A Studay On Perormance of Commercial Banks in India

A STUDY ON PERFORMANCE OF COMMERCIAL BANKS IN
INDIA
Dissertation submitted in partial fulfillment of the requirements for the
Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Of
BANGALORE UNIVERSITY

By
CHETAN G KHEMANNAVAR
Reg. No. 11SLCMA034

UNDER THE GUIDANCE
OF
Ms. ANURADHA R
Professor
THE OXFORD COLLEGE OF BUSINESS MANAGEMENT

4th SECTOR H.S.R LAYOUT, BANGALORE-560102.

2012-2013

CERTIFICATE OF ORIGINALITY

This is to certify that the project titled Performance of Commercial Banks in India is
an original work of the student and is being submitted in partial fulfillment for the award
of the Masters Degree in Business Administration of Bangalore University. The report
has not been submitted earlier either to this University/Institution for fulfillment of the
requirement of a course of study.

SIGNATURE OF GUIDE SIGNATURE OF STUDENT
PLACE: PLACE:
DATE: DATE:

SIGNATURE OF PRINCIPAL
PLACE:
DATE:

D DE EC CL LA AR RA AT TI IO ON N

I C CH HE ET TA AN N G G K KH HE EM MA AN NN NA AV VA AR R bearing register number 11S SL LC CM MA A0 03 34 4
hereby declare that this Dissertation titled Performance of Commercial Banks in
India is an original work carried out by me under the guidance of Ms. A AN NU UR RA AD DH HA A R R
towards the partial fulfillment of requirements for the MBA programme of the Bangalore
University. This has not been submitted earlier to any other University or Institution for
the award of any degree/ diploma/ certificate.

(Signature of Student)
Date: C CH HE ET TA AN N G G K KH HE EM MA AN NN NA AV VA AR R
Place: Bangalore. (REG NO: 11SLCMA034)

ACKNOWLEDGEMENT

The successful completion of any task would be incomplete without mentioning the
people who made it possible and whose constant guidance and encouragement secured
us our success. The study being first of its kind.

I heart fully thank my guide Ms. ANURADHA R The Oxford College of Business
Management, who spared their value time and gave me practical suggestions and
guidance throughout this study.

I am thankful to our Head of the Department M R PRATHIBHA for this kind of support
and help.

I extend my gratitude to our principal Dr. K. APARNA RAO for this kind of support and
help for the study.

I would like to acknowledge with sincere gratitude for the constructive guidance and
encouragement I received from The Oxford College of Business Management,
affiliated to Bangalore University throughout the completion of my study.

I again extend my gratitude to all my faculty members for their support throughout the
completion of the dissertation.

CHETAN G KHEMANNAVAR

ABSTRACT
The Banking Sector in the developed economies as well as in the emerging market economies may
face unique problems in the absence of well developed credit rating systems. The mechanism of robust
data collection, lack of proper analytical attitude, inappropriate capital assessment methods, non-
transparent systems and other infrastructure related problems can disturb the financial system of a
country Basel Accord for capital adequacy provides a sound framework for addressing increasingly
complex risks faced by banks with an objective to foster a secure and reliable banking sector. Basel
norms have been adopted by Indian commercial banks as per RBI guidelines to build up a more
transparent and risk free financial base. The present study attempts to examine the Indian commercial
banks response to implement Basel II framework as per Reserve bank guidelines. An effort has been
made to find out whether the commercial banks in India are ready for the Basel III norms. For this
purpose, annual reports of public and private sector banks operating in India have been analyzed in
detail for the year ended 2011-12. The study has indicated that Indian commercial banks have taken
significant and structural initiatives with regard to risk management to implement the Basel II norms in
their organizational structure. The study also highlighted that almost all the banks under the study have
entered in Memorandum of Understanding (MOU) with credit rating agencies for the purpose of rating
their domestic and overseas exposures.

Tables Of Contents

CHAPTER
NO
PARTICULARS PAGE NO.
List of Tables
List of Figures
List of Abbreviations

01 Introduction

1.1 Pre-Independence Period
1.2 Post Independence Pre Reforms
1.3 Post Nationalization Period
1.4 Role of Commercial Bank in social economic
1-13
02 Review of literature

2.1 Review of literature
2.2 Statement of problem
2.3 Scope of the study
2.4 Objectives of the study
2.5 Hypotheses
2.6 Research methodology
2.7 Method of data collection
2.8 Limitations of the study
2.9 Chapter plan
14-23
03 Research methodology

3.1 Industry profile
3.2 Profile of a selected industry
3.3 Conceptual framework
3.4 Sample design
3.5 Tools of analysis
24-50

04

Results and discussions

51-82
05 Summary, Findings and suggestions

5.1 Summary of findings
5.2 Suggestions
5.3 Policy implication and scope for further
study
5.4 Conclusion

83-88
06 References 89

List of Table

Table
No.
Descriptions Page No
4.1
Net Profit
52
4.2
Operating Profit
55
4.3
Interest Earned
58
4.4
Interest Expended
62
4.5
Spread
65
4.6
Establishment Expenses
68
4.7
Total Deposit
71
4.8
Total Advance
74
4.9
Total Volume
77
4.10
Return on Assets
80

List of Graphs

Table
No.
Descriptions Page No
4.1
Net Profit
53
4.2
Operating Profit
56
4.3
Interest Earned
59
4.4
Interest Expended
63
4.5
Spread
66
4.6
69
4.7
Total Deposit
72
4.8
Total Advance
75
4.9
Total Volume
78
4.10
Return on Assets
81
Performance of Commercial Banks in India

The Oxford College Of Business Management, Bangalore Page 1
INTRODUCTION
It has been around one and a 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. The importance of banking system in
India is noted by the fact that aggregate deposits stood at 61 percent of Gross Domestic Product
(GDP) and bank credit to government and commercial sector stood at 29 per cent and 38 per cent
of GDP respectively. An efficient banking system has significant positive externalities, as it
increases the efficiency of economic transaction in general. Therefore, one of the important
objectives of financial sector reforms was to improve the efficiency of banking system. In this
backdrop it is essential to study the efficiency levels of Indian commercial banks to understand
the impact of financial sector reforms on its performance.

In this research an attempt has been made to study the performance of commercial banks in
India: A comparative study of different categories of banks. The concept of banking and Indian
banking system have been defined as under:

Banking industry in India, during the course of its evolution and growth, has traversed through
innumerable twists and turns. The industry has emerged victorious against all odds, by the sheer
strength of its teeth. It has braved many challenges, weathered many storms, withstood many
onslaughts and has emerged as one of the dynamic and vibrant industry. The secret of success
lies in its ability to adapt to changes in most admirable manner. Like an oscillating pendulum, the
industry has witnessed extremely opposite and diverse conditions over the years. Whether it is
class banking or mass banking, whether private ownership or public sector status, whether state

of administered interest rate regime or state of operational freedom, whether bound by antiquated
manual process or a scenario witnessing unleashing of technological blitzkrieg - the industry has
its own experience to narrate.
Banking is an important segment of the tertiary sector and acts as backbone of economic and
social progress. The banks have played a stellar role in the development of the nation with its
high social content and commitment. The banks render vital services to the masses belonging to
the various sectors of the economy like agriculture, industry whether small scale or large scale.
The banking system is one of the few institutions that impinge on the economy and affect its
performance for better or worse. They act as a development agency and are the source of hope
and aspirations of the masses.
The banking sector continues to be dominant in our financial system. More than 70 per cent of
the financial system's assets are owned by banking sector. Even within banking sector, the public
sector banks own more than 80 per cent of the Commercial Banking assets. Development banks
are also owned by the public sector banks.

Indian Banking System and Policy Change
After independence, the major development in the Indian banking sector was nationalisation of
commercial banks in 1969. In the post nationalisation period there was a rapid expansion of
banks in terms of coverage and also in terms of deposit mobilisation. Policies at that time
ensured credit flows to certain important sectors of the economy. Importantly, the Government
also used banking sector as an instrument to finance its own deficit. While this was facilitated
through high Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), to keep the
borrowing cost of the Government low, the interest rate on bank loan was fixed at lower than

market rates. Along with high CRR and SLR, the operational freedom of the banks was curtailed
with high priority sector lending norms (as high as 40 per cent of the total lending). While some
of these measures were adopted to enhance social welfare, they affected the efficiency of the
banking sector adversely. As some of the priority sector loans were not economically profitable
the Non Performing Assets (NPA) increased from 14 per cent in 1969 to 35.4 per cent in 2012.
Also, due to the expansionary policy pursued by RBI, banks had to open certain number of
branches in the rural areas. Many of these branches were economically not viable due to which
the number of loss making branches increased which whittled away resources of the banking
industry. This affected profitability and the efficiency of banks. Further due to restrictions on the
operations of private and foreign banks the dominance of the public sector banks prevailed
resulting in lack of competition.
In 1991, Indian economy faced a major balance of payment crisis. The foreign exchange
resources had almost disappeared. The fiscal deficit was high and the inflation rate reached
double digits. To overcome this crisis India introduced economic reforms for many areas of the
economy, which included, amongst others, the financial sector reforms.
The financial sector reforms in India began as early as in 1985 with the implementation of the
recommendations of the Committee to Review the Working of the Monetary System. But the
real momentum was given to it in 1992 with the implementation of the recommendations of the
Committee on Financial System (CFS). Almost all of the recommendations of the CFS have
been implemented in a phased manner. In 1998, another committee, viz., the committee on
Banking Sector Reforms (BSR) was constituted. The recommendations of the BSR committee
have also been implemented in a phased manner. Important financial sector reforms introduced
after 1992 are as follows:

Reduction in the statutory pre-emption:
This includes reductions in CRR and SLR. At one stage CRR applicable to incremental deposit
was as high as 15% and SLR was 38.5 per cent; thus pre-empting 53.5 per cent of incremental
deposits. These ratios were reduced in a phased manner since 1992. By 2012, SLR was reduced
to 25 per cent and CRR to 4.5 per cent of the total deposit.

Interest rate liberalization:
Before 1991, interest rates, both on deposits and loans were controlled by RBI. But after
liberalization these rates were made market determined in a phased manner. The RBI now
directly controls only the interest rates charged on credit to exports, and also there is a ceiling on
lending rate on small loans (i.e., up to Rs 2 lacs). On the deposit side, except the interest rate paid
on savings deposits, all other interest rates have been deregulated.

Increased autonomy and competition:
Considerable operational autonomy has been provided to the banks by reducing the government's
stake in banks. Competition has been infused by allowing new private sector banks and more
liberal entry of foreign banks (at the end of march 2012, there were 8 new private sector banks,
23 old private sector banks and 42 foreign banks as against 23 foreign banks in 1991).
Regulatory Norms:
These were aimed at reducing the vulnerability of financial institutions in the face of fluctuations
in the economic environment. Important among them is the norm on maintaining a Capital
Adequacy Ratio. Following the CFS report the capital adequacy ratio was fixed at 8 per cent. It
was increased to 9 per cent following the BSR recommendation. Apart from this, various

prudential norms related to income recognition, asset classification, provisioning for bad assets
(NPAs) and assigning risk to various types of assets have been introduced.
These reforms are expected to have an impact on the operations of banks. With reduced statutory
requirements banks will have more funds at their disposal for commercial lending and interest
rate liberalization is expected to bring flexibility and competition into the banking system.
Competition is also infused by opening up banking sector for the private and foreign banks.
Along with these flexibilities, certain regulatory reforms are also introduced, which are meant to
make banks strong enough to face fluctuations in the economy. Overall, these reforms are aimed
at improving the performance of banks. Given this background it is important to examine how
far such reform measures have been successful in their objective of improving the performance
of the commercial banks. While performance of a bank can be measured in various ways, in the
present study we use technical efficiency as a measure of the performance of Indian commercial
banks.
One of the major areas of economy that have received renewed focus in recent times is banking.
This sector has become the foundation of modern economic development and linchpin of
development strategy. Any economy can develop by channelizing economic resources towards
productive investment. Banks are special as they not only deploy large amounts of
uncollateralized public funds in fiduciary capacity, but also leverage such funds through credit
creation. Banking system of India consists of the Central Bank (Reserve Bank of India),
commercial banks (Public Sector Banks, New Private Sector Banks, Old Private Sector Banks,
Foreign banks and Regional Rural Banks), Cooperative Banks and Development Banks
(development finance institutions).

Since the establishment of first bank in pre independent period to till date many catastrophic
changes have taken place in the banking industry. The first bank in India was established in
1786. From 1786 till today, the journey of Indian Banking System can be segregated into three
distinct phases. These phases are:

Phase--I Pre-Independence Period (from 1786 to 1947)

Phase-II Post-Independence pre reforms (Nationalization of Indian Banks and up to 1991
prior to Indian banking sector reforms).

