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An Analytical Study on Trends and Progress of Indian banking Industry | OMICS International
ISSN: 2167-0234
Journal of Business & Financial Affairs
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An Analytical Study on Trends and Progress of Indian banking Industry

Malyadri P1* and Sirisha S2

1Principal, Government Degree College, Osmania University, Hyderabad, India

2Assistant Professor, ITM-Business School, Warangal, India

*Corresponding Author:
Malyadri P
Principal, Government Degree College
Osmania University, Patancheru, Hyderabad, India
Tel: +919440064866
E-mail: [email protected]

Received April 03, 2015; Accepted May 13, 2015; Published May 30, 2015

Citation: Malyadri P, Sirisha S (2015) An Analytical Study on Trends and Progress of Indian banking Industry. J Bus Fin Aff 4:136. doi:10.4172/2167-0234.1000136

Copyright: © 2015 Malyadri P, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

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Abstract

Financial sector plays a pivotal role in the economic development. It is generally agreed that a strong and healthy banking system is a prerequisite for sustainable economic growth. Banks in India have been undergoing major challenges in the dynamic environment over the past few years as it is evident from several parameters, including No. of offices, No. of employees, Business per employee, Profit per employee, Net Worth, Deposits, Investments, Advances, Interest income, Other income, Interest expended, Operating expenses, Cost of Funds (CoF), Return on advances adjusted to CoF, Wages as % to total expenses, Return on Assets, CRAR and Net NPA ratio In order to resist negative shocks and maintain financial stability, it is important to identify theprofile of the banks. The current study is mainly concerned with the analysis of comparative profiles of Public Banks, Private Banks and Foreign Banks in India during the period of 2006-13 that reflects the impact of new competitive environment on the bank’s performance in terms of various selected parameters. The Data was collected through secondary sources from Trend and Progress Report of RBI and the tool used for data analysis of the profile of bank group wise is Compound Annual Growth Rate (CAGR) which is expressed in percentages. The results have found strong evidence that the Private Sector Banks surpasses the other bank groups and topped the position in all the parameters, while Public Sector Banks and Foreign Banks are just competing for the 2nd and the 3rd position.

Keywords

Commercial banks; Public sector banks; Private sector banks and foreign banks; NPA

Introduction

It has been around one and half decade since financial sector reforms were initiated in India. As banks are the major segment of the financial sector in India, reform measures are primarily aimed at improving the performance of the banking sector. An efficient banking system has significant positive externalities, which increases the efficiency of economic transaction in general. The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalized 14 private banks in the mentioned year. This has been elaborated in Nationalization Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks.

It is believed that private ownership helps to improve efficiency and performance of bank and accordingly, the Indian government started diluting its equity in PSBs from early 1990s in a phased manner. The privatization of Indian banks really helped to improve their efficiency and performance. Liberalization and Globalization ushered in by the government in the early 90s have thrown open many challenges to the Indian financial sector. Banks, amongst other things, were set on a path to align their accounting standards with the International standards and by global players. They had to have a fresh look into their balance sheet and analyze them critically. In this background, this article is designed to give an outline of profile of ban group wise in Indian banking industry. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customer’s base. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization.

Need for the Study

Banking business has done wonders for the world economy. The intensifying competitive environment in the banking sector forcing the banks to focus in their operations. The profile of the banks plays an important role in the performance of the banks and measuring the relative profile of bank group wise has gained academic attentions over the years. Various parameters have been used to determine the profile of the banks. Evaluating the profile of the commercial banks is important to depositors, owners, potential investors, managers and of course, regulators.

Objective

1. To explore the concentration of profile of Public sector banks, private sector banks; and Foreign banks

2. To analyse the comparison of performance of Nationalized Banks, State Bank Group, old Private sector Banks, New Private Sector Banks and Foreign Banks.

Review of Literature

Over the past decade, there has been a considerable growth in studies addressing the profile of the banks. Various studies conducted and numerous suggestions were sought to bring effectiveness in the working and operations of banks. Some of the studies are as follows:

Dipasha Sharma, Anil K Sharma, Mukesh K Barua in their study discussed that both the frontier approaches, parametric and non-parametric, are gaining an edge over the traditional financial performance measures. In the non-parametric approach, data envelopment analysis (DEA) is widely applied to measure a bank’s efficiency and productivity [1].

