Analysis of Deposits and Advances of Selected Private Sector Commercial Banks

10 Analysis of Deposits and Advances of Selected Private Sector Commercial Banks M. Anbalagan, Head, Dept. of Commerce, Sri Kaliswari College, Sivakasi Dr. M. Selvakumar, Assistant Professor in PG Commerce, Ayya Nadar Janaki Ammal College, Sivakasi ABSTRACT The resilience of the banking sector was marked by improvement in the capital base, asset quality and profitability. Even though the Public Sector Commercial Banks (PSCBs) have the maximum share of banking industry, the role of Private Sector Commercial Banks (Pvt.SCBs) is very important in the economic development of India, particularly Tamil Nadu. This study covers a period of 11 years from 2001-02 to 2011-12. In order to know the significant difference in the growth rates of deposits and advances of various TNBPvt.SCBs, Kruskal- Wallis Test is used. INTRODUCTION The Indian banking has come a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by a large dose of liberalization and economic reforms that allowed the banks to explore new business avenues rather than generating revenues from conventional streams (i.e., borrowing and lending). There has been a particularly discernible improvement in banks operating efficiency in recent years owing to technology up-gradation and staff restructuring. However, to sustain the high and inclusive growth, there is a need to raise the level of domestic savings and channel those savings into investment. The resilience of the banking sector was marked by improvement in the capital base, asset quality and profitability. Even though the Public Sector Commercial Banks (PSCBs) have the maximum share of banking industry, the role of Private Sector Commercial Banks (Pvt.SCBs) is very important in the economic development of India, particularly Tamil Nadu. STATEMENT OF THE PROBLEM The PSCBs have reported a negative growth in its profitability. It is mainly because of rising NPAs coupled with pace of loan restructuring, which leads to higher provisioning (2.75 per cent). Whereas, Pvt.SCBs have reported a robust growth in their bottom line numbers and supported the entire Banking Industry's profitability. Stable asset quality and loan restructuring were the primary reasons for the Private Banks superior performance. Still the Pvt.SCBs have to face the competition with PSCBs and also among themselves. The contribution of Pvt.SCBs to the economic development of India is admirable, particularly in the areas of financial literacy, technical up-gradation of operating, entrepreneurial development, project financing and reaching the low income people in urban areas too. As Pvt.SCBs plays a predominant role in the overall growth of a nation, a need is felt especially to analyze the performance of deposits and advances of Pvt.SCBs. REVIEW OF LITERATURE Subbiah A. and Selvakumar M. (2005) in their article, Regional Rural Banks and Agricultural Credit, examined the various agricultural credits given by RRBs in India. They observed that the RRBs were specially designed financial institutions for financing agriculture. The article concluded that the RRBs were suited to monitor regional development by providing financial assistance to the weaker sectors of the people. Selvakumar M. (2006) in his Ph.D. Thesis on Regional Rural Banks- A Performance Review analyzed deposit mobilization and lending performance of RRBs in Tamil Nadu. He also compares income, expenditure, profit, deposit and advances of RRBs operating in Tamil Nadu among themselves and with RRBs at National level. A Ph.D. Thesis on Financial Performance of Scheduled Commercial Banks in India -CAMEL Analysis submitted by Ashok Kumar. M. (2009) examined how the financial performance of SBI group, Nationalized banks group, private banks group and foreign banks group have been affected by the financial deregulation of the economy. Selvakumar M. (2010) in his article, Regional Rural Banks (RRBs): Performance Analysis, examined three regional rural banks namely Pandian Grama Bank, Adhiyaman Grama Bank and Vallalar Grama Bank. He concluded that there was no significance difference in the growth rates of deposits, advances, income expenditure and profit of RRBs operating in Tamil Nadu. Also there was no significance difference in the growth rates of deposits, advances, income expenditure and profit of RRBs in India and RRBs operating in Tamil Nadu.

