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CHAPTER-1

INTRODUCTION OF BANK

People earn money to meet their day-to-day expenses on food, clothing, education of

children, housing, etc. They also need money to meet future expenses on marriage,

higher education of children, house building and other social functions. These are

heavy expenses, which can be met if some money is saved out of the present income.

Saving of money is also necessary for old age and ill health when it may not be

possible for people to work and earn their living.

The necessity of saving money was felt by people even in olden days. They used to

hoard money in their homes. With this practice, savings were available for use

whenever needed, but it also involved the risk of loss by theft, robbery and other

accidents. Thus, people were in need of a place where money could be saved safely

and would be available when required. Banks are such places where people can

deposit their savings with the assurance that they will be able to withdraw money

from the deposits whenever required. People who wish to borrow money for business

and other purposes can also get loans from the banks at reasonable rate of interest.

Bank is a lawful organization, which accepts deposits that can be withdrawn on

demand. It also lends money to individuals and business houses that need it.

Banks also render many other useful services – like collection of bills, payment of

foreign bills, safe-keeping of jewellery and other valuable items, certifying the credit-

worthiness of business, and so on.

Banks accept deposits from the general public as well as from the business

community. Any one who saves money for future can deposit his savings in a bank.

Businessmen have income from sales out of which they have to make payment for

expenses. They can keep their earnings from sales safely deposited in banks to meet

their expenses from time to time. Banks give two assurances to the depositors –

a. Safety of deposit.

b. Withdrawal of deposit, whenever needed

On deposits, banks give interest, which adds to the original amount of deposit. It

is a great incentive to the depositor. It promotes saving habits among the public. On

the basis of deposits banks also grant loans and advances to farmers, traders and

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businessmen for productive purposes.

Thereby banks contribute to the economic development of the country and well being

of the people in general. Banks also charge interest on loans. The rate of interest is

generally higher than the rate of interest allowed on deposits. Banks also charge fees

for the various other services, which they render to the business community and

public in general. Interest received on loans and fees charged for services, which

exceed the interest allowed on deposits, are the main sources of income for banks

from which they meet their administrative expenses.

The activities carried on by banks are called banking activity. ‘Banking’ as an

activity involves acceptance of deposits and lending or investment of money. It

facilitates business activities by providing money and certain services that help in

exchange of goods and services. Therefore, banking is an important auxiliary to

trade. It not only provides money for the production of goods and services but also

facilitates their exchange between the buyer and seller.

There are laws, which regulate the banking activities in our country.

Depositing money in banks and borrowing from banks are legal transactions. Banks

are also under the control of government. Hence they enjoy the trust and confidence

of people. Also banks depend a great deal on public confidence. Without public

confidence banks cannot survive.

1.1) DISTINCTION BETWEEN BANK & MONEY LENDER

Every body thinks that a bank is like a moneylender who provides funds to borrowers

and charges interest on the loan. But it is not so. A bank is quite different from a

moneylender. A bank performs two main functions. Firstly, it accepts deposits, and

on that basis it lends money.

The moneylenders, on the other hand, advance money out of their own private wealth

and usually do not accept deposits from others.

The following table shows the distinction between a bank and moneylender.

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Basis Banks Money lender

Entity Banks are organized institutions Moneylenders are

individuals

Activity Banking activities include acceptance

of deposits as well as lending of

money

Activities of Moneylender

may not include

acceptance of deposits

Clients Banks meet the needs of people in

general and the business community

in particular

Moneylenders met the

need of agriculturist and

poor people

Security Banks accept tangible ands personal

security against loan

Moneylenders generally

accept

Process of

recovering loans

The process of recovery is flexible The process of recovery is

rigid and strict

Interest rate Interest charged by banks on loan is

governed by RBI

Rate of interest is decided

by the money lender and is

normally very high

Table 1: distinction between bank & moneylender

1.2) ROLE OF BANKING

Banks provide funds for business as well as personal needs of individuals. They play

a significant role in the economy of a nation. Let us know about the role of banking.

•It encourages savings habit amongst people and thereby makes funds available for

productive use.

•It acts as an intermediary between people having surplus money and those requiring

money for various business activities.

•It facilitates business transactions through receipts and payments by cheque instead

of currency.

•It provides loans and advances to businessmen for short term and long-term

purposes.

•It also facilitates import export transactions.

• It helps in national development by providing credit to farmers, small-scale

industries and self-employed people as well as to large business houses which lead to

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balanced economic development in the country.

•It helps in raising the standard of living of people in general by providing loans for

purchase of consumer durable goods, houses, automobiles, etc.

1.3) TYPES OF BANK

There are various types of banks, which operate in our country to meet the financial

requirements of different categories of people engaged in agriculture, business,

profession, etc. On the basis of functions, the banking institutions in India may be

divided into the following types:

Types of Banks

A) Central Bank

A bank, which is entrusted with the functions of guiding and regulating the banking

system of a country, is known as its Central bank. Such a bank does not deal with the

general public. It acts essentially as Government’s banker, maintain deposit accounts

of all other banks and advances money to other banks, when needed. The Central

Bank provides guidance to other banks whenever they face any problem. It is

therefore known as the banker’s bank. The Reserve Bank of India is the central bank

of our country.

The Central Bank maintains record of Government revenue and expenditure

Types of bank

Central bank (RBI)

Commercial Banks 1) Public sector Banks 2) Private Sector banks 3) Foreign Banks

Development Banks Specialized banks EXIM, SIDBI

Co-operative Banks 1) Private cooperative society 2) Central co-operative Banks 3) State co-operative Banks

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under various heads. It also advises the Government on monetary and credit policies

and decides on the interest rates for bank deposits and bank loans. In addition,

foreign exchange rates are also determined by the central bank.

Another important function of the Central Bank is the issuance of currency notes,

regulating their circulation in the country by different methods. No other bank than

the Central Bank can issue currency.

B) Commercial Banks

Commercial Banks are banking institutions that accept deposits and grant short-term

loans and advances to their customers. In addition to giving short-term loans,

commercial banks also give medium-term and long-term loan to business enterprises.

Now a day some of the commercial banks are also providing housing loan on a long-

term basis to individuals. There are also many other functions of commercial banks,

which are discussed later in this lesson.

Types of Commercial banks: Commercial banks are of three types i.e., Public sector

banks, Private sector banks and Foreign banks.

(i) Public Sector Banks: These are banks where the Government of India or Reserve

Bank of India holds majority stake. Examples of public sector banks are: State Bank

of India, Corporation Bank, Bank of Boroda and Dena Bank, etc.

(ii) Private Sectors Banks: In case of private sector banks private individuals hold

majority of share capital of the bank. These banks are registered as companies with

limited liability. For example: The Jammu and Kashmir Bank Ltd., Bank of

Rajasthan Ltd., Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat

Overseas Bank Ltd., Global Trust Bank, Vysya Bank, etc.

(iii) Foreign Banks: These banks are registered and have their headquarters in a

foreign country but operate their branches in our country. Some of the foreign banks

operating in our country are Hong Kong and Shanghai Banking Corporation (HSBC),

Citibank, American Express Bank, Standard & Chartered Bank, Gridley’s Bank, etc.

The number of foreign banks operating in our country has increased since the

financial sector reforms of 1991.

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C) Development Banks

Business often requires medium and long-term capital for purchase of machinery and

equipment, for using latest technology, or for expansion and modernization. Such

financial assistance is provided by Development Banks. They also undertake other

development measures like subscribing to the shares and debentures issued by

companies, in case of under subscription of the issue by the public. Industrial Finance

Corporation of India (IFCI) and State Financial Corporations (SFCs) are examples of

development banks in India.

D) Co-operative Banks

People who come together to jointly serve their common interest often form a co-

operative society under the Co-operative Societies Act. When a co-operative society

engages itself in banking business it is called a Co-operative Bank. The society has to

obtain a license from the Reserve Bank of India before starting banking business.

Any co-operative bank as a society is to function under the overall supervision of the

Registrar, Co-operative Societies of the State.

As regards banking business, the society must follow the guidelines set and issued by

the Reserve Bank of India.

Types of Co-operative Banks

There are three types of co-operative banks operating in our country. They are

primary credit societies, central co-operative banks and state co-operative banks.

These banks are organized at three levels, village or town level, district level and state

level.

(i) Primary Credit Societies: These are formed at the village or town level with

borrower and non-borrower members residing in one locality. The operations of each

society are restricted to a small area so that the members know each other and are able

to watch over the activities of all members to prevent frauds.

(ii) Central Co-operative Banks: These banks operate at the district level having

some of the primary credit societies belonging to the same district as their members.

These banks provide loans to their members (i.e., primary credit societies) and

function as a link between the primary credit societies and state co-operative banks.

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(iii) State Co-operative Banks: These are the apex (highest level) co-operative banks

in all the states of the country. They mobilize funds and help in its proper

channelisation among various sectors. The money reaches the individual borrowers

from the state co-operative banks through the central co-operative banks and the

primary credit societies.

E) Specialized Banks

There are some banks, which cater to the requirements and provide overall support for

setting up business in specific areas of activity. EXIM Bank, SIDBI and NABARD

are examples of such banks. They engage themselves in some specific area or activity

and thus, are called specialized banks.

i. Export Import Bank of India (EXIM Bank): If one wants to set up a business for

exporting products abroad or importing products from foreign countries for sale in our

country, EXIM bank can provide you the required support and assistance. The bank

grants loans to exporters and importers and also provides information about the

international market. It gives guidance about the opportunities for export or import,

the risks involved in it and the competition to be faced, etc.

ii. Small Industries Development Bank of India (SIDBI): If you want to establish

a small-scale business unit or industry, loan on easy terms can be available through

SIDBI. It also finances modernization of small-scale industrial units, use of new

technology and market activities. The aim and focus of SIDBI is to promote, finance

and develop small-scale industries.

iii. National Bank for Agricultural and Rural Development (NABARD): It is a

central or apex institution for financing agricultural and rural sectors. If a person is

engaged in agriculture or other activities like handloom weaving, fishing, etc.