Siraj and Sudarsanan Pillai, in their paper determined that asset quality and efficiency of bank is highly correlated. Against this backdrop, this paper investigates the growth of selected NPA variables and compares it with banking performance indicators [2]. Variables that impact NPA of banks is assessed and based on its growth rate, inference is generated. The analysis focused on identifying relative efficiency of different bank groups in managing their NPA.

Singh analysed the profitability management of banks under the deregulated environment with some financial parameters of the major four bank groups i.e. public sector banks, old private sector banks, new private sector banks and foreign banks, He emphasized to make the banking sector competitive in deregulated environment and prefer non-interest income sources [3].

Souza, in his study evaluated the performance of public sector banks, private sector banks and foreign banks during the period 1990- 1991 to 1999-2000. The efficiency of the banking system was measured in terms of spread/working fund ratio and turnover/employees ratio [4].

Kannan and Aditya Narain made an attempt to identify the factors influencing spreads of scheduled commercial banks in India and concluded that nonperforming asset effect bank spread.

Centric to the ratio analysis, these studies have customized and blended financial ratios in a model form to examine and predict the financial health. Similarly, comparative performance, recovery performance, cost reduction, productivity and efficiency are vital areas which have been considered by various analysts. With inquisitiveness the present study has been undertaken with specific objectives as envisaged in the objectives of the study [5].

Research Methodology

Data collection and sources of data

The study is based on secondary data collected from the select bank records and other secondary sources like research papers, review papers, published papers of related Banks,. Banks’ websites, periodicals, Bank’s publications, newspapers etc. A list of the related articles from various journals is also used to develop the basic idea about the particular topic. This paper uses the Compound Annual Growth Rate (CAGR) Method and Ranking method to analyse the profile of banks. The study covers for the period of 8 years data from 2005-06 to 2012-13.

Data analysis and interpretation

Customer deposit is a major part of total liabilities of any bank and it is a major source of fund for banks. Since deposit is the main concern for any bank therefore it becomes important to examine the deposit of each bank groups in India. Customer deposits provide funds for investment and financing. Growth in customer deposits is a positive indicator of banking growth. Bank group-wise, public sector banks accounted for the largest CAGR (56.19 per cent) in total deposits followed by private sector banks (54.57 per cent). Foreign banks showed the lowest CAGR (49.77 Percent). High levels of public deposit ensured that most of the banks had a comfortable liquidity profile.

It is observed from the Table 1 that the scheduled commercial bank offices in the country showed CAGR of 6.12%, over a period of eight years and for this growth the major contribution is observed from the growth in the new private sector banks. It is also observed from the Table 2 that there is a continuous increase in number of offices in scheduled commercial banks and this is as a result of continuous increase in number of offices of all bank group wise that is in case of public sector banks, private sector banks and foreign banks.

Bank Group Wise 2005 - 06 2006 -07 2007 -08 2007 -09 2009 -10 2010 -11 2011 -12 2012 -13 CAGR (%)
Nationalised Banks 1080072 1360724 1679993 21057056 25839338 31265862 35969893 41272523 57.68
SBI & Associates 542409 633476 773875 10070415 11080856 12458624 14050241 16184449 52.88
Public Sector Banks 1622481 1994200 2453868 31127471 36920194 43724487 50020134 57456972 56.19
Old Private Sector Banks 130456 138249 165589 1992735 2298969 2641571 3158914 3738964 52.11
New Private Sector Banks 298000 413738 509444 5371041 5929038 7386018 8586960 10219391 55.56
Private Sector Banks 428456 551987 675033 7363776 8228007 10027588 11745874 13958355 54.57
Foreign banks 113745 150750 191161 2140764 2320995 2406668 2769477 2879997 49.77
Scheduled Commercial Banks 2164682 2696937 3320062 40632011 47469196 56158743 64535485 74295324 55.58

Table 1: Trends in Deposits Relating to Bank Group Wise During 2006 to 2013.

