Post on 06-Jul-2020
53 Oct. 2016 vol. 01 issue 10
Performance of Indian Banks Since 1990s: A Traditional Approach
Mr. Sanjoy De Research Scholar, Department of Economics, Burdwan University, West Bengal
Abstract
Since 1990s, Indian banking sector has embraced significant changes with respect
to banking conditions, technology, regulations etc. Given the massive changes in the banking
sector, an analysis of the performance of different categories of banks starting from pre-
reform era to the modern day banking, is very much pertinent. Our paper attempts to measure
the performance of Indian banking sector during the period 1992-2012, by adopting
traditional measures. We see that in all scores of performance evaluation such as
management efficiency, profitability, productivity and asset quality, foreign banks category
has outclassed its peers. It appears that the liberalization has crushed the dominance of the
public sector banks and we are moving towards a more convergence and a competitive regime.
Management of public sector banks has serious tasks before them to raise profit and business
with the help of huge labor force and existing infrastructure.
Introduction
Banks mobilize deposits by offering attractive
rates of interest. Also, banks use a part of the
deposit for lending purposes among different
types of borrowers such as individuals,
agriculture, industry, trade, institutions and even
government bodies and charge rate of interest.
This availability of formal credit facility with
inherent features of safety and trustworthiness,
in turn, helps in promoting development of
agriculture, trade and industry. However,
sometimes the disbursement of loans backfires
as the borrowers fail to repay the loan. Despite,
the risk of default, the importance of
institutionalized credit facility is undeniable as it
aids productive activities, which in turn spurs
economic growth. Given the huge importance of
banking system, particularly the credit
disbursement activities, it is very much pertinent
to analyze the performance of the banking sector
in the country.
A sound banking sector also safeguards an
economy from outside economic onslaughts. In
the aftermath of the East Asian financial crisis,
many economic observers started to view the
phenomenal economic success story of the East
Asian economies to have been built upon a
rather sloppy structure (Stiglitz, 1998). An
unprecedented crisis actually pointed out the
serious laxity in the fundamental financial
structure of those then well-performing nations.
Economists opine that this financial crisis could
have been avoided had there been greater
transparency and heightened supervision in
lending activities.
Given the huge importance of the financial
system, a revaluation of the banking
performance is very important. The smooth
functioning of the financial system has a strong
linkage with the functioning and performance of
Eduved International Journal of Interdisciplinary Research
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54 Oct. 2016 vol. 01 issue 10
the other sectors of the economy. Efficient
functioning of the banking system should help
in improving resource allocation thereby
promoting overall productivity growth.
In India, too, banking sector plays a key role in
the overall economic growth. Banking in India
is now concentrated not only in urban
metropolitan areas, but also in the remote areas
of the country. In fact, in recent times, the
banking space in India has witnessed meteoric
changes with the introduction of various
technology-embedded products such as Internet
banking, ATMs and mobile banking. Given the
vast changes embraced by the Indian banking
system since the 1990s, it should be very much
relevant and interesting to study the
performance of the different categories of banks
till the onset of so called modern banking, at
least on the basis of some traditional measures.
There is often a debate of using sophisticated
tools to analyze the performance of banking
sector. These tools are however built up on a
number of structural assumptions and
nomenclature. Hence, they often present a view
of the reality as peeped through their theoretical
telescope. While the importance of sophisticated
tools cannot be denied, it is also necessary to
look at the pattern of the banking performances
as evidenced from some simple measures.
Our paper seeks to analyze the performance of
the Indian banking sector during the period
1992-2012. This period of 21 years can be sub-
divided into two distinct phases–the phase of
early stage of liberalization (1992-2001) and the
phase with a radical change in the process of
market liberalization and reforms (2002-2012).
The banks have been categorized into four broad
categories– nationalized banks, SBI & its
associates, private banks (including both the old
private banks and the new private sector banks)
and foreign banks. There are substantial
differences in the structure and performance of
these different categories of banks. Therefore, it
becomes necessary to study them separately
under the two time periods. In section 2, we
provide the theoretical understanding on the
importance of the banks in the development
process. Section 3 provides an overview of the
banking sector in India. In section 4, we give
description of various indicators used to judge
the performance of banks. Section 5 deals with
the analytical evaluation of the performance of
banks on the basis of those indicators. And, in
section 6, we conclude.
Banks and the Development Process
In the standard mainstream economics, banks
play the cushioning role of diverting investible
funds to the investors who can use it
productively, creating employment and output.
In the pre-modern age, when there were no
banks, a huge amount of investible resources
were wasted or remained idle in the form of
conspicuous consumption, hoarding and various
types of traditional storages. As a result, this
huge investible surplus could not be diverted for
productive & profitable uses. Kings and nobles
lived in luxury but the country as a whole was
poor and stripped in poverty. The paradox of
poverty among plenty was explained by the lack
of machinery that could transfer the huge
investible surplus into a productive outlet.
When Francois Bernier, the French traveler,
came to India during the time of the Mughal
emperor Aurangazeb, he found this strange
phenomenon. Bernier noted that even peasant
women wore gold ornaments, while there were
insufficient funds for manufacturing and trading
activities. In medieval China, printing machine
was invented, but it could not be used in mass
scale due to lack of funds.
