Paper 19

AJRBFVolume1,Issue2(November,2011)ISSN:22497323

JournalofAsianResearchConsortiumhttp://www.aijsh.org

86

A J o u r n a l o f A s i a n R e s e a r c h C o n s o r t i u m

AJRBF:

A S I A N J O U R N A L O F R E S E A R C H I N B A N K I N G

A N D F I N A N C E PERFORMANCE EVALUATION OF

SCHEDULED COMMERCIAL BANKS IN INDIA- A COMPARATIVE STUDY

DR. R. K. UPPAL*; AMIT JUNEJA**

*Principal Investigator, UGC Financed Major Research Project,

D.A.V. College, Malout, Punjab. **Research Scholar, Department of Economics,

Panjab University, Chandigarh.

ABSTRACT After deregulation and banking sector reforms, Indian Banking has changed its face completely. From a very comfortable and peaceful environment, now the Indian Banking Sector is characterized by stiff competition and profit war between different bank groups. So, this paper attempts to evaluate and compare the performance of different bank groups. Secondary data is used for this type of comparison and evaluation. All the bank groups i.e. Public Sector, Old Private Sector, New Private Sector and Foreign Banks constitute the sample for the above analysis. After the Analysis of the data for a time period of 2007- 2011 for 17 parameters of bank performance, it is found that Old Private banks are much profitable and efficient than any other bank group. The performance of foreign banks is worst during the study period on all the parameters which shows that this bank group is yet not able to make its place in Indian banking Industry and Indian Banking Industry is still dominated by Old Private Sector banks. KEYWORDS: Performance of Banks, Deregulation of Banking System, Profitability, Efficiency of Banks.

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I. INTRODUCTION

Banks are the important component of any financial system. They play important role of channelizing the savings of surplus sectors to deficit sectors. The efficiency and competitiveness of banking system defines the strength of any economy. Indian economy is not an exception to this and banking system in India also plays a vital role in the process of economic growth and



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development. After the series of banking sector reforms in last decade the Indian commercial banks has pass through certain developments and challenges. At the one hand the efficiency and outlook of banks has improved due to technological development and customer orientation but at the same time increasing level of NPA's becomes serious concerns for banks.

Indian banking, which was operating in a highly comfortable environment till the beginning of the 1990s, has been pushed into the choppy water of intense competition. The modern banking activity is marked by itineraries into un-chartered horizons mingled with risks and heavy competition. Immediately after nationalization, the Public Sector Banks spread their branches to remote areas at a rapid pace Their main objective was to act on behalf of the government to fulfill economic obligations towards the common man. They acted over enthusiastically in penetrating into far-flung and remote corners of the country. The social responsibility that was entrusted upon the Public sector Banks digresses them from the profit motive. On the other hand private and foreign banks did not make such moves. Instead, they pursued profit making as the objective for their operations.

In 1992 the RBI launched banking sector reforms, as per the recommendations made by the Narasimhan Committee on financial reforms to create a more profitable, efficient and sound banking system. The reforms opened the banking sector for private players. Domestic private sector banks are divided into two categories old banks which existed with the public sector banks before the entry deregulation and the new banks that came into existence after the reforms of 1992. The old banks are smaller in size and are regional. In contrast the new private sector banks are much larger in size, operate primarily in metros and are technologically superior. Interestingly, unlike many developing countries, where the government owned financial institutions own major equity of the private banks, the equity share holders of the old private sector banks were mainly non government bodies. However, most of the new private sector banks, in India are promoted by the government owned financial Institutions. These banks, too, are in the process of reducing promoters stake by raising funds through the capital market.

These developments in the area of banking regulations has made public sector banks more concerned about their position and place in the Indian banking industry. On the other hand, banks in private sector and foreign sector are making their operations in their own way. There is a big difference in the operation style of these different types of bank groups. So, there is a need to compare and evaluate the operations of these different bank groups and their achievements on different parameters.

SCHEME OF THE PAPER

The plan of research report has been framed under six sections:-

Section-I gives the introduction of the problem taken for study.

Section -II deals with review of related literature.

Section -III objectives, data base, statistical techniques and research methodology.

Section -IV deals with the analysis and interpretation of data.



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Section-V deals with conclusions and implications of the study.

Section-VI deals with future areas of research.