Bank Group Wise 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 2012 -13 CAGR(%)
Nationalised Banks 35858 37431 39234 41041 43690 46462 50713 54478 5.37
Sbi & Associates 14130 14673 15846 16938 18390 19338 20256 21301 5.26
Public Sector Banks 50168 52104 55080 57979 62080 65800 70969 75779 5.29
Old Private Sector Banks 4819 4826 4690 4952 5273 5090 5673 6283 3.37
New Private Sector Banks 2016 2598 3632 4336 5243 7007 8297 9718 21.73
Private Sector Banks 6835 7424 8322 9288 10516 12097 13970 16001 11.22
Foreign banks 259 272 279 295 310 318 323 334 3.23
Scheduled Commercial Banks 57262 59800 63681 67562 72906 78215 85262 92114 6.12

Table 2: Trends in Bank Group Wise Number of Offices During 2006 to 2013.

Capital adequacy ratio is a measure of a bank’s financial health and it measures the performance of a bank’s capital. It reflects the soundness of a financial institution. It is expressed as a percentage of a bank’s risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. A Bank shall maintain a minimum ratio between its total regulatory capital (the numerator) and the aggregate of its risk weighted on balance sheet assets and risk weighted off-balance sheet assets less approved deduction. The Ratio is provided by equity plus reserves over total assets. It is shown in the Table 3 that the CAGR of foreign banks is 4.04% as compared to public sector banks and private sector banks where it is 0.21 and 3.88 respectively. The Capital to Risk weighted Assets Ratio (CRAR) profile of SCBs remains comfortable and much above the minimum regulatory requirements of 9%. The decline in the capitalization level of the nationalized banks, is attributable largely to strong credit growth.

Bank Group Wise 2005 -06 2006 -07 2007 -08 2007 -09 2009 -10 2010 -11 2011 -12 2012 -13 CAGR(%)
Nationalised Banks 12.27 12.37 12.13 13.24 13.18 13.47 13.03 12.26 -0.01
Sbi & Associates 11.95 12.30 13.21 13.96 13.46 12.25 13.70 12.67 0.73
Public Sector Banks 12.17 12.36 12.51 13.49 13.27 13.08 13.23 12.38 0.21
Old Private Sector Banks 11.69 12.08 14.08 14.74 14.85 14.55 14.12 13.73 2.03
New Private Sector Banks 12.60 11.99 14.39 15.33 18.03 16.87 16.66 17.52 4.21
Private Sector Banks 12.42 12.10 14.34 15.23 17.43 16.46 16.21 16.84 3.88
Foreign banks 13.02 12.39 13.08 14.19 17.26 16.97 16.75 17.88 4.04
Scheduled Commercial Banks 12.32 12.28 13.01 13.97 14.54 14.19 14.24 13.88 1.50

Table 3: Trends in Bank Group Wise CRAR During 2006 to 2013.

Total operating expenses includes staff costs, general and administrative Expenses. A lower Operating Expense (OE) shows better control and highlights higher earnings. Operating Expense (OE) differentiates between low efficiency and high efficiency bank. Table 4 shows, Bank Group wise operating expenses. In case of private sectors banks the operating expenses increased significantly over the period of eight years i.e. from 2006-2013 and overall there was an increase by 50.29%.

Bank Group Wise  2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 25548 27268 29670 354160 407922 538193 574753 647182 49.78
Sbi & Associates 15760 15987 16993 200877 252828 291459 327299 370940 48.41
Public Sector Banks 41308 43255 46663 555037 660749 829652 902052 1018122 49.27
Old Private Sector Banks 3089 2967 3235 39392 47153 56000 65404 77459 49.59
New Private Sector Banks 8949 12353 17032 178401 181357 220064 274898 327392 56.82
Private Sector Banks 12038 15320 20267 217794 228510 276064 340301 404851 55.18
Foreign banks 5854 7745 10353 122984 111019 125686 133367 142882 49.09
Scheduled Commercial Banks 59201 66319 77283 895814 1000279 1231403 1375720 1565855 50.59

Table 4: Trends in Bank Group Wise Operating Expenses During 2006 to 2013.

