Comparative Analysis of Different Banks

Comparative Analysis of Different Vivek Srivatsva #1, Dr M L Maurya *2 Abstract The economic reforms in India started in early nineties, but their outcome is visible now. Major changes took place in the functioning of in India only after liberalization, globalization and privatization. It has become very mandatory to study and to make a comparative analysis of services of Public sector and banks. Increased competition, new information technologies and thereby declining processing costs, the erosion of product and geographic boundaries, and less restrictive governmental regulations have all played a major role for Public in India to forcefully compete with and. Keywords Non-Interest Income (Other Income), Interest Expended, Operating Expenses, Provisions & Contingencies, Cost of Funds (CoF), Return on advances adjusted to COF, Wages as % to total expenses, Return on Equity, Return on Assets, CRAR I. INTRODUCTION Bank plays very important role for the economic development of any country either developing or developed. Bank has to act desired role for the directional and overall development of any economy. As the basic function of the bank is to mobilize the saving and utilize it for the best development. Reserve Bank of India (RBI) issues directives to all the banks for better regulation and motivation. Banking sector reforms gave competition to the banks. Nationalization of the banks saw growth and reforms in banking sector, which were unmatched by any other country. Indian banking industry has been successful to a great extent with basic services which are imperative for any growing economy to provide to its citizens in order to move on the path of inclusive growth. After nationalization it was observed that about 89000 new bank branches opened throughout the country. New branches were not only opened in metros but also in other unbanked areas. RBI s effective policy for granting licenses for new branches led to the expansion of banking services of less developed pockets of the country. India has a well-developed banking system. Indian entrepreneurs founded most of the banks in India in the preindependence era to provide financial assistance to traders, agriculturists and budding Indian industrialists. Indian banks have played a significant role in the development of Indian economy by inculcating the habit of saving in Indians and by lending finance to Indian industry. Indian banks can be broadly classified into nationalised banks/public sector banks and private banks. A. Public sector banks Public sector banks are the ones in which the government has a major holding. Nationalised banks or public banks dominate banking System in India. The major objective behind nationalisation was to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. They are divided into two groups i.e. Nationalized and State Bank of India and its associates. Among them, there are 19 nationalized banks and 8 State Bank of India associates. Public dominate 75% of deposits and 71% of advances in the banking industry. These can be further classified into: 1) State Bank of India 2) Nationalized banks 3) Regional Rural B. sector banks All the banks in India were earlier private banks. They were founded in the pre-independence era to cater to the banking needs of the people. But after nationalisation of banks in 1969 public sector banks came to occupy dominant role in the banking structure. sector banking in India received a flip in 1994 when Reserve Bank of India encouraged setting up of private banks as part of its policy of liberalisation of the Indian Banking Industry. sector banks came into existence to supplement the performance of Public sector banks and serve the needs of the economy better. As the public sector banks were merely in the hands of the government, banks had no incentive to make profits and improve the financial he Main difference is only that Public follow the RBI Interest rules strictly but could have some changes but only after the approval from the RBI! sector banks are the banks which are controlled by the private lenders with the vide section 42 (6) (a) of the Act. As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The scheduled commercial banks in India comprise of State bank of India and its associates (8), nationalized banks (19), foreign banks (45), private sector banks (32), cooperative banks and regional rural banks. Whereas Public sector Bank simply means a banking entity which owned by Govt. of India any of state govt s. Thus all PSB's are scheduled (almost) but all scheduled banks are not PSB's. II. REVIEW OF RELATED LITERATURE Kumar, S & Gulati R. (20) examines whether the effect of ownership on the efficiency of Indian domestic banks is 52