Phase-III Post Nationalization (from 1991to till date)

1.1 Pre-Independence Period
Banking in India originated in the first decade of 18 century The General Bank of India, which
came into existence in 1786. This was followed by Bank of Hindustan. The oldest bank in
existence in India is the State Bank of India being established as "The Bank of Bengal" in
Calcutta in June 1806. Bank of Hindustan and Bengal Bank came into existence immediately
after the establishment of Bank of India. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it
Presidency Banks. The first fully Indian owned bank was the Allahabad Bank, which was
established in 1865. By the 1900s, the market expanded with the establishment of banks such as
Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai. Between 1906
and 1913 Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of

Mysore were set up. To regulate the issue of bank notes and for keeping reserves to secure
monetary stability in India the Reserve Bank of India Act was passed in 1934.The Reserve Bank
commenced operations on 1935.During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. During the same time period public has
lesser confidence in the banking industry. During this time period even though there were 1100
(approximate) small banks were in existence the savings bank facility provided by the Postal
Department was considered comparatively safer. Moreover, funds were largely given to traders.

1.2 Post-Independence Pre -Reforms
Government took major reforms in Indian Banking Sector after independence. In 1948, the
Reserve Bank of India (central bank) was nationalized, and it became an institution owned by the
Government of India. In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India In 1955, it
nationalized Imperial Bank of India with extensive banking facilities on a large scale especially
in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country. On
19th July 1969; major process of nationalization was carried out with the sincere and concerned
efforts of the Prime Minister of India; Mrs. Indira Gandhi. During her regime 14 major
commercial banks in the country were nationalized. Second phase of nationalization Indian
Banking Sector Reform was carried out in 1980 with seven more banks. This step brought
80percent of the banking segment in India under Government ownership. After the
nationalization of banks, the branches of the public sector bank India raised to approximately
800 percent in deposits and advances took a huge jump by 11,000 percent .Banking in the

sunshine of Government ownership gave the public implicit faith and immense confidence about
the sustainability of these institutions. The major aim of nationalization was to give priority to
meet the credit requirement of neglected sectors. This credit facility was supposed to be extended
at considerably low rates. With nationalization there was all-around growth in branch network
deposit, credit disbursement, assets & employment. In this process, profitability & competition
has lost the front seat.

1.3 Post Nationalization Period
Although nationalization of banks helped in the spread of banking to the rural and hitherto
uncovered areas, the monopoly granted to the public sector and lack of competition led to overall
inefficiency and low productivity. By 1991, the country's financial system was saddled with an
inefficient and financially unsound banking sector. Some of the reasons for this were (i) high
reserve requirements, (ii) administered interest rates, (iii) directed credit and (iv) lack of
competition (v) political interference and corruption. As recommended by the Narasimhan
Committee Report (1991) several reform measures were introduced which included reduction of
reserve requirements, de-regulation of interest rates, introduction of prudential norms,
strengthening of bank supervision and improving the competitiveness of the system, particularly
by allowing entry of private sector banks. With a view to adopting the Basel Committee (1988)
framework on capital adequacy norms, the Reserve Bank introduced a risk-weighted asset ratio
system for banks in India as a capital adequacy measure in 1992. Banks were asked to maintain
risk-weighted capital adequacy ratio initially at the lower level of 4 per cent, which was
gradually increased to 9 per cent. Banks were also directed to identify problem loans on their
balance sheets and make provisions for bad loans. The period 1992-97 laid the foundations for

reform in the banking system (Rangarajan, 1998). The second Narasimhan Committee Report
(1998) focused on issues like strengthening of the banking system, upgrading of technology and
human resource development. The report laid emphasis on two aspects of banking regulation,
viz., capital adequacy and asset classification and resolution of NPA-related problems. After
adequate skills are developed, both at the banks and at the supervisory levels, some banks might
be allowed to migrate to the internal rating based (IRB) approach (Reddy 2012). At present,
banks in India are venturing into non-traditional areas and generating income through diversified
activities other than the core banking activities. Strategic mergers and acquisitions were being
explored and implemented. With this, the banking sector is currently on the threshold of an
exciting phase.

In the early 1990s the then Narasimha Rao Government embarked on a policy of liberalizations
and gave licenses to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis
Bank), ICICI Bank ,HDFC Bank etc.. This move, along with the rapid growth in the economy of
India, kick started the banking sector in India, which has seen rapid growth with strong
contribution from banking industry.
Commercial Banking in India
The beginning of commercial banking in India was made in the 17th Century when the British
established agency houses in the country but commercial banking in a systematic form was
initiated in the early part of the 19th century when Presidency Banks were established. In 1913,
eighteen such commercial banks were functioning. The Imperial Bank of India was set up in

1920 with the merger of three Presidency Bank. In 1955, this bank was nationalized and renamed
as the State Bank of India.
In 1949, The Banking Regulation Act, 1949, was passed and the Reserve Bank was thus vested
with regulatory power over the commercial banks. In 1950-51, there were nearly 430
commercial banks in India but due to mergers and acquisitions, the number reduced to 256 in
1960-61. In 1969, 14 major commercial banks were nationalized. At present there are 27 such
nationalized banks including the SBI group. In 1995-96, total number of scheduled commercial
banks operating in the country was 271 and number further reduced to 183 in 2011-12.
Commercial banks are the most important constituents of banking system. These are the banks
which do banking business to earn profit. Some have used the term "commercial bank" to refer to
banks which focus mainly on companies. In some English-speaking countries outside North
America, the term "trading bank" was and is used to denote a commercial bank. These banks
raise funds by collecting deposits from businesses and consumers via checkable deposits, savings
deposits, and time (or term) deposits. They make loans to businesses and consumers. They also
buy corporate bonds and government bonds. Their primary liabilities are deposits and primary
assets are loans and bonds. Functions of commercial banks can be divided into three parts
namely, primary functions, secondary functions and social and developmental functions.

1.4 Role of Commercial Banks in Social-Economic Development
The banks have become the foundation of economic and social development of a nation. If any
country wants to increase its rate of capital formation, it is very important to build an efficient
commercial banking system equipped with an adequate coverage so that, apart from mobilizing
savings, it may also be able to foster the banking habits in a society. The commercial banks

create the awareness among the rural and urban people about society's wasteful spending and
provide them enough opportunities to make their investment in more generating assets.

The commercial banks help the agricultural sector in a number of ways. They open a network of
branches in rural areas to provide agricultural credit. They also finance agriculture sector for
modernization and mechanization of farms, for providing irrigation facilities, for high yielding
seeds and fertilizers for insecticides-pesticides, for developing/improving land etc. They also
provide financial assistance for animal husbandry, dairy farming, sheep breeding, poultry
farming and horticulture. The Regional rural banks fulfill the credit requirements of almost all
types of rural people and help in upliftment of rural areas.
Commercial banks play a significant role in economic growth and development of developing
countries like India. Banks lubricate the entire monetary and financial system and ensure smooth
operation. Commercial banks are the nerve-centre of the capital market, industrial and trading
activities of a country. The commercial banks are the most important financial institutions and
play an important role in the economic development of a country.
The monetary policy of the central bank of the country is a very important instrument of
economic policy in a liberalized economy. The monetary policy must be implemented effectively
and efficiently to manage the crucial factors of sound health of economy. The effectiveness of
the monetary policy depends upon the co-operation of commercial banks. It would not be
possible to carry out effective implementation of any monetary policy in the country without the
active co-operation of commercial banks. In fact commercial banks constitute the centre-stage of
any monetary programme of the Government or the Central Bank of the country.


The commercial banks help in developing both internal and external trade of a country. The
banks provide loans to retailers, traders, wholesalers for their inventory and also help in
transferring of goods from one place to another by providing all types of facilities, such as
discounting and accepting bills of exchange, providing overdraft facilities, issuing draft etc.

Another crucial role of banks is to finance exim activities and providing foreign exchange
facilities to importers and exporters of goods. Commercial banks have been facilitating the flow
of foreign receipts and payments. In order to encourage better participation of commercial banks
in the area of finance, some countries have established a system of guarantee and ensure banks
against fluctuations in exchange values and dangers of non-realization of payment due to
commercial or political reasons.

Banks act as bankers for the issue of new capital. They help their customers in marketing of
securities and send the dividends to customer's account directly. They undertake the issue of
credit instruments like letters of credit, the acceptance of bills of exchange and documents, acting
as a referee to the respectability and financial standing of customers and providing specialised
advisory services to the customers. Most of the banks have introduced new technology in their
operations. Among the new services introduced during the last few years, the bank guiro, ATMs,
credit cards and Bancassurance deserve special mention. The bank guiro is a system by which a
bank's customer with many payments to make, instead of drawing a cheque for each item, may
simply instruct his bank to transfer to the bank accounts of his creditors the sum due from him
and he writes one cheque debiting his account with the total amount. By providing these
diversified services banks help in the overall growth of trade and industry to a great extent.

Modern commercial banks have diversified their activities with their entry into new non-
traditional areas of business such as mutual funds, merchant banking, portfolio management,
corporate counselling, project counselling, hire purchase finance equipment leasing, venture
capital and factoring service etc. These new activities by banks and their subsidiaries result in the
development of domestic and international business.

To sum up, the commercial banks are very important instrument of macro-economic policy to
stabilize economy. They have become an omnibus institution in the modern times to which
people of varied interests look for help and success. They give life and sustenance to their
customers and, in turn, get vitality and vigour from them, to become an effective tool of social
transformation and rejuvenation. A succulent and resilient banking system in a country portends
health and vigour whereas a sterile and malevolent system in crippling and strait jacketing of a
country's economy.


REVIEW OF LITERATURE
2.1 Review Of Literature
A large number of studies have been conducted on the topics related to performance of
commercial banks in India: A comparative study of different categories of banks. In this chapter
an attempt has been made to present in brief, a review of literature available on the studies done
so far. The review of past studies has been presented in chronological order to provide a glimpse
of work done in this area.

Buser et al (1981) studied the capitalization ratio
Buser et al (1981) studied the capitalization ratio of banks and argued that banks generally have
an optimal capitalization ratio and need to remain well capitalized when they have a high
franchise value. They confirmed the positive relationship whether we use interest margin or
return on assets as a dependant variable and in all specifications. This indicated that well-
capitalized banks support lower expected bankruptcy costs for themselves and their costumers,
which reduce their cost of capital.

Vashisht (1987) critically evaluated the trends and progress
Vashisht (1987) critically evaluated the trends and progress of commercial banks in India during
the period 1971-1983. The ratio analysis was used to evaluate the performance of commercial
banks with respect to different indicators. He analysed that commercial banks did very well with
respect to branch expansions, deposit mobilization and priority sector advances.


Amandeep (1990) evaluated the profits and profitability
Amandeep (1990) evaluated the profits and profitability of nationalized banks. The study
analysed the factors that influence the profitability of banks and suggested that in order to
improve the banks' profitability, the banks need to focus attention on the management of spread,
burden, establishment expenses, income and deposit composition.

Berg et al (1992) studied the impact of deregulation
Berg et al (1992) studied the impact of deregulation on efficiency of different banking sectors.
They used the stochastic frontier technique to study the impact and the study showed that
financial liberalization has positively affected the efficiency and productivity of commercial
banks and deregulation has significant impact on efficiency.

Molyneux and Thornton (1992) explored thoroughly the determinants of bank profitability
on a set of countries.
They use a sample of 18 European countries during the 1986-1989 period. They found a
significant positive association between the return on equity and the level of interest rates in each
country, bank concentration and government ownership.

Presely (1992) focused on asset and liability management in the banking sector.
The literature concerning the asset and liability management for banks strongly suggests that
risk management issues and its implications must be concentrated by the banking industry. He
concluded from his study that there is a need for greater risk management in relation to more
effective portfolio management, and this requires a greater emphasis upon the nature of risk and

return in bank asset structure, and greater diversification of assets in order to spread and reduce
the bank's risks.

Avkiran (1995) studied the financial performance
Avkiran (1995) studied the financial performance of banks by using combination of financial
ratio analysis, benchmarking, measuring performance against budget and concluded that most of
the banks registered huge difference with respect to performance as compared to the ideal one.

Angbazo (1997) investigated the determinants of bank net interest margins for a sample of
US banks for 1989-2003 period.
The results for the pooled sample documents that default risk, the opportunity cost of non-
interest bearing reserves, leverage and management efficiency are all positively associated with
bank interest spread.