II. REVIEW OF RELATED LITERATURE

Kumar, S & Gulati R. (2010) examines whether the effect of ownership on the efficiency of Indian domestic banks is significant. The efficiency scores for public and private sector banks were computed using a deterministic, non-parametric and linear programming based frontier technique, which is popularly known as Data Envelopment Analysis (DEA). Using the cross-sectional data of the public and private sector banks, which operated in the financial years 2005-06 and 2006-07, the study finds that (1) The new private sector banks dominate the formation of efficient frontier of Indian domestic banking industry; (2) The overall technical inefficiency stems primarily from managerial inefficiency (as reflected by pure technical inefficiency) rather than scale inefficiency; and (3) Though the efficiency differences between the public and private sector banks have been noted, these differences are statistically insignificant in most of the instances. On the whole, the study concludes that ownership does not matter in the Indian domestic banking industry.

Munusamy, J. et al. (2010) conducted this research focused on the measurement of customer satisfaction through delivery of service quality in the banking sector in Malaysia. A quantitative research was used to study the relationship between service quality dimensions and customer satisfaction. The methodology employed in obtaining information about customer satisfaction in banking via a survey conducted at a sample of the general consumer population. The survey questionnaire is design and distributed to target respondent randomly. Targeted respondents are the general public who are at the legal age to hold a Savings and/or Current Account in any of the retail banks in Malaysia. A sample of 117 respondents was taken for the study. The findings reveal that assurance has positive relationship but it has no significant effect on customer satisfaction. Reliability has negative relationship but it has no significant effect on customer satisfaction. Tangibles have positive relationship and have significant impact on customer satisfaction. Empathy has positive relationship but it has no significant effect on customer satisfaction. Responsiveness has positive relationship but no significant impact on customer satisfaction. The study highlights implications for marketers in banking industry for improvement in delivery of service quality.

Mitra,R. & Shankar R. (2008) in their study on the evaluation of Indian banks concludes that a stable and efficient banking sector is an essential precondition to increase the economic level of a country. This paper tries to model and evaluate the efficiency of 50 Indian banks. The Inefficiency can be analyzed and quantified for every evaluated unit. The aim of this paper is to estimate and compare efficiency of the banking sector in India. The analysis is supposed to verify or reject the hypothesis whether the banking sector fulfils its intermediation function sufficiently to compete with the global players. The results are insightful to the financial policy planner as it identifies priority areas for different banks, which can improve the performance. This paper evaluates the performance of Banking Sectors in India.



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Kumar, S. (2008) in his article on an evaluation of the financial performance of Indian private sector banks wrote Private sector banks play an important role in development of Indian economy. After liberalization the banking industry underwent major changes. The economic reforms totally have changed the banking sector. RBI permitted new banks to be started in the private sector as per the recommendation of Narashiman committee. The Indian banking industry was dominated by public sector banks. But now the situations have changed new generation banks with used of technology and professional management has gained a reasonable position in the banking industry.

Vimi Jham & Kaleem Mohd Khan(2008) conducted a study among five Indian banks, aimed at identifying customer satisfaction variables which lead to relationship building, and developing a conceptual framework of relationship marketing practices in Indian banks by capturing the perspectives of customers with respect to their satisfaction with various services. It also sought to identify whether demographics have a role to play in customer satisfaction. A questionnaire designed from a literature review and in-depth interviews were utilized to arrive at the 16 variables which determined the satisfaction of 555 customers of the five banks. The findings suggest that while private banks have been able to attract the younger customers with higher educational levels, who are comfortable with multi channel banking, the customers of the national bank are older and more satisfied with the traditional facilities. The results from this study could provide managerial lessons on assessment of strengths and improvement of services and in evolving a research strategy that will benefit the management of banks.

Kumar, S. (2007) conducted a study based on cross-sectional data for 27 banks. This study explores the relationship between technical efficiency and profitability in Indian Public Sector Banking industry. The technique of Data Envelopment Analysis has been utilized to compute the TE-score for each bank in the year 2005. The mean level by TE for the industry is found to be 88.5 percent. This implies that Public Sector Banks can produce 1.13 times as much output from the same inputs if they operate at efficiency frontier. In 20 inefficient banks, the technical inefficiency ranges from 2.6 percent to 36.8 percent. Also the banks belonging to SBI group out perform the banks belonging to the Nationalized Banks Groups in terms of operating efficiencies.

Mishra, J.K. and Jain, M. (2007) studied various dimensions of customers satisfaction in nationalized and private sector banks. The study concluded that the satisfaction of the customers is an invaluable asset for the modern organizations, providing unmatched competitive edge; it helps in building long term relationship as well as brand equity. The best approach to customer relationship is to deliver high level of customer satisfaction that result in strong customer loyalty. Two-stage factor analysis was computed to arrive at the dimensions of customer satisfaction. The study analyzed ten factors and five dimensions of customer satisfaction for nationalized and private sector banks respectively.

