SOCIAL BANKING PERFORMANCE Contents 7.1 Analysis Based on Average Ratios 7.2 Bank-wi wise Analysis 7.3 Bank Group-wise Analysis 7.4 Bank Sector-wi wise Analysis 7 As a result of the reforms made in the banking sector, there was a shift in the objective of banks from integrated social development to profit making. Banks are interested in meeting the requirements of the users who have adequate repaying capacity, rather than those of the rural people and farmers. The new generation private sector banks which entered the industry consequent on the economic reforms have shown excellent growth performance and captured their business well, above the existing banks. To maintain the present growth level and to face competition in the new atmosphere banks need profit through efficient utilisation of their resources. The PSB switched over to a new style of business and changed their attitude and tended to make maximum profit. The Government also directed all commercial banks to lend at least forty percent of their credit to the priority sector. The banks are financial storehouses and they have the responsibility to meet the varied needs of all classes of people including totally neglected groups. Against this backdrop, the researcher thinks that social banking is also a major indicator while analysing the overall performance of banks. The social banking performances of the selected banks are examined by using the indicators given below. Higher ratios in each indicator show the better social commitment by the banks. 225
Chapter -7 1. Share of Rural and semi-urban branches to total branches 2. Share of Priority sector advances to total advances 3. Growth rate in priority sector advances 7.1 Analysis based on Average Ratios Table 7.1 Average of Social commitment ratios bank-wise, bank group-wise and sector-wise Sl No. 1 2 3 4 5 6 7 8 BANK SBI SBT Social Commitment Ratios RASU B to TB PSA to Total Advances Growth in PSA 69.47 27.67 21.28 72.69 37.03 24.01 SBG(AV) 71.08 32.35 22.65 PNB BOB BOI CB 65.50 38.37 26.73 65.50 27.11 22.06 64.16 27.41 20.76 53.87 33.50 24.02 ONB (AV) 62.26 31.59 23.39 PSB (AV) 65.19 31.85 23.14 ICICI HDFC 33.94 22.14 79.89 23.99 23.47 59.20 NGPB(AV) 28.97 22.81 69.55 Source: Compiled and computed from the Annual Reports of banks for various years 7.1.1 Bank-wise analysis 226
Considering various social banking indicators used in the study, it is obvious from Table 7.2 that SBT stands first, followed by SBI in the ratio of the total of rural and semi-urban branches to total branches. In the case of the ratio of priority sector advances to total advances, PNB, a bank coming under ONB group comes first, followed by SBT. As growth rate in priority sector advances is taken, new generation private sector banks come in the forefront, i.e., ICICI Bank Ltd., followed by HDFC Bank Ltd. This shows that new generation private sector banks are also trying to extend their lending to the priority sector in accordance with the strict guidelines of the Reserve Bank of India. The public sector banks are more concentrated in the rural and semiurban areas whereas the new generation banks are concentrated in the cities. 7.1.2 Bank group-wise analysis Regarding the mean ratio of the total number of rural and semi-urban branches to total branches and the ratio of priority sector advances to total advances, SBG stands first, followed by ONB. It is clear that the nationalised banks and the State Bank group are more concentrated in the rural sector and lend more to the priority sector. Considering the growth rate in priority sector advances, NGPB stand first, followed by ONB. Table.7.2 Best performers in social banking indicators Sl.N o Details Rural and Semi-urban Branches to Total Branches Priority Sector Advances to Total Advances Growth in Priority Sector Advances 1 Bank-wise SBT PNB ICICI Bank Ltd. 2 Bank groupwise SBG SBG NGPB 227
Chapter -7 3 Bank sectorwise PSB PSB PSB 7.1.3 Bank sector-wise analysis 228 The bank sector-wise analysis shows that the performance of public sector banks is far better than that of their competitors, the new generation private sector banks, in the first two indicators, viz., the total number of rural and semi-urban branches to total branches and the ratio of priority sector advances to total advances. NGPB comes top only in the growth rate of priority sector advances. The bank-wise, bank group-wise and bank sector-wise analysis clearly shows that there is significant difference in the average social commitment ratios of banks under study and the public sector banks lend more to the agricultural and the priority sector. 7.2 Bank-wise analysis- Social Commitment Ratios and Variations among banks after controlling for possible changes due to trend over time Hypothesis I H0: There is no significant difference in the means of social commitment ratios of banks after controlling for possible changes due to trend over time. 7.2.1 Difference in Social commitment ratios of banks due to time The results are interpreted in the following way. This is a Multivariate analysis of Co-variance with time being considered as a Covariate. This is done to eliminate possible changes which are natural to the concept being measured, i.e., social commitment ratios over time may change due to trend.