It was the development of the banking system
that removed this anomaly. Industrial revolution
occurred in Britain solely because the early
innovators were financed by the flow of
investible surplus.
55 Oct. 2016 vol. 01 issue 10
Thus, it was the development of the banking
sector, that is, probably the key to the modern
world. In the developed society, the existence of
the well-functioning banks is almost axiomatic.
However, this is not so in an underdeveloped
economy. Underdevelopment, among other
factors, is a result of the absence of well-
functioning credit market, including banks. If
the performance of the banking sector can be
improved, it will have a direct impact on
enhancing output and employment. Thus the
analysis of banking performance, is at the core
of the development economics.
Overview of Indian Banking Sector
The Indian banking system is characterized by
the presence of mainly three different types of
banks in terms of ownership – public sector
banks (PSBs), privately owned banks and
foreign banks (FBs). In the public sector banks,
there are State Bank of India (SBI) and its
associates and nationalized banks and in the
privately owned banks category, there are old
private sector banks and new private sector
banks. Over the years, the public sector banks
achieved a place of importance in the financial
intermediation process. These banks were able
to expand geographical footprint, mobilize
savings and provide finance for investments in
agriculture/ small-scale industry.
During the period 2009-2012, nationalized
banks accounted around 60% of the total bank
offices. The PSBs accounted for more than 85%
of the bank offices both in 2009 and 2010,
whereas in 2011 and 2012, PSBs accounted for
84.1% and 83.3% of the bank offices
respectively. Foreign banks had the lowest
percentage of bank offices (0.4%) during the
period 2009-2012. New private sector banks,
which are the new entrants to the banking arena,
have witnessed an increasing trend in branch
expansion and have outpaced the old private
sector banks in terms of number of offices.
The present form of the PSBs has evolved over
the years. In 1955, pursuant to the provisions of
the State Bank of India Act of 1955, the
Government of India, acquired a controlling
interest in the Imperial Bank of India and formed
the State Bank of India. Later on, in 1959, the
government passed the State Bank of India
(Subsidiary Banks) Act, which enabled the State
Bank of India to make the eight former State-
associated banks as its subsidiaries. This
acquisition was in tune with the first Five Year
Plan, which prioritized the development of rural
India. The government integrated these banks
into the State Bank of India system to expand its
rural outreach. However, despite the
advancement made by these banks in terms of
geographical coverage and credit expansion, it
Table 1: Percentage of Bank Offices – Category Wise
2009 2010 2011 2012
SBI & Associates 25.1 25.2 24.7 23.8
Foreign Banks 0.4 0.4 0.4 0.4
Nationalized Banks 60.7 59.9 59.4 59.5
New Private Sector Banks 6.5 7.2 9.0 9.7
Old Private Sector Banks 7.3 7.3 6.5 6.6
Total 100 100 100 100
Source: RBI
56 Oct. 2016 vol. 01 issue 10
was felt that banking services were still mainly
concentrated in the metropolitan areas and
sectors such as small scale industries and
agriculture were being neglected. Further, the
findings of the All-India Rural Credit Survey
Committee (RBI, 1954) of the inequitable
distribution of bank credit raised doubts about
the ability of the markets to efficiently allocate
resources. In response, the Government
tightened its control over the credit allocation
process to ensure adequate flow of credit into
genuinely productive activities in conformity
with the Plan priorities. Towards this end,
controls on lending rates were introduced,
liquidity requirements were raised, and a system
of development banks, catering to various
segments of industry and agriculture were
established. The process culminated into the
nationalization of 14 major private banks in
1969. The banks which were nationalized were
Allahabad Bank, Bank of Baroda, Bank of India,
Bank of Maharashtra, Canara Bank, Central
Bank of India, Syndicate Bank, UCO Bank,
United Bank of India, Union Bank, Punjab
National Bank, Indian Overseas Bank, Indian
Bank and Dena Bank. A second round of
nationalization followed, with 6 more private
banks getting nationalized in 1980 which
included Andhra Bank, Corporation Bank, New
Bank of India, Oriental Bank of Commerce,
Punjab & Sindh Bank and Vijaya Bank.
The bank nationalization process was
undertaken in 1969 with an aim to ‘control the
commanding heights of the economy and to
meet progressively…the needs of development
of the economy in conformity with national
policy and objectives’ (Reserve Bank of India,
1983). Main objectives of nationalization were
(i) rapid branch expansion and to spread banking
services into the previously neglected suburban
and rural areas, (ii) to mobilize deposits and
direct funds towards investments in the public
sector and loans to the priority sectors such as
agriculture, small scale industries and export
sector, (iii) channeling of credit according to
plan priorities, (iv) to disentangle the
monopsony control of the large business houses
over the banks of the country. The objectives
behind the bank nationalization can be found in
Bhattacharyya (1993), Ghosh (1993), and
Rangarajan (1993).