Mittal,R.K. & Dhingra,S.(2007) conducted a study on assessing the impact of computerization on productivity and profitability of Indian Banks for a period of 2003-04 and 2004-05 by using Data Envelopment Analysis (DEA). Results show that ICICI Bank is found to be efficient in all indicators. Nearly 70% of ICICI Banks transactions take place electronically, resulting in lower cost of transactions, high productivity and better profitability. The input and output parameters,



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which are clearly affected by computerization in the banks were considered for productivity and profitability analysis. The output of DEA, indicates that Private Banks are much better than Public Sector Banks in productivity and profitability indicators, Hence, of the many factors which could lead to improved performance of banks, increased IT investment is one of the vital contributing factors for enhanced performance.

Uppal, R.K. (2007) concludes that Indian Banking industry has undergone radical changes due to liberalization and globalization measures undertaken since 1991. A highly satisfied and delighted customer is a very vital non-financial asset for the banks in the emerging IT era. This paper is based on the responses of the 768 customers of public sector banks and Indian Private Sector banks and foreign banks operating in Amritsar District of Punjab in the month of September 2007 in case of bank have been taken into consideration. Time is major factor which affects the quality and reputation of banks. E-banks provide quick services and are very essential that all bank groups should put a place the right kind of systems to further cut down on service time and render instantaneous services to the customers.

Uppal, R. K. and Kaur, R. (2007) analyze the efficiency of all the bank groups in the post banking sector reforms era. Time period of study is related to second post banking sector reforms (1999-2000 to 2004-05). The paper concludes that the efficiency of all the bank groups has increased in the second post banking sector reforms period but these banking sector reforms are more beneficial for new private sector banks and foreign banks. This paper also suggests some measures for the improvement of efficiency of Indian nationalized banks. The sample of the study in Indian banking industry which comprises five different ownership groups and the ratio method is used to calculate the efficiency of different bank groups. New private sector banks are compelling with foreign banks for continuous improvement in their performance.

RESEARCH GAP

From the review of the above literature, it is clear that pubic sector banks are really facing it very hard to make themselves survive in the present era of cut throat competition because of their prime motive of social and welfare banking. On the other hand, private sector and foreign banks has no such motive for themselves. This is the reason why these banks are making continuous advancements in banking field. This will surely affect the performance of other bank groups. On the other hand, government is withdrawing its support continuously by deregulating the banking system. So, these policies of the government also have its effect on the performance of different bank groups. Competition is every where by one means or the other. So, there is a great need to evaluate the performance of various bank groups on different parameters. So that it can be found out that which bank group is more able to cope up with this changing environment in the banking system of the country?

III. OBJECTIVES

i. To study and analyze the performance of all bank groups with reference of selected parameters from 2007-11.

ii. To study and compare the relative impact of the various bank groups on each others performance.



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DATA BASE

Secondary data had been used in the present study.

i. Report on Trend and Progress of Banking in India, RBI Publications, Mumbai 2006-07 to 2010-11.

STATISTICAL TECHNIQUES

For the analysis of data arithmetic mean and percentage statistical techniques were used. Percentage increase was calculated by using the following formula:

CY

BY X 100

RESEARCH METHODOLOGY

RESEARCH DESIGN

A descriptive conclusion research design was used for the present study. A comparative study has been conducted about the performance of various bank groups in terms of different selected parameters.

SAMPLE DESIGN

The present study is concerned with Indian Banking Industry in whole and it is further divided into four bank groups to compare their performance in terms of selected parameters.

i. SBI & its associates and Nationalized Banks known as Public Sector Banks- G-I

ii. Old Private Sector Banks- G-II

iii. New Private Sector Banks-G-III

iv. Foreign Banks-G-IV

TIME PERIOD

Time period for the present study will be taken from 2006-07 to 2010-11. This time period is deliberately taken because several type of changes are occurring in the banking sector like failure of a lot of banks in the developed countries, change on the policy rates by the government on a continuous basis, merger of New Private Sector Banks in Inter and Intra group etc. All these changes affect the relative performance of the various bank groups differently.

PARAMETERS OF THE STUDY

In the present study, the analysis and comparison of the performance of various bank groups is done with reference to the following parameters:



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1. Business per Employee of All Scheduled Commercial Banks.