Table 7.3 Social commitment ratios -variations among banks due to time Effect Value F Hypothes is df Error df Partial Eta Squared Time Pillai's Trace.348 12.293 b 3.000 69.000.000.348 Wilks' Lambda.652 12.293 b 3.000 69.000.000.348 Hotelling's Trace.534 12.293 b 3.000 69.000.000.348 Roy's Largest Root.534 12.293 b 3.000 69.000.000.348 a. The statistic is an upper bound on F that yields a lower bound on the significance level. b. Exact statistic c. Design: Bank + Time The Multivariate analysis of covariance results (MANCOVA Table 7.3) show that there is difference in the social commitment ratios over time as Pillai s Trace F value is 12.293, which is significant at 5% level of significance, i.e., the P value (0.000) is less than 0.05 and the associated Partial Eta Squared is 0.348 which is high. 7.2.2 Ratio-wise difference in Social commitment ratios of banks due to time While considering the social commitment ratios separately, it may be seen that the difference is found significant at 5% level of significance only in two ratios, namely, the total number of rural and semi-urban branches to total branches, and the percentage of priority sector advances to total advances, as the P value is less than.05. There is no significant difference in the growth rate in PSA among banks as the P value of 0.108 is higher than 0.05. Sl. No. Table 7.4 Social Commitment Ratios-Ratio-wise difference due to time Ratios F value value Partial Eta Squared 229
Chapter -7 1 Rural and Semi- urban branches to Total Branches 2 Priority sector advances to total advances 10.535 0.002 0.129 25.934 0.000 0.268 3 Growth in priority sector advances 2.654 0.108 0.036 Regarding the variations in ratios among banks, PSA to total advances ratio seems to vary more as the associated Partial Eta Squared is high and the variation is the least in the growth rate of priority sector advances. The importance in terms of the differences of ratios among banks is in the following order. The value of associated Partial Eta Squared is given in brackets. 1) Ratio of Priority sector advances to total advances (0.129) 2) Total of Rural and semi- urban branches to total branches (0.0.268) 3) Growth rate in Priority sector advances (0.036) 7.2.3 Difference in Social commitment ratios of banks after controlling for possible variations due to trend over time Table 7.5 Social commitment ratios -Difference among banks after controlling for time Hypothes Error Partial Eta Effect Value F is df df Squared Ban k Pillai s Trace 1.851 14.302 24.000 213.00 0 Wilks' Lambda.001 71.350 24.000 200.72 2 Hotelling's Trace 192.084 541.571 24.000 203.00 0.000.617.000.887.000.985 Roy's Largest Root 189.943 1685.74 8.000 71.000.000.995 1 a a. The statistic is an upper bound on F that yields a lower bound on the significance level. b. Exact statistic c. Design: Bank + Time 230
The result of Multivariate analysis of Co-variance (MANCOVA, Table 7.5) reveals that Pillai s Trace is 14.302 which is highly significant as the P value is 0.000 which is less than 0.05 and the associated Partial Eta Squared is 0.617. Therefore the difference in the social banking performance of banks after controlling for possible changes due to trend over time is highly significant. Hence the null hypothesis is rejected. 7.2.4 Ratio-wise difference in Social commitment ratios of banks after controlling or possible variations due to trend over time While taking each ratio separately among banks, it is seen from the Multivariate tests that all ratios are highly significant as the P values (0.000) in all the indicators are less than 0.05. Further, while looking at the Multivariate tests (tests of between subjects effects, the importance in terms of differences in the social banking performance of banks can be measured on the basis of the value of Partial Eta Squared. The higher the value of Partial Eta Squared, the greater the variation and so the difference is in the following order. The value of associated Partial Eta Squared is given in brackets. 1. Rural and Semi-Urban Branches to Total Branches (.993) 2. Priority Sector Advances to Total Advances (.978) 3. Growth in Priority Sector Advances (.516) 7.3 Bank group-wise analysis- Social commitment ratios and variations among banks after controlling for possible changes due to trend over time Hypothesis II H0: There is no significant difference in the means of Social commitment ratios of the three bank groups under study after controlling for possible changes due to trend over time. 231