NABARD can provide credit, both short-term and long-term, through regional rural

banks. It provides financial assistance, especially, to co-operative credit, in the field

of agriculture, small-scale industries, cottage and village industries handicrafts and

allied economic activities in rural areas.

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1.4) FUNCTION OF COMMERCIAL BANKS

The functions of commercial banks are of two types.

(A) Primary functions

(B) Secondary functions.

(i) Primary functions

The primary functions of a commercial bank include:

a) Accepting deposits; and

b) Granting loans and advances.

a) Accepting deposits

The most important activity of a commercial bank is to mobilize deposits from the

public. People who have surplus income and savings find it convenient to deposit the

amounts with banks.

Depending upon the nature of deposits, funds deposited with bank also earn

interest. Thus, deposits with the bank grow along with the interest earned. If the rate

of interest is higher, public are motivated to deposit more funds with the bank. There

is also safety of funds deposited with the bank.

b) Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances.

Such loans and advances are given to members of the public and to the business

community at a higher rate of interest than allowed by banks on various deposit

accounts. The rate of interest charged on loans and advances varies according to the

purpose and period of loan and also the mode of repayment.

i) Loans

A loan is granted for a specific time period. Generally commercial banks provide

short-term loans. But term loans, i.e., loans for more than a year may also be granted.

The borrower may be given the entire amount in lump sum or in installments. Loans

are generally granted against the security of certain assets. A loan is normally repaid

in installments. However, it may also be repaid in lump sum.

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ii) Advances

An advance is a credit facility provided by the bank to its customers. It differs from

loan in the sense that loans may be granted for longer period, but advances are

normally granted for a short period of time. Further the purpose of granting advances

is to meet the day-to-day requirements of business. The rate of interest charged on

advances varies from bank to bank.

Interest is charged only on the amount withdrawn and not on the sanctioned amount.

Types of advances

Banks grant short-term financial assistance by way of cash credit, overdraft and bill

discounting.

a) Cash Credit

Cash credit is an arrangement whereby the bank allows the borrower to draw amount

up to a specified limit. The amount is credited to the account of the customer. The

customer can withdraw this amount as and when he requires. Interest is charged on

the amount actually withdrawn. Cash Credit is granted as per terms and conditions

agreed with the customers.

b) Overdraft

Overdraft is also a credit facility granted by bank. A customer who has a current

account with the bank is allowed to withdraw more than the amount of credit balance

in his account.

It is a temporary arrangement. Overdraft facility with a specified limit may be

allowed either on the security of assets, or on personal security, or both.

c) Discounting of Bills

Banks provide short-term finance by discounting bills, that is, making payment of the

amount before the due date of the bills after deducting a certain rate of discount. The

party gets the funds without waiting for the date of maturity of the bills. In case any

bill is dishonored on the due date, the bank can recover the amount from the

customer.

ii) Secondary functions

In addition to the primary functions of accepting deposits and lending money, banks

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perform a number of other functions, which are called secondary functions. These are

as follows-

a. Issuing letters of credit, travelers’ cheque, etc.

b. Undertaking safe custody of valuables, important document and securities by

providing safe deposit vaults or lockers.

c. Providing customers with facilities of foreign exchange dealings.

d. Transferring money from one account to another; and from one branch to another

branch of the bank through cheque, pay order, demand draft.

e. Standing guarantee on behalf of its customers, for making payment for purchase of

goods, machinery, vehicles etc.

f. Collecting and supplying business information.

g. Providing reports on the credit worthiness of customers.

i. Providing consumer finance for individuals by way of loans on easy terms for

purchase of consumer durables like televisions, refrigerators, etc.

j. Educational loans to students at reasonable rate of interest for higher studies,

especially for professional courses.

1.5) E-banking (Electronic Banking)

With advancement in information and communication technology, banking services

are also made available through computer. Now, in most of the branches you see

computers being used to record banking transactions. Information about the balance

in your deposit account can be known through computers. In most banks now the

Automated Teller Machine (ATM) is replacing a day’s human or manual teller

counter. Banking activity carried on through computers and other electronic means of

communication is called ‘electronic banking’ or ‘e-banking’.

1) Automated Teller Machine

Banks have now installed their own Automated Teller Machine (ATM) throughout

the country at convenient locations. By using this, customers can deposit or withdraw

money from their own account any time.

2) Debit Card

Banks are now providing Debit Cards to their customers having saving or current

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account in the banks. The customers can use this card for purchasing goods and

services at different places in lieu of cash. The amount paid through debit card is

automatically debited (deducted) from the customers’ account.

3) Credit Card

The bank issues credit cards to persons who may or may not have an account in the

bank. Just like debit cards, credit cards are used to make payments for purchase, so

that the individual does not have to carry cash. Banks allow certain credit period to

the credit cardholder to make payment of the credit amount. Interest is charged if a

cardholder is not able to pay back the credit extended to him within a stipulated

period. This interest rate is generally quite high.

4) Net Banking

With the extensive use of computer and Internet, banks have now started transactions

over Internet. The customer having an account in the bank can log into the bank’s

website and access his bank account. He can make payments for bills, give

instructions for money transfers, fixed deposits and collection of bill, etc.

5) Phone Banking

In case of phone banking, a customer of the bank having an account can get

information of his account, make banking transactions like, fixed deposits, money

transfers, demand draft, collection and payment of bills, etc. by using telephone.

As more and more people are now using mobile phones, phone banking is possible

through mobile phones. In mobile phone a customer can receive and send messages

(SMS) from and to the bank in addition to all the functions possible through phone

banking.

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CHAPTER-2

JUSTIFICATION

Now the question arises that why we have chosen a topic, which is quite related to

retail finance in banking sector is the direct connectivity of retail finance with

common people.

Retail banking can be crudely defined as the antonym of wholesale or bulk banking.

It is nothing, but shared business .A deposit of Rs.1 lack from single customer Vs.

small deposits of Rs. 10000 each from 10 different customers. The corporate and

retail divide is nothing but internal segmentations and the customer remains always a

customer.

Retail banking generally refers to offering financial services, products related to

deposits and assets to individual customers for personal consumption.

Banks concentrate on various segments like professionals, housewives, pensioners,

children, salaried class etc. Different types of products like recurring deposits,

savings bank deposits, fixed deposits, credit cards, housing and consumer loans and

educational loans are offered by banks to the above mentioned marked segments.

The domain of retail banking market has tremendous growth potential for banks and

finance companies, as at present it is largely untapped. The penetration level is 2.5 to

3 % and is in a scenario when the requirements of the consumers are growing. In the

past, people never believed in buying consumer goods on credit. But today the

attitude is changing. The demand for consumer products has increased. Today, about

70% of consumer goods purchased are through finance schemes/loans as against 40%

about 1 to 6 years ago. The home loans alone account for nearly two-third of the total

retail portfolio of the bank.

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CHAPTER-3

LITERATURE REVIEW

Literature on community bank performance, especially related to efficiency and bank

strategy continues to expand. The following discussion summarizes some research in

this area over the past decade. Wall (1985) examined small and medium sized banks

from the early 1970’s until deregulation occurred in the early 1980’s. He found that

profitable banks had lower interest and non-interest expense than less profitable

banks. In addition, the more profitable banks had lower cost of funds, greater use of

transactions deposits, more marketable securities and higher capital levels.

Gup and Walter (1989) found that consistently profitable small banks stressed basic

banking with low cost funds and high quality investments. The study examined banks

from 1982 to 1987 during the early stages of bank deregulation. During this period

there were considerable differences between regions due to declining energy, real

estate and commodity prices. High performance banks during this period made higher

quality loans, held proportionately more capital, invested more in securities

(especially long-term) and relied on lower cost funding sources compared with the

average small bank.

Zimmerman (1996) examined community bank performance in California during the

early 1990’s, a period of slow recovery for these institutions. Excessive reliance on

real estate lending caused deterioration in asset quality, which reduced overall

profitability. Lack of geographic diversification further compounded community bank

performance.

Two different studies by Bassett and Brady (2001; 2002) examined recent

performance of community banks. The 2001 study found that many small banks from

1985-2000 vanished through mergers and acquisitions. Increased competition with

stock, bond and mutual fund investments may have weakened the competitive

position of small banks. These community banks, nevertheless, were able to compete

effectively against larger banks due in part to superior knowledge of local loan

markets combined with a reluctance of customers to bank with out-of- area

institutions. Bassett and Brady’s (2002) study found that small banks grew more

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rapidly than large banks from 1985-2001 with profitability remained at a high level.

While interest costs increased, this was more than offset by higher returns on earning

assets.

Gilbert and Sierra (2003) used the Federal Reserve System for Estimating

Examination Ratings (SEER) surveillance system to estimate the probability of failure

for community banks (which they define as less than $1 billion in assets) versus large

banks (with assets greater than $1 billion). The failure probability declined for both

groups during the 1990’s. The risk of failure since about 1997 rose slightly for

community banks and as of 2003 was about 4 basis points higher than for large banks.

Myers and Spong (2003) examined community bank growth in the 10th Federal

Reserve District (Kansas City) with an emphasis on economic conditions in slower

growing markets. These slower growing markets presented problems in loan quality

as well as staffing including senior management and directors. Community banks in

low growth markets experienced higher overhead costs relative to income than banks

in higher growth markets.

DeYoung, Hunter and Udell (2003) provided an extensive investigation of community

bank performance commencing in the early 1970’s. They concluded that while many

community banks have left the industry in the past three decades, many more

inefficient banks must still exit in order for those remaining to be competitive with

their larger bank counterparts.

Critchfield, Davis, Davison, Gratton, Hanc and Samolyk (2005) in a study of past,

present and future community bank performance conducted for the FDIC concluded

that community banks continue to be of interest because

1) They still constitute over 90% of all banks,

2) They are economically important to small business and agricultural lending and 3)

they represent a disproportionately large percentage of FDIC failure costs.