2. Profit per Employee of All Scheduled Commercial Banks.

3. Deposits of All the Scheduled Commercial Banks.

4. Advances of All Scheduled Commercial Banks.

5. Investment of All Scheduled Commercial Banks.

6. Assets of All Scheduled Commercial Banks.

7. Interest Income of All Scheduled Commercial Banks.

8. Non-Interest Income of All Scheduled Commercial Banks.

9. Total Income of All Scheduled Commercial Banks.

10. Interest Expenses of All Scheduled Commercial Banks.

11. Operating Expenses of All Scheduled Commercial Banks.

12. Expenditure of All Scheduled Commercial Banks.

13. Operating Profits of All Scheduled Commercial Banks.

14. Provisions & Contingencies of All Scheduled Commercial Banks.

15. Net Profits of All Scheduled Commercial Banks.

16. Gross NPA of All Scheduled Commercial banks.

17. Net NPA of All Scheduled Commercial banks.

IV. FINDINGS AND DISCUSSION

The major findings of this research and the analysis of data is shown the following tables:



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TABLE 1 AVERAGE BUSINESS PER EMPLOYEE OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank

Public Sector Banks 4.96 6.27 7.80 9.04 1084 1.19 1

Old Private Sector Banks

4.10 5.11 5.86 6.58 7.63 0.86 2

New Private Sector Banks

6.77 7.07 7.44 8.71 9.80 0.45 4

Foreign Banks 10.37 1.28 1.43 1.41 15.12 0.46 3

Source: Report on Trend and Progress of Banking in India, 2006-11

Table 1 is showing Business per Employee of all the Scheduled Commercial Banks. It is quite clear that all the Scheduled Commercial Banks shows an increase in their Business per Employee. But among all the banking groups Public Sector Banks shows highest percentage increase in their Business per Employee i.e. 1.19pc. New Private Sector Banks and Foreign Banks show least percentage increase in their business per Employee. Old Private Sector Banks also shows a 0.86 increase in their Business per Employee which can be said well enough.

TABLE 2 AVERAGE PROFIT PER EMPLOYEE OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank

Public Sector Banks 3.11 3.91 3.69 4.35 6.51 1.09 3


1.78 4.39 5.00 3.80 5.28 1.97 1


4.35 4.95 5.43 7.75 9.64 1.21 2

Foreign Banks 2.61 4.36 3.88 2.03 0.41 -0.84 4

Source: Same as in Table 1



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Table 2 shows Profit per Employee in various bank groups. It is clear that all bank groups except the Foreign Banks show an increase in their Profit per Employee. Among all these bank groups Old Private Sector Banks shows maximum percentage increase in their profit per employee i.e. 1.97pc. The Foreign Sector Banks were the only banks in which there is a decrease in their profit per employee i.e. -0.84pc.

TABLE 3 AVERAGE DEPOSITS OF ALL THE SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07 2007-08 2008-09 2009-10 2010-11 % Increase

Rank

Public Sector Banks

73859.22 90883.96 115286.96 136733.29 168191.73 1.28 2


7276.26 8717.32 13284.93 15326.46 18868.36 1.59 1


51717.25 63680.50 76729.28 84700.57 105514.57 1.04 3

Foreign Banks 5198.27 6737.79 7135.90 7672.69 7521.63 0.45 4


Table 3 shows Average Deposits of all the Scheduled Commercial Banks. All the bank groups show an increase in their average deposits, but the Old Private Sector Banks topped the position with a 1.59pc increase in their average deposits. While Foreign Banks were lagging behind among the entire bank groups with only 0.45pc increase in their average deposits. The performance of the Public Sector Banks can also be said very well with 1.28pc increase in their average deposits during the study period. Again the foreign banks are lagging far behind in this field also with only 0.45pc increase in their average deposits.

TABLE 4 AVERAGE ADVANCES OF ALL SCHEDULED COMMERCIAL BANKS (IN CRORE RS.)


Rank

Public Sector Banks

53338.74 66574.26 83709.48 100141.14 127139.69 1.38 2


4888.79 5877.37 8567.47 10275.73 13217.64 1.70 1


40233.13 50841.63 63832.00 68336.85 87555.14 1.18 3

Foreign Banks 4356.50 5584.48 5513.83 5266.45 6110.56 0.40 4 Source: Same as in Table 1



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Table 4 shows Average Advances of the four bank groups. Old Private Sector Banks again at the top with 1.70pc increase in their advances. Public Sector Banks are at the second position with 1.38pc increase in their average advances. Again Foreign Banks lagged behind with only 0.40pc increase in their average deposits. This shows an expansionary advances policy of the Old Private Sector Banks.