In the next decade following bank
nationalization, Indian banking sector witnessed
unprecedented expansion of branch network of
public sector banks. Expansion of banking
network was not only aimed at mobilizing
potential savings but also to bring the wider
section of the economy into the ambit of
organized banking. In this direction, apart from
changing the sectoral composition of credit, the
RBI stipulated the lending targets to priority
sectors, set up credit guarantee schemes,
provided refinancing arrangements and directed
banks to open branches in rural and semi-urban
areas to cover a wider section of the population.
Further, several quantitative and functional
restrictions were imposed. During early 1991,
the cash reserve ratio (CRR) of commercial
banks was at the statutory maximum of 15%,
while investment in government debt
instruments in the form of statutory liquidity
ratio (SLR) was highest around 38.5%. Banks
had limited access to financial markets. Interest
rates on both sides of the balance sheet were
highly regulated. Also, competition was limited
due to strict entry barrier of new private banks.
However, compulsion of fulfillment of various
restrictions resulted into many public sector
creeping in the ails of unprofitability and under-
capitalization with a huge proportion of non-
performing assets (NPAs) and huge
administrative costs. Many banks had lower
capital adequacy ratio, earning less than
reasonable rate of return and offering poor
quality customer service. In recognition of these
growing illnesses, the Government of India set
up the Narasimham committee to evaluate the
functioning of the entire financial services
industry in the country. On the basis of the
recommendations of the committee (submitted
in November 1991), the RBI initiated major
reform programs which were aimed at creating
57 Oct. 2016 vol. 01 issue 10
a more profitable, efficient and sound banking
system. The reform measures aimed at
improving bank efficiency through entry
deregulation, deregulation of interest rates,
branch de-licensing and allowing public sector
banks to raise up to 49% equity in the capital
market. The reform measures also mandated
phased reduction in CRR and the SLR, and to
bolster the banking system through the
implementation of the Bank of International
Settlements (BIS) norms of a 8% capital
adequacy ratio, as well as stringent income
recognition and provisioning norms. These
changes were likely to create a competitive
ambience that, in the long-run, was expected to
fetch appreciable gains in efficiency,
profitability, and productivity.
Since 1992-93, the Indian banking system has
undergone radical changes with respect to scale,
opportunities and operational characteristics.
New banking services (ATM machines and
Internet banking) have been emerging due to
advancement of computers and information
technology. The performance of public banks
has become more market driven with growing
emphasis placed on profitability.
The commercial banks are now encountering a
heightened level of competition in the
intermediation process from a variety of
participants such as non-banking financial
intermediaries (like mutual funds and leasing
companies), term lending institutions, chit funds
and capital markets. Informal credit channels are
also operating on a parallel basis, belittling the
scope of formal credit facilities or indicating the
loopholes of the institutional credit to bring the
entire population under the formal credit
umbrella.
Description of Various Performance
Indicators of Banks
We now embark upon depicting the various
performance indicators of banks that we have
used in our study. Here, we have judged the
performance of banks on the basis of four broad
indicators–(a) management efficiency, (b)
profitability, (c) productivity and (d) asset
quality. Now, we provide a brief idea about
these key financial parameters.
a. Management Efficiency
In a business, involving the savings of people,
the role of the management is vital. Despite the
fact that all the banks have to follow certain
guidelines stipulated by the RBI, role played by
the management is crucial in smooth and
efficient functioning of the banks. In order to
judge the performance of the management, we
have used 2 indicators: credit deposit ratio (C-D
ratio) and return on advance adjusted to cost of
funds (ROADVCOF).
C-D ratio is simple to understand and it
measures the amount of credit disbursed as a
ratio of the amount of deposits generated, and
reflects how efficiently the management has
been able to channelize the savings into
productive uses. There is no minimum or
maximum level of C-D ratio that a bank has to
maintain. However, a very low C-D ratio
indicates bank’s inability to utilize its resources
to its fullest extent. On the hand, a very high C-
D ratio means pressures on the available
resources of a bank.
ROADVCOF is defined as the difference
between return on advances and cost of funds (
ROADVCOF =return on advance –cost of funds
Whereas, return on advance=IEA/advancers;
Cost of funds= (IPD+IPB)/
(Deposit+Borrowing)
Here, IEA=interest earned on advance & bills
IPD=interest paid on deposits
IPB=interest paid on borrowing from RBI &
other agencies
58 Oct. 2016 vol. 01 issue 10
ROADVCOF is a finer indicator to measure the
performance of banks, as it takes into
consideration the amount of borrowing the bank
has to make to stay in business. And,
nonetheless, the basic idea of banking business
to manage deposits for lending purposes with
differing deposits and lending rates, is also well
captured through this indicator. Importantly, it is
the management, which is primarily responsible
for the conduct of all these business of deposit
creation, lending and borrowing at varied rates.
b. Profitability
Despite some social obligations, like all other
business, banks also should aim at to raise profit.
To evaluate the profitability of banks, we have
employed 3 indicators-rate of net interest margin
to assets (or spread), return on assets (ROA) and
return on equity (ROE).