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CHAPTER-4

COMPANY PROFILE

BANK OF INDIA

Relationship beyond banking…

4.1) HISTORY & PRESENT

Bank of India (BoI), established on 7 September 1906 is a commercial bank with

headquarters in Mumbai. Government-owned since nationalization in 1969, It is

India's 6th largest bank, after ICICI Bank & Canara Bank, with about 3140 branches,

including 27 branches outside India. BoI is a founder member of SWIFT (Society for

Worldwide Inter Bank Financial Telecommunications) in India which facilitates

provision of cost-effective financial processing and communication services. The

Bank completed its first one hundred years of operations on 7 September 2006.

Previous banks that used the name Bank of India

At least three banks having the name Bank of India had preceded the setting up of the

present Bank of India.

1. A person named Ramakishen Dutt set up the first Bank of India in Calcutta

(now Kolkata) in 1828, but nothing more is known about this bank.

2. The second Bank of India was incorporated in London in the year 1836 as an

Anglo-Indian bank.

3. The third bank named Bank of India was registered in Bombay(now Mumbai)

in the year 1864.

The current bank

The earlier holders of the Bank of India name had failed and were no longer in

existence by the time a diverse group of Hindus, Muslims, Parsis, and Jews helped

establish the present Bank of India in 1906. It was the first bank in India promoted by

Indian interests to serve all the communities of India. At the time, banks in India were

either owned by Europeans and served mainly the interests of the European merchant

houses, or by different communities and served the banking needs of their own

community.

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The promoters incorporated the Bank of India on 7 September 1906 under Act VI of

1882 with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs.

100. The promoters placed 55,000 shares privately, and issued 45,000 to the public by

way of IPO on 3 October 1906; the bank commenced operations on 1 November

1906.

The lead promoter of the Bank of India was Sir Sassoon J. David (1849-1926). He

was a member of the community of Baghdadi Jews, which was notable for its history

of social service and included the Sassoons. He was a prudent banker, and remained

the Chief Executive of the bank from its founding in 1906 until his death in 1926.The

first board of directors of the bank consisted of Sir Sassoon David, Sir Cowasjee

Jehangir, J. Cowasjee Jehangir, Sir Frederick Leigh Croft, Ratanjee Dadabhoy Tata,

Gordhandas Khattau, Lalubhai Samaldas, Khetsety Khiasey, Ramnarain Hurnundrai,

Jenarrayen Hindoomull Dani, Noordin Ebrahim Noordin.

4.2) SOME MILESTONES

• 1906: Founded with Head Office in Mumbai.

• 1921: BoI entered into an agreement with the Bombay Stock Exchange to

manage its clearing house.

• 1946: BoI opened a branch in London, the first Indian bank to do so. This was

also the first post-WWII overseas branch of any Indian bank.

• 1950: BoI opened branches in Tokyo and Osaka.

• 1951: BoI opened a branch in Singapore.

• 1953: BoI opened a branch in Kenya and another in Uganda.

• 1953 or 54: BoI opened a branch in Aden.

• 1955: BoI opened a branch in Tanganyika.

• 1960: BoI opened a branch in Hong Kong.

• 1962: BoI opened a branch in Nigeria.

• 1967: The Government of Tanzania nationalized BoI's operations in Tanzania

and folded them into the government-owned National Commercial Bank,

together with those of Bank of Baroda and several other foreign banks.

• 1969: The Government of India nationalized the 14 top banks, including Bank

of India. In the same year, the People's Democratic Republic of Yemen

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nationalized BoI's branch in Aden, and the Nigerian and Ugandan

governments forced BoI to incorporate its branches in those countries.

• 1970: National Bank of Southern Yemen incorporated BoI's branch in Yemen,

together with those of all the other banks in the country; this is now National

Bank of Yemen. BoI was the only Indian bank in the country.

• 1972: BoI sold its Uganda operation to Bank of Baroda.

• 1973: BoI opened a rep in Jakarta.

• 1974: BoI opened a branch in Paris. This was the first branch of an Indian

bank in Europe.

• 1976: The Nigerian government acquired 60% of the shares in Bank of India

(Nigeria).

• 1978: BoI opened a branch in New York.

• 1970s: BoI opened an agency in San Francisco.

• 1980: Bank of India (Nigeria) Ltd, changed its name to Allied Bank of

Nigeria.

• 1986: BoI acquired Paravur Central Bank (Karur Central Bank or Parur

Central Bank) in Kerala in a rescue.

• 1987: BoI took over the three UK branches of Central Bank of India (CBI).

CBI had been caught up in the Sethia fraud and default and the Reserve Bank

of India required it to transfer its branches.

• 2003: BoI opened a representative office in Shenzhen.

• 2005: BoI opened a representative office in Vietnam.

• 2006: BoI plans to upgrade the Shenzen and Vietnam representative offices to

branches, and to open representative offices in Beijing, Doha, and

Johannesburg. In addition, BoI plans to establish a branch in Antwerp and a

subsidiary in Dar-es-Salaam, marking its return to Tanzania after 37 years.

• 2007: BoI acquired 76 percent of Indonesia-based PT Bank Swadesi.

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4.3) CMD SINCE NATIONALISATION

• 1969-1970: Tribhovandas Damodardas Kansara

• 1970-1975: J N Saxena

• 1975-1977: C P Saha

• 1977-1980: H C Sarkar

• 1981-1984: N Vaghul

• 1984-1986: T. Tiwari

• 1987-1991: R. Srinivasan

• 1992-1995: G. S. Dahotre

• 1995-1997: G. Kathuria

• 1997-1998: M G Bhire

• 1998-2000: S Rajagopal

• 2000-2003: K V Krishanamurthy

• 2003-2005: M Venugopal

• 2005-2007: M. Balachandran

• 2007-2009:T.S.Narayanasami

• 2009- : Alok Kumar Mishra

Some Important facts about BOI

1) Type; - Public (BSE INDEX)

2) Industry: - financial commercial bank

3) Founded 1906

4) Head quarter: - Mumbai (India)

5) Key people: - Shri Alok Kumar Mishra

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4.4) BOI’S VISION, MISSION & QUALITY POLICY

BOI vision: - “To Become The Bank Of Choice For Corporate, Medium Business

And Up Market Retail customer And Development Banking For Small Business,

Mass Markets And Rural Markets”

BOI mission: - “To provide superior proactive banking service to niche markets

globally, while providing cost effective, responsive services to others in our role as a

development bank, and in doing so, meet the requirements of our stake holders.”

Quality policy: - We at bank of India are committed to become the bank of choice by

providing SUPERIOR, PROACTIVE, INNOVATIVE, STATE OF THE ART

banking services with an attitude of care and concern for the customers and patrons.

4.5) HIGHLIGHTS FOR THE YEAR ENDED MARCH 2010

Milestones achieved

1) The bank crossed milestone of Rs. 4,00,000Cr. Of Business mix.

2) CASA deposits grew by Rs 13206 Cr. (a growth rate of 27%)touching a level

of Rs 61843 Cr. Improved from 30.70% to 31.75%.

3) As many as 31.5 lakh S/b accounts and 1.17 lakh current accounts opened

during the year. Customer base improves by over 10%.

4) Domestic network touched 3207 branches and 820 ATMS.186 branches and

320 ATMS were inaugurated during the year.

5) 28 specialized Mid corporate Banking branches were opened.

6) Syndicated risk reactivated and projects involving outlay of close to Rs. 10000

cr. Processed.

7) To aid credit delivery, online credit application processing system (CAPS)

introduced.

8) Bank achieved 100% CBS status.

9) 1000 branches of the bank were refurbished with the bank’s standard design.

10) MTN programme of US$500 million concluded at a fine rate amidst immense

investor enthusiasm.

11) Global remittance center for facilitating NRE remittances from across the

world was opened in Mumbai.

20

12) To facilitate control and monitoring computer aided audit tool (CAAT)

launched.

13) Manpower planning put-on fast track and as many as 2650 employees

promoted and 27200 staff members trained. Plans for recruitment of over 4500

staff finalized.

21

CHAPTER- 5

OBJECTIVE OF STUDY

My subject during training was “ Retail finance in bank of India”.

To judge the different aspect of performance measurement I studied different journals

available in branch to accomplish the project. In the starting I studied basics of

banking, profile of Bank of India. These are being clearly mentioned in the report.

Practical knowledge like how to deal with different type of customer and employees

has been imparted.

During working on project I came to know about camel rating model.

In CAMEL rating model ratings are obtained by five aspects of banking i.e.

Capital, Asset, Management, Earning, liquidity. These five aspects are given a certain

weight age and on the basis of this weight age final rating is obtained.

PRIMARY OBJECTIVE

• To study loan procedure of Bank of India and Banking scenario.

In recent scenario a tough competition has been faced by public sector bank by

private sector bank.

The current customer & untapped market of India is more inclined towards private

sector bank due to efficient & fast service.

Here in our study we will try to find out different factors like Capital handling, Asset

handling, Management, Earning, Liquidity of BOI, SBI, AXIS, HDFC, BOB which

shows the cumulative current ranking of the leading PSU with private banks.

That is why we are trying to find out CAMEL ranking of public sector bank with

private sector bank.

SECONDARY OBJECTIVE

By keeping above-mentioned point in mind secondary objective is to

• Capital handling of above banks on the basis of Capital ratios.

• Asset handling of banks on the basis of Asset ratios.

• Management efficiency of management of banks.

• Earning of the banks.

• Liquidity of banks

22

CHAPTER-6

RESEARCH METHODOLOGY

A) Statement of problem

In the recent years the financial system especially the banks have undergone

numerous changes in the form of reforms, regulations & norms. The attempt here is to

see how various ratios have been used and interpreted to reveal a bank’s performance

and how this particular model encompasses a wide range of parameters making it a

widely used and accepted model in today’s scenario.