TABLE 5 AVERAGE INVESTMENT OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)


Rank

Public Sector Banks

24624.26 29593.67 37506.15 44667.51 51097.46 1.08 4


2297.21 2827.21 4821.07 5566.60 6615.50 1.88 1


21376 28062.25 33448.43 38659.71 47057.57 1.20 2

Foreign Banks 2464.53 3416.97 4345.13 5138.25 5171.84 1.10 3

SOURCE: SAME AS IN TABLE 1

Table 5 shows Average Investment of the four bank groups. Here Old Private Bnaks got the first place with 1.88pc increase in their average investment. It should be noted that the Public Sector banks shows least increase in their average investment. They are only able to increase their investment to 1.08pc in the five years. Most importantly there is big gap between the first position and second position of almost 0.66pc. The performance of Foreign Banks and Public Sector Banks is quite similar with 1.10pc and 1.08pc increase in their average investments respectively.



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TABLE 6 AVERAGE ASSETS OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)


Rank

Public Sector Banks

90376.52 111934.70 139508.00 164486.33 203608.35 1.25 2


8450.63 10239.74 15466.73 17931.80 2072.21 1.61 1


73105.25 93199.25 113637.71 125975.85 155595.00 1.13 3

Foreign Banks 9461.80 12595.02 14904.97 13133.74 13688.72 0.45 4


Table 6 shows Average Assets of various bank groups. It is clear that Old Private Sector Banks are more successful in increasing their average assets to 1.61pc.No bank group is even close to Old Private Sector Banks as far as the average assets are concerned. Public Sector Banks are at the 2nd position with 1.25pc increase in their average assets. New Private Sector banks are close to the performance of Public Sector Banks with 1.13pc increase in their average assets. Here again Foreign Banks are lagging behind with only 0.45pc increase in their average assets.

TABLE 7 AVERAGE INTEREST INCOME OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09 2009-10 2010-11 % Increase

Rank

Public Sector Banks

6080.93 7926.85 10126.96 11351.44 14089.15 1.32 2


603.89 773.37 1252.2 1371.00 1553.27 1.57 1


4761.5 7054.38 9469.00 8901.42 10504.0 1.21 3

Foreign Banks 618.06 842.13 1010.73 824.71 792.50 0.28 4




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Table 7 is showing the Average Interest Income earned by various bank groups. Old Private Sector Banks increase their average interest income to 1.57pc. Public Sector Banks and New Private Sector Banks also increase their average interest income to 1.32pc and 1.21pc respectively. But Foreign Banks are far behind them by only increasing their average interest income by only 0.28pc which shows regressive trends in their earnings from interest payment by their customers.

TABLE 8 AVERAGE NON-INTEREST INCOME OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



82.53 110.74 185.93 205.60 216.38 1.62 1


1343.13 1845.63 2165.71 2442.14 2528.14 0.88 3

Foreign Banks 242.89 364.07 496.37 310.98 353.97 0.46 4


Table 8 shows Average Non-interest Income earned by various bank groups. In this old Private Sector Banks topped the position with 1.62pc increase in their average Non-Interest Income. Public Sector Banks and New Private Sector Banks are at 2nd and 3rd position with a 1.10pc and 0.88pc increase in their Non-interest Income respectively. Again Foreign Banks are not successful in it with only 0.46pc increase in their Average Non-Interest Income. Again there is a big gap between the 1st and the 2nd position which means that the Old Private Sector Banks are far more successful than any other bank group in the case of their non-interest income.

TABLE 9 AVERAGE INCOME OF ALL SCHEDULED COMMERCIAL BANKS (IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09 2009-10 2010-11 % Increase

Rank

Public Sector Banks

6958.12 9108.92 11689.18 13143.55 15930.12 1.29 2


686.42 884.11 1438.13 1576.60 1880.57 1.73 1


6104.63 8900.01 11634.71 11343.57 13.32.14 1.13 3

Foreign Banks 860.95 1206.20 1507.10 1101.28 1097.31 0.27 4 SOURCE: SAME AS IN TABLE 1



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Table 9 shows the Average Income earned by the four bank groups. Here again Old Private Sector Banks are more successful in increasing their average income with a 1.73pc. Public Sector Banks and New Private Sector Banks are at 2nd and 3rd position with 1.29pc and 1.13pc increase in their average income. Again Foreign Banks are at the lowest position with only 0.27pc increase in their average income during the study period. Old Private Sector Banks are again successful in making a huge difference than their counterparts.

