page 34 of 48
country to withstand financial shock. They focus on the risks that banks were
vulnerable to, particularly after the crisis in the banking sector, which was triggered
by the problem in the US sub-prime mortgage market. Base III aims to plug the gaps
in the existing Basel II guidelines. The new norms will be made effective in a hazed
manner from January 1, 2013 and implemented fully from March 31, 2018. The
guidelines will ensure that banks are well capitalized to manage all kinds of risks. The
existing norms stipulate that banks should maintain Tier-I capital, or core capital, and
Tier-II capital that comprise instruments with debt-like features.
C. Roland^' (2015) in his research paper. "Banking sector liberalization in India"
India has over the last decades experienced different degrees of repressive policies in
the banking sector. He focused on the changing intensity of three policies that were
commonly associated with financial repression, namely interest rate controls, statutory
pre-emptions and directed credit as well as the effects these policies had.
A. Gajera, V. Pithadia'^ (2015) in their research paper. "Financial performance
evaluation of private and public sector banks with reference to capital adequacy ratio"
has analyzed the capital adequacy with the help of selected parameters of private and
public sector banks. AH public and private sector banks have been taken into
consideration for time period of 2001-02 to 2012-13. For comparing capital adequacy
between different sector banks one of the tools of inferential statistics, ANOVAs F-
test has been used for analyzing difference in performance.

They found new private sector banks were performing better in both
parameters compare to other sector banks. From the data analysis they also came to
know that over the years all four sector banks performance was improving in terms of
capital adequacy ratio.
M.R.Mohapatra et af^ (2015) in their research paper. "A study of operational
efficiencyof commercial banks in Indian financial system: At a glance". The present
study has taken some parameters like labour productivity, branch expansion,
profitability ratio etc to analyze the efficiency of different sector banks.
They found that internal management and employee efficiency of foreign banks
were far better than other sectors of commercial banks. Maximmn workers were
working with public sector banks due to out-dated technology and improper employee
management whereas foreign sector banks which was less in number but using latest
technology to render the services to their customers have very less staff

(page 35 of 48
R.K.Uppal, P. Khanna''* (2015) in his research paper. "Factors affecting NPAs of
scheduled commercial banks: An empirical study based in Punjab" has explored the
primary reasons for the growth of NPAs in scheduled commercial banks of Punjab
and also suggested the measures for controlling the same. The objectives of study
were, to find out the factors that affects the loan repayment capacity of the bank
customers.
S.S.Prasad, P.Goyaf^ (2015) in their research paper. "A study of non-performing
assets and its impact on Vijaya bank performance" made an attempt to study the
impact of nonperforming assets on the performance of Vijay bank. For The study
investigated the impact of "NPA to net advances ratio" on return on capital employed
(ROCE), return on assets (ROA), return on net worth (RONW) respectively of Vijaya
bank for the period of 6 years i.e., from the year 2008 to 2013. The findings of the
study revealed that NPA was not the factors which significantly affect the ROCE,
ROA and RONW of Vijaya bank. The study concluded that Vijaya bank was
effectively able to manage its NPAs resulted in not affecting its profitability,
D.S.Mitry, V.Savani^^ (2015) in their research paper. "A comparative study of the
profitability performance in the banking sector: Evidence from Indian private sector
bank", has studied to classify Indian private sector banks on the basis of their financial
characteristics and to assess their financial performance. The study found that return
on assets and interest income size have negative correction with operational
efficiency, whereas positive correlation with assets utilization and assets size. It was
also revealed fi-om the study that there exists an impact of operational efficiency, asset
management and bank size on financial performance of the Indian private sector
banks.

P.Garg, S.kumari" (2015) in their research paper "An empirical analysis of

profitability position of selected private sector banks in India" has taken 10 years data
fi-om 2004 to 2014 and five major private banks have been considered as sample units.
Ratio and single factor ANOVA (F-test) has been used. The study revealed that
HDFC bank remained an outperforming player over the last decade in the banking
sector with leading in the profitability from the different perspectives.
M. Loganathan^^ (2015) in his research paper "Financial performance of select
scheduled commercial banks in India — with reference to pre and post recession
period" has analyzed the trends and growth of select scheduled commercial banks in

(page 36 of 48
India and profitability during two session pre-recessionary period (i.e., 2002-03 to
2006-07) and post-recessionary period (2007-08 to 2011-12), revealed that there was
strong relationship with the profitability ratio's with capital adequacy, resource
deployment, asset quality, management efficiency and system evaluation, earning
quality and liquidity in scheduled commercial banking in India.
C. Marwadi^' (2015) in his research paper "Determinants of profitability: A study of
selected public sector and private sector banks in India" covered a sample size of three
public sector banks with three private sector bank. The study covers a period of 8
years from 2006-07 to 2013-14.
Profitability of public sector banks and private sector banks mostly influenced by
'overall business productivity factor', this factor was having significant effect in
public sector banks whereas profitability his having significant effect in private sector
banks.
H. M. Tandel^" (2013) in his Ph.D. thesis, "Financial analysis of selected plastics
manufacturing industrial units of Gujarat for the period 2000-01 to 2009-10". The
study was divided into nine chapters. The accounting and statistical techniques, such
as ratio analysis, trend analysis and analysis of variance (ANOVA) have been used.
It was concluded that the plastic industry of Gujarat was in rising trend during the
first half of the decade in terms of Net Profit Margin Ratio and it was ups and down in
alternate year in the second half of the decade. Earnings per Share was linearly raising
trend.
A. D. Patel*' (2013) in his Ph.D. thesis, "Financial analysis of cement industry of
India for the period 2001-02 to 2011-12. A statistical approach". Financial analysis
of selected cements industry of India for the period 2001-02 to 2011-12". The
accoimting and statistical techniques, such as ratio analysis, trend analysis and
analysis of variance (ANOVA) have been used.
P.G. Tulsian*^ (2016) in his research paper, "Interrelationship between bank credit to
commercial sector and economic development in India since independence till 2015".
Has attempted to investigate the relationship between bank credit to commercial
sector growth and economic development in India, during the period 1950 to 2015.
GDP growth rate has been taken as proxy of the economic growth indicator and bank
credit to commercial sector was taken for banking sector development. ADF unit root
test, Granger causality test and Eagle-Granger test have used to analysis the short term
and long term relationship between them. The study has concluded that in short term
neither GDP nor bank credit to commercial sector have any impact on each other,
while in long run both are having significant impact on each other. Therefore, the
government should have to frame the policy in such a way that the bank credit to
commercial sector will be increased, which will increase the economic development
in long run.
Banking developments greatly contributed to economic development of the
country. A positive relationship between financial sector development and economic
growth was established by economists in various empirical studies. (Goldsmith 1969,
King and Levine 1993, Levine 1999, Khan and senhadji 2000) In pre-reform period,
the commercial banks and other financial institutions were operating in stable
environment with little or absence of competition. But in the reform period
remarkable changes took place in banking industry. During liberalized era, banking
industry entered new phase and became globally competitive. It has to fixlfiU both
social and national objectives. In wake of these changes it is necessary to study the
performance of the banks. As per the topic of the research "Financial statement
analysis of banking sector of India.

(page 38 of 48
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