B) Research Design

Here, we are under going to have descriptive research i.e. analysis of banks financial

statements that will make us understand the position of one bank in comparison of

another and their financial position.

C) Sample Design

1) Sample Unit

Indian Commercial Bank.

2) Sample size

Five banks including, both public & private sector bank. Banks are Bank of India,

state bank of India, Punjab national bank, axis bank.

3) Sampling Technique

Convenience sampling which is a non probabilistic sampling techniques in which

samples are chosen from the available sample element according to convince and

there is no fixed probability of chosen from all the sample elements.

4) Area of survey

The survey will be done for five banks. The study environment will be the

Banking industry.

23

5) Plan of analysis

Here, we will be using financial statements of the banks in order to calculate different

ratios required for camel rating system as it considers all areas of banking operations

and considered to be the best available method for evaluation bank performance and

bank’s health.

D) Data Collection

Data Source

We have taken secondary data. Secondary data on the subject was collected from

bank’s prospectus, annual reports and other websites.

E) Data analysis

Statistical tool

We have used CAMEL RATING technique for the comparative study of different

public and private sector banks of India.

24

CHAPTER-7

DATA ANALYSIS

7.1) PROFIT & LOSS ACCOUNT

Table2: profit & loss account

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Interest Earned 7,028.70 9,180.33 12,355.22 16,347.36 17,877.99

Other Income 1,184.38 1,562.95 2,116.93 3,051.86 2,616.64

Total Income 8,213.08 10,743.28 14,472.15 19,399.22 20,494.63

Expenditure

Interest expended 4,396.72 5,739.86 8,125.95 10,848.45 12,122.04

Employee Cost 1,328.13 1,614.00 1,657.01 1,937.41 2,296.07

Selling and Admin

Expenses

858.15 957.63 1,122.39 1,120.62 2,334.80

Depreciation 96.73 96.73 73.13 69.37 101.29

Miscellaneous Expenses 831.91 1,211.89 1,484.26 2,416.02 1,899.36

Preoperative Exp

Capitalized

0 0 0 0 0

Operating Expenses 2,650.74 3,165.32 3,342.23 3,716.65 5,422.07

Provisions &

Contingencies

464.18 714.93 994.56 1,826.77 1,209.45

Total Expenses 7,511.64 9,620.11 12,462.74 16,391.87 18,753.56

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit for the Year 701.44 1,123.17 2,009.40 3,007.35 1,741.07

Extraordinary Items 0 0 0 0 0

Profit brought forward 220 541.76 541.76 0 0

Total 921.44 1,664.93 2,551.16 3,007.35 1,741.07

Preference Dividend 0 0 0 0 0

25

Equity Dividend 166.73 196.69 245.77 491.54 428.65

Corporate Dividend Tax 0 0 0 0 0

Per share data

(annualized)

Earning Per Share (Rs) 14.39 23.04 38.26 57.26 33.15

Equity Dividend (%) 34 35 40 80 70

Book Value (Rs) 99.03 117.89 168.06 224.39 243.75

Appropriations

Transfer to Statutory

Reserves

-76.79 405.6 795.78 1,518.33 686.86

Transfer to Other

Reserves

289.74 520.88 1,509.61 997.48 625.56

Proposed Dividend/

Transfer to Govt

166.73 196.69 245.77 491.54 428.65

Balance c/f to Balance

Sheet

541.76 541.76 0 0 0

Total 921.44 1,664.93 2,551.16 3,007.35 1,741.07

26

7.2) BALANCE SHEET

Table 3: Balance Sheet

Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 488.14 488.14 525.91 525.91 525.91

Equity Share Capital 488.14 488.14 525.91 525.91 525.91

Share Application

Money 0 0 0 0 0

Preference Share Capital 0 0 0 0 0

Reserves 4,338.39 5,257.75 8,300.38 11,258.72 12,275.46

Revaluation Reserves 157.35 149.48 1,763.10 1,710.29 1,428.62

Net Worth 4,983.88 5,895.37 10,589.39 13,494.92 14,229.99

Deposits 93,932.03 119,881.74 150,011.98 189,708.48 229,761.94

Borrowings 5,893.91 6,620.83 7,172.45 9,486.98 22,399.90

Total Debt 99,825.94 126,502.57 157,184.43 199,195.46 252,161.84

Other Liabilities &

Provisions 7,464.44 9,239.05 11,056.16 12,811.39 8,574.63

Total Liabilities 112,274.26 141,636.99 178,829.98 225,501.77 274,966.46

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Assets

Cash & Balances with

RBI 5,588.42 7,196.89 11,741.85 8,915.28 15,602.62

Balance with Banks,

Money at Call 5,857.57 10,208.65 5,975.54 12,845.97 15,627.51

Advances 65,173.74 84,935.89 113,476.33 142,909.37 168,490.71

27

Investments 31,781.75 35,492.76 41,802.88 52,607.18 67,080.18

Gross Block 1,674.00 1,733.50 3,448.44 3,578.23 3,790.81

Accumulated

Depreciation 874.71 955.61 1,049.28 1,156.75 1,504.07

Net Block 799.29 777.89 2,399.16 2,421.48 2,286.74

Capital Work In

Progress 10.68 11.41 26.92 110.45 65.07

Other Assets 3,062.83 3,013.50 3,407.32 5,692.02 5,813.63

Total Assets 112,274.28 141,636.99 178,830.00 225,501.75 274,966.46

Contingent Liabilities 57,844.12 54,811.58 100,486.14 107,155.08 118,535.87

Bills for collection 12,086.74 17,116.16 20,181.00 11,490.74 28,372.75

Book Value (Rs) 99.03 117.89 168.06 224.39 243.75

Highlights of the Banks performance in the year 2009-2010 as compared to the

previous year and the performance for the quarter-ended march 2010 as against

March 2009 are given below (Rs. In Crores)

28

7.3) BOI COMPARATIVE STUDY OF 2009 AND 2010

Annual Annual Qua. Ended Qua. Ended

March 10 March 09 March 10 March 09

Net Profit 1741.07 3007.35 427.91 810.37

Operating Profit 4704.77 5456.80 1275.39 1408.06

Gross NPA (%) 2.85 1.71 2.85 1.71

Net NPA (%) 1.31 0.44 1.31 0.44

Capital adequacy

ratio

Basel 1 12.63 13.21 12.63 13.21

Basel 2 12.94 13.01 12.94 13.01

Return on avg. asset 0.70 1.49 0.65 1.50

Cost to income ratio 43.81 36.18 43.94 36.14

Total business 401079 334440 401079 334440

Total Deposits 229762 189708 229762 189708

Gross credit 171317 144732 171317 144732

CASA ratio 32.00 31.00 32.00 31.00

Avg. cost of deposits 5.16 5.76 4.79 6.07

Avg. yield on

deposits

8.42 9.78 8.12 9.68

Credit deposit ratio 74.56 76.29 74.56 76.29

Net interest margin 2.51 2.97 2.57 2.98

Business per

employee (Cr.)

10.11 8.33 10.11 8.33

Earning per share

(Rs.)

33.15 57.26 8.15 15.43

Table 4: BOI comparative study 2009-10

29

7.4) BRANCHES & ATMS (BOI COMPARISION WITH OTHER BANKS)

Branches ATMs Sr.

no.

Name of the

Bank Rural Semi-

Urban

Urba

n

Metropo

litan

Total On-

site

Off-

site

Total

1 Bank of

Baroda

1,099 651 536 629 2915 691 488 1179

2 Bank of

India

1,231 603 542 559 2935 3000 200 500

3 Punjab

National

Bank

1,881 895 849 702 4327 1541 609 2150

4 State Bank of

India

4,366 3311 2022 1773 11472 5229 3319 8548

5 Axis Bank

Ltd.

30 189 314 253 786 1004 2591 3595

6 HDFC Bank

Ltd.

67 325 468 548 1408 1749 1546 3295

7 ICICI Bank

Ltd.

138 461 400 410 1409 1863 2850 4713

8 Kotak

Mahindra

Ltd.

14 37 48 121 220 212 175 387

Table 5: Branches & ATMS

30

INTERPRETATION

As we can interpret from the table that: -

1) In terms of highest branches, SBI is the leader, which is having more than

twice the branch of PNB. That’s the reason they possess highest amount of

low cost deposits.

2) In private sector HDFC & ICICI is having close competition in terms of

(approx. 1408) branches. ICICI is prevalent in rural & semi urban area while

HDFC is having strong position in urban & metropolitan area.

3) In no of ATM, SBI leading all other banks with 8548 ATMS. And no

competition has been provided by other PSUS. ICICI is at second position

with 4713 ATMS.

CONCLUSION

1) Reach

With the no of branches the reach of any bank increases, as they will be able to

serve more & more customer.

So SBI can be considered having best reach in Indian bank.

2) Better services

Can deliver better services than others e.g. outward, jet clearing cheque procedure,

Deposit & withdrawal facility on comparatively more no of branches than others.

SUGGESTION

To increase the low cost margin, and interest income, which is very low in case of

BOI, they should increase the no. of customer.

And in today’s world deposit can be increased by providing good service of easy

withdrawal and deposits with the help of services like ATM facility through large

network of ATMS all over world.