TABLE 10 AVERAGE INTEREST EXPENSES OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



414.88 664.00 855.60 938.40 1054.86 1.54 1


3225.00 4816.88 6303.29 5304.29 6049.57 0.88 3

Foreign Banks 262.19 365.81 474.78 319.21 379.36 0.45 4


Table 10 is showing average interest expenses of all scheduled commercial banks. It is clear that all the scheduled commercial banks show an increase in their average interest expenses. But among all the bank groups Old Private Sector Banks shows highest percentage increase in their average interest expenses i.e. 1.54pc. Foreign Banks shows least percentage increase in their average interest expenses. The performance of Public Sector Banks is also good and quite close to the performance of Old Private Sector Banks which means that Public Sector Banks are giving tough competition to Old Private Sector Banks.



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TABLE 11 AVERAGE OPERATING EXPENSES OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



174.47 215.67 262.60 314.33 400.00 1.29 1


1544.25 2129.13 2548.57 2590.86 3143.71 1.04 3

Foreign Banks 267.06 357.81 396.71 336.70 359.46 0.35 4


Table 11 is showing average operating expenses of all scheduled commercial banks. It is very clear that old private sector banks are leading in this area with a 1.29pc increase in their operating expenses. Public sector banks and new private sector banks are also doing well and their performance on this parameter is quite similar. Again foreign banks are much lagging behind with only 0.356pc increase in their operating expenses which shows regressive trends in the way of their development.

TABLE 12 AVERAGE EXPENDITURE OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10 2010-11 % Increase

Rank



589.59 879.14 1118.20 1252.73 1454.86 1.47 1


4769.38 6946.00 8852.00 7895.00 9193.43 0.93 3

Foreign Banks 529.24 723.62 810.26 607.55 662.94 0.25 4




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Table 12 shows average expenditure of all scheduled commercial banks. Table reveals that again old private sector banks are lagging other bank groups far behind with a 1.47pc increase in their average expenditure. Public sector banks are also very close to them with 1.33pc increase in their average expenditure. Foreign banks again are at the last position with only 0.25pc increase in their average expenditure. Foreign banks really disappoint with their performance as far as the average expenditure parameter is concerned.

TABLE 13 AVERAGE OPERATING PROFITS OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



159.00 189.74 319.93 323.86 425.64 1.68 2


1335.25 1954.00 2782.86 3473.57 3838.71 1.87 1

Foreign Banks 331.71 482.58 669.93 493.74 479.38 0.45 4


Table 13 shows Average Operating profits earned by the four bank groups. New Private Sector Banks earned the highest percentage average operating profits increase i.e. 1.87pc. Foreign Banks show least percentage increase in their average operating profits i.e. 0.45pc. As far as the performance of Old Private Sector Banks is concerned, it can be said quite well with a 1.68pc increase in their average operating profits during the study period.

TABLE 14 AVERAGE PROVISIONS & CONTINGENCIES OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank

Public Sector Banks 824.33 865.22 1206.59 1395.92 2121.73 1.57 2 Old Private Sector

Banks 99.95 85.63 159.33 169.66 204.14 1.04 3


667.38 1010.88 1574.57 1930.85 1751.57 1.62 1

Foreign Banks 173.60 254.55 419.60 372.91 286.30 0.65 4 Source: Same as Table 1



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Table 14 shows Average Provisions and Contingencies of all Scheduled Commercial banks. New Private Sector banks show grater increase in their Average Provisions and Contingencies with 1.62pc increase. Public Sector Banks again are behind them at the 2nd position with 1.57pc increase in their Average Provisions and Contingencies. Foreign Banks show only 0.65pc increase in their Average Provisions and Contingencies which was least among the four bank groups.

TABLE 15 AVERAGE NET PROFITS OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



59.05 104.11 160.60 154.13 221.50 2.75 1


808.13 943.00 1208.43 1542.71 2087.14 1.58 2

Foreign Banks 158.11 228.03 250.33 143.43 226.76 0.43 4


Table 15 shows Average Net profits earned by the four bank groups. Old Private Sector Banks show the greater percentage increase in their Average Net Profits i.e.2.75pc. No other bank group is even close to the Old Private Sector banks. New Private Sector Banks are 2nd in this regard with 1.58pc increase in their Average Net Profits. Again, Foreign Sector banks are at the last position with only 0.43pc increase in their Average Net Profits.