It is observed from Table 5 that the rate of distribution of employees in new private sector banks is high as compared to any other bank group. The trend of number of employees during the study period is highly volatile. In case of Nationalized banks it is observed that there was a decrease in number of employees in the year 2007 when it is compared to 2006 then again there was increase in number of employees in 2008 as compared to 2007 then again there was a slight decrease in 2009 as compare to 2008. From the year 2010 to 2013 there was continuous increasing trend. In case of SBI and Associates there was a continuous decrease in the year 2007 and 2008 as compared to the base year then there was a marginal increase in the year 2009 but again in 2010 it decreased. In the year 2011 the number of employees increased but again in the year 2012 the analysis showed a decreasing trend and it again picked up in the year 2013. Public sector banks also showed the same trend as SBI and Associates till 2009. In case of old private sector banks only in the initial year of the study that is from 2006 to 2007 the number of employees decreased otherwise till 2012 it showed increasing trend then later on in the year 2013 there was a decrease in number of employees. In case of New Private Sector banks there was a drastic increasing trend and as result the private sector banks CAGR was at 11.81. In case of Foreign Banks from the year 2006 to 2008 there was increase in the number of employees but it has decreased in 2009 and 2010, later on 2011 to 2013 it was continuously increasing, and the scheduled commercial banks continuously increased during the study period.

Bank Group Wise 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 473725 473179 466400 462926 473041 471727 494520 507694 0.87
SBI & Associates 270608 255699 242029 268598 266605 283375 279809 293965 1.04
Public Sector Banks 744333 728878 708429 731524 739646 755102 774329 801659 0.93
Old Private Sector Banks 51138 48667 48700 51341 55052 55380 62589 66208 3.28
New Private Sector Banks 59367 88617 110123 142237 133280 162573 185695 203733 16.66
Private Sector Banks 110505 137284 158823 193578 188332 217953 248284 269941 11.81
Foreign banks 22117 28426 33969 29582 28012 28041 25907 25384 1.74
Scheduled Commercial Banks 876955 894588 901221 954684 955990 1001096 1048520 1096984 2.84

Table 5: Trends in Bank Group Wise Number of Employees 2006 to 2013.

Table 6 Reflects that the new private sectors are maintaining high net worth CAGR as compared to other banks which has been followed by the Foreign banks CAGR. The public sector banks showed the lowest CAGR i.e. 56.24. The analyses shows that during the period of eight years study the bank group wise has resulted in a continuous increase in net worth.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 77384 92689 113079 1359202 1572758 2059079 2483255 2832832 56.84
Sbi & Associates 37660 42941 61706 724216 837256 843942 1072494 1253189 54.98
Public Sector Banks 115044 135630 174785 2083419 2410014 2903020 3555749 4086022 56.24
Old Private Sector Banks 9684 10736 15315 174765 201706 237982 278963 330127 55.45
New Private Sector Banks 34140 39736 76056 996686 1199839 1385664 1592952 1929461 65.59
Private Sector Banks 43823 50473 91371 996686 1199839 1385664 1592952 1929461 60.5
Foreign banks 24314 33075 49332 599368 691760 810507 936917 1073817 60.56
Scheduled Commercial Banks 183181 219179 315488 3679473 4301613 5099192 6085618 7089300 57.93

Table 6: Trends in Bank Group Wise Net worth During 2006 to 2013.

Table 7 is displaying the data related to return on assets (ROA) of public, private, and foreign banks during the period of 2006-2013. The ROA is a functional indicator of bank’s profitability. ROA reflects bank’s management ability to utilize the bank’s financial and real investment resources to generate profits. This ratio is used to know the earning capacity of profit of a bank by using its assets and can be calculated as the after tax net profit percentage to total assets. Here, private banks have high ROA than public and foreign banks, which means they are using their assets efficiently. It refits the efficiency with which banks deploy their assets.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 0.89 0.94 1.01 1.03 1.00 1.03 0.88 0.74 -2.28
Sbi & Associates 0.87 0.86 0.97 1.02 0.91 0.79 0.89 0.88 0.14
Public Sector Banks 0.88 0.92 1.00 1.03 0.97 0.96 0.88 0.78   -1.50
Old Private Sector Banks 0.64 0.78 1.14 1.15 0.95 1.12 1.20 1.26 8.84
New Private Sector Banks 1.22 1.09 1.13 1.12 1.38 1.51 1.63 1.74 4.54
Private Sector Banks 1.07 1.02 1.13 1.13 1.28 1.43 1.53 1.63 5.40
Foreign banks 2.08 2.28 2.09 1.99 1.26 1.75 1.76 1.94 -0.87
Scheduled Commercial Banks 1.01 1.05 1.12 1.13 1.05 1.10 1.08 1.03 0.25

Table 7: Trends in Bank Group Wise Return on Asset (ROA) During 2006 to 2013.