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).Mittal, M. & Dhade, A. (2007) conducted a comparative study on profitability and productivity in Indian banks for the time period 1999-2000 to 2003-04. They reported that Indian specially the Public and Old are lagging far behind their competitors in terms of both productivity and profitability with the exceptions of the SBI and its associates. The other Public and Old need to go for the major transformation program for increase their productivity and profitability.vyas,r.k & Dhade,A.(2007) conducted a study mainly focuses on the State Bank of India (SBI), the premier bank in the Indian banking sector, as to what extent it has been affected by the entry of new private sector banks. The study applies the t-test for finding the significant difference in the performance of SBI before and after the entry of private sector banks, with the help of financial ratios selected as the parameters for ascertaining the changes in the business of SBI. Shanmugam and Das (2004) attempted to measure the efficiency of banks for different bank groups of the Indian scheduled commercial banks during the reform period (92-1999). The study showed that the state bank group and foreign banks are more efficient than their counterparts. A. Scope of the study are facing a cut throat competition in Indian market. They are doing their hard for survive in this era. Unfortunately, minimum government support, making a welcome policies for coming of more New private players in banking Industry and giving statements that public sector banks cannot do much better than what they are doing, will discourage to public banks efforts. There are not many research works on the impact of the entry of banks on the Public in India. This study tries to fill this gap to some extent. B. Objectives of the study i. To examine the performance of all bank groups with reference of selected parameters from 2008-. ii. To analyze the impact of the - Old & New and banks on the performance of Public in India. C. Methodology Indian Banking Industry divided into five groups to compare their performance in terms of selected parameters. 1) SBI & its associates ( G-I) 2) Nationalized banks known as public sector banks(g-ii) 3) Old ( G-III) 4) New (G-IV) 5) (G-V) A descriptive and conclusive research design was used. A comparative study has been evaluated about the performance of different banks on the basis of various parameters. Secondary data had been used. Arithmetic mean and percentage statistical techniques were used for the analysis of secondary data from 2008-20. Time period for the present study will be taken from 2008- to 20-. Percentage was calculated by the following formula: Current Year X 0 Base Year D. Factors consider for the Study The comparison of the performance of various bank groups is analysed on the basis of the following parameters: 1) Non-Interest Income (Other Income) of All Scheduled Commercial. 2) Interest Expended of All Scheduled Commercial. 3) Operating Expenses of All Scheduled Commercial. 4) Provisions & Contingencies of All Scheduled Commercial. 5) Cost of Funds (CoF) of All Scheduled Commercial. 6) Return on advances adjusted to COF of All Scheduled Commercial. 7) Wages as % to total expenses of All Scheduled Commercial. 8) Return on Equity of All Scheduled Commercial. 9) Return on Assets of All Scheduled Commercial. ) CRAR of All Scheduled Commercial. Analysis and Interpretation The major findings of this research and the analysis of data is shown the following tables: TABLE 1 AVERAGE OTHER INCOME OF ALL SCHEDULED COMMERCIAL BANKS 20-20- 20- Ra nk SBI & 160727 183937 192400 178231 197442 22.84 4 Nationalized 263936 304996 287249 325766 370370 40.33 3 Old 27821 31518 30286 33948 41452 49.00 2 New 150781 1727 178447 216532 256475 70. 1 148940 995 18 8959 17 53