Chapter -7 7.3.1 Differences in Social commitment ratios among the three bank groups, SBG, ONB and NGPB, due to time Table 7.6 Differences in Social commitment ratios of bank groups due to time Tim e Effect Value F Pillai's Trace.235 7.564 b Wilks' Lambda.765 7.564 b Hypothesi s df Error df Partial Eta Squared 3.000 74.000.000.235 3.000 74.000.000.235 Hotelling's Trace.307 7.564 b 3.000 74.000.000.235 Roy's Largest Root.307 7.564 b 3.000 74.000.000.235 a. The statistic is an upper bound on F that yields a lower bound on the significance level. b. Exact statistic c. Design: GB + Time Of the three social commitment ratios considered for possible differences due to time, the MANCOVA results (Table 7.6) show that Pillais Trace F value is 7.564 with a significance value of 0.000 and the associated Partial Eta Squared of 0.235. The significance value is <0.05 and hence there is significant difference in the social commitment ratios of the three bank groups due to time. 7.3.2 Ratio-wise difference in Social commitment ratios among bank groups due to time Table 7.7Variations in Social commitment ratios among bank groups due to time Sl.N o Ratios 1 Rural and S.U branches to Total Branches F value value Partial Eta Squared 6.291 0.014 0.076 232
2 PSA to Total Advances 15.403 0.000 0.169 3 Growth in PSA 2.787 0.099 0.035 While individually considering the ratios for possible differences due to time, it is seen that two ratios, namely, that of the total of rural and semi-urban branches to total branches, and the ratio of priority sector advances to total advances, are significant as the P value in both the cases is less than 0.05. In terms of growth rate in priority sector advances, the difference is found insignificant because the P value is greater than 0.05. Regarding the degree of variation among the three bank groups (Table 7.7), the ratio of PSA to total advances seems to change more as the associated Partial Eta Squared is higher than that of the other two after controlling for possible variations over time. The importance of variation in the ratios due to time is in the following order. The value of Partial Eta Squared is given in brackets. 1. Ratio of Priority sector advances to total advances ( 0.169) 2. Ratio of Rural and semi-urban branches to total branches (0.076) 3. Growth in Priority sector advances (Partial Eta Squared 0.035) 7.3.3 Differences in Social commitment ratios of bank groups after controlling for possible variations due to trend over time Table 7.8 Variations in social commitment ratios among bank groups after controlling for time Effect Value F Hypothesi s df Error Df Partial Eta 233
Chapter -7 Squared GB Pillai's Trace 1.486 24.879 9.000 228.00 0 Wilks' Lambda.005 160.723 9.000 180.24 7.000.495.000.832 Hotelling's Trace 108.35 2 Roy's Largest Root 107.41 7 874.840 9.000 218.00 0 2721.230 a.000.973 3.000 76.000.000.991 a. The statistic is an upper bound on F that yields a lower bound on the significance level. b. Exact statistic c. Design: GB + Time The result of Multivariate analysis of Co-variance (MANCOVA, Table 7.8) reveals that Pillai s Trace F value is 24.879 which is significant as the P value of 0.000 is less than 0.05 and the associated Partial Eta Squared is 0.495. Therefore, the difference in social banking performance of bank groups after controlling for possible changes due to trend over time is highly significant and so the null hypothesis is rejected. 7.3.4 Ratio-wise differences in Social commitment ratios between bank groups While taking each ratio separately among bank groups, it is seen from the Multivariate tests that the difference in all ratios among the three bank groups is highly significant as the P values in all the indicators are.0000 which is less than 0.05. Further while looking at the associated Partial Eta Squared, the importance in terms of the differences in the social commitment ratios among banks is seen in the following order. The value of associated Partial Eta Squared is given in brackets. 234