Barajas et al (1999) documented significant effects of financial liberalization on banks'
interest margins.
Although the overall spread has not declined after financial reform, the relevance of the different
factors behind the bank spreads were affected by such measures. Another change linked with the
liberalization process was the increase of the coefficient of loan quality after the liberalization.

Demergu-Kunt and Huizingha (1999) examined the determinants of bank interest margins and
profitability using a bank level data for 80 countries in the 1988-1995 period.


The set of variables included several factors accounting for bank characteristics, macroeconomic
conditions, taxation, regulations, financial structure and legal indicators. They reported that a
larger ratio of bank assets to GDP and a lower market concentration ratio lead to lower margins
and profits.

Patel (2000) highlighted the problem of bad loans growing level of non-performing assets in the
commercial banks in the post-reformed period. It was observed that it is important for the banks
and supervisory authorities to adopt more effective lending practices. It was also emphasized that
corporate entities should follow more stringent disclosure and transparency practices and
corporate governance principles.

Ben and Goaied (2001) investigated the determinants of the Tunisian banks' performances
during the period 1980-1995.
The study used panel data regression analysis to find the underlying determinants of Tunisian
banking industry performance. They indicated that the best performing banks are those who have
struggled to improve labour and capital productivity, those who have maintained a high level of
deposit accounts relative to their assets and finally, those who have been able to reinforce their
equity.

Abreu and Mendes (2002) investigated the determinants of banks
Abreu and Mendes (2002) investigated the determinants of banks' interest margins and
profitability for some European countries in the last decade. They reported that well capitalized-
banks face lower expected bankruptcy costs and this advantage "translate" into better

profitability. Although with a negative sign in all regressions, the unemployment rate is relevant
in explaining bank profitability. The inflation rate is also relevant.

Guru et al (2002) attempted to identify the determinants of successful deposit banks in order to
provide practical guides for improved profitability performance of these institutions. The study
was based on a sample of seventeen Malaysian commercial banks over the 1986-1995 period.
The profitability determinants were divided in two main categories, namely the internal
determinants (liquidity, capital adequacy and expenses management) and the external
determinants (ownership, firm size and external economic conditions). The findings of this study
revealed that efficient expenses management was one of the most significant in explaining high
bank profitability. Among the macro indicators, high interest ratio was associated with low bank
profitability and inflation was found to have a positive effect on bank performance.

Chien and Danw (2004) showed in their study that most previous studies concerning company
performance evaluation focus merely on operational efficiency and operational effectiveness
which might directly influence the survival of a company. By using an innovative two-stage data
envelopment analysis model in their study, the empirical result of this study was that a company
with better efficiency does not always mean that it has better effectiveness.

Elizabeth and Elliot (2004) correlation
Elizabeth and Elliot (2004) studied the correlation between customer service and financial
performance among Australian financial institutions. They applied the coefficient of correlation

and concluded that all financial performance measures as interest margin, ROA, and capital
adequacy are positively correlated with customer service quality scores.

Sensarma (2005) examined the efficiency of scheduled commercial banks for the period
1986-2003.
He employed the technique of stochastic frontier analysis to estimate bank-specific cost and
profit efficiency and concluded that the cost efficiency of the banking industry increased during
the period and profit efficiency underwent a decline.

Tektas and Gunay (2007) discussed the asset and liability management in financial crisis.
They argued that an efficient asset-liability management requires maximizing bank's profit as
well as controlling and lowering various risks, and their study showed how shifts in market
perceptions can create trouble during crisis.

Drehmann et al (2008) studied the integrated impact of correlated credit risk and interest
rate risk on commercial banks in perspective of economic value and capital adequacy.
It was emphasized that by modeling the whole balance sheet of a bank and taking account of the
repricing characteristics of all exposures, we cannot only assess the impact of credit and interest
rate risk on the bank's economic value but also on its future earnings and capital adequacy.

Based on the above literature, we can say that there are some studies about banks in India and in
some other countries also has been done on analyzing the performance by using various
techniques like stochastic frontier analysis and panel data regression analysis. In this study an

attempt has been made to study the performance of commercial banks in India on the basis of
certain indicators such as net profit, operating profit, interest earned, interest expended, spread,
establishment expenses etc.

2.2 STATEMENT OF THE PROBLEM:
The study attempts to evaluate the performance of commercial bank in india for past five year.

2.3 SCOPE OF THE STUDY:
There is ample scope for subsequent studies in this dynamic sector of the economy. The studies
may be taken by studying other variables and furthermore studies may be undertaken to analyze
the impact of new products on the performance of banks. Still more, studies may be conducted
on the qualitative aspects and analysis scaling techniques. On the basis of findings of the study, it
is purposed that micro level studies on the various variables be conducted in order to facilitate
SWOT analysis of each bank.
2.4 Objectives of the study
Following were the objectives of the study:

1. To study the trends in the performance of different categories of the banks on the basis of
selected parameters.
2. To determine the performance of selected banks by asserting their revenue
3. To study the Growth rate of different banks.
4. To study the causes of changes in banks profit during the period.


2.5 Hypothesis :
The broader hypothesis are as under :
A) There is no significant difference in operational efficiency among all the banking groups.
B) There is no significant difference in profitability trends within all the five banking groups.
C) There is no significant difference regarding credit efficiency among all the banking groups.
D) There is no significant difference regarding overall performance of all the banking groups.

2.6 RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem.

RESEARCH DESIGN
A research design is purely and simply the framework or plan for a study that guides the
collection and analysis of data. Generally a research design is a blue print of the research that is
to be followed in completing the study.

The study is based on descriptive research type. Descriptive research type is those, which are
concerned with describing the characteristics of a particular individual or of a group, where
we cannot control the variables

It is imperative to decide upon and document a research methodology well in advance to carry
out the research in the most effective and systematic way. This chapter describes the research
methodology adopted to serve the objectives of the study in an effective manner. This chapter
consists of the following sections:

Conceptual Framework
Sample design
Collection of data
Tools of analysis
Limitations of study

2.7 METHOD OF DATA COLLECTION:.
Secondary source: news papers and magazines / business today and economic times.
Books : futures and options by Edwards and Ma Tata McGraw hill
Swaps: ICFAI publications.

2.8 LIMITATIONS OF THE STUDY
The study has following limitations:
1. The study concentrated only on the analysis of quantitative financial data. The qualitative
aspects of performance of banking industry were not covered by the study.
2. The study was primarily dependent on secondary data. In such a case, limitations of
secondary data were inherent in the study.
3. The accuracy of the research is limited by the knowledge of the researcher.
4. As the study was to be completed in a short time, the time factor acted as a
considerable limit on the scope and extensiveness of the study.


2.9 Chapter Plan :
I) Indian Banking System - An Overview
II) Performance appraisal - a conceptual framework.
III) Research methodology.
IV) Analysis of operational efficiency of Indian banking sector.
V) Analysis of profitability of Indian banking sector.
VI) Analysis of credit efficiency and productivity of Indian banking sector.
VII) Summary, Findings and Suggestions


INDUSTRY PROFILE
Evolution of Commercial Banks in India
3.1 Industry Profile
The commercial banking industry in India started in 1786 with the establishment of the Bank of
Bengal in Calcutta. The Indian Government at the time established three Presidency banks,viz.,
the Bank of Bengal (established in 1809), the Bank of Bombay (established in 1840) andthe
Bank of Madras (established in 1843). In 1921, the three Presidency banks were amalgamated to
form the Imperial Bank of India, which took up the role of a commercial bank,a bankers' bank
and a banker to the Government. The Imperial Bank of India was establishedwith mainly
European shareholders. It was only with the establishment of Reserve Bank ofIndia (RBI) as the
central bank of the country in 1935, that the quasi-central banking role of the Imperial Bank of
India came to an end.
In 1860, the concept of limited liability was introduced in Indian banking, resulting in the
establishment of joint-stock banks. In 1865, the Allahabad Bank was established with purely
Indian shareholders. Punjab National Bank came into being in 1895. Between 1906 and 1913,
other banks like Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian
Bank, and Bank of Mysore were set up. After independence, the Government of India started
taking steps to encourage the spread of banking in India. In order to serve the economy in
general and the rural sector in particular, the All India Rural Credit Survey Committee
recommended the creation of a state-partnered and state-sponsored bank taking over the Imperial
Bank of India and integrating with it, the former state-owned and state-associate banks.
Accordingly, State Bank of India (SBI) was constituted in 1955. Subsequently in 1959, the State

Bank of India (subsidiary bank) Act was passed, enabling the SBI to take over eight former state-
associate banks as its subsidiaries.
To better align the banking system to the needs of planning and economic policy, it was
considered necessary to have social control over banks. In 1969, 14 of the major private sector
banks were nationalized. This was an important milestone in the history of Indian banking. This
was followed by the nationalisation of another six private banks in 1980. With the
nationalization of these banks, the major segment of the banking sector came under the control of
the Government. The nationalisation of banks imparted major impetus to branch expansion in
un-banked rural and semi-urban areas, which in turn resulted in huge deposit mobilization,
thereby giving boost to the overall savings rate of the economy. It also resulted in scaling up of
lending to agriculture and its allied sectors. However, this arrangement also saw some
weaknesses like reduced bank profitability, weak capital bases, and banks getting burdened with
large non-performing assets.
To create a strong and competitive banking system, a number of reform measures were initiated
in early 1990s. The thrust of the reforms was on increasing operational efficiency, strengthening
supervision over banks, creating competitive conditions and developing technological and
institutional infrastructure. These measures led to the improvement in the financial health,
soundness and efficiency of the banking system.
One important feature of the reforms of the 1990s was that the entry of new private sector banks
was permitted. Following this decision, new banks such as ICICI Bank, HDFC Bank, IDBI Bank
and UTI Bank were set up. Commercial banks in India have traditionally focused on meeting the
short-term financial needs of industry, trade and agriculture. However, given the increasing
sophistication and diversification of the Indian economy, the range of services extended by

commercial banks has increased significantly, leading to an overlap with the functions performed
by other financial institutions. Further, the share of long-term financing (in total bank financing)
to meet capital goods and project-financing needs of industry has also increased over the years.

Company profile
ICICI BANK History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,
and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of
ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in
an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional
investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World
Bank, the Government of India and representatives of Indian industry. The principal objective
was to create a development financial institution for providing medium-term and long-term
project financing to Indian businesses.
In the 1990s, ICICI transformed its business from a development financial institution offering
only project finance to a diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.
In 1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking,
the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI

Bank would be the optimal strategic alternative for both entities, and would create the optimal
legal structure for the ICICI group's universal banking strategy. The merger would enhance value
for ICICI shareholders through the merged entity's access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the payments system
and provide transaction-banking services. The merger would enhance value for ICICI Bank
shareholders through a large capital base and scale of operations, seamless access to ICICI's
strong corporate relationships built up over five decades, entry into new business segments,
higher market share in various business segments, particularly fee-based services, and access to
the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of
ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited,
with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of
Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger,
the ICICI group's financing and banking operations, both wholesale and retail, have been
integrated in a single entity

Corporate Profile
ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91
billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year
ended March 31, 2011. The Bank has a network of 2,774 branches and about 10,021 ATMs in
India, and has a presence in 19 countries, including India.


ICICI Bank offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialised subsidiaries in the
areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in
United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International
Finance Centre and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in
Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock
Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).


AXIS BANK PROFILE
Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum
of financial services to customer segments covering Large and Mid-Corporates, SME,
Agriculture and Retail Businesses.
The Bank has a large footprint of 1787 domestic branches (including extension counters) and
10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The Bank
also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai,
DIFC - Dubai and Abu Dhabi.
Axis Bank is one of the first new generation private sector banks to have begun operations in
1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India
(SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India (LIC), General
Insurance Corporation of India (GIC), National Insurance Company Ltd., The New India
Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance
Company Ltd. The shareholding of Unit Trust of India was subsequently transferred to SUUTI,
an entity established in 2003.
With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is ranked 9th
amongst all Indian scheduled banks. Axis Bank has achieved consistent growth and stable asset
quality with a 5 year CAGR (2007-12) of 31% in Total Assets, 30% in Total Deposits, 36% in
Total Advances and 45% in Net Profit.


HDFC Bank Profile
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited
(HDFC), India's largest housing finance company. It was among the first companies to receive
an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector. The Bank started operations as a scheduled commercial bank in January 1995 under the
RBI's liberalisation policies.
Times Bank Limited (owned by Bennett, Coleman & Co./The Times Group) was merged with
HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders
of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.
In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than
1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000 crore and net advances
of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs.
1,63,000 crore.
Business focus
HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail
Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for
providing working capital finance, trade services, corporate finance, and merchant banking. It is
also providing sophisticated product structures in areas of foreign exchange and derivatives,
money markets and debt trading And Equity research.