TABLE 16 AVERAGE GROSS NPA OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank

Public Sector Banks 1443.26 1503.52 1666.33 2219.51 2826.19 0.96 2 Old Private Sector

Banks 156.26 134.58 204.80 241.46 264.36 0.69 1


785.88 1303.25 1979.14 2002.57 2077.29 1.64 3

Foreign Banks 78.03 99.20 207.89 256.45 211.29 1.71 4 Source: Same as in Table 1



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Table 16 shows the Average Gross NPA of all scheduled commercial banks. Old Private Sector Banks are at the 1st position in this regard with only a 0.69pc increase in their average gross NPA. Public Sector Banks are just behind them with a 0.96pc increase in their Average Gross NPA. But New Private Sector Banks and Foreign Banks are not able to control their Gross Non-Performing Assets as there is a great amount of increase in their Gross Non-Performing Assets i.e. 1.64pc and 1.71pc respectively.

TABLE 17 AVERAGE NET NPA OF ALL SCHEDULED COMMERCIAL BANKS

(IN CRORE RS.)

Bank Group 2006-07

2007-08

2008-09

2009-10

2010-11

% Increase

Rank



46.89 38.95 77.26 84.73 80.43 0.72 2


392.13 613.38 893.28 747.86 492.57 0.26 1

Foreign Banks 31.97 43.42 107.03 106.27 91.64 1.87 4


Table 17 shows the Average Net NPA of all scheduled commercial banks. New Private Sector Banks are at the 1st position in this regard with only a 0.26pc increase in their Average Net NPA. Old Private Sector Banks are behind them with a 0.72pc increase in their Average Net NPA. But Public Sector Banks and Foreign Banks are not able to control their Net Non-Performing Assets as there is a great amount of increase in their Net Non-Performing Assets i.e. 1.44pc and 1.87pc respectively.



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TABLE SHOWING RANKING TO ALL BANK GROUPS IN SELECTED PARAMETERS

Parameter G-I G-II G-III G-IV

Business per Employee 1 2 4 3

Profit per Employee 3 1 2 4

Deposits 2 1 3 4

Advances 2 1 3 4

Investment 4 1 2 3

Assets 2 1 3 4

Interest Income 2 1 3 4

Non-Interest Income 2 1 3 4

Income 2 1 3 4

Interest Expenses 2 1 3 4

Operating Expenses 2 1 3 4

Expenditure 2 1 3 4

Operating Profits 3 2 1 4

Provisions & Contingencies 2 3 1 4

Net Profits 3 1 2 4

Gross Non-performing Assets 2 1 3 4

Net Non-Performing Assets 3 2 1 4

Total 1st Rank Achieved 1 13 3 0



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V. CONCLUSIONS AND IMPLICATIONS OF THE STUDY

CONCLUDING REMARKS

i. As far as the overall performance of the different bank groups is concerned, it is quite clear that that Old Private Sector Banks surpasses all the other bank groups in the study period. They performed far better. It seems that the Indian Banking industry has become a monopoly of this bank group. As far as the performance of New Private Sector Banks and the Public Sector Banks is concerned, it can be said that these bank groups are only successful in maintaining their place in the banking industry and nothing can be said good about them as far as their performance is concerned. Foreign Banks really disappoint with their performance as they are lagging far behind from their competitive bank groups in every parameter. So if they really want to survive in Indian Banking Industry, they have to improve their performance and gain the faith of their customers.

ii. As far as the performance of the Public Sector Banks is concerned, it is clear that though they are able to maximize their percentage increase in business per employee, but their performance in all the other areas is not so good. It means that the employees of these Public Sector banks are not so efficient to make the bank successful in other fields also. In case of their performance on other parameters, they are mostly at 2nd or 3rd position. This bank group is the oldest bank group in the Indian Banking Industry and after so many years of experience and expertise, they are yet not able to make their place in the banking industry and in the preferences of the customers and are yet not successful in gaining the faith of their customers.

iii. As far as the performance of the Old Private Sector Banks is concerned, it is clear that they are performing really well in almost all the parameters. They havent got the last rank on any of the parameter. They completely put down all the other bank groups during the study period with their performance and the Indian Banking Industry clearly seems to be as a monopoly of this bank group. All the other bank groups are really affected with the performance of this bank group. Most of the effect of the performance of this bank group seems on foreign banks and public sector banks which completely lost their place in the Indian Banking Industry.