1. Priority sector advances to total advances (0.988) 2. Total of rural and semi-urban branches to total branches (0.0.960) 3. Growth rate in priority sector advances (0.506) 7.3.5 Social commitment ratios and Banks inter-group comparison Hypothesis III H0: There is no significant difference in the means of the social commitment ratios of three bank groups under study 7.3.5.1 Difference in Social banking performance between bank groups Table 7.9 Social commitment ratios and banks inter-group comparison Effects Value F Hypothesis df Error df Partial Eta Squared Pillai's Trace.897 20.328 6.000 150.000.000.448 Wilk s Lambda.118 47.058 a 6.000 148.000.000.656 Hotelling's Trace Roy's Largest Root 7.327 89.140 6.000 146.000.000.786 7.309 182.72 3.000 75.000.000.880 5 b a. Exact statistic b. The statistic is an upper bound on F that yields a lower bound on the significance level. The hypothesis is tested by using the Multivariate tests to know whether the difference among the bank groups in the social commitment ratios is significant or not. The results (Table No.7.9) reveal that the difference is highly significant as Pillai s Trace F value is 20.328 with the P value of 0.000 at 5% level of significance and the associated Partial Eta Squared of 0.448. 235
Chapter -7 7.3.5.2 Ratio-wise difference between bank groups Table 7.10 Social commitment ratios and banks inter-group comparison Group of Banks SBG Vs NGPB ONB Vs NGPB Simple Contrast Dependent Variable Priority sector advance Rural and Semiurban branches to Total branches s to total advance s Growth in Priority sector advance s Contrast Estimate 42.114 9.546-46.902 Hypothesized Value 0 0 0 Difference (Estimate - Hypothesized) 42.114 9.546-46.902 Std. Error 2.110 1.973 12.856.000.000.000 95% Confidence Interval for Difference Lower Bound Upper Bound 37.911 5.616-72.508 46.317 13.475-21.296 Contrast Estimate 33.297 8.796-46.154 Hypothesized Value 0 0 0 Difference (Estimate - Hypothesized) 33.297 8.796-46.154 Std. Error 1.827 1.709 11.134.000.000.000 95% Confidence Lower Bound 29.658 5.393-68.329 Interval for Difference Upper Bound 36.937 12.199-23.978 a. Reference category = 3 The banks inter-group comparison (i.e. comparison between the bank groups coming under the public sector SBG and ONB with NGPB to know whether there is any significant difference in the social commitment ratios) 236
results clearly depict that the difference in all the three social commitment ratios is highly significant as the P value in all the three ratios in both the cases is less than 0.05. 7.4 Bank sector wise analysis- social commitment ratios and variations among PSB and NGPB after controlling for possible changes due to trend over time Hypothesis IV H0: There is no difference in the means of Social commitment ratios of PSB and NGPB after controlling for possible changes due to trend over time 7.4.1 Difference Social commitment ratios between PSB and NGPB due to time Table 7.11 Social commitment ratios -Variations among PSB and NGPB due to time Effect Value F Hypothesi Error Partial Eta s df df Squared Tim i Pillai's Trace.229 7.409 a 3.000 75.000.000.229 e Wilks' Lambda.771 7.409 a 3.000 75.000.000.229 Hotelling's Trace Roy's Largest Root.296 7.409 a 3.000 75.000.000.229.296 7.409 a 3.000 75.000.000.229 a. Exact statistic b. The statistic is an upper bound on F that yields a lower bound on the significance level c. Design: GBC + Time While considering the three social commitment ratios after controlling for possible differences over time, the MANCOVA results (Table 7.11) show that Pillai s Trace F Value is 7.049 which is significant at 5% significance 237
Chapter -7 level, i.e., P < 0.05. The associated Partial Eta Squared is 0.730 which is very high and we may conclude that there is significant difference in the social commitment ratios of PSB and NGPB due to trend over time. 7.4.2 Ratio-wise difference in Social commitment ratios between PSB and NGPB due to time Table 7.12 Social commitment ratios - Ratio-wise difference among PSB and NGPB due to time Variations among banks due to time Sl. No. Ratios 1 R and S.U Branches to Total Branches F value value Partial Eta Squared 4.879 0.030 0.060 2 PSA to Total Advances 15.566 0.000 0.168 3 Growth in PSA 2.824 0.097 0.035 While considering the ratios of PSB and NGPB separately, it can be seen that the difference is significant in two ratios only viz., the ratio of rural and semi-urban branches to total branches and the ratio of priority sector advances to total advances, as the P value is less than 0.05. The difference in the growth rate of priority sector advances of the two sectors is not significant as the P value is > 0.05. Regarding the differences in ratios due to time, the ratio of PSA to total advances seems to differ more as the associated Partial Eta Squared is high, i.e., 0.168. The variation is seen in the order of: 1) PSA to total advances 238