Wholesale banking services
For customers from ongoleBlue-chip manufacturing companies in the Indian corp to small &
mid-sized corporates and agri-based businesses the Bank provides a wide range of commercial
and transactional banking services, including working capital finance, trade services,
transactional services, cash management, etc. The bank is also a leading provider of the above
services to its corporate customers, mutual funds, stock exchange members and banks.
Retail banking services
HDFC Bank was the first bank in India to launch an International Debit Card in association with
VISA (Visa Electron) and issues the Master Card Maestro debit card as well. The Bank launched
its credit card business in late 2001. By March 2009, the bank had a total card base (debit and
credit cards) of over 13 million. The Bank is also one of the leading players in the merchant
acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards
acceptance at merchant establishments. The Bank is positioned in various net based B2C
opportunities including a wide range of Internet banking services for Fixed Deposits, Loans, Bill
Payments, etc.With Finest of Technology and Best of Man power in Banking Industry HDFC
Bank's retail services have become by and large the best in India and since the contribution to
CASA i.e. total number of current and savings account of more than 50%, HDFC BANK has full
potential to become India's No.1 Private Sector Bank.
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities, and Equities. These services are provided

through the bank's Treasury team. To comply with statutory reserve requirements, the bank is
required to hold 25% of its deposits in government securities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.
Distribution network
An HDFC Bank Branch
HDFC Bank is headquartered in Mumbai and as of March 31, 2012, the Banks distribution
network was at 2,544 branches and 8,913 ATMs in 1,399 cities as against 1,986 branches and
10000 ATMs in 996 cities as of october,2012.
2007
HDFC Bank has signed an agreement with Tata Pipes to offer credit facilities to farmers across
the country.
Hdfc Bank Ltd has appointed Mr. Pandit Palande as an additional Director of the Bank at the
Board Metting held on 24
th
April 2007.
HDFC Bank Ltd has informed that the Board of Directors of the Bank at its meeting held on
October 12, 2007, has been appointed Mr. Paresh Sukthankar & Mr. Harish Engineer as
Executive Directors on the Board of Directors of the bank. Mr. Sukthankar & Mr. Engineer have
been senior employees of the Bank since 1994 and have held various positions of responsibility.
2009 - HDFC Bank Bags Asiamoney Award for the "Best Domestic Bank" - HDFC Bank offers
electronic payment collection facility to Guruvayoor Devaswom. - HDFC Bank launches
Meritus Scholarship Programme. - The Asian Banker declares HDFC Bank the Best Retail
Bank

2010
With a view to attract long term deposits and prevent premature withdrawal when the interest
rates peak, HDFC, the housing finance major, has decided to pay variable interest rate on
recurring deposits.
HDFC Bank approved the appointment of Mr. C. M. Vasudev, who is a Director of the Bank, as
Non Executive Chairman of the Bank on a part time basis for a period of three years effective
July 06, 2010 in replace of Mr. Jagdish Capoor retires from his services on the same date.
HDFC Bank plan to add 250 new branches to its network over next 2 years.
2011
HDFC Bank looking at 3G services to boost mobile banking share
The Housing Development Finance Corporation Limited (HDFC), one of the largest private
sector banks in India, which had a network of 1,725 branches as at March 2010, opened 275 new
branches in the current fiscal. The bank now has a total network of 2,000 branches spread across
1,000 cities. The bank also acquired Centurion Bank of Punjab in 2008, which adds around 404
branches to its networks.
The Asian Banker magazine has declared that the strongest bank in Asia Pacific region is HDFC
India's private banking major ,HDFC Bank has launched its new credit card offering called
Infinia in direct competition with global credit card major ,American Express(Amex) .The new
HDFC product is exclusively for the bank's high net worth and super rich clients in the country.
2012
The third-largest US lender by assets, Citigroup Inc has sold its complete 9.85 per cent stake in
Housing Development Finance Corporation Ltd (HDFC) for USD 1.9 billion.


PNB bank Profile
Punjab National Bank (PNB) is an Indian financial services company based in New Delhi,
India. PNB is the third largest bank in India by assets. It was founded in 1894 by Lala Lajpat Rai
and is currently the second largest state-owned commercial bank in India ahead of Bank of
Baroda with about 5000 branches across 764 cities. It serves over 37 million customers. The
bank has been ranked 248th biggest bank in the world by the Bankers' Almanac. The bank's total
assets for financial year 2007 was about US$60 billion. PNB has a banking subsidiary in the UK,
as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty,
Dubai, Oslo, and Shanghai.
History
Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act with its
office in Anarkali Bazaar Lahore. The founding board was drawn from different parts of India
professing different faiths and a varied back-ground with, however, the common objective of
providing country with a truly national bank which would further the economic interest of the
country. PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh
Majithia and Lala Harkishan Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala,
Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass.
[2]

[3]
Lala Lajpat Rai was actively
associated with the management of the Bank in its early years. The board first met on 23 May
1894. Ironically, the PNB Website now claims Lala Lajpat Rai to be the founding father,
surpassing Rai Mul Raj and Dyal Singh Majithia.
[4]
The bank opened for business on 12 April
1895 in Lahore.

PNB has the distinction of being the first Indian bank to have been started solely with Indian
capital that has survived to the present. (The first entirely Indian bank, Commercial Bank, was
established in 1881 in Faizabad, but failed in 1958.)
PNB has had the privilege of maintaining accounts of national leaders such as Mahatma Gandhi,
Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi, as well as the account
of the famous Jalianwala Bagh Committee.
Timeline
In 1900, PNB established its first branch outside Lahore in Rawalpindi. Branches in Karachi and
Peshawar followed. The next year, PNB absorbed Bhagwan Dass Bank, a scheduled bank
located in Delhi Circle.
In 1947, at the Partition of India and the commencement of Pakistani independence, PNB lost its
premises in Lahore, but continued to operate in Pakistan. Partition forced PNB to close 92
offices in West Pakistan, 33% of the total number, and which held 40% of the total deposits.
PNB still maintained a few caretaker branches. On 31 March 1947, even before Partition, PNB
had decided to leave Lahore and transfer its registered office to India; it received permission
from the Lahore High Court on 20 June 1947, at which time it established a new head office in
Calcutta.
1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became
Bharat Nidhi Ltd.
1960: PNB again shifted its head office, this time from Calcutta to Delhi.
1961: PNB acquired Universal Bank of India.

1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon).
September 1965: After the Indo-Pak war the government of Pakistan seized all the offices
in Pakistan of Indian banks. PNB also had one or more branches in East Pakistan
(Bangladesh).
1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a rescue.
1969: The Government of India (GOI) nationalized PNB and 13 other major commercial
banks, on 19 July 1969.
1976 or 1978: PNB opened a branch in London.
1986 The Reserve Bank of India required PNB to transfer its London branch to State
Bank of India after the branch was involved in a fraud scandal.
1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition
added Hindustan's 142 branches to PNB's network.
1993: PNB acquired New Bank of India, which the GOI had nationalized in 1980.
1998: PNB set up a representative office in Almaty, Kazakhstan.
In 2003, PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At the time of
the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its
shareholders received no payment for their shares. PNB also opened a representative office in
London.
The next year, PNB established a branch in Kabul, Afghanistan and a representative office in
Shanghai. PNB also established an alliance with Everest Bank in Nepal that permits migrants to
transfer funds easily between India and Everest Bank's 12 branches in Nepal. Currently, PNB
owns 20% of Everest Bank.

In 2005 PNB opened a representative office in Dubai.
Two years later, PNB established PNBIL Punjab National Bank (International) in the UK,
with two offices, one in London, and one in South Hall. Since then it has opened more branches,
this time in Leicester, Birmingham, Ilford, Wembly, and Wolverhampton. PNB also opened a
branch in Hong Kong.
In January 2009, PNB established a representative office in Oslo, Norway. PNB hopes to
upgrade this to a branch in due course.
In 2010, PNB purchased a small minority stake in Kazakhstan-based JSC Dana Bank. Within the
year PNB increased its ownership and now PNB owns 84% of what has become JSC (SB) PNB.
The subsidiary has branches in Almaty, Astana, Kangandu, and Pavlodar. Danabank was
established on 20 October 1992 in Pavlodar.
Also, in January 2010, PNB established a subsidiary in Bhutan. PNB owns 51% of Druk PNB
Bank, which has branches in Thimpu, Phuentsholing, and Wangdue. Local investors own the
remaining shares. Then on 1 May, PNB opened its branch in Dubai's financial center.
In September 2011, PNB opened a representative office in Sydney, Australia.
In December 2012 it signed an agreement with US based life Insurance company Metlife to
acquire a 30% stake in MetLife's Indian affiliate MetLife India Limited. The company would be
renamed PNB MetLife India Limited and PNB would sell MetLife's products in its branches.
[


CITI Bank Profile
Citibank one of the major international banks, is the consumer banking arm of financial services
giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First
National City Bank of New York. As of March 2010, Citigroup is the third largest bank holding
company in the United States by total assets, after Bank of America and JPMorgan Chase.
Citibank has retail banking operations in more than 160 countries and territories around the
world. More than half of its 1,400 offices are in the United States, mostly in New York City,
Chicago, Los Angeles, the San Francisco Bay Area, Washington, D.C. and Miami. More
recently, Citibank has expanded its operations in the Boston, Philadelphia, Houston, and Dallas
metropolitan areas.
In addition to the standard banking transactions, Citibank offers insurance, credit cards and
investment products. Their online services division is among the most successful in the field
claiming about 15 million users.
As a result of the global financial crisis of 20082009 and huge losses in the value of its
subprime mortgage assets, Citibank was rescued by the U.S. government under plans agreed for
Citigroup. On November 23, 2008, in addition to initial aid of $25 billion, a further $25 billion
was invested in the corporation together with guarantees for risky assets amounting to
$306 billion. Since this time, Citibank has repaid its government loans in full.


History
The City Bank of New York was founded on June 16, 1812. The first president of the City Bank
was the statesman and retired Colonel, Samuel Osgood, ownership and management of the bank
was taken over by Moses Taylor, a protg of John Jacob Astor and one of the giants of the
business world in the 19th century. During Taylor's ascendancy, the bank functioned largely as a
treasury and finance center for Taylor's own extensive business empire.
In 1863, the bank joined the U.S.'s new national banking system and became The National City
Bank of New York. By 1868, it was considered one of the largest banks in the United States, and
in 1897, it became the first major U.S. bank to establish a foreign department.
When the Federal Reserve Act allowed it,
[6]
National City became the first U.S. national bank to
open an overseas banking office when its branch in Buenos Aires, Argentina, was opened in
1914. Many of Citi's present international offices are older; offices in London, Shanghai,
Calcutta, and elsewhere were opened in 1901 and 1902 by the International Banking Corporation
(IBC), a company chartered to conduct banking business outside the U.S., at that time an activity
forbidden to U.S. national banks. In 1918, IBC became a wholly owned subsidiary and was
subsequently merged into the bank. By 1919, the bank had become the first U.S. bank to have
$1 billion in assets.

Charles E. Mitchell was elected president in 1921 and in 1929 was made chairman, a position he
held until 1933. Under Mitchell the bank expanded rapidly and by 1930 had 100 branches in 23
countries outside the United States. The policies pursued by the bank under Mitchell's leadership
are seen by historical economists as one of the prime causes of the stock market crash of 1929,

which led ultimately to the Great Depression. In 1933 a Senate committee, the Pecora
Commission, investigated Mitchell for his part in tens of millions dollars in losses, excessive
pay, and tax avoidance. Senator Carter Glass said of him: "Mitchell more than any 50 men is
responsible for this stock crash.
On December 24, 1927, its headquarters in Buenos Aires, Argentina, were blown up by the
Italian anarchist Severino Di Giovanni, in the frame of the international campaign supporting
Sacco and Vanzetti.

In 1952, James Stillman Rockefeller was elected president and then chairman in 1959, serving
until 1967. Stillman was a direct descendant of the Rockefeller family through the William
Rockefeller (the brother of John D.) branch. In 1960, his second cousin, David Rockefeller,
became president of Chase Manhattan Bank, National City's long-time New York rival for
dominance in the banking industry in the United States.

Citibank footprint
Following its merger with the First National Bank in 1955, the bank changed its name to The
First National City Bank of New York, then shortened it to First National City Bank in 1962.
The company organically entered the leasing and credit card sectors, and its introduction of US
dollar denominated certificates of deposit in London marked the first new negotiable instrument
in the market since 1888. Later to become part of MasterCard, the bank introduced its First
National City Charge Service credit card popularly known as the "Everything Card" in 1967.