11 Manicka Mahesh (2011) in his Ph.D. Thesis Performance Evaluation of Co-operative Urban Banks in Virudhunagar District examined Income, Expenditure and Profits of Co-operative Urban Banks in Virudhunagar District and also the factors that influence the net profit through multiple regression analysis. SCOPE OF THE STUDY The Private Sector Commercial Banks (Pvt.SCBs) includes 13 Old Pvt.SCBs (excluding Bharat Overseas Bank Ltd. which was taken over by the Indian Overseas Bank on April 1, 2007) and 07 New Pvt.SCBs as on 2012. Out of the 13 Old Pvt.SCBs in India, four banks have their registered office in Tamil Nadu having a population of more than six crores and are playing an important role in all spheres of economic activities. Though they have branches at throughout the India, their origin is from Tamil Nadu. They are City Union Bank Ltd., having its registered office at Kumbakonam, Karur Vysya Bank Ltd., at Karur, Tamilnad Mercantile Bank Ltd., at Thoothukudi, and Lakshmi Vilas Bank Ltd. at Karur. So the scope of this study is limited to these four banks which are collectively called as Tamil Nadu Based Private Sector Commercial Banks (TNBPvt.SCBs) in India. PLAN OF ANALYSIS In order to know the significant difference in the growth rates of deposits and advances of various TNBPvt.SCBs, Kruskal-Wallis Test is used. KRUSKAL WALLIS TEST The Kruskal Wallis Test is a non-parametric test. Nonparametric test are distribution free, since these tests do not depend on the shape of distribution. Non-parametric tests are applicable to all types of data: qualitative (nominal scale) data in rank form (ordinal scale) as well as data that have been measured more precisely (interval or ratio scale). Many non-parametric methods make it possible to work with very small samples. Non-parametric tests require less restrictive assumptions concerning the level of data measurement. Kruskal Wallis Test can be used with ordinal data as well as interval or ratio data. This test does not require the assumptions of normality and equal variances. The Kruskal Wallis Test statistic, which is based on the sum of ranks for each of the samples, can be computed as follows: OBJECTIVE OF THE STUDY To make a comparative analysis of the deposits and advances of TNBPvt.SCBs with one another. HYPOTHESES OF THE STUDY For the purpose of comparing the growth of deposits and advances of various TNBPvt.SCBs, the following null hypothesis was framed: There is no significant difference among the demand deposits, savings bank deposits, term deposits, total deposits, priority sector advances, non- priority sector advances and total advances of various TNBPvt.SCBs during the study period. PERIOD OF STUDY This study covers a period of 11 years from 2001-02 to 2011-12. METHODOLOGY This study is based upon the secondary data which have been collected from the annual reports of the individual bank, reports on trends and progress of banking in India, websites and profile of banks 2011-12. Where k = Number of population groups n i = Number of items in sample I n T = Total number of items in all samples R j = Sum of the ranks for sample I The Kruskal Wallis Test is used when k 3. In order to compute the W value for this study, ranks are assigned to combined data from low to high. The lowest value receives the rank of 1, whereas the highest value receives the rank of 40. Tied growth rates are assigned average rank values. Kruskal and Wallis were able to show that under the null hypothesis the populations are identical, the sampling distribution of w can be approximated by a χ 2 (chisquare) distribution with k-1 degrees of freedom. This approximation is generally acceptable if each of the sample sizes is greater or equal to 5. The calculated value of W is compared with the table value of chi-square (χ 2 ), at 5 per cent level of significance. If the calculated value of W is less than or equal to table value of chi-square (χ 2 ), at 5 per cent level of significance there is no significant difference in the deposits and advances of TNBPvt.SCBs.

