A comparative study on financial of private and public sector banks with special reference to affecting factors and their impact on indicators SYNOPSIS Submitted To Gujarat Technological University For The Degree of Doctor of Philosophy (Faculty of Management) Submitted By Alpesh C. Gajera Enrollment No. 119997392009 Assistant Professor Sunshine Group of Institutions Under The Supervision of Dr. Vijay Pithadia Director Smt. S. H. Gajera MBA Mahila College Amreli International Co-Supervisor Dr. Timotej Jegric DPC Members Dr. Sandip Solanki Dr. Dharmesh Raval
INDEX Sr. No. Particular Page No. A Title of the thesis and abstract 1 B Brief Description on the state of the art of the research 2 topic C Definition of the problem 4 D Objective and scope of the work 5 E Original contribution by the thesis 6 F Methodology of Research, Result/Comparison 7 G Achievement with respect to objectives 8 H Conclusion 14 I Copies of papers published and the list of all publications 15 arising from the thesis J References 16
A. Title of the thesis and abstract TITLE OF THESIS A comparative study on financial of private and public sector banks with special reference to affecting factors and their impact on indicators ABSTARCT Research work under this title is divided into two parts (1) Evaluation of financial of private and public sector banks and (2) Identifying the factors responsible for better/poor financial of private/public sector banks. (1) Evaluation of financial of private and public sector banks: For analyzing financial of private and public sector banks all private sector banks (20) as well as all public sector banks (26) are taken into consideration. Private sector banks include old private sector banks (13) as well as new private sector banks (7). Public sector banks include SBI and its associates (6) as well as all nationalized banks (20). (As on date of 31/03/2012). To evaluate the financial of above banks 29 financial parameters are selected. Financial data of last 12 years, i.e. from year 2001-02 to 2012 13 are collected for calculating and analyzing financial parameters. (2) Identifying the factors responsible for better/poor financial of private/public sector banks. : On the basis of result of financial analysis, second part of research is to carry forward for identifying the factors responsible for deviation in financial of private and public sector banks. For identifying the factors responsible for better/poor financial of private/public sector banks, parameters are decomposed by using their definitions. So at the end of these two stage research, I came to know about the factors responsible for better/poor financial of private/public sector banks in each financial indicators. 1
B. Brief Description on the state of the art of the research topic It is most important to decide appropriate parameter at the time of measuring financial of banks. Till today many experts have given their opinion on parameters of financial of banks, even enormous numbers of research are available on financial of banks which has used different parameters for measuring financial. In terms of financial of banks I would like to add one more point regarding parameters of financial that time period also play a vital role in terms of selection of financial parameters. The financial parameters that we should select in 1990 or before must be different that the parameters we should select in 2010-11, as since independent Indian banking is passing through lots of changes which does not permit us to evaluate on same parameters. One more important aspect which one should highlight at the time of selecting financial parameters is availability of data on selected parameters for desired time period. Financial of banking industry Definition of Financial The of banks in India has been assessed by considering variables, viz. branches, deposits, advances, investments, spread, burden, business, operating profits, NPA, cost of deposits, cost of borrowings, cost of funds, return on advances, return on investments, return on funds, net profit, spread, burden and operating expenses and sectorial deployment of credit. Suby, B. (2011). Performance of public and private sector banks in Kerala - A comparative study. Kerala: Mahatma Gandhi University. For this research work financial of banks is measured by selected financial parameters which are divided into seven heads such as capital adequacy ratios, debt coverage parameters, balance sheet parameters, management efficiency parameters, profitability parameters, employee s efficiency parameters and non performing assets parameters. There will be a vast difference in terms of selecting parameters for financial, when we are talking about financial of any individual bank and financial 2
of banking sector, as Indian banking sector is divided into different sectors such as SBI and its associates banks, nationalized banks, old private sector banks, new private sector banks etc which has some distinct characteristics in terms of its operations, rules and regulations etc The diversity of Indian banking sector makes it more difficult for researcher to determine and come up with a final list of parameters for financial of banking sector which give equal representation to all banks and also depict true picture about financial of Indian banking. In this research work by going through lots of literature review, RBI bulletins, RBI database, discussion with panel members at various occasions of progress review presentation, discussion with DPC members and guide, I came up with final list of parameters for measuring financial of banks, which are as under. Capital adequacy ratio (BASEL II) Debt coverage parameters Balance sheet parameters Management efficiency parameters Profitability parameters Employee efficiency parameters Nonperforming assets parameters 3