In 1976, under the leadership of CEO Walter B. Wriston, First National City Bank (and its
holding company First National City Corporation) was renamed Citibank, N.A. (and Citicorp,
respectively). By that time, the bank had created its own "one-bank holding company" and had
become a wholly owned subsidiary of that company, Citicorp (all shareholders of the bank had
become shareholders of the new corporation, which became the bank's sole owner).
The name change also helped to avoid confusion in Ohio with Cleveland-based National City
Bank, though the two would never have any significant overlapping areas except for Citi credit
cards being issued in the latter National City territory. (In addition, at the time of the name
change to Citicorp, National City of Ohio was mostly a Cleveland-area bank and had not gone on
its acquisition spree that it would later go on in the 1990s and 2000s.) Any possible name
confusion had Citi not changed its name from National City eventually became completely moot
when PNC Financial Services acquired the National City of Ohio in 2008 as a result of the
subprime mortgage crisis.
Automated banking card
Shortly afterward, the bank launched the Citicard, which allowed customers to perform all
transactions without a passbook. Branches also had terminals with simple one-line displays that
allowed customers to get basic account information without a bank teller. When automatic teller
machines were later introduced, customers could use their existing Citi card.


SBI Bank Profile
The evolution of State Bank of India can be traced back to the first decade of the 19th century. It
began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was
redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-
stock bank of the British India, established under the sponsorship of the Government of Bengal.
Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras
(established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the
modern banking scenario in India, until when they were amalgamated to form the Imperial Bank
of India, on27 January1921.
An important turning point in the history of State Bank of India is the launch of the first Five
Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in
general and the rural sector of the country, in particular. Until the Plan, the commercial banks of
the country, including the Imperial Bank of India, confined their services to the urban sector.
Moreover, they were not equipped to respond to the growing needs of the economic revival
taking shape in the rural areas of the country. Therefore, in order to serve the economy as a
whole and rural sector in particular, the All India Rural Credit Survey Committee recommended
the formation of a state-partnered and state-sponsored bank.
The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of
India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an
Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI)
was established on 1 July 1955. This resulted in making the State Bank of India more powerful,
because as much as a quarter of the resources of the Indian banking system were controlled

directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in
1959. The Act enabled the State Bank of India to make the eight former State-associated banks
As its subsidiaries.
The State Bank of India emerged as a pacesetter, with its operations carried out by the 480
offices comprising branches, sub offices and three Local Head Offices, inherited from the
Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to
creditworthy parties, the State Bank of India catered to the needs of the customers, by banking
purposefully. The bank served the heterogeneous financial needs of the planned economic
development.
Branches
The corporate center of SBI is located in Mumbai. In order to cater to different functions, there
are several other establishments in and outside Mumbai, apart from the corporate center. The
bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major
cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater
To its customers throughout india.
ATM Services
SBI provides easy access to money to its customers through more than 8500 ATMs in India. The
Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which
includes the ATMs of State Bank of India as well as the Associate Banks - State Bank of Bikaner
& Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transact money
through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-
Debit cards.


Subsidiaries
The State Bank Group includes a network of eight banking subsidiaries and several non-banking
subsidiaries. Through the establishments, it offers various services including merchant banking
services, fund management, factoring services, primary dealership in government securities,
Credit cards and insurance.

The eight banking subsidiaries are:
State Bank of Bikaner and Jaipur (SBBJ)
State Bank of Hyderabad (SBH)
State Bank of India (SBI)
State Bank of Indore (SBIR)
State Bank of Mysore (SBM)
State Bank of Patiala (SBP)
State Bank of Saurashtra (SBS)
State Bank of Travancore (SBT)
Products and services
Personal Banking
SBI Term Deposits SBI Loan For Pensioners
SBI Recurring Deposits Loan Against Mortgage Of Property
SBI Housing Loan Loan Against Shares & Debentures
SBI Car Loan Rent Plus Scheme
SBI Educational Loan Medi-Plus Scheme


Other Services
Agriculture/Rural Banking
NRI Services
ATM Services
Demat Services
Corporate Banking
Internet Banking
Mobile Banking
International Banking
Safe Deposit Locker
RBIEFT
E-Pay
E-Rail
SBI Vishwa Yatra Foreign Travel Card
Broking Services
Gift Cheques

3.3 CONCEPTUAL FRAMEWORK
In this study, 'Performance of commercial banks in India: A comparative study of different
categories of banks', the performance of different categories of banks was analysed on the basis
of certain performance indicators. The following performance indicators were proposed to be
included in this study:


Net Profit
Operating Profit
Interest Earned
Interest Expended
Spread
Total Deposits
Total Advances
Total Volume
Return on Assets
Three different categories of banks were chosen from Public sector, Private Sector and Foreign
Banking Sector. In this research, the performance of different categories of banks have been
analysed on the basis of certain performance indicators such as Net Profit, Operating Profit,
Total Deposits, Spread, Total Advances, Return on Assets etc. and in order to compare the banks
of different categories, various statistical tools have been applied viz., Trend Analysis,
Compounded Annual Growth rate, Arithmetic, Standard Deviation and Coefficient of Variation .

3.4 SAMPLE DESIGN
The sample for the study consisted of total of six banks from three different categories of banks
called strata's viz., Public Sector, Private Sector and Foreign Banking Sector and each bank was
the unit of population. The population for the study comprised of all the commercial banks from
public sector, private sector and foreign banking sector. The public sector banks comprised of 20
nationalised banks and 8 banks of the State Bank Group. The private sector banks consisted of

21 old private banks and new 9 private sector banks. The foreign banking sector comprised of 33
foreign banks. Thus, the total of 91 banks was there in population for the study. The sampling
technique used was stratified random sampling. The selected banks were - ICICI Bank, AXIS
Bank, HDFC Bank, State Bank of India, Punjab National Bank and CITI Bank.

COLLECTION OF DATA
The entire structure of data for the study rests solely on secondary sources of information. The
study was carried out for the period from 2004-05 to 2010-11. Data relating to performance
indicators i.e. Net Profit, Operating Profit, Interest Earned, Interest Expended, Establishment
Expenses, Spread etc. of banks under study has taken from Bank Quest, Credit Information
Review, IBA Bulletins, Annual Reports of the banks and websites such as Moneycontrol.com,
Money.rediff.com and websites of the banks. Only those banks were selected for the purpose of
the study for which data for completed 12 months from 2003-04 to 2010-11 was available. The
raw data in the form of various for the sample banks was first recorded in a master table and then
subsequent statistical tools for the analysis were applied.

3.5 TOOLS OF ANALYSIS
Analysis and interpretation of performance indicators was done to compare the different
categories of banks selected, which in turn helped in studying the performance of the commercial
banks taken under the study. To compare the different categories of banks on the basis of various
performance indicators such as net profit, interest earned, establishment expenses, total advances
etc. various statistical tools have been applied viz., Trend Analysis, Arithmetic, Standard

Deviation, Coefficient of Variation, and Compounded Annual Growth rate . Following were the
tools used to analyse the secondary data.

3.5.1 TREND ANALYSIS
Trend Analysis is one quantitative method use to determine patterns in data collected over time.
It is also used to detect patterns of change in statistical information over regular intervals of time.
Trend represents the long term direction of the time series. The method of Least Squares has
been used to figure out the trend. It is a mathematical method and used to fit a straight line trend.
The straight line trend is represented by the equation

where:
Yc is the estimated value of the dependent variable
X is the independent variable (time in trend analysis)
a is the Y-intercept (the value of Y when X=0)
b is the slope of the trend line
a and b can be calculated as:

la= Y
N

b =
X
2
XY

where:
N represents the number of years (months or any other period) for which data are given.

3.5.2 ARITHMETIC MEAN
The Arithmetic Mean is an average. The formula for arithmetic mean is:
A.M. (X ) X
1
+ X
2
+ X
3
+ + X
n =
X
i
/n
i=1

3.4.3 STANDARD DEVIATION
The Standard Deviation is an absolute measure of dispersion that expresses variation in the same
units as the original data. The formula for standard deviation is:

S.D. = (X
i
- X )
2
/ (n-1)

3.5.4 COEFFICIENT OF VARIATION
The Coefficient of Variation is one relative measure of dispersion. It relates the standard
deviation and the mean by expressing the standard deviation as a percentage of the mean. The
unit of measure, then, is "percent" rather than the same units as the original data. The formula
for coefficient of variation is:
Coefficient of =
Variation (C.V.) X

3.5.5 COMPUNDED ANNUAL GROWTH RATE
The Compounded Annual Growth Rate of the performance indicators such as Establishment
Expenses, Spread, etc. can be calculated for a period of six years i.e. 2004-05 to 2010-11. The
formula for calculating compounded annual growth rate (CAGR) is:

CAGR = [(Final Value / Initial Value)
1/n
- 1] x 100


RESULTS AND DISCUSSIONS
To meet the first objective of the research, trend analysis of the banks under consideration has
been determined by using method of least square. The trend graphs have been plotted of each
performance indicator. To determine the second objective, the various statistical tools have
applied to compare the performance of the banks under consideration, such as Arithmetic Mean,
Standard Deviation, Coefficient of Variation, Compounded Annual Growth Rate and test of
Significance. Following is the comparison of the banks on the basis of various performance
indicators.


4.1 NET PROFIT
Table 4.1: Net Profit of the Commercial Banks
(Rs. crores)
Banks
Years

Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 258 1206 1637 2005 2540 3110 1792.67 918.57 51.24 51.55
%
change 367.44 35.74 22.48 26.68 22.44
AXIS
Bank 134 193 271 324 485 659 344.33 178.76 51.92 30.48
%
change 44.03 40.41 19.56 49.69 35.88
HDFC
Bank 297 438 602 853 1116 1382 781.33 379.16 48.53 29.27
%
change 47.47 37.44 41.69 30.83 23.84
SBI
2432 3105 4379 4304 4406 4541 3861.17 799.75 20.71 10.99
%
change 27.67 41.03 -1.71 2.37 3.06
PNB
562 842 1108 1410 1439 1540 1150.17 352.51 30.65 18.33
%
change 49.82 31.59 27.26 2.06 7.02
CITI
Bank 325 391 572 600 706 900 582.33 191.25 32.84 18.54
%
change 20.31 46.29 4.90 17.67 27.48



Fig. 4.1 Trend Growth in Net Profit
Source: Company websites and journals
Net Profit is one of the most driving and motivating force for every business concern. Profits
must be earned to: a) pay the dues to stakeholders, b) expand or diversify the business. Table 4.1
showed Net Profit for all the commercial banks taken under study through 2007-08 to 2011-12
and provided that the maximum average net profit amounting to Rs.3,861.17 crores was earned
by State Bank of India followed by ICICI Bank and Punjab National Bank was amounting to
Rs.1,792.67 crores and Rs.1,150.17 crores, respectively. The minimum average net profit
amounting to Rs.344.33 crores was earned by the AXIS bank followed by the CITI Bank and
HDFC Bank amounting to Rs.582.33 crores and Rs.781.33 crores, respectively. The maximum
standard deviation of net profit was noticed in ICICI Bank followed by State Bank of India and
HDFC Bank. The major reason behind high standard deviation of ICICI Bank was of steep
increase in the net profit from the 2007-08 to 2010-11. The minimum standard deviation was of
Trend Graph of Net Profit
0
1000
2000
3000
4000
5000
6000
Mar' 07 Mar' 08 Mar' 09 Mar' 10 Mar' 11 Mar' 12
No. of Years
Value in crores
ICICI Bank AXIS Bank HDFC Bank SBI PNB CITI Bank

CITI Bank. The coefficient of variation revealed the consistency and it was maximum in the case
of AXIS Bank (51.92%) followed by the ICICI Bank (51.24%) and HDFC Bank (48.53%),
respectively. The least coefficient of variation was noticed in the State Bank of India (20.71%)
and it also showed the maximum consistency. The laudable compounded annual growth rate of
net profit has been attained by ICICI Bank (51.52%0 followed by AXIS Bank (30.48%) and
HDFC Bank (29.27%), respectively and the minimum growth rate has been noticed by State
Bank of India (10.99%). The reason for high growth rate of ICICI Bank was due to sharp
increase of 968 per cent in interest earned during the period of the study and moreover, the bank
is gaining market share in private banking, retail banking, credit cards and most of the other
verticals in which it is present whereas, there was only 32.47 per cent increase in interest earned
of State Bank of India during the period of the study. The t-values in the table 4.2.1 revealed that
there was no significant difference between the performances of all the banks taken under study
and the banking industry on account of various indicators.
In figure 4.1, the growth in percent of trend showed that all the banks performances increased
and decreased over the time period of the study and the maximum fluctuations was recorded in
case of ICICI Bank. In the year 2007-08 highest growth in percent of trend was recorded by the
HDFC bank (128.57%) followed by the AXIS Bank (150.56%) and CITI Bank (105.01%),
respectively and the least was recorded by ICICI Bank (55.72%) but it has shown the highest
growth in the next year i.e. 2004-05 and this was due to sharp increase of 335 per cent in interest
earned in the year 2008-09. In the year 2010-11, each bank has shown similar growth in percent
of trend and it also showed the maximum increased and decreased over the period of the study.