31

7.5) HIGHLIGHT OF BANK’S PERFORMANCE

Parameters Units 31.3.07 31.3.08 31.3.09 31.03.10

Branches Nos. 2725 2883 3021 3207

Overseas 25 26 27 29

No. of staff Nos. 41511 40616 40155 39676

Deposits Rs.in

Crores

119882 150012 189708 229762

Inc. over previous year

March 31

% 27.63 25.13 26.46 21.11

Advances (Gross) Rs.in

Crores

86791 114792 144732 171317

Inc. over previous year

March 31

% 30.19 32.26 26.08 18.37

CD ratio % 72.39 76.52 76.29 74.56

Investments (net) Rs. in

Crores

35493 41803 52607 67080

Capital and reserves (net) Rs. In 5895 10589 13495 14230

Interest income Rs. In

Crores

8936 12355 16347 17878

Interest Expenditure Rs. In

Crores

5496 8126 10848 12122

Non Interest income Rs. In

Crores

1563 2117 3052 2617

Non interest Expenditure Rs. In

Crores

2608 2645 3094 3668

Total income Rs. In

Crores

10499 14472 19399 20495

Total Expenditure Rs. In

Crores

8104 10771 13942 15790

Operating profit Rs. In

Crores

2395 3701 5457 4705

Table 6: Bank’s performance comparison

32

7.6) BRANCHES PROFITABILITY RATIO

BANK TOTAL

BUSINESS

BRANCH ADVANC

E

DEPOSIT DPB

RATIO

APB

RATIO

BPB

RATIO

BOI 401079 3207 171317 229762 71.64 53.41 125

SBI 1284576.33 11472 542503.20 742073.13 64.6 47.28 111.97

ICICI 436658.67 1408 218310.85 218347.82 155 155.05 310.12

AXIS 198930.88 786 81556.77 117374.11 149.33 103.76 253

BOB 336382.9 2915 143985.95 192396.95 66 49.39 115.49

PNB 364463.49 4327 154702.99 209760.50 48.47 35.75 84.23

HDFC 201694.61 1408 58883.03 142811.58 101.42 41.82 143.24

KMB 32270.27 220 16625.34 15644.93 71.11 75.56 146.68

Table 7:Branches Profitability ratio

A) DEPOSIT PER BRANCH RATIO

This is the productivity ratio to measure and compare the productivity of different

banks.

Deposit per branch ratio= Total deposits/No. Of Branch

=229762/3207=71.64 Crores

Interpretation

ICICI is having highest deposit per branch ratio, which shows their branch efficiency

in attracting and dealing with the customer.

That is the reason that in spite of having fewer branches as compared to SBI they are

giving tough competition to all bankers.

Conclusion

PSU Banks like SBI, BOI are attracting more deposits but they are not as efficient as

private sector banks.

Suggestion

Public sector bank should try to increase branch efficiency by improving

1) Employee efficiency

33

2) Hiring techno savvy employees

3) By reducing the time needed in documentation process.

4) By providing better services like efficient net banking, ATM services.

B) ADVANCE PER BRANCH RATIO

Advance per branch ratio= Total advance/No. of branches

=171317/3207=53.41 Crores

Interpretation

At the same time ICICI is having best advance per branch ratio utilizing the deposits

to the maximum. Means no ideal money.

Conclusion

BOI is far behind than private sector bank in terms of utilizing available fund. Reason

can be service oriented rather than money oriented nature of private bank.

Suggestion

To compete with the competitors like ICICI bank, PSU should invest the available

ideal deposits.

C) TOTAL BUSINESS PER BRANCH

Total business per branch= Total Business/ no. of branches

=401079/3207=125.06 Crores

Interpretation

With less number of branches as compared to public sector banks, private sector

banks are giving more business.

ICICI is having 310 Crores of business as compared to 125 Crores of BOI.

34

7.7) EMPLOYEE PROFITABILITY RATIO

BANK TOTAL

BUSINES

S

EMPL

OYESS

ADVANCE DEPOSIT DPE

RATIO

APE

RATIO

BPE

RATIO

NPPE

RATIO

BOI 401079 39671 171317 229762 5.79 4.31 10.11 .04

SBI 1284576.

33

231038 542503.20 742073.13 3.21 2.34 5.56 .05

ICICI 436658.6

7

37833 218310.85 218347.82 5.7 5.77 11.54 1.1

AXIS

BANK

198930.8

8

18767 81556.77 117374.11 6.25 4.34 10.60 .1

BOB 336382.9 36803 143985.95 192396.95 5.22 3.91 9.14 .06

PNB 364463.4

9

55643 154702.99 209760.50 3.76 2.78 6.55 .06

HDFC 201694.6

1

45223 58883.03 142811.58 3.15 1.3 4.46 .04

KMB 32270.27 9300 16625.34 15644.93 1.68 1.78 3.47 .03

Table 8: Employee profitability ratio

1) BUSINESS PER EMPLOYEE

Business per employee=Total Business/ no. of employees

401079/39676=10.10 Crores

2) NET PROFIT PER EMPLOYEE

Net profit per employee=net profit/ no of employee

=1741/39676=. 043 Crores

3) CREDIT DEPOSIT RATIO

It is the credit to deposit ratio =Total Credit/ Total Deposits

=171317/229722=74.56%

35

7.8) ANNUAL POLICY STATEMENT OF RBI

Key rates Previous rates Current rates

CRR 5.75 6.00

Repo Rates 5.00 5.25

Reverse Repo 3.50 3.75

Bank Rates 6 6

SLR 25 24

Table 9 : Different rates

A) CRR RATIO

CRR means Cash Reserve Ratio. Banks in India are required to hold a certain

proportion of their deposits in the form of cash. However, actually Banks don’t hold

these as cash with themselves, but deposit such case with Reserve Bank of India

(RBI) / currency chests, which is considered as equivalent to holding cash with

themselves.

This minimum ratio (that is the part of the total deposits to be held as cash) is

stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.

Thus, When a bank’s deposits increase by Rs100, and if the cash reserve ratio is 9%,

the banks will have to hold additional Rs 9 with RBI and Bank will be able to use

only Rs 91 for investments and lending / credit purpose.

Therefore, higher the ratio (i.e. CRR), the lower is the amount that banks will be able

to use for lending and investment. This power of RBI to reduce the lend able amount

by increasing the CRR makes it an instrument in the hands of a central bank through

which it can control the amount that banks lend. Thus, it is a tool used by RBI to

control liquidity in the banking system.

B) REPO RATES

Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the

banks. When the repo rate increases borrowing from RBI becomes more expensive.

Therefore, we can say that in case, RBI wants to make it more expensive for the

banks to borrow money, it increases the repo rate; similarly, if it wants to make it

cheaper for banks to borrow money, it reduces the repo rate

36

C) REVERSE REPO RATE

Reverse Repo rate is the rate at which banks park their short-term excess liquidity

with the RBI. The RBI uses this tool when it feels there is too much money floating

in the banking system. An increase in the reverse repo rate means that the RBI will

borrow money from the banks at a higher rate of interest. As a result, banks would

prefer to keep their money with the RBI.

D) SLR RATES

Every bank is required to maintain at the close of business every day, a minimum

proportion of their Net Demand and Time Liabilities as liquid assets in the form of

cash, and gold and un-encumbered approved securities. The ratio of liquid assets to

demand and time liabilities is known as Statutory Liquidity Ratio (SLR).

37

7.9) CASA RATIO

A) Current a/c-Saving a/c

CASA stands for current and savings account.

Banks have different kinds of deposits

1) Current account

2) Savings account

3) Term deposits

The CASA ratio shows how much deposit a bank has in the form of current and

saving account deposits in the total deposit.

CASA ratio=low margin deposit (Current a/c+ SB a/c deposit)/Total deposit

B) IMPORATANCE OF CASA RATIO

A higher CASA ratio means higher portion of the deposits of the bank has come from

current and savings deposit, which is generally a cheaper source of fund.

As many banks don’t pay interest on the current account deposits and money

lying in the savings accounts attracts a mere 3.5% interest rate. Hence, higher the

CASA ratio betters the net interest margin, which means better operating efficiency of

the bank.

38

C) BOI’s CASA RATIO

CASA ratio of BOI has increased from 31 % to 32 % . The higher casa ratio higher

will be net interest margin because higher portion of the bank deposits comes from

cheaper source.

NAME OF

BANK

ADVANCES DEPOSITS CD

RATIO

CASA

RATIO

CA+SA

DEPOSIT

BANK OF

INDIA

171317 229762 74.56 32 73523

SBI 542503.20 742073.13 73.1 39.29 291560.53

ICICI 218310.85 218347.82 99.98 28.7 62665.82

AXIS

BANK

81556.77 117374.11 69.48 43.1 50588.24

BANK OF

BARODA

143985.95 192396.95 74.8 34.87 67088.81

PNB 154702.99 209760.50 73.75 39 81806.59

HDFC 58883.03 142811.58 41.23 47 67121.44

KMB 16625.34 15644.93 106 32 5006.37

Table 10: CASA ratio Comparison

INTERPRETATION OF TABLE

1) As we can see from the table that SBI is having highest amount of low margin

deposits i.e.291560.53 Crores .That is the reason why SBI is able to set its

BASE RATE at 7.5% much lower in comparison to all other banks.

2) In public sector bank SBI is having highest CASA ratio while in private sector

bank HDFC is leading the private sector.

3) In overall performance HDFC emerged as the market leader from the point of

view of CASA ratio.

SUGGESTIONS

1) As we can see from the table that public sector banks are facing tough competition

from private sector banks like HDFC (47%), AXIS (43.1)

39

Banks should increase their low cost deposits by attracting more & more customer.

And the reason behind attracting more and more customer is good services provided

by private sector bank.

40

7.10) CD RATIO

(Credit-Deposit ratio)

CD ratio is the proportion of loan-assets created by banks from the deposits received.

The higher the ratio, the higher the loan-assets created from deposits.

CD RATIO = Credit given/Deposit received

Implication of CD ratio

1) Low ratio

It is required to have a proper tradeoff in ratio of credit to deposit.

A very low CD ratio indicates excess money lying ideal in bank. Resulting no Interest

income to bank. And indicates poor management

2) High ratio

High interest rate could lead to rise in interest rate.

Consider Bank X that has deposits worth Rs. 100 Crores and a credit-deposit ratio of

60 per cent. That means Bank X has used deposits worth Rs. 60 Crores to create loan-

assets. Only Rs. 40 Crores is available for other investments.

Now, the Indian government is the largest borrower in the domestic credit market.

The government borrows by issuing securities (G-secs) through auctions held by the

RBI. Banks, thus, lend to the government by investing in these G-secs. And Bank X

has only Rs. 40 Crores to invest in G-secs. The government has two options.