Table 8 is showing the data related to investment of Scheduled Commercial banks during the period of 2006-2013. This is one of the important segments of total assets which are used for different areas. Here, foreign banks have the high investment than private banks and public banks which mean foreign banks make more investment than private banks and public banks from their assets in other areas.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 408796 452981 536018 6550419 8281248 9503797 10899479 12861079 53.89
Sbi & Associates 224761 211875 263823 3576239 3874734 3856967 4173221 4729979 46.35
Public Sector Banks 633557 664856 799841 10126658 12155981 13360764 15072700 17591058 51.51
Old Private Sector Banks 45254 43647 54080 723926 834993 926545 1093333 1344993 52.80
New Private Sector Banks 135314 171008 224498 2341385 2706176 3294031 4166489 4916070 56.69
Private Sector Banks 180568 214655 278578 3065312 3541169 4220576 5259822 6261063 55.78
Foreign banks 52384 71471 98910 1303537 1592909 1654993 2006511 2280631 60.27
Scheduled Commercial Banks 866508 950982 1177330 14495506 17290059 19236333 22339033 26132752 53.08

Table 8: Trends in Bank Group Wise Investments During 2006 to 2013.

Table 9 is depicting the data regarding advances of bank group wise during the period of 2006-2013. Here, Nationalised banks have high Advances which mean that Nationalised banks grant more advances than private and foreign banks. The above analysis reveals that all most all the bank group wise increased their advances every year from 2006 to 2013 except the foreign bank has decreased its advances in the year 2010 as compared to 2009.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 734608 957877 1203678 15197619 18430819 23102793 27253162 30935500 59.61
Sbi & Associates 371679 482270 593722 7394499 8579368 9941536 11519913 13792240 57.10
Public Sector Banks 1106288 1440146 1797401 22592117 27010187 33044329 38773075 44727740 58.80
Old Private Sector Banks 82957 92887 111670 1285039 1540853 1846473 2300795 2699373 54.54
New Private Sector Banks 230005 321865 406733 4468237 4783556 6128967 7363235 8733113 57.55
Private Sector Banks 312962 414751 518402 5753276 6324409 7975440 9664030 11432486 56.79
Foreign banks 97562 126339 161133 1653846 1632604 1955106 2298488 2636799 51.00
Scheduled Commercial Banks 1516811 1981236 2476936 29999239 34967200 42974875 50735592 58797025 57.96

Table 9: Trends in Bank Group Wise Advances During 2006 to 2013.

Comparison of bank group wise performance in terms of NPA reflects the profitability of loan portfolios of banks since less NPA contributes to higher interest income. Table 10 is demonstrating the data related to NPA to advances during the period of 2006-2013. This ratio is used to know the asset quality, which is based on loan portfolio. Here, public sector banks have high ratio than other banks which means the asset quality of public banks is poor among other scheduled commercial banks. The nationalized banks are more exposed to high potential losses in case of defaults.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 1.16 0.94 0.77 0.68 0.91 0.92 1.44 2.00 7.05
Sbi & Associates 1.63 1.32 1.43 1.47 1.50 1.49 1.76 2.04 2.84
Public Sector Banks 1.32 1.06 0.99 0.94 1.10 1.09 1.53 2.02 5.46
Old Private Sector Banks 1.66 0.96 0.66 0.90 0.82 0.53 0.58 0.77 -9.16
New Private Sector Banks 0.78 0.97 1.21 1.40 1.09 0.56 0.42 0.45 -6.64
Private Sector Banks 1.01 0.97 1.09 1.29 1.04 0.56 0.46 0.52 -7.96
Foreign banks 0.83 0.73 0.77 1.81 1.82 0.67 0.61 1.01 2.48
Scheduled Commercial Banks 1.22 1.02 1.00 1.05 1.12 0.97 1.28 1.68 4.08

Table 10: Trends in Bank Group Wise Non Performing Assets (NPA) During 2006 to 2013.