4.2 OPERATING PROFIT
Table 4.2: Operating Profit of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 545 1250 1988 3077 3949 4749 2593.00 1476.78 56.95 52.25
%
change 129.36 59.04 54.78 28.34 20.26
AXIS
Bank 407 319 435 562 867 1166 626.00 297.90 47.59 27.55
%
change -21.62 36.36 29.20 54.27 34.49
HDFC
Bank 545 623 839 1153 1587 2628 1229.17 716.28 58.27 36.88
%
change 14.31 34.67 37.43 37.64 65.60
SBI
6045 5188 5860 9786 11151 10249 8046.50 2396.96 29.79 16.84
%
change -14.18 12.95 67.00 13.95 -8.09
PNB
1474 1540 1997 2603 2881 2932 2237.83 599.62 26.79 17.29
%
change 4.48 29.68 30.35 10.68 1.77
CITI
Bank 853 868 1233 1172 1577 2180 1313.83 457.76 34.84 20.17
%
change 1.76 42.05 -4.95 34.56 38.24



Fig. 4.2 Trend Growth in Operating Profit
Every economic identity should generate sufficient profits from its primary operations. The
operating profit refers to the pure profit of the firm generated by the operations of the firm. It is
calculated by total income less total expenditure.
Table 4.2 showed Operating Profit for all the commercial banks taken under study through 2007-
08 to 2011-12 and provided that the maximum average net profit amounting to Rs.8,046.50
crores was earned by State Bank of India followed by ICICI Bank and Punjab National Bank was
amounting to Rs.2,593 crores and Rs.2,237.83 crores, respectively. The minimum average net
profit amounting to Rs.626 crores was earned by the AXIS bank followed by the HDFC Bank
and CITI Bank amounting to Rs.1,229.17 crores and Rs.1,313.83 crores, respectively. The
maximum standard deviation of operating profit was noticed in State Bank of India followed by
Trend Graph of Operating Profit
0
2000
4000
6000
8000
10000
12000
No. of Years
Value in
crores

ICICI Bank and HDFC Bank. The reason behind high standard deviation of State Bank of India
was because of lot many variations in the operating expenses occurred during the period of
study. The minimum standard deviation was of AXIS Bank. The coefficient of variation revealed
the risk and it was maximum in case of HDFC Bank (58.27%) followed by the ICICI Bank
(56.95%) and AXIS Bank (48.53%), respectively. The least coefficient of variation was noticed
in the Punjab National Bank (26.79%) and it also showed the maximum consistency. The
laudable compounded annual growth rate of operating profit has been attained by ICICI Bank
(43.55%) followed by HDFC Bank (30.05%) and AXIS Bank (19.22%), respectively and the
minimum growth rate has been noticed by State Bank of India (9.22%). The highest growth in
ICICI Bank was due to combined effect of rise in provisions and contingencies and net profit that
increased from Rs.43.95 crores to Rs.1,638.68 crores and Rs.1,206.16 crores to Rs.3,110.22
crores, respectively. The t-values in the table 4.2 revealed that there was no significant difference
between the performances of all the banks except AXIS Bank and the banking industry on
account of various indicators. AXIS Bank only showed the significant difference.
In figure 4.2, the growth in percent of trend showed that all the banks performances increased
and decreased over the time period of the study and State Bank of India has increased and
decreased very quickly as compared to rest of the banks under consideration, this was due to
huge fluctuation in the provisions and contingencies through out the period of the study.


4.3 INTEREST EARNED
Table 4.3: Interest Earned of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 2152 9368 8894 9410 13784 22994 11100.33 6317.44 56.91 45.23
%
change 335.32 -5.06 5.80 46.48 66.82
AXIS
Bank 1179 1465 1586 1924 2888 4560 2267.00 1158.44 51.10 29.29
%
change 24.26 8.26 21.31 50.10 57.89
HDFC
Bank 1703 2023 2549 3093 4475 6889 3455.33 1775.05 51.37 31.42
%
change 18.79 26.00 21.34 44.68 53.94
SBI
29810 31087 30460 32428 35795 39491 33178.50 3424.63 10.32 5.55
%
change 4.28 -2.02 6.46 10.38 10.33
PNB
6648 7485 7779 8460 9584 11537 8582.17 1598.93 18.63 10.78
%
change 12.59 3.93 8.75 13.29 20.38
CITI
Bank 1910 1979 2280 2203 3064 4384 2636.67 867.14 32.89 16.78
%
change 3.61 15.21 -3.38 39.08 43.08


Fig. 4.3 Trend Growth in Interest Earned

The major chunk of a banks income flows in from interest earned which comprises the
following as per schedule 13 of Banking Regulation Act 1949, a) Interest/discount on
advances/bills, b) Income on investments, c) Interest on balances with Reserve Bank of India and
others. All banks intend to maximum the interest income by improving credit deposit ratio and
extending long-term loans especially in the deregulated environment when the interest rate
witnessed a declining trend.
Table 4.3 represented the position as regards interest earned and provided that the
maximum average interest earned amounting to Rs.33,178.50 crores was earned by State Bank of
India followed by ICICI Bank and Punjab National Bank was amounting to Rs.11,100.33 crores
and Rs.8,582.17 crores, respectively. The minimum average interest earned amounting to
Trend Graph of Interest Earned
0
5000
10000
15000
20000
25000
30000
35000
40000
No. of Years
Value in
crores

Rs.2267 crores was earned by the AXIS bank followed by the CITI Bank and HDFC Bank
amounting to Rs.2,636.67 crores and Rs.3,455.33 crores, respectively. The maximum standard
deviation of Interest Earned was noticed in State Bank of India followed by ICICI Bank and
HDFC Bank. The minimum standard deviation was noticed by AXIS Bank. The coefficient of
variation revealed the risk and it was maximum in case of ICICI Bank (56.91%) followed by the
HDFC Bank (51.37%) and AXIS Bank (51.10%), respectively. The least coefficient of variation
was noticed in State Bank of India i.e. 10.32 per cent, and it was the highest consistent performer
because it manages all aspects of its business much better than other banks do. The compounded
annual growth rate revealed that splendid performance was recorded by ICICI Bank (48.53%)
followed by HDFC Bank (26.29%) and AXIS Bank (25.34%), respectively and the minimum
growth rate has been noticed by State Bank of India i.e. 4.81 per cent. The reason for high
growth rate of ICICI Bank was due to sharp increase of 316 per cent in advances during the
period of the study whereas, there is only 179 per cent increased in advances of State Bank of
India during the period of the study. The t-values in the table 4.3 revealed that only AXIS Bank
and CITI Bank were having significant difference between their performances and the banking
industry on account of various indicators. Rest of the banks under consideration showed no
significant difference.
In figure 4.3, the growth in percent of trend has shown that all the banks, under consideration,
performances increased and decreased over the period of the study and out of these, ICICI Bank
has shown the maximum fluctuations over the time period. As in the year 2003-04, the highest
growth rate was recorded in case of HDFC Bank (164.14%) followed by AXIS Bank (161.62%)
and CITI Bank (125.16%), respectively. The least growth was recorded by ICICI Bank (80.49%)
whereas, in 2004-05, the highest growth was recorded by ICICI Bank (154.98%) much higher

than the other banks taken under study and this was due to tremendous increase of 335 per cent
in interest earned in the year 2007-08. From period 2008-09 to 2011-12, ICICI Bank, HDFC
Bank, AXIS Bank and CITI Bank were all showing the similar fashion in growth of percent of
trend whereas State Bank of India and Punjab National Bank were showing the similar fashion in
growth of percent of trend.


4.4 INTEREST EXPENDED
Table 4.4: Interest expended of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 1559 7944 7015 6571 9597 16358 8174.00 4410.72 53.96 41.93
%
change 409.56 -11.69 -6.33 46.05 70.45
AXIS
Bank 980 1142 1021 1193 1810 2993 1523.17 712.29 46.76 22.56
%
change 16.53 -10.60 16.85 51.72 65.36
HDFC
Bank 1074 1192 1211 1315 1929 3179 1650.00 737.36 44.69 21.97
%
change 10.99 1.59 8.59 46.69 64.80
SBI
20729 21109 19274 18483 20159 23437 20531.83 1566.89 7.63 1.25
%
change 1.83 -8.69 -4.10 9.07 16.26
PNB
4353 4361 4155 4453 4917 6023 4710.33 631.16 13.40 6.04
%
change 0.18 -4.72 7.17 10.42 22.49
CITI
Bank 1103 1030 924 752 1006 1696 1085.17 294.31 27.12 5.51
%
change -6.62 -10.29 -18.61 33.78 68.59



Fig. 4.4 Trend Growth in Interest Expended
Among the expenses incurred by a bank, interest expended the leading amount of expenses. As
per schedule 15 of Banking Regulation Act 1949, the interest expended comprises of a) Interest
on deposits, b) Interest on Reserve Bank of India/Inter Bank Borrowings and others

The study of interest expended as presented in table 4.4 revealed that amount of average interest
expended to the tune of Rs.20,531.83 was maximum in case of State Bank of India followed by
ICICI Bank, Rs.8,174 crores, and Punjab National Bank, Rs.4,710.33 crores, respectively and
minimum has been noticed in case of CITI Bank Rs.1,085.17 crores. The maximum standard
deviation of interest expended was noticed in ICICI Bank followed by State Bank of India and
HDFC Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of
variation of 53.96 per cent is highest in case of ICICI Bank followed by the AXIS Bank
Trend graph of Interest Expended
0
5000
10000
15000
20000
25000
No. of Years
Value in crores

(46.76%) and HDFC Bank (44.69%), respectively. The least coefficient of variation was noticed
in State Bank of India i.e. 7.63 per cent, and it was a more consistent performer as it manages all
aspects of its business much better than other banks do. The compounded annual growth rate
revealed that splendid performance was recorded by ICICI Bank (48.08%) followed by AXIS
Bank (20.50%) and HDFC Bank (19.87%), respectively and the minimum growth rate has been
noticed by State Bank of India i.e. 2.07 per cent. The t-values in the table 4.4 depicted that half
of the banks namely, AXIS Bank, State Bank of India and CITI Bank were having significant
difference between their performances and the banking industry on account of various indicators,
and remaining half of the banks under consideration, namely, ICICI Bank, HDFC Bank and
Punjab National Bank showed no significant difference.
performances increased and decreased over the period of the study and out of these, ICICI Bank
has shown the maximum fluctuations over the time period. As in the year 2007-08, the highest
growth rate was recorded by ICICI Bank (165.17%) much higher than the other banks taken
under study and this was due to tremendous increase of 409.55 per cent in interest expended in
the year 2007-08. From period 2008-09 to 2011-12, ICICI Bank, HDFC Bank, AXIS Bank and
CITI Bank were all showing the similar fashion in growth of percent of trend whereas State Bank
of India and Punjab National Bank were showing the similar fashion in growth of percent of
trend.