1) It can raise yields to make investment by banks in G-secs attractive.

2) Force the RBI to take the securities into its books.

Yields on G-secs serve as a benchmark for interest rates on other debt instruments. A

rise in the former, thus, pushes up interest rates on the latter. If the money so released

is large, ``too much money will chase too few goods'' in the economy resulting in

higher inflation levels. This would prompt investors to demand higher returns on debt

instruments. In other words, higher interest rates.

7.11) NET INTEREST MARGIN

Net interest margin is difference between total interest income and expenditure and is

shown as a percentage of average earning assets. Higher income from CASA will

improve the net interest margin, as the cost of this fund is relatively lower. For

instance, most banks lend at over 10%, whereas, the rate of interest that they pay on

41

saving deposit is just 3.5%. However, actual realization depends on other expenditure,

too.

7.12) TOTAL BUSINESS

Total business of bank is defined as

Total Business=Advances +Deposits

As total deposits is 229762 Crores and gross bank credit is 171317 Crores.

Hence total business of Bank of India is401079 Crores in march 2010 which has

increased by 19.93 % from march 2009 I.e. 334440 Crores.

7.13) TOTAL DEPOSITS

Total Deposits consists of low cost deposits and term Deposits

As low cost deposits (CD+SB)=61843 Crores

And, term deposits= 167919 Crores

NPA MANAGEMENT OF BOI

Bank has been able to resolve large no. of NPA accounts. As a result there have been

substantial recoveries in NPA accounts / written off accounts successively for last

several years. Due to heavy slippages, NPA level has been increased during the year

to Rs. 4882.65Cr. Cash recoveries are Rs. 621.64 Crores during the year march, 10

compared to Rs. 675.82 Crores during the year March 09. Up gradation have been Rs.

203.56 Crores vis-a –vis Rs. 324.53 Crores of previous year ended march, 09 total

reduction has been Rs. 1568.90 Crores (including write off) compared to Rs. 1559.77

Crores of march, 09.

42

DEPOSITS OF BOI

Deposits as on March’ 10 have grown by 21.11% as compared to March’09. During

the period deposits went up from Rs. 189709 Crores to Rs. 229762 Crores.

43

ADVANCES OF BOI

We have adopted a proactive approach in ensuring a strong growth in quality assets.

Global Credit went up from Rs.144732 Crores to Rs. 171317 Crores as on

March’10.All the sectors registered a heavy growth. The Bank’s advances went up by

18.37% on YOY basis.

44

PERFORMANCE COMPARISION HIGHLIGHTS

For quarter ended March 2010 vis-a -vis March 2009

Particulars Increase/Decrease 04.03.2010 04.03.2009

Total Business Increase 19.93% 401079 334440

Total Deposits Increase 21.11% 229762 189708

Low cost deposits Increase 27.15% 61843 48637

Gross Bank Credit Increase 18.37% 171317 144732

Gross Profit Decrease -9.42% 1275.39 1408.06

Net Profit Decrease -47.02% 427.91 810.37

Gross NPA Increase 97.61% 4883 2471

Net NPA Increase 251.43% 2207 628

% of Gross NPA Increase 1.14% 2.85% 1.71%

% of net NPA Increase 0.87% 1.31% 0.44%

45

CHAPTER-8

RATIO ANALYSIS

8.1) CAPITAL RATIOS

1) CAPITAL ADEQUACY RATIO

Table 10: Capital Adequacy ratio

2) DEBT EQUITY RATIO

BANK DEBT EQUITY DEBT-EQUITY RATIO

BANK OF INDIA 199195.46 13494.92 14.7

SBI 795786.81 57947.70 13.73

AXIS BANK 127559.59 10214.80 12.48

BANK OF BARODA 198033.04 12835.5 15.42

HDFC 145497.42 15052.73 9.66

Table 11: Debt-Equity ratio

BANK CAPITAL ADEQUACY RATIO (%)

BANK OF INDIA 13.0

SBI 14.3

AXIS BANK 13.7

BANK OF BARODA 14.8

HDFC 15.7

46

3) ADVANCES –TOTAL ASSET RATIO

BANK ADVANCES TOTAL

ASSET

ADVANCES-TOTAL

ASSET RATIO %

BANK OF INDIA 142909.37 225501.75 63.37

SBI 542503.20 964432.08 56.25

AXIS BANK 81556.77 147722.06 55.20

BOB 143985.90 227406.73 63.31

HDFC 98883.05 183270.78 53.95

Table 12: Advance-total asset ratio

4) SECURITY-INVESTMENT RATIO

BANK SECURITIES INVESTMENT SEC-INV.RATIO

BANK OF INDIA 43189.6 52607.18 82.09

SBI 228110.15 189501.27 120.37

AXIS BANK 27588.5 46330.35 59.54

BOB 41101.32 52445.88 78.66

HDFC 52157.83 58817.55 88.67

Table 13: Security –investment ratio

47

8.2) ASSET RATIOS

1) GROSS NPA –NET ADVANCES RATIO (%)

BANK GROSS NPA NET

ADVANCES

GROSSNPA –NET

ADVANCES RATIO (%)

BANK OF INDIA 1572 142909.37 1.1

SBI 8680.05 542503.20 1.6

AXIS BANK 4893.4 81556.77 .6

BOB 1151.88 143985.90 .8

HDFC 1087.71 98883.05 1.1

Table 14: Gross NPA –Net advance ratio

2) NET NPA-NET ADVANCES RATIO

BANK NET NPA NET

ADVANCES

NET NPA –NET

ADVANCES

RATIO %

BANK OF INDIA 571.63 142909.37 .4

SBI 9765.05 542503.20 1.8

AXIS BANK 326.22 81556.77 .4

BANK OF BARODA 431.95 143985.90 .3

HDFC 593.29 98883.05 .6

Table 15:Net NPA –Net advance ratio

48

3) TOTAL LOANS –TOTAL ASSET RATIO

BANK TOTAL

LOANS

TOTAL ASSET TOTAL LOANS –

TOTAL ASSET

RATIO%

BANK OF INDIA 142909.37 225501.75 63.37

SBI 542503.20 964432.08 56.25

AXIS BANK 81556.77 147722.06 55.20

BOB 143985.90 227406.73 63.31

HDFC 98883.05 183270.78 53.95

Table 16: Total loans-Total asset ratio

4) MARKET VALUE –BOOK VALUE RATIO

BANK MARKET

VALUE

BOOK

VALUE

MARKET VALUE- BOOK

VALUE RATIO (%)

BANK OF INDIA 220 224.39 98.04

SBI 1067 776.48 137.41

AXIS BANK 415 284.50 145.86

BANK OF BARODA 235 352.37 66.69

HDFC 968 344.44 281.03

Table 17: Market value-Book value ratio

49

8.3) MANAGEMENT RATIOS

1) MARKET VALUE –FACE VALUE RATIO

Table 18: Market value- face value

BANK MARKET

VALUE

FACE VALUE MARKET VALUE –

FACE VALUE RATIO

(%)

BANK OF INDIA 220 10 22

SBI 1067 10 106

AXIS BANK 415 10 41.5

BANK OF BARODA 235 10 23.5

HDFC 968 10 96.8

2) TOTAL ADVANCES –TOTAL DEPOSIT (CD RATIO)