Spread is the measure of bank profitability and
efficiency and it is defined as the difference
between interest charged and interest paid by
banks as a percentage of total assets of the
banks. ROA is defined as the net income divided
by total assets and is a proxy of bank’s
profitability. Another important indicator that
has been employed to capture the profitability of
banks is ROE, which measures the amount of net
income that a bank generates with the money
that the shareholders have invested.
c. Productivity
To calculate bank’s productivity, we have used
4 indicators–businesses per employee, profit per
employee, business per branch and profit per
branch. The first 2 indicators give idea about the
productivity of the employees of a bank,
whereas the last 2 indicators talk about the
productivity of a branch. Notably, the 2 main
business of a bank is creation of deposit and to
make advance. Businesses here are the sum of
these 2 activities. So, the productivity indicators
are defined as :
Business per employee=
(Deposit+Advance)/total employees
Profit per employee= Profit or loss/ total
employees
Business per branch= (Deposit+Advance)/ total
no. of branches
Profit per branch= Profit or loss/ total no. of
branches
d. Asset Quality
One important variable that determines the
quality of a bank’s asset is the non performing
asset (NPA). NPA is a loan or advance for which
the principal or the interest payment remained
overdue for a period of 60 days.
Types of NPA
Gross NPA: Gross NPAs are the sum total of all
loan assets that are classified as NPAs as per
RBI Guidelines. Gross NPA reflects the quality
of the loans made by banks. It consists of all the
non-standard assets like as sub-standard,
doubtful, and loss assets.
Gross NPAs Ratio = Gross NPAs / Gross
Advances
Net NPA: Net NPAs are those type of NPAs in
which the bank has deducted the provision
regarding NPAs. Net NPA shows the actual
burden of banks. Since in India, bank balance
sheets contain a huge amount of NPAs and the
process of recovery and write off of loans is very
time consuming, the banks have to make certain
provisions against the NPAs according to the
central bank guidelines. Net NPA ratio can be
calculated by following:
Net NPA Ratio = Net NPAs/ Net Advance=
(Gross NPAs – Provisions) / (Gross Advances –
Provisions)
59 Oct. 2016 vol. 01 issue 10
Analytical Evaluation of the Performance
of Bank
Our first variable is the C-D ratio. There is
sufficient temporal and categorical variation in
the performance of banks over the 21 years with
respect to C-D ratio. Standing in 1992, SBI & its
associates was the dominating category among
all other categories of banks. The C-D ratio of
the SBI & its associates group was 1.36 times
than that of the private sector banks and 1.31
times than that of the foreign banks. Over the 21
years period from 1992-2012, the C-D ratio of
all categories of banks have increased,
indicating discernible improvement in
management efficiency, but the increase was
uneven. The relative gap in C-D ratio between
SBI & its associates and other categories of
banks have changed rather dramatically. The
private sector banks and foreign banks have
surpassed the SBI & its associates group in 2012
and these two groups are enjoying higher C-D
ratio than the SBI & its associates group. In
majority of the years under study, C-D ratio of
the nationalized banks was lower than that of the
SBI & its associates group but the gap has fallen
down over the years. The C-D ratio of the SBI
& its associates was 1.26 times that of the
nationalized banks in 1992 and 1.18 times that
of all scheduled commercial banks. These ratios
have fallen to 1.08 and 1.04 in 2012. It appears
that the liberalization has crushed the dominance
of the SBI & its associates group and we are
moving towards a more convergence and a
competitive regime.
Looking at the C-D ratio, we find that during the
period (1992-2012), on an average, this ratio
was highest in case of foreign banks (71.56%)
and lowest in case of nationalized banks
(57.29%), with an overall average of 60.36%. In
phase 1, C-D ratios of all categories of banks
was lower than during phase 2, indicating a
marked improvement in management’s
efficiency in the banking sector over these two
distinct time periods. Like in the phase 1, during
2002-2012, the C-D ratio was highest in case of
the foreign banks and lowest in case of the
nationalized banks. Another metric that we have
used to measure the performance of the
management, (ROADVCOF ), also indicates
that the management of the foreign banks
emerged out as the best performer during the
period 1992-2012, which was followed
nationalized banks and the private sector banks.
SBI & its associates group came out as the worst
performer. The same trend was observed during
both the phases of our study.
If we glance through the profitability indicators,
we observe that foreign banks group has
outclassed all its peers with respect to all the
yardsticks such as spread, ROA and ROE that
we have used to measure profitability during
phase 1, phase 2 and during the entire period of
study. The nationalized banks group grabbed the
second spot with respect to spread during the
period 1992-2012, whereas private sector banks
got the last position. On the basis of ROA,
private sector banks grabbed the second spot,
followed by the SBI and its associates and the
nationalized banks during the period 1992-2012.
Again, with respect to ROE, nationalized banks
were relegated to the last position, whereas the
SBI & its associates emerged out as the second
best and the private sector banks grabbing the
third spot.
Now, coming to the productivity index of
business per employee, we find that an average
employee of a foreign bank generated highest
amount of business among all categories of
banks. Business generated by an average
employee of the SBI & its associates group was
the least. The same trend has been observed in
both the 2 phases of our study. But, business
generated by all the categories of banks
improved during 2002-2012 period from that of
1992-2001 period. This reflects to much better
performance by the banks’ employees over the
years.