-24.72 5 Table1 is showing the Average other Income earned by various bank groups except foreign banks. New banks increase their average other interest income to 70.%. Old and Nationalized also increase their average other income to 49.00% and 40.33% respectively. But are far behind them by only decreasing their average other income by only 24.72%.SBI and also increased 22.84% of other Income. TABLE 2 AVERAGE INTERESTED EXPENDED OF ALL SCHEDULED COMMERCIAL BANKS Bank Group SBI & Associ ates Nation alized Old New Foreig n 200 8-617 704 1 676 2 8 340 441 234 8 191 200 9-662 285 145 7 5 140 760 371 296 893 79 201 0-670 179 164 5 1 147 681 423 8 6 227 201 1-888 6 239 728 0 225 057 642 787 149 824 20-65 334 28 956 2785 98 7927 33 1874 06 %In creas e /Dec rease 72.4 7 1. 70 7. 08 79.6 6 46.1 9 Table 2 is showing the Average Interested expended by various bank groups. Old banks increase their average interest expended income to 7.08%. Nationalized and SBI & Associate also increase their average interest expended to1.70% and 72.47% respectively. But are far behind them by only increasing their average interest expended by only 46.19%. TABLE 3 AVERAGE OPERATING EXPENSES OF ALL SCHEDULED COMMERCIAL BANKS 20-20- 20- SBI & 200877 252828 291459 327299 3740 84.66 2 Nationalized 354160 407922 538193 574753 647182 82.74 4 Old 39392 47153 56000 65404 77459 96.64 1 New 178401 1857 220064 274898 327392 83.51 3 2984 19 5686 3367 142882 16.18 5 4 2 1 3 5 Table 3 is showing the Average operating expenses by various bank groups. Old banks increase their average operating expenses to 96.64%. New and SBI & Associate also increase their average operating expenses to83.5% and 84.66% respectively. But are far behind them by only increasing their average operating expenses interest income by only 16.18%. TABLE 4 20-20- 20- SBI & 2.39 2.36 2.84 3.25 2.98 24.69 1 Nationalized 2.32 2.26 2.74 2.55 2.39 3.02 4 Old 2.79 2.56 2.95 2.95 2.94 5.38 3 New 2.88 3 3.15 3. 3.3 14.58 2 4.33 3.96 3.86 3.89 3.89 -.16 5 AVERAGE NET INTEREST MARGIN OF ALL SCHEDULED COMMERCIAL BANKS Table 4 is showing the Average Net Interest Margin by various bank groups except foreign banks. SBI and banks increase their Average Net Interest Margin to 24.69%. New, Old and Nationalized also increase their Average Net Interest Margin to14.58%, 5.38 % and 3.02% respectively. But are far behind them by decreasing their Average Net Interest Margin by only.16%. TABLE 5 AVERAGE COST OF FUNDS OF ALL SCHEDULED COMMERCIAL BANKS 20-20- 20- SBI & 6 5.32 4.85 5.66 5.96-0.67 3 Nationalized 6. 5.37 4.93 6.22 6.39 4.93 2 Old 6.67 6. 5.66 7.1 7.27 9.00 1 New 6.15 4.42 4.27 5.45 5.77-6.18 4 4.46 2.83 3. 3.88 4.05-9.19 5 Table 5 is showing the Average Cost of Funds by various bank groups. Old increase their Average Net Interest Margin to 9.00%. Nationalized also increase their Average Cost of Funds to 4.93%. But, New private banks and SBI & decreases their Average Cost of Funds by only 9.19%.6.18% and 0.67% respectively. 54

TABLE 6 AVERAGE RETURN ON ADVANCES ADJUSTED TO COF OF ALL SCHEDULED COMMERCIAL BANKS Bank Group SBI & Associa tes Nationa lized Old New 2008-20 - 20-20- %Increa se /Decreas e 3.98 3.6 4. 4.61 3.93-1.26 2 4. 3.82 4.28 4.1 3.76-8.07 4 5.15 4.82 5.02 4.88 4.88-5.24 3 5.36 5.14 5.14 5.32 5.57 3.92 1 8.15 7.16 5.64 5.72 5.5-32.52 5 Table 6 is showing the Averages Return on Advances adjusted to COF by various bank groups. New private increase their Averages Return on Advances adjusted to COF to 3.92%. Nationalized,, Old private banks and SBI & decrease their Averages Return on Advances adjusted to COF by only 8.07%, 32.52%.5.24% and 1.26%. TABLE 7 AVERAGE WAGES AS % TO TOTAL EXPENSES OF ALL SCHEDULED COMMERCIAL BANKS TABLE 8 AVERAGE RETURN ON EQUITY OF ALL SCHEDULED COMMERCIAL BANKS Bank Group SBI & Asso ciates Nation alized Old New 2008-20- 20-20- %Inc/ Dec 17.74 15.92 14. 