Table 19: Total Advances-total Deposits ratio

3) BUSINESS PER EMPLOYEE & PROFIT PER EMPLOYEE

Table 20:Business per employee & profit per employee

BANK TOTAL

BUSINESS

EMPLOYESS BPE

RATIO

NPPE

RATIO

BOI 401079 39671 10.11 .04

SBI 1284576.33 231038 5.56 .05

AXIS BANK 198930.88 18767 10.60 .1

BANK OF BARODA 336382.9 36803 9.14 .06

HDFC 201694.61 45223 4.46 .04

NAME OF BANK ADVANCES DEPOSITS CD RATIO

BANK OF INDIA 171317 229762 74.56

SBI 542503.20 742073.13 73.1

AXIS BANK 81556.77 117374.11 69.48

BANK OF BARODA 143985.95 192396.95 74.8

HDFC 58883.03 142811.58 41.23

50

8.4) EARING RATIOS

1) INTEREST SPREAD

BANK INTEREST

EARNED

INTEREST

EXPENDITURE

SPREAD

BANK OF INDIA 16347.36 10848.45 66.36

SBI 63788.43 42915.29 67.27

AXIS BANK 10835.49 7149.27 65.98

BANK OF BARODA 15091.58 9968.17 66.05

HDFC 16332.26 8911.10 54.56

Table 21: Interest Spread

2) NET PROFIT-AVG ASSET

BANK NET PROFIT AVG ASSET NET PROFIT-

AVG ASSET %

BANK OF INDIA 3007.35 202165.87 1.4

SBI 9121.23 842979.2 1.08

AXIS BANK 1815.36 128649.95 1.41

BANK OF BARODA 2227.20 203503.11 1.09

HDFC 2244.94 158223.69 1.41

Table 22: Net profit- Avg Asset

51

3) INTEREST INCOME-TOTAL INCOME

BANK INTEREST

INCOME

TOTAL

INCOME

INTEREST

INCOME-TOTAL

INCOME %

BANK OF INDIA 16347.36 19399.22 84.2

SBI 63788.43 76479.78 83.4

AXIS BANK 10835.49 13732.37 78.9

BANK OF BARODA 15091.58 17849.24 84.5

HDFC 16332.26 19802.89 82.47

Table 23:Interest income-Total income

52

8.5) LIQUIDITY RATIOS

1) LIQUIDITY ASSET-TOTAL ASSET RATIOS

BANK LIQUID ASSET TOTAL

ASSET

LIQUIDITY

ASSET-TOTAL

ASSET RATIOS

%

BANK OF INDIA 21761.25 225501.75 9.65

SBI 104403.8 964432.08 10.82

AXIS BANK 15016.9 147722.06 10.16

BANK OF BARODA 24087.11 227406.73 10.59

HDFC 17506.62 183270.78 9.55

Table 24 Liquidity Asset –Total Asset ratio

2) GOVT SECURITIES- TOTAL ASSET RATIOS

BANK GOVT

SECURITIES

TOTAL ASSET LIQUIDITY ASSET-

TOTAL ASSET %

BANK OF INDIA 42530.98 225501.75 18.86

SBI 226217.47 964432.08 23.4

AXIS BANK 27588.50 147722.06 18.6

BANK OF BARODA 40134.67 227406.73 17.6

HDFC 52156.58 183270.78 28.4

Table 25: Govt securities-Total Asset ratios

53

3) APPROVED SEQURITY- TOTAL ASSET RATIOS

BANK APPROVED

SECURITY

TOTAL

ASSET

LIQUIDITY ASSET-

TOTAL ASSET RATIOS

%

BANK OF INDIA 658.62 225501.75 .29

SBI 1892.68 964432.08 .19

AXIS BANK 0.00 147722.06 0

BOB 966.65 227406.73 .42

HDFC 1.25 183270.78 .42

Table 26: Approved security-total asset ratios

4) LIQUID ASSET- DEMAND DEPOSIT RATIOS

BANK LIQUID

ASSET

DEMAND

DEPOSIT

LIQUID ASSET-

DEMAND DEPOSIT

RATIOS %

BANK OF INDIA 21761.25 12581.54 172

SBI 104403.8 110753.57 94.2

AXIS BANK 15016.9 24821.61 60.4

BANK OF BARODA 24087.11 14451.22 166

HDFC 17506.62 28444.92 61.5

Table27: Liquidity Asset-Demand Deposit ratio

54

5) LIQUID ASSET- TOTAL DEPOSIT RATIOS

BANK LIQUID

ASSET

TOPTAL

DEPOSIT

%

BOI 21761.25 229762 9.47

SBI 104403.8 742073.13 14.06

AXIS BANK 15016.9 117374.11 12.79

BOB 24087.11 192396.95 12.51

HDFC 17506.62 142811.58 1.22

Table 28:Liquidity Asset-Total Deposit ratios

55

1) CAPITAL RATIOS

BANK CAPITAL

ADEQUACY

RATIO

DEBT

EQUITY

RATIO

ADVANCES

-ASSETS

RATIO

SECURITIES –

TOTAL

INVESTMENT

BANK OF INDIA 13.0 14.7 63.37 82.09

SBI 14.3 13.73 56.25 120.37

AXIS BANK 13.7 12.48 55.20 59.54

BANK OF BARODA 14.8 15.42 63.31 78.66

HDFC 15.7 9.66 53.95 88.67

WEIGHTAGE 0.5 0.3 0.1 0.1 TOTAL

BANK OF INDIA 6.5 4.41 6.33 8.20 25.44

SBI 7.15 4.11 5.62 12.03 28.91

AXIS BANK 6.85 3.74 5.52 5.95 22.06

BANK OF BARODA 7.4 4.62 6.33 7.86 26.21

HDFC 7.85 2.89 5.39 8.86 24.99

Table 29: Capital ratios

Interpretation

1) As per the capital adequacy ratio the minimum ratio is 9%.i.e every bank has

to maintain with RBI. Here HDFC outstands from the other banks

2) Advances to asset ratios shows how efficient capital is managed, so here we

have BANK OF INDIA at the top position.

3) Security to total investment shows the quick fund of the bank, which can be in

cashed at any point of time. Here State bank of India has the highest ratio.

Capital ratio for BOB & SBI show following characteristics

1) Capital levels exceed all regulatory requirements.

2) Strong earning performance.

3) Well-managed and controlled growth.

4) Competent management able to analyze the risk associated with the activities

in determining appropriate capital levels.

5) Reasonable dividends and ability to raise new capitals.

56

6) Low volume of problem assets.

Capital ratio for BOI & HDFC show following characteristics

Capital and solvency ratios exceed regulatory requirements, but:

1) Problem assets relatively high.

2) Management inability to maintain sufficient capital to support risks

Capital ratio for AXIS BANK

1) High level of problem assets in excess of 25% of total capital.

2) Bank fails to comply with regulatory regulations Poor earnings.

3) Inability to raise new capital to meet regulatory requirements and correct

deficiencies.

4) It requires regulatory oversight to ensure management and shareholders

address the issues of concern

2) ASSET RATIOS

BANK GROSS NPA

–NET

ADVANCES

NET NPA-

NET

ADVANCES

TOTAL

LOANS-

TOTAL

ASSET

MARKET

VALUE-

BOOKVALUE

BOI 1.1 .4 63.37 98.04

SBI 1.6 1.8 56.25 137.41

AXIS BANK .6 .4 55.20 145.86

BOB .8 .3 63.31 66.69

HDFC 1.1 .6 53.95 281.03

WEIGHTAGE .1 .5 .2 .2 TOTAL

BOI .11 .2 12.67 19.60 32.58

SBI .16 .9 11.25 27.48 39.79

AXIS BANK .06 .2 11.04 29.17 40.47

BOB .08 .15 12.66 13.33 26.22

HDFC .11 .3 10.79 56.20 67.4

57

Table 30: Asset ratios

1) The net non-performing assets to loans (advances) ratio is used as a measure of

the overall quality of the bank’s loan book. Higher ratio reflects rising bad quality

of loans. But here NPA percentage of BOB Bank is just .3%, which shows bank is

performing well, and it is able to recover its debt. The Bank has maintained high

standard in asset quality through appropriate risk management measures and

recovery measures as evidenced by lower NPA levels. Here as compared to its

peers it has lowest ratio, which is better. At the same time SBI need to think over

its policy to give loans as they are occurring highest 1.8% ratio.

2) The loan to assets ratio measures the total loans outstanding as a percentage of

total assets. The higher this ratio indicates a bank is loaned up and its liquidity is

low. The higher the ratio, the more risky a bank may be to higher defaults. Here

the ratio for all the banks is almost same. But the position of HDFC is better than

others with having least 53.95 value.

3) Market value ratios are strong indicators of what investors think of the firm’s past

Performance and future prospects. It basically shows Goodwill or Reputation of

the bank in the market. Here HDFC Bank is highly reputed in the minds of

investors. Means private banks are having good reputation in the market.

4) So overall in Assets Ratio, HDFC Bank is on top position as compared to its

peers.

5) If we compare only public banks, again SBI is ahead than other Banks.

Asset quality of HDFC BANK

1) Past due and extended loans kept under control by a specific unit, in accordance

with the law

2) Concentrations of credits and loans to insiders provide minimal risk

3) Efficient loan portfolio management, close monitoring of problem loans

58

4) Non credit assets pose no loss threat

Asset quality of SBI and BOI

1) There are weaknesses in the management underwriting standards and control

procedures

2) Loans to insider pose some regulatory concern, but can be easily corrected

3) Return on non credit assets is low and they display more than normal risk without

posing a threat of loss

Asset quality of AXIS BANK and BOB

1) Bank is experiencing high level of past due and rescheduled credits

2) Poor underwriting standards

3) Policies and procedures are not properly implemented

4) Inappropriate loans to insiders

5) Non credit assets display abnormal risks and may pose a threat of loss

59

3) MANAGEMENT RATIOS

BANK MARKET

VALUES

-EQUITY

CAPITAL

TOTAL

ADVANCES

TOTAL

DEPOSITS

BUSSINESS

PER

EMPLOYEE

PROFIT

PER

EMPLOYEE

BOI 22 74.56 10.11 .04

SBI 106 73.1 5.56 .05

AXIS BANK 41.5 69.48 10.60 .1

BOB 23.5 74.8 9.14 .06

HDFC 96.8 41.23 4.46 .04

WEIGHTAG

E

0.25 0.25 TOTAL 0.25 0.25 TOTAL %

BOI 5.5 18.62 24.12 2.52 .01 2.53 25.04

SBI 26.5 18.27 44.77 1.39 .012 1.40 13.98

AXIS BANK 10.37 17.37 27.74 2.65 .02 2.67 26.67

BOB 5.87 18.7 24.57 2.28 .015 2.29 22.87

HDFC 24.2 10.30 34.5 1.11 .01 1.12 11.18

10.01 100

Table 31: Management ratios

1) Business per employee/ profit per employee

These ratios indicate the productivity level of the bank’s employees. Since state

run banks are operating with large employee base, the productivity ratio for these

banks lags behind when compared with new generation private sector banks. Here

AXIS bank has ratio of 10.6 Crores leading BOI having 10.11 Crores of business.

2) Market Value to equity Capital

60

This Ratio indicates the price of the shares in the market compared to the actually

face value of the shares. It shows the premium on each share people are ready to

pay because of the reputation and value of the company. Here, SBI is having

almost 106 times the market value whereas BOI is having only 22 times which is

lowest of all five banks.

3) Total Advances to Total Deposits

It indicates Money Lend by the Bank compared to Money borrowed by the bank.

Higher the ratio indicates the Efficiency of the Bank. BOB is having 74.8%

whereas HDFC is having only 42%.

4) Over all if we compare Management Ratio, AXIS bank is on the top

Position where as BOI is in second position. There is very Minor difference

between the two banks. They are well performing in Profit per employee and

Business per employee.

5) In PSUS, BOI is better than all other banks.

61

4) EARNING RATIOS

BANK OPEARTING

PROFIT-AVG

WORKING

FUND

INTEREST

SPREAD

NET

PROFIT –

AVG

ASSET

INTEREST

INCOME-

TOTAL

INCOME

BOI 2.7 66.36 1.4 84.2

SBI 2.1 67.27 1.08 83.4

AXIS BANK 3.0 65.98 1.41 78.9

BOB 2.2 66.05 1.09 84.5

HDFC 2.9 54.56 1.41 82.47

WEIGHTAGE .25 .25 .25 .25 TOTAL

BOI .67 16.59 .35 21.05 38.66

SBI .52 16.81 .27 20.85 38.45

AXIS BANK .75 16.49 .35 19.72 37.35

BOBS .55 16.51 .27 21.12 38.45

HDFC .72 13.64 .35 20.61 35.32

Table 32: Earning ratios

1) Operating profit to Average Working Funds shows the return on working funds.