On the basis of the profit per employee indicator
also, foreign banks group fared much better than
60 Oct. 2016 vol. 01 issue 10
other categories of banks during the period
1992-2012, which was followed by the private
sector banks, nationalized banks and SBI & its
associates. In terms of profit per employee, both
during phase 1 and phase 2, foreign banks
category was the best performer. In phase 1,
nationalized banks were the worst performer.
However, in phase 2, SBI & its associates were
relegated to the worst position. In both these
phases, private banks group consistently
grabbed the second spot. In fact, on the basis of
both these parameters’ related to employee
efficiency, SBI & its associates group were the
worst performer during 2002-2012 period,
whereas during 1992-2001, on the basis of both
these parameters, nationalized banks were the
worst performer. This indicates to relatively
poor performance of SBI & its associates with
respect to employee productivity.
Branch productivity wise, both with respect to
business per branch and profit per branch,
nationalized banks were the worst performer
both in phase 1 and phase 2, as well as in the
entire period of study. This implies that, for
nationalized banks, there is huge scope to raise
the productivity of branches to the benefit of the
customers as well as for the bank itself. Here
also, the foreign banks emerged out as the best
performer, followed by the private banks and
SBI & its associates during the period 1992-
2012.
Regarding asset quality indicators, we have
taken data on net NPA ratio during the period
1998-2012. During the period 1998-2012, on an
average, net NPA ratio was highest for old
private sector banks (3.66%). With an average
net NPA ratio of 3.60%, public sector banks
group was very close to the old private sector
banks. High prevalence of NPAs among these 2
categories of banks , points out to severe
problem of asset quality in the Indian banking
sector. In terms of this indicator too, foreign
banks group is positioned at the top on the basis
of the performance during the period 1998-
2012.
Conclusion
Foreign banks with their profit-oriented
business model, scripted superior performance
among all categories of banks on the basis of
different traditional banking performance
indicators. Management of public sector banks,
however, has huge scope to utilize its resources
such as huge labor force and existing
infrastructure to raise its productivity and
business. Another serious concern before both
the public sector banks and the old private sector
banks is the alarming levels of NPAs. Here also,
the question of efficiently raising business,
which comprises of both deposits and advances,
becomes pertinent. Scope of raising business is
huge, but it is also the prerogative of the
management to see whether any increase in
business is actually adding to NPAs or not.
61 Oct. 2016 vol. 01 issue 10
Appendix
Table 2- C-D Ratio (1992-2012)(In percentage)
STATE BANK
OF INDIA &
ITS
ASSOCIATES
NATIONALISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDU
LED
COMMER
CIAL
BANKS
(EXCL.
RRBS)
1992 71.06 56.31 52.41 54.05 60.2
1993 69.19 53.16 51.93 50.02 57.4
1994 53.83 45.8 48.83 44.83 48.2
1995 57.13 47.99 54.28 54.33 51.42
1996 60.95 49.28 61.83 73.52 55.16
1997 56.06 45.56 56.1 71.54 51.26
1998 56.2 45.32 50.95 68.32 50.39
1999 49.45 45.24 49.38 62.18 47.95
2000 50.35 46.38 49.04 72.21 49.26
2001 48.18 48.28 49.8 72.64 49.82
1992-
2001
57.24 48.332 52.455 62.364 52.106
2002 46.88 51.17 68.71 75.39 53.69
2003 48.39 52.32 66.55 75.27 54.53
2004 50.94 51.92 63.45 75.5 54.82
2005 56.31 61.17 70.34 87.18 62.63
2006 68.52 68.01 73.04 85.77 70.07
2007 76.13 70.39 75.14 83.81 73.46
2008 76.72 71.65 76.8 84.29 74.61
2009 73.43 72.17 78.13 77.25 73.83
2010 77.43 71.33 76.86 70.34 73.66
2011 79.8 73.89 79.53 81.24 76.52
2012 81.99 75.77 82.28 82.99 78.62
62 Oct. 2016 vol. 01 issue 10
2002-
2012
66.96 65.44 73.71 79.91 67.86
1992-
2012
62.33 57.29 63.59 71.56 60.36
Sources: RBI
Table 3:Return on Advance Adjusted to Cost of Funds (1992-2012)
STATE BANK OF
INDIA & ITS
ASSOCIATES
NATIONALISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
1992 3.09 5.95 0.76 12.91
1993 2.52 4.34 0.83 12.11
1994 2.18 5.68 1.15 8.69
1995 2.33 4.93 1.27 6.26
1996 2.89 6.33 1.87 6.75
1997 3.01 7.07 2.70 7.76
1998 2.18 5.11 2.06 6.65
1999 1.71 5.16 1.66 5.74
2000 1.57 4.69 1.53 4.32
2001 1.56 4.95 1.44 4.65
2002 0.96 4.43 0.99 2.82
2003 0.77 4.62 2.85 2.80
2004 0.82 4.49 2.82 2.44
2005 1.12 4.21 2.34 2.19
2006 2.93 3.86 4.39 4.9
2007 3.72 3.99 4.38 5.74
2008 3.65 3.69 4.88 6.60
2009 3.95 4.09 5.23 8.15
2010 3.60 3.82 5.06 7.16
2011 4.05 4.28 5.09 5.64
2012 4.62 4.10 5.22 5.72
Total 2.54 4.75 2.79 6.19
Sources: RBI
63 Oct. 2016 vol. 01 issue 10
Table 4: Spread (1992-2012)
STATE
BANK OF
INDIA &
ITS
ASSOCIAT
ES
NATIONALIS
ED BANKS
PRIVAT
E
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDULED
COMMERCI
AL BANKS
(EXCL.