The above given Table 11 shows the new private sector banks CAGR is high as compared to other bank group. In the above analysis it is noticed in all bank group wise the interest income during the period of study is gradually increasing, except in the year 2010 the private sector a foreign banks has shown a declining figure. In case of private sector banks the declining figure is due to decrease in case of new private sector.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 88574 110720 142647 1838924 2080289 2563064 3411767 3911088 60.56
Sbi & Associates 49301 53465 70428 891958 979537 1098281 1435552 1637677 54.94
Public Sector Banks 137874 164185 213075 2730882 3059826 3661345 4847318 5548765 58.7
Old Private Sector Banks 10372 11474 14614 187898 204975 232989 325802 399275 57.83
New Private Sector Banks 24851 38092 56377 662816 623090 734142 1019752 1265589 63.44
Private Sector Banks 35223 49567 70991 850714 828064 967131 1345555 1664864 61.93
Foreign banks 12291 17924 24417 303220 263897 284931 359966 422486 55.61
Scheduled Commercial Banks 185388 231675 308482 3884816 4151786 4913407 6552839 7636115 59.17

Table 11: Trends in Bank Group Wise Interest Income During 2006 to 2013.

Table 12 Shows that in case of other income earned by the banks the new private sector bank has the highest CAGR during the period of study. If we observe, the nationalised banks during the period of study increased continuously except in the year 2011, in case of SBI & Associates there was decrease in the other income in the year 2007 and 2012. In case of old private sector banks there was continuous increase during the study period, except in the year 2011. In case of foreign banks the decreasing trend was in the year 2010 and 2012.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 12379 14264 20979 263936 304996 287249 325766 370370 52.93
Sbi & Associates 9526 9420 11818 160727 183937 192400 178231 197442 46.07
Public Sector Banks 21905 23684 32797 424662 488932 479649 503997 567812 50.21
Old Private Sector Banks 1221 1568 2184 27821 31518 30286 33948 41452 55.37
New Private Sector Banks 6870 10745 14822 150781 172713 178447 216532 256475 57.22
Private Sector Banks 8091 12313 17006 178602 204231 208734 250480 297927 56.95
Foreign banks 5371 7044 10588 148940 99513 110118 108959 112127 46.2
Scheduled Commercial Banks 35368 43041 60391 752204 792676 798501 863437 977866 51.433

Table 12: Trends in Bank Group Wise Other Income During 2006 to 2013.

The above given Table 13 reflects that the interest expended in nationalized banks has more CAGR as compared to other bank group wise. From the above analysis it is clear that in all bank group wise during the period of study the interest expenditure has increased, except in the year 2010, where the foreign banks interest expenditure has declined as compared to 2009 and the same in case of private sector banks.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 52464 69353 101093 1316762 1457115 1641351 2397280 2813956 64.51
Sbi & Associates 28040 32607 47809 617704 662285 670179 888609 1065334 57.57
Public Sector Banks 80504 101960 148902 1934467 2119401 2311530 3285889 3879290 62.32
Old Private Sector Banks 6247 7055 9960 128340 140760 147681 225057 278598 60.75
New Private Sector Banks 15261 25802 38535 441234 371296 423810 642787 792733 63.85
Private Sector Banks 21507 32856 48495 569574 512056 571491 867843 1071332 62.99
Foreign banks 5149 7603 10604 128191 89379 106227 149824 187406 56.72
Scheduled Commercial Banks 107161 142420 208001 2632232 2720836 2989248 4303557 5138027 62.22

Table 13: Trends in Bank Group Wise Interest Expended During 2006 to 2013.

It has been observed from the above Table 14 that almost all the banks had shown a declining trend in case of wages as percentage to total expenses, except the New Private Sector banks. There are many fluctuations in the above trend, in case of Nationalised banks, SBI and Associate and old private sector banks there was a continuous declining trend from the year 2007 to 2009 then in the year 2010 and 2011 there was an increasing trend, but again in the year 2012 and 2013 there was a decreasing trend. If we look at new private sector banks the scenario is different, there is a continuous increase from the year 2006 to 2011, except in the year 2007 later on in the year 2012 and 2013 there was a fall in the trend. In case of Foreign banks, the wages as percentage to total expenses has increased in the year 2007 when it compared to 2006 but in the year 2008 an 2009 it has decreased, and again in the year 2010 it has increased but in the year 2011 it has reduced and again there was a raise in the year 2012 and fall in the year 2013.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 21.42 17.94 14.05 13.31 13.65 16.41 12.20 11.81 -7.17
Sbi & Associates 24.35 21.55 15.89 15.06 17.10 19.97 17.42 16.20 -4.97
Public Sector Banks 22.48 19.15 14.66 13.88 14.79 17.50 13.72 13.09 -6.54
Old Private Sector Banks 18.93 16.89 13.67 13.26 14.57 16.75 13.00 12.28 -5.27
New Private Sector Banks 9.54 9.36 9.56 10.17 12.10 13.83 11.97 11.40 2.25
Private Sector Banks 12.15 10.93 10.35 10.83 12.73 14.53 12.22 11.61 -0.57
Foreign banks 18.22 20.08 19.95 19.44 23.48 23.30 20.35 18.22 0
Scheduled Commercial Banks 20.11 17.32 14.01 13.60 14.85 17.22 13.73 13.02 -5.29