4.5 SPREAD
Table 4.5: Spread of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 593 1424 1879 2839 4187 6635 2926.17 2006.22 68.56 56.71
%
change 140.13 31.95 51.09 47.48 58.47
AXIS
Bank 199 322 565 732 1078 1567 743.83 464.79 62.49 50.05
%
change 61.81 75.47 29.56 47.27 45.36
HDFC
Bank 629 831 1338 1778 2546 3710 1805.33 1058.98 58.66 42.99
%
change 32.11 61.01 32.88 43.19 45.72
SBI
9531 9977 11186 13944 15635 16054 12721.17 2619.09 20.59 12.67
%
change 4.68 12.12 24.66 12.13 2.68
PNB
2295 3124 3625 4006 4667 5515 3872.00 1037.37 26.79 17.65
%
change 36.12 16.04 10.51 16.50 18.17
CITI
Bank 807 950 1356 1451 2058 2688 1551.67 647.12 41.70 27.09
%
change 17.72 42.74 7.01 41.83 30.61


Fig. 4.5 Trend Growth in Spread
Spread Management focuses on maintaining an adequate spread (gap) between interest earned
and interest expended to ensure an acceptable profit margin regardless of interest rate
fluctuations. Mathematically, spread can be expressed as:
Spread = Interest earned Interest expended

The analysis of data contained in table 4.5 indicated that the mean spread of Rs.12,721.17 crores
was again highest in case of State Bank of India followed by Punjab National Bank, Rs.3,872
crores, and ICICI Bank, Rs.2,926.17 crores, respectively and lowest has been noticed in case of
AXIS Bank Rs.743.83 crores. The maximum standard deviation of spread was noticed in State
Bank of India followed by ICICI Bank and HDFC Bank. The minimum standard deviation was
noticed by AXIS Bank. The coefficient of variation of 68.56 per cent was highest in case of
Trend Graph of Spread
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
No. of Years
Value in crores

ICICI Bank followed by the AXIS Bank (62.49%) and HDFC Bank (58.66%), respectively. The
least coefficient of variation was noticed in case of State Bank of India (20.59%), and it was a
more consistent performer. It manages all aspects of its business much better than other banks
do. The analysis of compounded annual growth rate reveals that ICICI Bank was leading by
recording a growth rate of 49.67 per cent followed by AXIS Bank (41.15%) and HDFC Bank
(34.50%0, respectively and the minimum growth rate has been noticed by State Bank of India
i.e. 9.10 per cent.
The t-values in the table 4.5 revealed that only AXIS Bank was having significant difference
between their performances and the banking industry on account of various indicators, and rest
of the banks showed no significant difference.
performances increased and decreased over the period of the study and this increase or decrease
was not huge in all the banks over the time period taken under study. During the period 2007-08,
the highest growth of 546.54 per cent was recorded by ICICI Bank followed by AXIS Bank
(244.17%) and HDFC Bank (206.23%), respectively. The minimum growth of 97.06 per cent
was recorded by Punjab National Bank. The reason for the maximum growth of ICICI Bank was
because of huge percentage increase in spread of 140.13% during 2007-08. In the years from
2007-08 to 2011-12, all the banks taken under study showed similar growth in percent of trend.


4.6 ESTABLISHMENT EXPENSES
Table 4.6: Establishment Expenses of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in %)
C.G.R
(in %)

ICICI
Bank 147 403 546 737 1082 1616 755.17 480.59 63.64 54.61
%
change 174.15 35.48 34.98 46.81 49.35
AXIS
Bank 51 85 121 177 240 381 175.83 110.34 62.75 47.27
%
change 66.67 42.35 46.28 35.59 58.75
HDFC
Bank 109 152 204 276 487 777 334.17 232.26 69.50 47.55
%
change 39.45 34.21 35.29 76.45 59.55
SBI
5153 5688 6447 6907 8123 7932 6708.33 1085.25 16.18 9.87
%
change 10.38 13.34 7.14 17.61 -2.35
PNB
1316 1476 1654 2121 2115 2352 1839.00 378.24 20.57 12.85
%
change 12.16 12.06 28.23 -0.28 11.21
CITI
Bank 163 189 252 244 294 376 253.00 69.63 27.52 16.93
%
change 15.95 33.33 -3.17 20.49 27.89



Fig. 4.6 Trend Growth in Establishment Expenses
In banking parlance, establishment expenses refer to the amount expended on employees in the
form of salaries and provisions (contribution to gratuities funds, provident funds and pension
funds etc. Establishment cost is inseparable part of any banking organization.
The analysis of data contained in table 4.6 indicated that the mean establishment expenses of
Rs.6,708.33 crores was again highest in case of State Bank of India followed by Punjab National
Bank, Rs.1,839 crores, and ICICI Bank, Rs.755.17 crores, respectively and lowest has been
noticed in case of AXIS Bank Rs.175.83 crores. The maximum standard deviation of
establishment expenses was noticed in State Bank of India followed by ICICI Bank and Punjab
National Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of
variation of 69.50 per cent is highest in case of HDFC Bank followed by the ICICI Bank
(63.64%) and AXIS Bank (62.75%), respectively. The least coefficient of variation was noticed
Trend Graph of Establishment Expenses
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
No. of Years
Value in
crores

in case of State Bank of India (16.18%), and it also showed the maximum consistency. The
analysis of compounded annual growth rate revealed that ICICI Bank was leading by recording a
growth rate of 49.23 per cent followed by AXIS Bank (39.91%) and HDFC Bank (38.82%),
respectively and the minimum growth rate has been noticed by State Bank of India i.e. 7.47 per
cent. As we have seen in the table 4.6 that the average establishment expense was maximum in
case of public sector banks i.e. State Bank of India and Punjab National Bank but the
compounded annual growth rate of public sector was much less than that of private sector i.e.
ICICI Bank, AXIS Bank and HDFC Bank and foreign banking sector i.e. CITI Bank. This
happened because of private banks are employing personnel with professional skill and
experience in large number whereas, in public sector they are about to overstaffed. The t-values
in the table 4.6 revealed that AXIS Bank and CITI Bank were having significant difference
between their performances and the banking industry on account of various indicators, and rest
of the banks showed no significant difference.

performances increased and decreased over the period of the study and this increase and decrease
was very minute in all the banks over the time period taken under study. In the year 2005-06
highest growth in percent of trend was recorded by the HDFC bank (573.68%) followed by the
AXIS Bank (242.86%) and ICICI Bank (210%), respectively and the least was recorded by State
Bank of India (99.85%). From the year 2007-08 to 2011-12, public sector banks and foreign
banking sector showed similar trend and all the private sector banks showed similar trend.


4.7 TOTAL DEPOSITS
Table 4.7: Total Deposits of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in
%)
C.G.R
(in %)

ICICI
Bank 32085 48169 68108 99819 165083 230510 107295.67 69839.49 65.09 48.92
%
change 50.13 41.39 46.56 65.38 39.63
AXIS
Bank 12287 16964 20954 31712 40113 58785 30135.83 15807.10 52.45 36.24
%
change 38.06 23.52 51.34 26.49 46.55
HDFC
Bank 17654 22376 30408 36354 55797 68298 38481.17 18035.75 46.87 31.87
%
change 26.75 35.90 19.55 53.48 22.40
SBI
270560 3E+05 318618 367047 380046 435521 344652.50 55578.63 16.13 9.79
%
change 9.45 7.60 15.20 3.54 14.60
PNB
64123 75813 87916 103167 119685 139859 98427.17 25786.36 26.20 16.78
%
change 18.23 15.96 17.35 16.01 16.86
CITI
Bank 15242 17743 20465 21484 27912 37875 23453.50 7535.54 32.13 18.56
%
change 16.41 15.34 4.98 29.92 35.69


Fig. 4.7 Trend Growth in Total Deposits
Acceptance of deposits is the primary activity of banking system. More and more deposits
should be mobilized at cheaper rates of interest to enhance advances. The various types of
deposits mobilized by banks are: a) term deposits, b) saving fund deposits, c) current deposits, d)
recurring deposits, e) miscellaneous deposits.
The analysis of data contained in table 4.7 indicated that the mean total deposits of
Rs.3,44,652.50 crores was again highest in case of State Bank of India followed by, ICICI Bank
Rs.1,07,295.67 crores, and Punjab National Bank, Rs.98,427.17 crores, respectively and lowest
has been noticed in case of CITI Bank i.e. Rs.23,453.50 crores. The maximum standard deviation
of total deposits was noticed in ICICI Bank followed by State Bank of India and Punjab National
Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of variation
of 65.09 per cent was highest in case of ICICI Bank followed by the AXIS Bank (52.45%) and
Trend Graph of Total Deposits
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
No. of Years
Value in
crores

HDFC Bank (46.87%), respectively. The least coefficient of variation was noticed in case of
State Bank of India (16.13%), and it also showed the maximum consistency. The analysis of
compounded annual growth rate revealed that ICICI Bank was leading by recording a growth
rate of 39 per cent followed by AXIS Bank (29.88%) and HDFC Bank (25.35%), respectively
and the minimum growth rate has been noticed by State Bank of India i.e. 8.27 per cent. ICICI
Bank was showing highest growth rate because it was focusing on growth, taking on slightly
more risk than other banks. The t-values in the table 4.7 revealed that only CITI Bank was
having significant difference between their performances and the banking industry on account of
various indicators, and rest of the banks under consideration showed no significant difference.

performances increased and decreased over the period of the study and this increase and decrease
was not huge in all the banks over the time period taken under study. In the year 2006-07 highest
growth in percent of trend was recorded by the ICICI bank (352.16%) followed by the AXIS
Bank (157.51%) and HDFC Bank (137.83%) respectively and the least was recorded by State
Bank of India (102.37%). The reason for huge growth in percent of trend of ICICI Bank in the
year 2003-04 was because of huge growth 617.43 per cent of total deposits during the period of
study. From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and
Punjab National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e.
ICICI Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.


4.8 TOTAL ADVANCES
Table 4.8: Total Advances of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in
%)
C.G.R
(in %)

ICICI
Bank 47035 53279 62095 91405 146163 195865 99307.00 54493.19 54.87 35.16
%
change 13.28 16.55 47.20 59.91 34.00
AXIS
Bank 5352 7180 9363 15603 22314 36876 16114.67 10885.58 67.55 47.33
%
change 34.16 30.40 66.65 43.01 65.26
HDFC
Bank 6814 11755 17744 25566 35061 46945 23980.83 13758.06 57.37 46.21
%
change 72.51 50.95 44.08 37.14 33.90
SBI
120806 1E+05 157933 202374 261641 337336 202974.67 75860.31 37.37 23.22
%
change 14.03 14.65 28.14 29.29 28.93
PNB
34369 40228 47224 60412 74627 96596 58909.33 21437.33 36.39 23.07
%
change 17.05 17.39 27.93 23.53 29.44
CITI
Bank 11385 12629 15259 18111 24455 32861 19116.67 7474.02 39.10 23.74
%
change 10.93 20.83 18.69 35.03 34.37


Fig. 4.8 Trend Growth in Total Advances

Advances are the major product of banking system. The advances must gain momentum if the
banks are to improve its operating performance. A bank sanctions advances in various forms
like: a) bank overdrafts, b) cash credits, c) discounting of bills, d) term loans and others.
The analysis of data contained in table 4.8 indicated that the mean total deposits of
Rs.2,02,974.67 crores was recorded highest in case of State Bank of India followed by, ICICI
Bank Rs.99,307 crores, and Punjab National Bank, Rs.58,909.33 crores, respectively and lowest
has been noticed in case of AXIS Bank i.e. Rs.16,114.67 crores. The maximum standard
deviation of total deposits was noticed in State Bank of India followed by ICICI Bank and
Punjab National Bank. The minimum standard deviation was noticed by CITI Bank. The
Trend Graph of Total Advances
0
50000
100000
150000
200000
250000
300000
350000
No. of Years
Value in crores

coefficient of variation of 67.55 per cent was highest in case of AXIS Bank followed by the
HDFC Bank (57.37%) and ICICI Bank (54.87%), respectively. The least coefficient of variation
was noticed in case of Punjab National Bank (36.39%), and it also showed the maximum
consistency. The analysis of compounded annual growth rate revealed that AXIS Bank and
HDFC Bank are leading by recording a growth rate of 38.03 per cent followed by ICICI Bank
(26.90%) and CITI Bank (19.37%), respectively and the minimum growth rate has been noticed
by State Bank of India i.e. 18.71 per cent. ICICI Bank was showing highest growth rate because
it was focusing on growth, taking on slightly more risk than other banks. The t-values in the table
4.8 revealed that only CITI Bank was having significant difference between their performances
and the banking industry on account of various indicators, and rest of the banks under
consideration showed no significant difference.
performances increased and decreased over the period of the study and the fluctuations were very
minute in all the banks over the time period taken under study. In the year 2003-04 highest
growth in percent of trend was recorded by the AXIS Bank (458.42%) followed by the ICICI
Bank (194.71%) and HDFC Bank (166.36%), respectively and the least was recorded by Punjab
National Bank i.e. 121.14 per cent. The reason for huge growth in percent of trend of AXIS Bank
in the year 2007-08 was because of huge growth 589.01% of total advances during the period of
study. From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and
Punjab National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e.
ICICI Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.