RRBS)
1992 1.94 3.54 0.57 4.98 6.44
1993 1.58 2.53 0.45 4.57 4.88
1994 1.41 2.73 0.53 4.99 4.94
1995 1.69 3.52 0.65 4.24 5.85
1996 1.74 3.72 0.78 3.83 6.10
1997 1.73 3.76 0.86 3.92 6.21
1998 1.57 3.57 0.79 3.50 5.68
1999 1.47 3.50 0.74 2.95 5.36
2000 1.40 3.32 0.84 2.91 5.24
2001 1.43 3.53 0.96 2.79 5.47
2002 1.36 3.35 0.87 1.92 4.96
2003 1.31 3.68 1.06 1.90 5.35
2004 1.35 3.83 1.24 1.87 5.52
2005 1.44 3.65 1.27 1.76 5.48
2006 3.22 2.92 2.74 4.05 3.04
2007 2.79 2.80 2.54 4.36 2.86
2008 2.49 2.28 2.67 4.33 2.58
2009 2.39 2.32 2.86 4.33 2.62
2010 2.36 2.26 2.90 3.96 2.54
2011 2.84 2.74 3.10 3.86 2.91
2012 3.25 2.55 3.09 3.89 2.90
Total 1.94 3.15 1.50 3.57 4.62
Sources: RBI
64 Oct. 2016 vol. 01 issue 10
Table 5 : Business Per Employee (1992-2012) (In Rs Crores)
STATE
BANK OF
INDIA &
ITS
ASSOCIAT
ES
NATIONA
LISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL SCHEDULED
COMMERCIAL
BANKS (EXCL.
RRBS)
1992 0.455494 0.444685 0.372571 2.034489 0.466915
1993 0.500573 0.488463 0.457075 2.375614 0.518119
1994 0.521971 0.522328 0.571843 2.873891 0.558098
1995 0.595381 0.615415 0.867714 3.262013 0.660777
1996 0.664229 0.68802 1.010225 4.130846 0.746466
1997 0.744312 0.769528 1.361934 4.839504 0.854381
1998 0.878091 0.91209 1.701576 4.699967 1.012825
1999 1.064445 1.075007 2.056193 4.963566 1.199904
2000 1.258407 1.266924 2.686135 5.817104 1.430119
2001 1.610152 1.627612 3.278855 7.722718 1.835083
2002 1.828927 1.973705 4.155324 9.460903 2.211566
2003 2.062044 2.223909 4.849056 10.30833 2.50666
2004 2.471785 2.602473 5.693119 12.7251 2.989282
2005 2.99637 3.18163 6.213068 12.2311 3.579629
2006 3.51919 3.906361 7.833253 12.58079 4.405096
2007 3.51919 3.906361 7.833253 12.58079 4.405096
2008 5.982358 6.611454 12.97889 19.32813 7.480509
2009 6.979321 8.327096 12.78602 22.82609 8.775889
2010 7.37 9.36 8.26 14.11 8.62
2011 7.90 11.53 8.62 15.55 9.90
2012 9.14 12.79 9.406 19.56 11.00
Total 2.955681 3.562483 4.904529 9.713899 3.578924
Sources: RBI
65 Oct. 2016 vol. 01 issue 10
Table 6 : Profit Per Employee (1992-2012) (In Rs Crores)
STATE
BANK OF
INDIA &
ITS
ASSOCIA
TES
NATIONA
LISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS ALL
SCHEDULED
COMMERCIAL
BANKS (EXCL.