16 15.29 -.81 18.05 18.3 18.19 15.05.34-31.63 14.69.29 14. 15.18 16.22.42 2.69.87.62 15.27 16.51 54.44 1.75 7.34.28.79.52-16.22 Ra nk 3 Table 8 is showing the Averages Return on Equity by various bank groups.new private sector banks increase their Averages Return on Equity to 54.44%. Old also increase their Averages Return on Equity to.42%, respectively. But, Nationalized banks and SBI & decreases Their Averages Return on Equity by only 16.22%.31.63% and.81%. TABLE 9 AVERAGE RETURN ON ASSETS OF ALL SCHEDULED COMMERCIAL BANKS 5 4 Bank Group SBI & Nationalized Old New 20-20- 20-2008- 15.06 17.1 19.97 17.42 16.2 7.57 2.31.65 16.41.2.81 -.27 5.26 14.57 16.75.28-7.39 4.17.1.83.97.4. 1 19.44 23.48 23.3 20.35 18.22-6.28 3 Table 7 is showing the Averages Wages as % to total expenses by various bank groups.new increase their Averages Wages as % to total expenses to.%. SBI and also increase their Averages Wages as % to total expenses to 7.57%. But, Old private banks and Nationalized decreases their Averages Return on Advances adjusted to COF by only 6.28%, 7.39% and.27% respectively. Bank Group,2008-200 9-20 - 20-20 -, %Incr ease /Decre ase SBI & 1.02 0.91 0.79 0.89 0.88 -.73 4 Nationalized 1.03 1 1.03 0.88 0.74-28.16 5 Old 1.15 0.95 1. 1.2 1.26 9.57 2 New 1. 1.38 1.51 1.63 1.74 55.36 1 1.99 1.26 1.75 1.76 1.94-2.51 3 Table 9 is showing the Averages Return on Assets by various bank groups.new private sector banks increase their Averages Return on Assets to 55.36%. Old also increase their Averages Return on Assets to 9.57%. But, Nationalized banks and SBI & decrease their Averages Return on Assets by only 2.51%.28.16% and.73%. TABLE AVERAGE CRAR (CAPITAL TO RISK ASSETS RATIO OF ALL SCHEDULED COMMERCIAL BANKS 55

20-20- 20- SBI &.96.46.25.7.67-9.24 5 Nationalized.24.18.47.03.26-7.40 4 Old 14.74 14.85 14.55 14..73-6.85 3 New 15.33 18.03 16.87 16.66 17.52 14.29 2 14.19 17.26 16.97 16.75 17.88 26.00 1 Table is showing the Averages CRAR by various bank groups. increase their Averages CRAR to 26.00%. New also increase their Averages CRAR to 14.29%. Old, Nationalized and SBI & decrease their Averages CRAR by only 6.85%, 7.40% and 9.24% respectively. TABLE TABLE SHOWING RANKING TO ALL BANK GROUPS IN SELECTED PARAMETERS Parameter G-I G-II G-III G-IV G-V Other 4 3 2 1 5 Income Interest 4 2 1 3 5 Expended Operating 2 4 1 3 5 Expenses Net Interest Margin 1 4 3 2 5 Cost of 3 2 1 4 5 Funds Return on 2 4 3 1 5 Advances Wages 2 5 4 1 3 Return on 3 5 2 1 4 Equity Return on 4 5 2 1 3 Assets CRAR 5 4 3 2 1 Total 1st 3 4 2 1 5 Achieved III. CONCLUDING REMARKS A. As far as the overall performance of the different bank groups is concerned, it is quite clear that Old and New performed far better than Nationalized, SBI & and. So it seems that the RBIs step to give license to the private players in Indian banking industry is quite logical as these are doing really well from the past several years. But as far as the performance of SBI and is concerned, they are also very good in some areas and they can do well if they are given proper support by the banking authorities. and Nationalised really disappoint with their performance as they are lagging far behind from their competitive banks in almost every parameter. So if they really have to survive in Indian Banking Industry, they have to improve their performance and gain the faith of their customers. B. As far as the performance of the Nationalised in the Indian Banking Industry is concerned, they really disappoint. They are not showing any significant improvement in their performance during the study period on almost all the parameters. They are only quite good in increasing their cost of funds. They are at second last position as far as the percentage increase is concerned. For this, it may be the government policy and 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. C. As far as the performance of the SBI and is concerned, it is clear that though they are able to maximize their increase in some parameters, especially Net Interest Margin, Operating Expenses, return on Advances, Wages. Remaining parameters also is in good position except only CRAR. D. As far as the performance of the Old is concerned, it is clear that they are performing quite well in almost all the parameters. Their performance on Interest, Expended, Operating Expenses, Cost of Funds, Return on Equity, return on Assets is also good as they show quite satisfactory percentage increase in these parameters. E. As far as the performance of the New is concerned, it is clear that they are more successful in increasing their Other Income, Return on advances a great percentage. On the other parameters they also show satisfactory performance except Cost of Funds. 56