C. Definition of the problem By going through literature review in form of research papers and Ph. D. thesis, I came to know that almost all research papers are only talking about financial of different sector banks such as private, public, foreign, co operative or combination there off. I came across hundreds of research works which are advocating that one sector banks are performing well compare to other sector banks, but I haven t found any research work which extends from of financial to identifying the reasons or factors responsible for better or poor financial between different sector of banks. So my research work is divided into two aspects. 1. Evaluating financial of all public sector banks, including SBI and its associates and nationalized banks and private sector banks, including old private and new private sector banks. 2. Identifying the factors responsible for better or poor financial of private or public sector banks. This research work will be helpful to readers in terms of judging financial of Indian banks as well as they will also come to know about the reason behind better or poor financial of banks. 4
D. Objective and scope of the work This research work is carried out for attaining below mentioned objectives. 1. To study the financial of last 12 years of public and private sector banks. 2. To identify the parameters in which private/public sector banks are performing better/poor compare to private/public sector banks. 3. To identify the factors (reasons) responsible for better/poor financial of private/public sector banks. As I have mentioned earlier there are enormous numbers of research which have analyzed financial of different sector of banks time to time with suitable parameters as per the objectives that they have stated in their research work. The scope of work in my Ph. D. work is to extend from of financial to identifying the reason or factors responsible for better or poor financial in between different sector of banks. 5
E. Original contribution by the thesis The thesis on mentioned topic will contribute to the Indian banking industry as a whole as well as parties associated with banking industry as mention below. 1. As in this research work financial is evaluated on the basis of current data, it will give the idea about current position of Indian banking industry. 2. All private sector banks and public sector banks are included in research. So all bankers can get idea about their bank s financial. 3. All Bankers and associated parties of banks can also get comparative analysis of banking industry and compare their banks with other private and public sector banks of Indian banking industry. 4. The main contribution of this thesis is identification of factors responsible for better/poor financial of private/public sector banks. So reader of thesis can also get information about the reasons behind better/poor financial in particular parameters of their banks. 6
F. Methodology of Research, Result/Comparison Research Methodology includes the assumptions and values, which is useful for interpreting data and reaching to conclusions. Any project requires a basic plan of action, or a series of actions chalked out, in order to accomplish the objectives effectively and efficiently within a time framework, without deviating from the original target. In other words we can say that, from where we are and where we want to go, the process involved is carefully transformed in to a blue print called the research design. In this research three different research design have been used in parallel, which are as under 1. Descriptive Research Design As in this research work first task is of determining financial parameters, which is descriptive in nature as in this research work financial of banks are described with the help of selected parameters. 2. Analytical Research Design After selecting parameters for measuring financial the next task is to analyze the financial of banks with the help of secondary data collected on selected parameters. So this part of research is analytical in nature. 3. Exploratory Research Design Next task after analyzing financial of banks is to identify the factor responsible for better/poor financial of private/public sector banks. For identification of factor responsible for better/poor financial of banks exploratory research design is best suitable. 7
G. Achievement with respect to objectives This research work is carried out to attain above mentioned three objectives. The achievement with respect to individual objective is as under. 1. To study the financial of last 12 years of public and private sector banks. Activities required to achieve first objective is accomplished which includes. a. Deciding parameters for analyzing financial. b. Collecting secondary data for selected parameters to analyze financial. c. Apply appropriate statistical tools on secondary data to analyze financial. 2. To identify the parameters in which private/public sector banks are performing better/poor compare to private/public sector banks. Activities required to achieve second objective is also accomplished which include. a. Achieving first objective which is pre-requisite for achieving second objective. b. To identify whether there is any significant difference in the financial of private and public sector banks. c. financial is identified at three different level i. e. 1) Identification of difference in financial between banks within sub sector. 2) Identification of difference in financial between sub sectors and 3) Identification of difference in financial between private and public sector banks. 3. To identify the factors (reasons) responsible for better/poor financial of private/public sector banks. Achievement of first and second objectives will automatically lead to achievement of third and last objective. So there is nothing new, which needs to be done to achieve this objective. To achieve this objective factors are identified for better/poor financial of private/public sector banks with the help of secondary data analysis, parameter definition and literature review of past research. 8