Higher the ratio indicates the profitability of the bank. Here AXIS BANK is

having 3.0 %, where as its peers are having lower than it has. So AXIS Bank is

more profit making Bank.

2) Higher the Interest spread will be better for the bank as it shows the better offering

of bank in the market. Here SBI has the highest Interest Spread as compared to its

peers.

3) Net Profit To Average Assets shows return on assets of the banks. Higher the

return, better for the bank. Here HDFC bank and AXIS BANK is having highest

return on the assets.

62

4) The main income of any bank is interest. This ratio shows the percentage of

income generated in bank through Interest. Here BOB is having 84.5 % of income

through interest followed by BOI, SBI and HDFC.

5) Here overall BOI is performing well in earnings ratio and it is leading as

compared to its competitors.

6) If we compare only private banks then AXIS Bank is well performing than the

HDFC Bank.

5) LIQUIDITY RATIOS

BANK LIQUID

ITY

ASSET

TOTAL

GOVT

SECURITY

–TOTAL

ASSETS

APPROVED

SECURITIES

-TOTAL

ASSETS

LIQUID

ASSET -

DEMAND

DEPOSIT

LIQUID

ASSET –

TOTAL

DEPOSIT

BOI 9.65 18.86 .29 172 9.47

SBI 10.82 23.4 .19 94.2 14.06

AXIS BANK 10.16 18.6 0 60.4 12.79

BOB 10.59 17.6 .42 166 12.51

HDFC 9.55 28.4 .42 61.5 1.22

WEIGHTAGE .2 .2 .2 .2 .2 TOTAL

BOI 1.93 3.77 .05 34.4 1.89 42.04

SBI 2.16 4.68 .03 18.84 2.81 28.52

AXIS BANK 2.03 3.72 00 12.08 2.55 20.38

BOB 2.11 3.52 .084 33.2 2.5 41.41

HDFC 1.91 5.68 .084 12.3 .24 20.21

Table 33 : Liquidity ratios

1) Liquid Assets To Total Assets ratio shows the percentage of liquid assets out of

the total assets. Higher the ratio indicates better liquidity of the bank. Here BOI is

having better liquidity as compared to other banks.

63

2) Government securities are considered to be the quick assets of the bank which can

be in cashed easily. Here, HDFC bank is having 28.4% of the assets as

government securities and is the highest among others.

3) Same as government securities, approved securities also can be in cashed easily.

Here BOB and HDFC is having highest approved securities. AXIS Bank is not

having any approved securities.

4) Liquid Assets To Total Deposits ratio indicates the Percentage of liquid assets

bank against deposits. Here Bank Of Baroda is having the highest ratio i.e. 166%

as compared to its competitors. So it shows that it is having an ample amount of

liquidity to pay the deposits.

5) Overall, Bank of India is performing well i.e. 42.04% followed by its peers i.e.

BOB- 41.41%, AXIS Bank- 20.38% and HDFC Bank -20.21%.

Liquidity Ratio of BOI and BOB show the following characteristics

1) Sufficient liquid assets to meet loan demand and unexpected deposit reduction

2) Little reliance on inter-bank market

3) Strong and sophisticated planning, control and monitoring

4) Existence of an contingency plan

Liquidity Ratio of SBI and AXIS Bank and HDFC show the following

characteristics

1) Bank meets its liquidity requirements, but management lacks proper expertise for

planning, control and monitoring

2) Bank experienced liquidity problems. Management reacted appropriately but

failed to take action to prevent a recurring risk

3) Management is unaware of negative trends

4) Management did not address liquidity problems

64

CHAPTER-9

CAMEL RATING

BANK CAPITAL ASSETS MANAG

EMENT

EARNING LIQUI

DITY

BOI 25.44 32.58 49.16 38.66 42.04

SBI 28.91 39.79 58.75 38.45 28.52

AXIS BANK 22.06 40.47 54.41 37.35 20.38

BOB 26.21 26.22 47.44 38.45 41.41

HDFC 24.99 67.4 45.68 35.32 20.21

WEIGHTAGE .2 .2 .2 .2 .2 TOTAL RANK

BOI 5.08 6.51 9.83 7.73 8.40 37.55 3

SBI 5.78 7.95 11.75 7.69 5.7 38.87 1

AXIS BANK 4.41 8.09 10.88 7.45 4.07 34.9 5

BOB 5.24 5.24 9.48 7.69 8.28 35.93 4

HDFC 4.99 13.48 9.13 7.06 4.04 38.7 2

Table 34: camel rating

FINDINGS

Rank 1 – Here SBI indicates strong performance and risk management practices that

consistently provide for safe and sound operations. The historical trend and

projections for key performance measures are consistently positive. It is not

performing well in Liquidity ratio but it performs strong in other ratios, which

covered up its weak performing area any weaknesses can be handled routinely by the

board of directors and management. Banks are considered stable, well managed and

capable of withstanding all but the most severe economic downturns. Risk

management practices are strong and minimal supervisory oversight is required to

ensure the continuation and validation of the bank’s fundamental

65

Rank 2 – Here HDFC reflects satisfactory performance and risk management

practices that consistently provide for safe and sound operations. It maintains very

well in management and assets ratio, which has become its strength. In order to lead,

it should focus more on liquidity. Bank with a good composite rating and is in

substantial compliance with laws and regulations. Only moderate weaknesses are

present and well within the capabilities of the board of directors’ and management’s

capability and willingness to correct. HDFC bank is stable and can withstand most

economic downturns. Overall risk management practices are satisfactory and there are

not material supervisory concerns.

Rank 3 – BANK OF INDIA represents performance that is flawed to some degree and

is of supervisory concern. Performance is marginal. Risk management practices are

satisfactory. In order to improve their position, it should maintain the management

and Assets ratio so that it will be able to compete with their competitors.

Rank 4 –BOB Bank refers to poor performance that is of serious supervisory concern.

Risk management practices are generally unacceptable and the Bank should try to

improve its operations. It is performing Good in Earnings but Management and

Liquidity of the bank is not up to the mark and should give more importance to these

factors in order to be at the par with other banks.

Rank 5 – AXIS Bank is showing the worst condition in comparison to others banks.

Problem of liquidity exists in the bank which management has to take care. Banks has

weaknesses in one or more component areas that if not corrected within a reasonable

time frame could result in significant solvency or liquidity concerns. Management

may lack the ability or willingness to effectively address weaknesses in a timely

manner and Axis bank generally are less capable of withstanding business fluctuation

and are vulnerable to outside influences. Risk management practices may be less than

satisfactory and banks in this group may be in significant noncompliance with laws

and regulations.

66

CHAPTER-10

CONCLUSION

The current Banking Crisis, which is quite unprecedented, underlines the importance

of regulatory issues and the effects of incompetence in this area. CAMEL, as a rating

system for judging the soundness of Banks is a quite useful tool, that can help in

mitigating the conditions and risks that lead to Bank failures.

The report makes an attempt to examine and compare the performance of four

different banks of India i.e. BOI, SBI, HDFC, Bank Of Baroda, AXIS bank. The

analysis is based on the CAMEL Model.

After evaluating all the ratios, calculations and ratings we have given 1st Rank to

State bank 0f India, 2nd Rank to HDFC, 3rd Rank to Bank of India, and 4th to Bank

of Baroda, 5th rank to Axis Bank.

Although SBI (1st rank) is leading the banking sector a tough competition is given by

HDFC bank (2nd rank) indicating rapid growth in private banking sector.

So Bank of India need to take corrective actions regarding CAMEL factors as

mentioned in recommendation to improve its ranking.

67

RECOMMENDATION

1) Capital ratio of BOI is greater than RBI recommended ratio which is 9% for CAR

but lower than its counterparts which is due to two basic reasons, the capital adequacy

ratio of BOI is lesser than its counterparts which they have to take care by increase

their capital base i.e. tier1 & tier2 capital.

And the security –total investment ratio is lower as compared to others, which shows

inability of management to maintain the sufficient govt. securities.

2) Although credit has increased by 19%, BOI’s NPA has increased by 197%. So they

have to strengthen their credit lending policy by proper detection of credit exposure

through tightening KYC norms and not giving loans to priority sector above

prescribed RBI limit.

3) The ratio of market value-face value is only 22% which is lower than other banks

that means their reputation in the market is not at par than other banks. And Business

per employee of BOI is less as compared to others, which is due to existing non

techno-savvy conservative employees.

4) Action must be taken to strengthen the liquidity position of bank of India to meet

the entire obligation by extensive planning.

LIMITATIONS

1) The study was limited to only five banks.

2) Constraint of time & resources.

3) Study of completely done on the basis of ratios only.

4) Not able to communicate with higher management.

5) We haven’t covered foreign sector banks.

6) We fully trusted in secondary data.

68

BIBLIOGRAPHY

JOURNALS

• Singh Vijay,(2008),”sandipani one page manager”,8th edition,kanpur pub ltd.

BOOKS

.

• Hasija Ashok, Sood Rajendra (2002), “Ever More Banking”, 6th edition, Sachin

Publication

• Jeevanandam.C (1993). “Practice And Law Of Banking”, 7th edition, Premier

Book Vompany

• Varshney P.N,Swaroop Gopal (1999). “Banking Law and Practice”, 6th edition,

Sultan Chand And Sons.

WEB SITE

http://www.hdfcbank.com/aboutus/basel_disclosures/default.htm

www.moneycontrol.com/financials/icicibank/balance-sheet/ICI02

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofindia/

BOI

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabnation

albank/PNB05

http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/kotakmahind

rabank/KMB

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofbaroda

/BOB

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=A%20Profile%20of%20

Banks

69

70