4.9 TOTAL VOLUME
Table 4.9: Total Volume of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in
%)
C.G.R
(in %)

ICICI
Bank 79120 1E+05 130204 191224 311246 426375 206602.83 124252.90 60.14 41.58
%
change 28.22 28.35 46.86 62.77 36.99
AXIS
Bank 17639 24144 30317 47315 62427 95662 46250.67 26663.02 57.65 39.88
%
change 36.88 25.57 56.07 31.94 53.24
HDFC
Bank 24468 34130 48152 61920 90857 115242 62461.50 31736.73 50.81 36.68
%
change 39.49 41.08 28.59 46.73 26.84
SBI
391366 4E+05 476552 569422 641687 772857 547627.50 130676.55 23.86 14.55
%
change 10.86 9.83 19.49 12.69 20.44
PNB
98942 1E+05 135140 153838 160739 185048 141624.67 28631.26 20.22 12.87
%
change 17.28 16.46 13.84 4.49 15.12
CITI
Bank 26627 30372 35724 39595 52367 70736 42570.17 14988.85 35.21 20.56
%
change 14.06 17.62 10.84 32.26 35.08


Fig. 4.9 Trend Growth in Total Volume

Total Volume of the business refers to the sum total deposits and advances. Mathematically,
Volume of Business = Deposits + Advances. It is said high volume of business leads to reduced
cost per unit and improves profit. Those banks are efficient which create more advances from a
given volume of deposits.
The analysis of data contained in table 4.9 indicated that the mean total volume of
Rs.5,47,627.50 crores was recorded highest in case of State Bank of India followed by, ICICI
Bank Rs.20,602.83 crores, and Punjab National Bank, Rs.1,41,624.67 crores, respectively and
lowest has been noticed in case of CITI Bank i.e. Rs.42,570.17 crores. The maximum standard
deviation of total deposits was noticed in State Bank of India followed by ICICI Bank and HDFC
Trend Graph of Total Volume
0
100000
200000
300000
400000
500000
600000
700000
800000
No. of Years
Value in crores

Bank. The minimum standard deviation was noticed by CITI Bank. The coefficient of variation
of 60.14% is highest in case of ICICI Bank followed by the AXIS Bank, 57.65%, and HDFC
Bank, 50.81%, respectively. The least coefficient of variation was noticed in case of Punjab
National Bank, 20.22%, and it also showed the maximum consistency. The analysis of
compounded annual growth rate reveals that AXIS Bank was leading by recording a growth rate
of 32.62% followed by ICICI Bank, 32.48%, and HDFC Bank, 29.54%, respectively and the
minimum growth rate has been noticed by Punjab National Bank i.e. 11.02%. The t-values in the
table 4.9 revealed that only CITI Bank was having significant difference between their
performances and the banking industry on account of various indicators, and rest of the banks
under consideration showed no significant difference.

performances increased and decreased over the period of the study and the fluctuations were very
minute in all the banks over the time period taken under study. In the year 2003-04 highest
growth in percent of trend was recorded by the ICICI Bank i.e. 237.83%, followed by the AXIS
Bank and HDFC Bank, 196.68% and 144.74% respectively and the least was recorded by Punjab
National Bank i.e. 98.98%. The reason for huge growth in percent of trend of ICICI Bank in the
year 2005-06 was because of huge growth 438.89% of total advances during the period of study.
From the year 2007-08 to 2011-12, all the public sector banks i.e. State Bank of India and Punjab
National Bank, foreign banking sector i.e. CITI Bank and the private sector banks i.e. ICICI
Bank, AXIS Bank and HDFC Bank showed similar growth in percent of trend.


4.10 RETURN ON ASSETS
Table 4.10: Return on Assets of the Commercial Banks
(Rs. Crores)
Banks
Years
Mar'
07
Mar'
08
Mar'
09
Mar'
10
Mar'
11
Mar'
12
Mean S.D.
C.V.
(in
%)
C.G.R
(in %)

ICICI
Bank 0.25 1.13 1.31 1.19 1.02 0.91 0.97 0.34 35.63 18.89
%
change 352.00 15.93 -9.16 -14.29 -10.78
AXIS
Bank 0.93 0.98 1.12 0.86 0.97 0.89 0.96 0.08 8.72 -1.46
%
change 5.38 14.29 -23.21 12.79 -8.25
HDFC
Bank 1.24 1.44 1.42 1.66 1.52 1.52 1.47 0.13 8.68 3.89
%
change 16.13 -1.39 16.90 -8.43 0.00
SBI
0.7 0.83 1.07 0.94 0.89 0.81 0.87 0.11 13.17 2.34
%
change 18.57 28.92 -12.15 -5.32 -8.99
PNB
0.77 0.97 1.08 1.12 0.99 0.95 0.98 0.11 11.39 3.34
%
change 25.97 11.34 3.70 -11.61 -4.04
CITI
Bank 1.51 2.88 3.55 2.84 3.07 1.86 2.62 0.71 26.97 -1.57
%
change 90.73 23.26 -20.00 8.10 -39.41


Fig. 4.10 Trend Growth in Return on Assets
Return on Assets measures the relationship between the net profits and assets. It is defines as the
ratio of net profit after tax to total assets. It shows the efficiency with which banks deploy their
assets.
In the table 4.10, the mean analysis showed that the maximum return of 2.72% is recorded by
CITI Bank followed by HDFC Bank and Punjab National Bank, 1.47% and 0.98% respectively.
The maximum standard deviation was again recorded highest by CITI Bank followed by ICICI
Bank and HDFC Bank, respectively. The minimum was recorded by the AXIS Bank. The reason
for showing maximum mean return by CITI Bank was due to the banks strategy of expanding its
portfolio of services has paid off handsomely. The coefficient of variation was maximum shown
by ICICI Bank which revealed that there was more risk involved and the minimum return was
Trend Graph of Return on Assets
0
0.5
1
1.5
2
2.5
3
No. of Years
Value in crores

noticed by HDFC Bank and it also showed that it was more consistent. The reason for the highest
coefficient of variation in ICICI Bank was because from the year 2005-06 to 2008-09, the return
kept on increasing, then started decreasing from 2009-10 to 2011-12 and this is due to percentage
increase in total assets was more than the percentage increase in net profit in the later years of the
study. The maximum compounded annual growth rate is in case of ICICI Bank i.e. 24.08%
followed by Punjab National Bank and CITI Bank, 3.57% and 3.54% whereas AXIS Bank
recorded the least with negative growth rate, -0.73%,. The reason for this was that percentage
increase in total assets is much more than the percentage increase in net profit during the period
of the study. The t-values in the table 4.10 revealed that only ICICI Bank and CITI Bank are
having no significant difference between their performances and the banking industry on account
of various indicators, and rest of the banks under consideration showed significant difference.

In figure 4.10, the growth in percent of trend has shown that all the banks, taken under study,
performances has increased and decreased over the period of the study and there were huge
fluctuations in all the banks over the time period taken under study. The maximum fluctuation
was recorded by CITI Bank and these fluctuations were all because of the change in percentage
of net profits is different from that of change in total assets in each time period.


SUMMARY OF FINDINGS, CONCLUSION AND SUGGESTION
SUMMARY
The research project Performance of Commercial Banks in India: A comparative study of
different categories of banks was undertaken with the following objectives:
1. To study the trends in the performance of different categories of the banks on the basis of
selected parameters.
2. To compare the performance of different categories of the banks.
The performance of different categories of banks was analysed on the basis of certain
performance indicators such as Net profit, Operating profit, Interest expended, Spread, Return on
Assets etc. The study was carried out for six years period from 2007-08 to 2011-12. Only those
banks were chosen for which completed data of 12 months for the study period was available.
The selected banks were ICICI Bank, AXIS Bank, HDFC Bank, State Bank of India, Punjab
National Bank and CITI Bank. To achieve the first objective, the growth of percent of trend has
been done by applying the method of least square and to achieve second objective, various
statistical tools have been applied such as Coefficient of Variation and Compounded Annual
Growth Rate.


5.1 Findings of the study
1. The maximum average net profit is captured by State Bank of India followed by the ICICI
Bank and Punjab National Bank whereas, in case of compounded annual growth rate, ICICI
Bank recorded the highest value followed by AXIS Bank and HDFC Bank and the high
growth rate of ICICI Bank was due to sharp increase of 968 per cent in interest earned during
the period of the study and moreover, the bank is gaining market share in private banking,
retail banking, credit cards and most of the other verticals in which it is present. All the banks
showed insignificant difference.
2. The maximum average operating profit was recorded by State Bank of India and the
minimum was recorded by AXIS Bank. In case of compounded annual growth rate, the major
chunk was captured by ICICI Bank followed by HDFC Bank and AXIS Bank. This means
net profits in public sector banks have arisen on account of recovery of provisions and
Contingencies.
3. The interest earned growth rate was maximum in case of ICICI Bank followed by HDFC
bank and AXIS bank and the minimum was recorded by State Bank of India. This high
growth rate of ICICI Bank was all due to maximum increase in advances during the period of
the study than other banks. Only AXIS Bank and CITI Bank were having significant
difference between their performances and the banking industry on account of various
indicators.
4. The interest expended was also increased at fastest rate in private banks viz.; ICICI Bank,
AXIS Bank and HDFC Bank because the growth rate in deposits was highest in private
sector banks as compared to public sector banks and foreign banking sector. AXIS Bank,

State Bank of India and CITI Bank were having significant difference between their
performances and the banking industry on account of various indicators.
5. Establishment expenses being major item of expenses has grown at a lesser rate in public
sector banks than in public sector banks and foreign banking sector and this is because
private banks are employing personnel with professional skill and experience in large number
whereas, in public sector they are about to overstaffed. AXIS Bank and CITI Bank were
having significant difference between their performances and the banking industry on
account of various indicators, and rest of the banks showed no significant difference
6. As regards total deposits, though State Bank of India because of its vast network, was leading
in total deposits but the growth rate analysis revealed that ICICI Bank topped the chart
followed by AXIS Bank and HDFC Bank whereas, least growth has been recorded in case of
State Bank of India. The reason for high growth in ICICI Bank was due to its prima facie
focus on growth, taking on slightly more risk than other banks and same was the case with
total advances.
7. The maximum average return on assets has been noticed in CITI bank. The reason for
showing maximum mean return by CITI Bank was that the banks strategy of expanding its
portfolio of services has paid off handsomely and moreover, bank is investing huge in
computers and infrastructure. ICICI Bank and CITI Bank showed insignificant difference.


5.2 SUGGESTIONS
1. As the growth in total deposits, total advances and total volume was very low in case of
public sector banks viz.; State Bank of India and Punjab National Bank, it is recommended
that public sector banks should adopt more aggressive policies and practices the policies and
practices of private sector banks.
2. The growth rate of public sector banks viz.; State Bank of India and Punjab National Bank
were the lowest in every performance indicator taken under consideration. It is recommended
that these banks must go for higher disposable incomes, higher consumption and they must
have greater appetite for risk.
3. Banks that are able to innovate to keep up with emerging market trends are likely to be more
successful and will establish long-term leadership positions. So every bank must do this.
4. To attain higher growth, the banks must focus on every segment especially, rural, retail and
agriculture credit areas because there are ample of opportunities lying for ones growth.


5.3 Scope for further study
There is ample scope for subsequent studies in this dynamic sector of the economy. The studies
may be taken by studying other variables and furthermore studies may be undertaken to analyze
the impact of new products on the performance of banks. Still more, studies may be conducted
on the qualitative aspects and analysis scaling techniques. On the basis of findings of the study, it
is purposed that micro level studies on the various variables be conducted in order to facilitate
SWOT analysis of each bank.

Policy Implications
Public sector banks focus more on public interest policies, in this process the
performance may not be as competitive as private bank. Hence as a policy initiative both
public and private bank must take-off a public interest policies, so that competition will
be healthy.
The latest policy decision of having all women commercial bank is welcome sign to
upplitment of Indian women.


5.4 CONCLUSION
The maximum average operating profit was recorded by State Bank of India and the minimum
was recorded by AXIS Bank. In case of compounded annual growth rate, the major chunk was
captured by ICICI Bank followed by HDFC Bank and AXIS Bank. This means net profits in
public sector banks have arisen on account of recovery of provisions and Contingencies.
The interest earned growth rate was maximum in case of ICICI Bank followed by HDFC bank
and AXIS bank and the minimum was recorded by State Bank of India. This high growth rate of
ICICI Bank was all due to maximum increase in advances during the period of the study than
other banks. Only AXIS Bank and CITI Bank were having significant difference between their
performances and the banking industry on account of various indicators.
There are many activities performed at commercial department of which Accounting and
banking process is a part but it is very essential to maintain it properly.



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BIBLOGRAPHY
REFERENCES
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A Studay On Perormance of Commercial Banks in India

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A STUDY ON PERFORMANCE OF COMMERCIAL BANKS IN

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