12 COMPARISON OF DEMAND DEPOSITS OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of demand deposits among the TNBPvt.SCBs, the W value was calculated. TABLE 1 ing of s of Demand Deposits of TNBPvt.SCBs Year 2002-03 10.69 17 13.17 25 01.32 07 22.08 32 2003-04 18.59 28 14.64 26 05.21 11 08.54 14 2004-05 11.69 21 20.19 29 17.92 27 04.15 09 2005-06 12.91 24 21.11 30 11.04 19 06.11 12 2006-07 75.07 40 29.14 35 10.76 18 11.72 22 2007-08 08.20 13 25.33 33 11.39 20 10.47 15 2008-09 11.97 23 (- 2.76) 04 03.49 08 (- 12.00) 02 2009-10 57.82 39 37.00 37 43.45 38 27.73 34 2010-11 (- 0.86) 06 22.03 31 04.98 10 32.91 36 2011-12 10.62 16 (- 0.96) 05 (- 06.06) 03 (-13.56) 01 227 255 161 177 W = 12/1640 x (5152.9 + 6502.5+ 2592.1 + 3132.9) 123 W = 4.17 COMPARISON OF SAVINGS BANK DEPOSITS OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of savings bank deposits among the TNBPvt.SCBs, the W value was calculated. TABLE 2 ing of s of Savings Bank Deposits of TNBPvt.SCBs Year 2002-03 17.61 16 28.00 33 11.41 07 11.61 08 2003-04 24.24 28 31.86 36 20.53 20 25.65 31 2004-05 19.22 18 20.99 21 10.93 06 07.04 01 2005-06 23.37 26 28.70 34 21.83 22 16.92 15 2006-07 19.33 19 25.01 29 16.63 14 09.45 03 2007-08 27.25 32 23.01 24 15.98 12 09.82 05 2008-09 18.34 17 08.13 02 16.45 13 12.86 09 2009-10 34.48 38 37.36 39 33.48 37 37.92 40 2010-11 25.15 30 30.93 35 23.92 27 23.12 25 2011-12 22.75 23 12.92 10 14.49 11 09.55 04 247 263 169 141

13 W = 12/1640 x (6100.9 +6916.9 + 2856.1 + 1988.1) 123 W = 7.70 COMPARISON OF TERM DEPOSITS OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of term deposits among the TNBPvt.SCBs, the W value was calculated. TABLE 3 ing of s of Term Deposits of TNBPvt.SCBs Year 2002-03 18.24 16 23.28 24 10.82 09 10.19 07 2003-04 23.15 23 13.36 12 06.45 03 19.75 18 2004-05 06.89 04 10.57 08 07.93 05 06.22 02 2005-06 12.06 10 09.84 06 04.81 01 28.67 27 2006-07 31.23 34 21.93 21 16.52 13 17.32 15 2007-08 42.84 40 38.29 38 32.71 36 12.46 11 2008-09 30.99 33 26.32 26 29.54 31 39.19 39 2009-10 20.75 19 24.93 25 17.06 14 21.16 20 2010-11 29.24 30 28.70 28 19.68 17 21.97 22 2011-12 28.72 29 36.87 37 29.93 32 32.67 35 238 225 161 196 W = 12/1640 x (5664.4 + 5062.5+ 2592.1 + 3841.6) 123 W = 2.57 COMPARISON OF TOTAL DEPOSITS OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of total deposits among the TNBPvt.SCBs, the W value was calculated. TABLE 4 ing of s of Total Deposits of TNBPvt.SCBs Year 2002-03 17.41 15 22.53 20 09.51 05 11.85 07 2003-04 22.84 21 15.42 12 07.83 03 18.96 17 2004-05 08.73 04 12.87 09 09.60 06 06.07 01 2005-06 13.65 11 13.56 10 07.79 02 24.04 25 2006-07 33.59 38 23.27 23 15.70 13 15.76 14 2007-08 36.72 40 34.36 39 27.42 32 11.93 08 2008-09 27.73 34 20.33 18 24.72 27 31.01 37 2009-10 25.32 28 27.62 33 21.67 19 23.29 24 2010-11 25.57 29 28.28 35 18.51 16 22.85 22 2011-12 26.53 30 29.89 36 24.05 26 26.59 31 250 235 149 186