2) Total of rural and semi urban to total branches and 3) Growth rate in PSA. 239
Chapter -7 7.4.3 Difference in social commitment ratios between PSB and NGPB after controlling for possible changes due to trend over time Table 7.13 Variations in Social commitment ratios among PSB and NGPB after controlling for time GB C 240 Effect Value F Hypothes is df Error df Partial Eta Squared Pillai's Trace 1.450 66.824 6.000 152.000.000.725 Wilks' Lambda.006 291.867 a 6.000 150.000.000.921 Hotelling's Trace Roy's Largest Root 86.321 1064.62 5 6.000 148.000.000.977 85.463 2165.06 3.000 76.000.000.988 1 b a. Exact statistic b. The statistic is an upper bound on F that yields a lower bound on the significance level c. Design: GBC + Time The result of the Multivariate analysis of co-variance (MANCOVA, Table 7.13) reveals that Pillai s Trace F value is 66.824 which is significant as the P value of 0.000 is less than 0.05 and the associated partial eta Squared is 0.725. Therefore, the difference in social banking performance of PSB and NGPB after controlling for possible trends over time is highly significant and the null hypothesis is rejected. 7.4.4 Ratio-wise difference in social commitment ratios between PSB and NGPB after controlling for possible changes due to trend over time Taking each ratio separately among the two sectors of banks, it is found from the multivariate tests that all ratios are highly significant as the P value in all the indicators are.0000 which is less than 0.05. Further, while looking at the associated Partial Eta Squared, the importance in terms of differences in
the social commitment ratios among banks is seen in the following order. The value of associated Partial Eta Squared is given in brackets. 1) Total of rural and semi-urban branches to total branches (0.984) 2) Priority sector advances to total advances (0.960) 3) Growth rate in priority sector advances (associated Partial Eta Squared is 0.515). 7.4.5 Social commitment ratios and banks inter-sector comparison Hypothesis V H0: There is no significant difference in the social commitment ratios of public sector banks and new generation private sector banks over the period of study 7.4.6 Ratio-wise difference between PSB and NGPB Table 7.14 Ratio-wise difference in Social commitment ratios between PSB and NGPB Category of Banks Simple Contrast RASU totb Dependent Variable PSA tota GIPSA Contrast Estimate 36.236 9.046-46.403 PSB Hypothesized Value 0 0 0 Vs Difference (Estimate - 36.236 9.046-46.403 Hypothesized) NGPB Std. Error 1.956 1.602 10.429.000.000.000 95% Confidence Lower 32.341 5.855-67.171 Interval for Difference Bound Upper 40.132 12.237-25.636 Bound a. Reference category = 2 241
Chapter -7 From the custom hypothesis tests (Table No.7.14), it is clear that the difference in all the social commitment ratios of public sector banks and new generation banks is highly significant as the P value of all the ratios is 0.000 which is < 0.05. Table 7.15 Difference in Social Commitment Ratios of PSB and NGPB Effect Value F Hypothesis Error Partial Eta df Df Squared Pillai's Trace.844 135.547 a 3.000 75.000.000.844 Wilk s Lambda.156 135.547 a 3.000 75.000.000.844 Hotelling's Trace 5.422 135.547 a 3.000 75.000.000.844 Roy's Largest 5.422 135.547 a 3.000 75.000.000.844 Root a. Exact statistic It is known from Table No.7.15 that Pillai s Trace F value is 135.547 with df 3 and significance value is 0.000. This shows that there is significant difference between the public sector banks and the new generation private sector banks in terms of the social banking performance. Therefore, the null hypothesis is rejected. 7.5 Overall Social Banking Performance of Banks Table 7.16 shows the ranks of selected banks under social banking performance. Sl.N o Table 7.16 Ranks of Banks under Social Banking Performance Bank RASU B to TB PSA to Total Advances RANKS Growth in PSA Tota l Av. Ran k Positio n of banks 1 SBI 2 4 7 13 4.33 IV 2 SBT 1 2 5 8 2. 67 II 3 PNB 3 1 3 7 2.33 I 4 BOB 3 6 6 15 5.00 V 5 BOI 4 5 8 17 5.67 VII 6 CB 5 3 4 12 4.00 III 7 ICICI Bank 6 8 1 15 5.00 V 242
Ltd. 8 HDFC Bank Ltd. 7 7 2 16 5.33 VI The overall performance of banks under social banking is measured by taking averages of the ranks of all social commitment ratios used in the study. PNB is the best bank in the overall social banking performance, followed by SBT. BOI is placed in the last position..... 243