Table 14: Trends in Bank Group Wise Wages as % of total expenses During 2006 to 2013.

The above Table 15 gives the details of cost of funds for a period of eight years i.e. from 2005-06 to 2013-14 where, the foreign banks are showing the low cost of funds with a CAGR of 1.38% . There are many ups and downs in the trends of cost of funds during the study period. In case of Nationalised banks and old private sector banks there was a continuous increase in the cost of funds from 2006 to 2009 later on in the year 2010 and 2011 there was a fall in the cost of funds again increased in the year 2012 and 2013. In case of SBI and Associates the cost of funds reduced in the year 2007 as compared to 2006 and increased in the year 2008 and 2009 as compared to 2007 and again reduced in the year 2010 and 2011 and there on increased in the year 2012 and in the year 2013. In case of new private sector banks the cost of funds increased from 2006 to 2009 and in the year 2010 and 2011 it has been decreased and again increased in the year 2012 and 2013. In case of foreign banks there was a continuous increase in the cost of funds from 2006 to 2009, in the year 2010 it reduced as compared to previous years but again from the year 2011 to 2013 there was a continuous increase in the cost of funds.

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13 CAGR(%)
Nationalised Banks 4.27 4.80 5.82 6.09 5.37 4.93 6.22 6.39 5.17
Sbi & Associates 4.84 4.75 5.90 6.00 5.32 4.85 5.66 5.96 2.64
Public Sector Banks 4.46 4.79 5.85 6.06 5.35 4.91 6.06 6.27 4.35
Old Private Sector Banks 4.77 4.98 6.20 6.67 6.13 5.66 7.10 7.27 5.41
New Private Sector Banks 4.14 5.24 6.11 6.15 4.42 4.27 5.45 5.77 4.24
Private Sector Banks 4.35 5.18 6.13 6.27 4.83 4.60 5.84 6.12 4.36
Foreign banks 3.63 4.03 4.33 4.46 2.83 3.11 3.88 4.05 1.38
Scheduled Commercial Banks 4.39 4.82 5.80 5.99 5.10 4.75 5.90 6.12 4.24

Table 15: Trends in Bank Group Wise cost of funds During 2006 to 2013.

If we look at 8 years historical performance of different types of players in the banking industry, foreign banks has grown its business per employee by the highest rate CAGR i.e. 10.82%. There was a continuous increase in the trend of business per employee during the period of study in case of public sector banks and Foreign banks, but when it comes to private sector banks there was a fall in the year 2009 and this is as a result of fall in new private sector bank (Table 16).

Bank Group Wise 2005-06 2006-07 2007-08 2007-09 2009-10 2010-11 2011-12 2012-13
Nationalised Banks 383.07 490.01 618.28 783.16 935.86 1152.54 1278.50 1422.3
Sbi & Associates 337.79 436.35 565.06 650.22 737.43 790.48 913.80 1019.7
Public Sector Banks 366.61 471.18 600.10 734.35 864.34 1016.67 1146.80 1274.7
Old Private Sector Banks 417.33 474.93 569.32 638.43 697.49 810.41 872.30 972.4
New Private Sector Banks 889.39 830.09 831.96 691.80 803.80 831.30 858.90 930.3
Private Sector Banks 670.94 704.19 751.42 677.60 772.70 826.00 862.30 940.6
Foreign banks 955.41 974.77 1037.10 1282.74 1411.39 1555.50 1956.20 2173.3
Scheduled Commercial Banks 419.80 522.94 643.24 739.80 862.30 990.30 1099.50 1213.3

Table 16: Trends in Bank Group Wise Business per employees During 2006 to 2013.