RRBS)
1992 0.000861 0.000994 0.001628 0.030073389 0.001405
1993 0.000973 -0.00645 0.001198 -0.06267808 -0.00452
1994 0.001212 -0.00828 0.002515 0.043968278 -0.00393
1995 0.002845 0.000474 0.007888 0.052624039 0.002388
1996 0.002553 -0.00204 0.009424 0.057941725 0.000968
1997 0.005385 0.002535 0.011774 0.050227084 0.004695
1998 0.007809 0.004499 0.013651 0.041029048 0.006744
1999 0.004761 0.003177 0.011277 0.044719123 0.004903
2000 0.008742 0.004385 0.019416 0.070884125 0.007847
2001 0.007735 0.004202 0.018614 0.077077539 0.007544
1992-2001 0.004288 0.00035 0.009738 0.040587 0.002805
2002 0.012234 0.010263 0.02586 0.124766285 0.01385
2003 0.016033 0.01651 0.040982 0.154198557 0.020372
2004 0.021255 0.023578 0.045156 0.202942188 0.027294
2005 0.021517 0.020687 0.040963 0.149937221 0.025091
2006 0.022932 0.02278 0.052557 0.182697071 0.029413
2007 0.024598 0.030278 0.064019 0.239947789 0.037333
2008 0.039395 0.04032 0.103553 0.362771784 0.055134
2009 0.047538 0.051626 0.105934 0.451736068 0.065541
2010 0.05 0.06 0.08 0.17 0.06
2011 0.04 0.07 0.09 0.28 0.07
2012 0.06 0.07 0.107 0.36 0.08
2002-2012 0.031727
0.037435
0.069002
0.24341
0.04383
Total 0.018661 0.019775 0.040781 0.146827667 0.024294
Sources: RBI
66 Oct. 2016 vol. 01 issue 10
Table 7 : Business Per Branch (1992-2012) (In Rs Crores)
STATE
BANK OF
INDIA & ITS
ASSOCIATE
S
NATIONALI
SED BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDULE
D
COMMERC
IAL BANKS
(EXCL.
RRBS)
1992 10.42453 8.112604 4.722086 177.421 8.971577
1993 11.41502 8.853773 5.778681 211.3668 9.90467
1994 11.95704 9.424298 7.200486 243.5529 10.6438
1995 13.68157 10.98684 10.67476 275.5466 12.51551
1996 15.72278 12.0912 12.99306 309.093 14.13804
1997 17.4342 13.40378 16.91157 346.7439 15.98974
1998 20.33669 15.64603 21.23785 368.1801 18.72468
1999 24.36809 18.00476 25.11065 400.8338 21.7333
2000 28.51067 20.84742 32.90828 444.7191 25.53347
2001 33.89579 23.87386 38.01061 500.9167 29.70196
2002 37.57951 27.60002 51.04816 448.9799 34.61114
2003 42.19596 30.67428 61.62862 573.0362 38.98349
2004 47.35172 34.99698 73.78278 627.9041 44.80705
2005 56.77778 42.8819 83.11616 660.0302 53.74619
2006 63.86421 50.59612 108.4895 815.8569 64.28086
2007 76.00445 61.92348 130.1829 1018.708 78.20285
2008 86.23476 73.40762 143.0978 1262.702 90.91761
2009 103.2632 88.40232 141.6375 1286.308 104.6699
2010 107.7863 101.4115 171.7846 1275.354 113.4175
2011 117.7283 117.2016 177.7493 1367.327 127.4539
2012 129.227 125.1273 183.0894 1564.187 136.4058
Total 50.27427 42.64131 71.48356 675.1794 50.25491
Source: RBI
67 Oct. 2016 vol. 01 issue 10
Table 8 : Profit Per Branch (1992-2012) (In Rs Crores)
STATE
BANK OF
INDIA & ITS
ASSOCIATE
S
NATIONALISE
D BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDULED
COMMERCIA
L BANKS
(EXCL. RRBS)
1992 0.0197 0.018132 0.02064 2.6226 0.026995
1993 0.022178 -0.11686 0.015148 -5.57669 -0.08638
1994 0.027758 -0.14938 0.031666 3.726169 -0.07492
1995 0.065381 0.008464 0.097038 4.445223 0.045234
1996 0.065381 0.008464 0.097038 4.445223 0.045234
1997 0.065381 0.008464 0.097038 4.445223 0.045234
1998 0.126144 0.044147 0.146196 3.598703 0.087863
1999 0.180853 0.077181 0.170387 3.214082 0.124688
2000 0.108987 0.05321 0.137717 3.611302 0.088812
2001 0.198067 0.072156 0.237863 5.41911 0.140105
2002 0.162833 0.061637 0.215791 4.999461 0.122104
2003 0.251384 0.143514 0.317693 5.920952 0.216755
2004 0.328087 0.22772 0.520853 8.57184 0.316827
2005 0.407177 0.317063 0.585221 10.01393 0.409112
2006 0.407721 0.278825 0.547989 8.091102 0.376734
2007 0.447687 0.362688 0.870625 16.85721 0.5216
2008 0.567867 0.447673 1.141716 23.69979 0.670094
2009 0.703347 0.548069 1.173483 25.45648 0.781711
2010 0.681613 0.614476 1.68456 15.27106 0.790526
2011 0.62348 0.712191 1.896399 24.17328 0.900961
2012 0.777758 0.67532 2.082758 29.1054 0.967796
Total 0.297085 0.21015 0.57561 9.624354 0.310337
Sources: RBI
68 Oct. 2016 vol. 01 issue 10
Table 9 : Net NPA Ratio (1998-2012)
Public
Sector
Banks
New private
sector banks
Old private
sector banks
FOREIGN
BANKS
ALL
SCHEDULED
COMMERCIAL
BANKS (EXCL.