iv. As far as the performance of the New Private Sector Banks is concerned, it is clear that they are more successful in increasing their operating profits, Provisions & Contingencies and net non-performing assets to a great percentage. On the other parameters they also show only satisfactory performance. Though their performance on their profit per employee, investment and net profits can be said well and they really have to do a lot of work in this area if they want to survive in this era of cut throat competition.

v. If we compare the performance of Public Sector Banks and New Private Sector Banks, it is clear that that in most of the parameters these two types of banking groups are very close to each other. They are just competing for the third and the fourth place because on almost all the parameters Old Private Sector banks are making their supremacy. So, it can



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be said that these two bank groups are just playing a supplementing role to the Old Private Sector banks.

vi. As far as the performance of the Foreign Banks in the Indian Banking Industry is concerned, they really disappoint. They are not showing any sign of improvement in their performance during the study period on all the parameters. They are at the last position at almost every parameter. For this it may be the global recession that could be the reason behind the poor performance of these banks. But if they really want their presence felt in the Indian banking Industry they have to work hard in their operations and make their place in this competitive world.

CONCLUSION

From the comparative analysis of the different banking groups, it is clear that Old Private Sector Banks are really heading the Indian Banking Industry on the path of development. But there is a strong need to improve the functioning of the New Private Sector and Public Sector Banks, so that they can make their presence felt in the modern era of cut throat competition. Out of these two bank groups, Public Sector Banks needs more attention of the government and the RBI. This bank group being oldest and government policy oriented need to be more carefully handled. Foreign banks needs to quickly recover from their financial and other crisis and reorganize their functioning in order to maintain their position, otherwise they can never be able to stand on their own feet and face the fierce competition from the other bank groups.

IMPLICATIONS

The current study is mainly concerned with the analysis of comparative performance of the specific bank groups during the period of 2006-07 to 2010-11 that reflects the impact of new competitive environment on the banks performance in terms of various selected parameters. As the study reflects the number of banks that have improved or declined their performance in respect of all the selected parameters, so provides important analysis to judge the banks with poor performance which further help to make some policy measures to improve their performance. The study will be more beneficial for the RBI, for the bankers and policy makers to make some important decisions and to make policy measures to improve their performance. The study will be helpful to the academicians and researchers for further study in this respect.

VI. FUTURE AREAS OF RESEARCH

i. Comparative study of individual banks for all selected parameters both for traditional banks and for e-banks.

ii. Comparative performance evaluation of each bank in sensitive sectors.

iii. Performance evaluation of banks separately in domestic and abroad branches.

iv. Comparative performance of segment-wise rural, semi-urban and metropolitan branches of each bank.



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v. Comparative study of these bank groups with respect to some other parameters can be done.

REFERENCES

Kumar, S. (2007). An Analysis of Efficiency- Profitability Relationship in Indian Public Sector Banks, Research paper, Reader, Punjab School of Economics, G.N.D.U. Amritsar

Kumar, S & Gulati R. (2010). Assessing the Effect of Ownership on the Efficiency of Indian Domestic Banks, Article The IUP Journal of Bank Management, IUP Publications, Vol. 9, August, pp. 76-104

Mishra, J.K. and Jain, M. (2007). Constituent Dimensions of Customer Satisfaction: A Study of Nationalized and Private Banks, prajnan, Vol.35, No.4, pp.390-398

Mitra, R. and Shankar, R. (2008). "Measuring Performance of Indian Banks: an application Data Envelopment Analysis", International Journal of Business Performance Management, Vol. 10, No. 1, pp. 57-85

Mittal,R.K. & Dhingra,S.(2007). Profitability and Productivity in Indian Banks- A comparative study, Research paper. Published in AIMS international, Vol. 1, No. 2, May, pp.137-152

Munusamy, J. et al. (2010). Service Quality Delivery and its Impact on Customer Satisfaction in the Banking Sector in Malaysia, International Journal of Innovation, Management and Technology, Vol. 1, No. 4, October, pp. 398-404

Vimi Jham & Kaleem Mohd Khan(2008). Customer Satisfaction in the Indian Banking Sector-A study, IIMB Management Review, Vol. 20, No. 1, March

Uppal, R.K. (2007). Indian Banking Industry and Information Technology, published article, New Century Publications, New Delhi

Uppal, R. K. and Kaur, R. (2007). Indian Banking Industry: Comparative Performance Evaluation in the Liberalized and Globalized Era, Gyan Management, Vol. 2, No. 2, pp.3-24

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