It is revealed from the above facts that the foreign banks are at number position in case of profit per employee as compared to other two players in the banking industry i.e. public and private sector banks. The profit per employee is not in a similar trend in case of all bank group wise during the study period, in case of Nationalised banks there was a continuous increase in the profit per employee from the year 2006 to 2011, but in the year 2012 and 2013 it has been reduced. In case of SBI and Associates there was a continuous increasing trend in profit per employee till the year 2010, in the year 2011 it has been reduced but again in the year 2012 and 2013 it has shown an increasing trend. Old private sector banks showed increasing trend till the year 2009 and in the year 2010 it has decreased but again from the year 2011 to 2013 it resulted in increasing trend. In case of New private sector banks the profit per employee decreased in the year 2007 as compared to 2006 and increased in the year 2008 and again decreased in the year 2009, from the year 2010 to 2013 there was a continuous increasing trend. In case of foreign banks there was a continuous increase, except in the year 2010.

It has been observed and derived from the analysis over sample period, that the Changes over the past eight years i.e., from 2005-2006 to 2013-2014 in the banking system have been drastic. The above ranking is done based on the CAGR of each parameter. The results show that public, private and foreign banks has different rankings based on different parameters such as No. of offices, No. of employees, Business per employee, Profit per employee, Net Worth, Deposits, Investments, Advances, Interest income, Other income, Interest expended, Operating expenses, Cost of Funds (CoF),Wages as % to total expenses, Return on Assets, CRAR and NPA ratio. Private sector banks are at first on the base of return on total assets (ROA), Number of offices, Number of Employees, Non Performing Assets (NPA), Interest Income and other income. Based on CRAR, cost of funds, operating expenses, Investments, Net worth, Interest expended, Business per employee, profit per employee and Wages as % of total expenses, Business per employee Foreign Banks are at the first as compared to public bank and private banks Findings.

On the basis of results and analysis, the following are the findings

1. It has been found that the new private sector banks have shown the highest annual expansion in terms of number of branches vis-à-vis old private sector banks.

2. The capitalization profile of private banks continues to be better than that of Public Sector Banks, with the private banks CRAR at around 3.88% and that of PSBs at around 0.21%. However, continuous government support (via capital infusion) to enable PSBs maintain a minimum Tier I capital of 7% is likely to result in these banks being able to maintain a comfortable capitalization profile over short to medium term.

3. Bank group-wise, public sector banks accounted for the largest CAGR (56.19 per cent) in total deposits followed by private sector banks (54.57per cent). Foreign banks showed the lowest CAGR (49.77 Percent)

4. Private sector banks have very good Return on Assets ( ROA) as compared to other bank group during the study period of eight years i.e. from 2005- 06 to 2013-14.

5. As far as interest income is concerned, private banks are ahead in the race by reporting 61.93% growth, followed by pubic banks (58.7%) and then by foreign banks (55.61%).

6. Foreign banks have the highest business per employee as well as profit per employee.

7. The NPA of public sector bank was also significantly higher than that of private and foreign banks, which indicates the asset quality of public banks is comparatively poor.

Recommendations

Based on the findings of study the following are few suggestions to the Indian banking Industry, which helps them to improve their performance and efficiency and make them fit to compete in this competitive global scenario.

1. As the ROA i.e. Return on assets is the parameter that indicates the efficiency of banks management in utilization of its assets, it is advised that the public sector banks should take care regarding this parameter in general, and in particular it is in the case of nationalized banks where there is a need for improvement.

2. In case of cost of funds there is a need for both public sector banks and private sector banks to work upon this parameter because it shows on the higher side when it is compared to the foreign banks.

3. Having high ratio 11th of Non Performing Asset i.e., NPA is a sign of poor asset quality and in this study it is noticed that there is a high NPA in public sector banks as compared to private sector banks and foreign banks, and this high NPA’s in public sector banks is due to high NPAs in nationalized bank, so there is a need for nationalized banks to focus on this parameter in particular and public sector banks in general, as the simple reason is that the asset quality effects the performance of the banks

4. In case of business per employee the private sector banks are at the back end when it is compared with the other bank groups in the study, this point out that there is a need for private sector banks to look into this matter.

5. When we take profit per employee into consideration, the foreign banks are at front position so it is an indication to both the bank groups i.e. public sector and private sector to try to with stand with the foreign banks in the global scenario.

References

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