14 W = 12/1640 x (6250 + 5522.5+ 2220.1 + 3459.6) 123 W =4.70 COMPARISON OF PRIORITY SECTOR ADVANCES OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of priority sector advances among the TNBPvt.SCBs, the W value was calculated. TABLE 5 ing of s of Priority Sector Advances of TNBPvt.SCBs Year 2002-03 38.76 40 24.57 19 13.72 06 10.41 03 2003-04 25.97 23 35.66 37 19.29 14 25.30 20 2004-05 34.75 35 24.16 17 30.41 30 24.17 18 2005-06 22.90 16 13.28 04 15.72 07 13.49 5 2006-07 28.41 28 25.88 22 31.41 32 27.49 25 2007-08 15.82 08 18.89 12 25.43 21 10.24 02 2008-09 17.90 11 19.05 13 16.22 9 07.53 01 2009-10 37.91 39 17.71 10 30.66 31 31.44 33 2010-11 35.92 38 26.39 24 27.74 26 34.91 36 2011-12 28.56 29 33.13 34 27.89 27 21.02 15 267 192 203 158 W = 12/1640 x (7128.9 + 3686.4+ 4120.9 + 2496.4) 123 W = 4.56 COMPARISON OF NON-PRIORITY SECTOR ADVANCES OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of non-priority sector advances among the TNBPvt.SCBs, the W value was calculated. TABLE 6 ing of s of Non-Priority Sector Advances of TNBPvt.SCBs Year 2002-03 10.28 07 42.43 37 5.69 03 14.25 11 2003-04 28.70 26 12.64 09 2.63 01 10.45 08 2004-05 27.23 20 9.23 06 19.15 13 7.39 05 2005-06 24.63 17 25.01 18 22.04 15 37.08 35 2006-07 32.08 29 27.25 21 27.76 22 19.39 14 2007-08 50.00 39 42.95 38 37.29 36 4.70 02 2008-09 27.81 23 6.14 04 28.92 27 53.92 40 2009-10 12.99 10 36.47 34 22.82 16 14.66 12 2010-11 35.17 33 34.73 31 31.41 28 25.85 19 2011-12 32.65 30 35.04 32 28.21 24 28.57 25 234 230 185 171

15 W = 12/1640 x (5475.6 + 5290+ 3422.5 + 2924.1) 123 W = 2.21 COMPARISON OF TOTAL ADVANCES OF VARIOUS TNBPvt.SCBs For testing the null hypothesis, whether there is any statistically significant difference in the growth rate of total advances among the TNBPvt.SCBs, the W value was calculated. TABLE 7 ing of s of Total Advances of TNBPvt.SCBs Year 2002-03 19.88 11 35.95 39 08.87 02 12.89 05 2003-04 27.63 24 20.30 13 09.53 03 15.59 08 2004-05 30.12 30 14.83 07 24.23 17 13.69 06 2005-06 26.66 21 20.25 12 19.04 09 27.40 23 2006-07 30.58 31 26.73 22 29.44 27 22.35 15 2007-08 36.28 40 33.82 35 31.74 33 06.81 01 2008-09 24.43 18 10.49 04 23.27 16 35.70 38 2009-10 21.05 14 29.66 28 26.11 20 19.89 10 2010-11 35.44 37 31.98 34 29.82 29 28.94 26 2011-12 31.14 32 34.44 36 28.07 25 25.87 19 258 230 181 151 FINDINGS W = 12/1640 x (6656.4 + 5290+ 3276.1 + 2280.1) 123 W = 5.07 The results of Kruskal-Wallis Test are furnished as below. Table value at 5% (9.48) and at 1% (9.21) Variables Calculated value Result Demand Deposits 4.17 Accepted Savings Bank Deposits 7.70 Accepted Term Deposits 2.57 Accepted Total Deposits 4.70 Accepted Priority Sector Advances 4.56 Accepted Non-Priority Sector Advances 2.21 Accepted Total Advances 5.07 Accepted

16 CONCLUSION There is no significant difference among the demand deposits, savings bank deposits, term deposits, total deposits, priority sector advances, non-priority sector advances and total advances of various TNBPvt.SCBs both at 1 per cent and 5 per cent significance levels. REFERENCE [1] Subbiah A. and Selvakumar M., Regional Rural Banks and Agricultural Credit, Krukshetra, New Delhi, pp.45-47, December 2005. [2] Selvakumar M., Regional Rural Banks- A Performance Review Ph.D. Thesis submitted to Madurai Kamaraj University, 2006. [3] Ashok Kumar M., Financial Performance of Scheduled Commercial Banks in India -CAMEL Analysis Ph.D Thesis, Bharathiar University, Coimbatore, 2009. [4] Selvakumar M., Regional Rural Banks (RRBs): Performance Analysis, Indian Journal of Finance, pp.3-19, August, 2010. [5] Manicka Mahesh N., Performance Evaluation of Co-operative Urban Banks in Virudhunagar District Ph.D. Thesis submitted to Madurai Kamaraj University, July 2011.