Parameter No. 1.1 1.2 2.1 2.2 2.3 Parameter Name Capital adequacy ratio (Tier I) Capital adequacy ratio (Tier II) Cash to Deposit Ratio Credit to Deposit Ratio Investment to Deposit Summary of Financial Performance at three different level Bank Sector Interbank comparison within sector Comparison between sector Private V/S Public banks comparison Remarks identified at all identified at all level of only 2.4 Ratio of 9
2.5 3.1 3.2 3.3 3.4 4.1 Deposit to Total Liabilities Ratio of Demand & Saving Bank Deposit to total Deposit Ratio of Priority Sector Advance to total Advance Ratio of Secured Advance to total Advance Ratio of term loan to total Advance Ratio of investment in non approved secirities to total Investment Ratio of Interest Income to Total Assets identified at all level of only identified at all identified at all 10
4.2 4.3 5.1 5.2 Ratio of non Interest income to total assets Ratio of operating profit to total assets Return on Assets Return on Equity 5.3 Cost of Deposit 5.4 Cost of Borrowing level of only identified at all identified at all identified at all 11
5.5 Cost of Fund 5.6 5.7 6.1 6.2 6.3 6.4 Return on Advance Return on Investment Profit per Emloyee (Lakhs) Business per Employee (Lakhs) Wages as % of Total Expenses Wages as % to total Income identified at all identified at all 12
7.1 7.2 7.3 7.4 Gross NPA as percentage of Gross Advance Gross NPA as percentage of Assets Net NPA as percentage of Net Advance Net NPA as percentage of Assets level of only 13
H. Conclusion Since 2011 when I have been registered for Ph. D., lots of changes have been done in my topic. I have given many presentations at various occasions such as DPCs, Research week and also learned a lot in research. During these phases I have also attended various seminars and FDPs which helped me lot to improve my research work. After working for four years on this topic I am satisfactorily able to present it in a form of synopsis. The present study titled A comparative study on financial of private and public sector banks with special reference to affecting factors and their impact on indicators has been undertaken to analyze the financial of all private and all public sector banks, to compare the financial of private and public sector banks and to identify the reason behind better/poor financial of public/private sector banks for financial year 2001-02 to 2012 13. Financial s of banks have been analyzed at three different levels such as interbank comparison within sector, comparison between sectors and comparison between private and public sector banks. Differences in s have been identified at all level of comparison. Due to different level of comparison, level of intensity also came out in difference in financial. 14
I. Copies of papers published and the list of all publications arising from the thesis 1. Research Paper on the Title Financial Performance Evaluation of Private & Public Sector Banks with Reference to Capital Adequacy Ratio Published in PARIPEX Indian Journal of Research in Volume No. 4 (2015), Issue No. 05(May) with ISSN No. 2250-1991 2. Research Paper on the Title Makers & Breakers for the Indian Banking sector in 2013 Published in Vidyasankul Multidisciplinary Research Journal in Volume No. 1 (2014), Issue No. 01(July Sep.) with ISSN No. 2350-0107 3. Research Paper on the Title Employees efficiency analysis of private & public sector banks of India Published in International Journal of Management, IT and Engineering in Volume No. 4 (2014), Issue No. 03 (March) with ISSN No. 2249-0558. 4. Research Paper on the Title A Comparative Financial Analysis of Indian Banking Sector in context of NPA Management Published in International Journal of Research in Commerce, IT and Management in Volume No. 3 (2013), Issue No. 08 (August) with ISSN No. 2231-5756. 15
J. References 1. Alpesh Gajera, Vijay Pithadia, Financial Performance Evaluation of Private & Public Sector Banks with Reference to Capital Adequacy Ratio, PARIPEX Indian Journal of Research, Volume No. 4 (2015), Issue No. 05(May) ISSN No. 2250-1991 2. Alpesh Gajera, Vijay Pithadia, Makers & Breakers for the Indian Banking sector in 2013, Vidyasankul Multidisciplinary Research Journal, Volume No. 1 (2014), Issue No. 01(July Sep.) ISSN No. 2350-0107 3. Alpesh Gajera, Vijay Pithadia, Employees efficiency analysis of private & public sector banks of India, International Journal of Management, IT and Engineering, Volume No. 4 (2014), Issue No. 03 (March) with ISSN No. 2249-0558. 4. Alpesh Gajera, Vijay Pithadia, A Comparative Financial Analysis of Indian Banking Sector in context of NPA Management, International Journal of Research in Commerce, IT and Management, Volume No. 3 (2013), Issue No. 08 (August) with ISSN No. 2231-5756. 5. Baby, S. (2011). Performance of public and private sector banks in Kerala - A comparative study. Kerala: Mahatma Gandhi University. 6. Arora, S.; and Kaur, S. (2006), Financial Performance of Indian Banking Sector in Post-Reform Era, The Indian Journal of Commerce, Vol.59, No.1, pp.96-105. 7. Jain, V. (2006), Ratio Analysis: An Effective Tool for Performance Analysis in Banks, PNB Monthly Review, November, pp.27-29. 8. Kalita, B. (2004), Post-1991 Banking Sector Reforms in India: Policies and Impact, http://ssrn.com/abstract=1089020. 9. Jain, V. (2006), Ratio Analysis: An Effective Tool for Performance Analysis in Banks, PNB Monthly Review, November, pp.27-29. 10. Report on Trend and Progress of Banking in India 2010-2011. 11. www.rbi.org.in 12. www.dbie.rbi.org.in 16