RRBS)
1998 8.2 2.6 6.5 2.2 7.3
1999 8.1 4.5 9 2.9 7.6
2000 7.4 2.9 7.1 2.4 6.8
2001 6.7 3.1 7.3 1.8 6.2
2002 5.8 4.9 7.1 1.9 5.5
2003 4.5 1.5 5.2 1.7 4
2004 3.1 1.7 3.8 1.5 2.8
2005 2.1 1.9 2.7 0.8 2
2006 1.3 0.8 1.7 0.8 1.2
2007 1.1 1 1 0.7 1
2008 1 1.2 0.7 0.8 1
2009 0.9 1.4 0.9 1.8 1.1
2010 1.1 1.1 0.8 1.8 1.1
2011 1.2 0.6 0.5 0.6 1.1
2012 1.5 0.4 0.6 0.6 1.3
Total 3.6 1.973333 3.66 1.486667 3.333333
Source: RBI
Table 10 : Return on Asset (1992-2012)
roa
STATE
BANK OF
INDIA & ITS
ASSOCIATES
NATIONALISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDULED
COMMERCIAL
BANKS (EXCL.
RRBS)
1992 0.11 0.37 0.08 1.99 0.73
1993 0.12 -2.17 0.05 -3.40 -2.10
1994 0.13 -2.48 0.10 2.04 -1.63
1995 0.28 0.12 0.25 1.83 0.84
69 Oct. 2016 vol. 01 issue 10
1996 0.22 -0.46 0.30 1.60 0.30
1997 0.41 0.52 0.33 1.14 1.28
1998 0.52 0.79 0.34 0.86 1.56
1999 0.26 0.47 0.24 0.77 0.94
2000 0.40 0.55 0.35 0.94 1.28
2001 0.29 0.41 0.29 0.77 0.97
2002 0.38 0.84 0.37 0.79 1.45
2003 0.43 1.21 0.54 0.88 1.94
2004 0.49 1.49 0.54 0.89 2.18
2005 0.42 1.10 0.45 0.68 1.72
2006 0.87 0.89 1.07 2.08 1.01
2007 0.86 0.94 1.02 2.28 1.05
2008 0.97 1.01 1.13 2.09 1.12
2009 1.02 1.03 1.13 1.99 1.13
2010 0.91 1.00 1.28 1.26 1.05
2011 0.79 1.03 1.43 1.75 1.10
2012 0.89 0.88 1.53 1.76 1.08
0.5131519 0.45362 0.61078827 1.1905579 0.905056
Source: RBI
Table 11 : Return on Asset (1992-2012)
ROE
STATE
BANK OF
INDIA & ITS
ASSOCIATES
NATIONALISED
BANKS
PRIVATE
SECTOR
BANKS
FOREIGN
BANKS
ALL
SCHEDULED
COMMERCIAL
BANKS (EXCL.
RRBS)
1992 5.77 14.32 2.65 63.52 27.80
1993 4.90 -78.98 1.64 -74.57 -71.09
1994 4.33 -49.58 1.77 37.76 -32.85
1995 6.10 2.07 3.61 24.04 13.87
1996 4.05 -8.20 4.42 17.61 4.94
1997 7.09 8.69 4.99 12.67 20.01
1998 8.51 12.59 4.95 9.86 23.44
70 Oct. 2016 vol. 01 issue 10
1999 4.30 8.57 4.10 10.55 16.37
2000 7.39 10.58 6.30 12.63 22.58
2001 5.38 8.40 5.62 11.44 18.27
2002 7.56 16.76 6.54 10.91 25.92
2003 8.02 23.63 9.45 10.80 32.72
2004 8.52 27.59 9.41 12.01 36.53
2005 7.34 19.53 7.22 7.97 26.89
2006 16.92 14.65 13.34 14.18 14.77
2007 16.31 15.97 13.71 15.98 15.51
2008 17.21 17.09 13.43 16.05 15.98
2009 17.74 18.05 11.38 13.75 15.44
2010 15.92 18.30 11.94 7.34 14.31
2011 14.11 18.19 13.70 10.28 14.96
2012 16.00 15.05 15.25 10.79 14.60
9.688932 6.346121 7.877162 12.17060515 12.90307
Source: RBI
71 Oct. 2016 vol. 01 issue 10
References
• Reserve Bank of India — Functions and Working (4th ed.), Reserve Bank of India, Bombay, 1983, p.
167.
• Bhattacharyya, S.K. (1993), “The need for optimizing the banking industry structure”, in: D. Thakur
(ed.), Trends in Indian Economy, Vol. 5, Deep & Deep Publications, New Delhi, 205-228.
• Ghosh, D.N. (1993), “Commercial banking: Lessons from Indian experience”, in: D. Thakur (ed.),
Trends in Indian Economy, Vol. 5, Deep & Deep Publications, New Delhi, 1-16.
• Rangarajan, C. (1993), “Banking sector reform”, in: U. Kapila (ed.), Recent Developments in Indian
Economy - I11: The Ongoing Reforms, Academic Foundation, Delhi, 253-265.
• Stiglitz, J.E. (1998) “More Instruments and Broader Goals: Moving Toward the Post-Washington
Consensus,” the 1998 WIDER Annual Lecture, Helsinki, January 1998, reprinted Chapter 1 in The
Rebel Within, Ha-Joon Chang (ed.), London: Wimbledon Publishing Company, 2001, pp. 17-56.