F. If we compare the performance of Old and New, it is clear that in most of the parameters these two types of banking groups are very close to each other. They are just competing for the first or second place whether it is the case of Other Income, Return on equity and Return on Assets. They are just doing their good for the Indian banking Industry. G. As far as the performance of the in the Indian Banking Industry is concerned, they really not good in the position. They are not showing any significant improvement in their performance during the study period on almost all the parameters except No. of and Capital and Reserve & Surplus. They are only succeeding in increasing their Capital and Reserve & Surplus. They are at the last position as far as the percentage increase is concerned. 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. [4] Mittal,R.K. & Dhingra,S.(2007). Profitability and Productivity in Indian - A comparative study. Research paper. Published in AIMS international volume 1, No. 2 May 2007. pp.7-152. [5] Sharma, R.D., Kaur, G. & Sharma, J. (2007). Customer Delight-A Road to Excellence for. NICE Journal of Business, Vol.2, No.2 (july-dec.), pp.1-. [6] Vyas,R.K & Dhade,A.(2007).A Study on the Impact of New on State Bank of India Article The IUP Journal of Bank Management. IUP Publications. Volume: VI August.pp: 61-76. [7] Srivastava Vivek,(20) A Study On Non-Performing Assets Of Indian GYANPRATHA-ACCMAN Journal of Management, Volume 5, Issue 2,July20. [8] Srivastava Vivek, Bansal Deepak,(20), A Study of trends of Non- Performing Assets in in India, International Journal in Multidisciplinary and Academic Research (SSIJMAR) Vol. 2, No. 2, March-April (ISSN 2278 5973). [9] Srivastava Vivek, Guliti Mengistu, Dr. Gupta S K Marketing Innovations Changing Rural Indian Banking Technological and Management Advances in the New Age Economy: An Industry Perspective be published in the Conference Souvenir. ( Paperback ISBN : 978 93 5156 339 6 ) and all full papers duly submitted in ebook (ISBN: 978-93-5156-340-2). IV. CONCLUSIONS From the comparative analysis of the different banking groups, it is clear that though almost all the bank groups are able to increase their assets, profitability, income (interest and noninterest), advances, investments and deposits, but there is a strong need to improve the functioning of the Public, so that they can make their presence felt in the modern era of cut throat competition. RBI must frame its policies in such a way that these banks can grow and satisfy their customers as well as themselves. banks needs to quickly recover from their financial and other crisis and reorganize their functioning in order to maintain their position in the Indian Banking Industry. document is a template. An electronic copy can be downloaded from the conference website. For questions on paper guidelines, please contact the conference publications committee as indicated on the conference website. Information about final paper submission is available from the conference website. REFERENCES [1] Kumar, S & Gulati R. (20). Assessing the Effect of Ownership on the Efficiency of Indian Domestic. Article The IUP Journal of Bank Management. IUP Publications Volume: IX August. pp: 76-4. [2] Kumar, S. (2007). An Analysis of Efficiency- Profitability Relationship in Indian Public. Research paper. Reader, Punjab School of Economics, G.N.D.U. Amritsar. [3] Mittal, M. & Dhade, A. (2007). Profitability and Productivity in Indian - A comparative study. Research paper. Published in AIMS international volume- 1, No. 2 May 2007. pp. 7-152. 57