A

DISSERTATION PROJECT

ON
COMPARATIVE ANALYSIS OF THREE PRIVATE
SECTOR BANKS (ICICI, HDFC & KOTAK) WITH
REFERENCE TO THEIR NPAs & ITS IMPACT ON
THEIR PROFITABILITY, CAPITAL ADEQUACY,
CREDIT DEPLOYMENT(2009-2013)
Submitted to:
Kurukshetra University, Kurukshetra
In the Partial fulfillment for The Degree of Master of Business Administration

EXECUTIVE SUMMARY
The Dissertation report makes an attempt to study the problems of Non Performing
Assets (NPAs) in private sector banks and also its impact on the performance of these
banks.
Impact of NPAs on the profitability of the banks is analyzed by applying regression
model. Impact of NPAs on the capital adequacy, deployment policy of banks is also
analysed using camel model and others.
NPAs not only affects the performance of banks but also puts irrepairable harm to the
entire economy. It also endangers the very foundation of the credit system.
In order to do comparatively analyzing of three banks, the various tools like RATIO
ANALYSIS, REGRESSION ANALYSIS, and ANOVA have been used.
The report also includes objective of study, Research Methodology, Analysis and
Interpretation, findings recommendations limitation of study conclusion bibliography
and annexure.

CONTENTS
1. Introduction to industry profile
2. Introduction to topic
3. Theoretical framework
-construct
-dependent & independent variable
4. Literature review
5. Research objective
6. Research methodology
i.

Research design
Type of research design
Time horizon
Study setting
Flow chart for selection of statistical tools
ii. Hypothesis development and testing
iii. Sample & Sampling design
iv. Data Collection
v. Analytical tools
vi. Statistical tools
7. Data analysis
8. Results & Findings
9. Policy implications
10.
Suggestions
11.
Bibliography
12.
Annexure

INTRODUCTION TO BANKING

MEANING AND DEFINITION:

Bank is an institution that deals in money and its substitutes and
provides crucial financial services. The principal type of baking in the modern
industrial world is commercial banking & central banking.
Banking Means "Accepting Deposits for the purpose of lending or
Investment of deposits of money from the public, repayable on demand or otherwise
and withdraw by cheque, draft or otherwise."
-Banking Companies (Regulation) Act, 1949137777
The concise oxford dictionary has defined a bank as "Establishment for custody of
money which it pays out on customers order." Infact this is the function which the
bank performed when banking originated.18
"Banking in the most general sense, is meant the business of
receiving, conserving & utilizing the funds of community or of any special section of
it."
-By H.Wills & J. Bogan
"A banker of bank is a person, a firm, or a company having a place
of business where credits are opened by deposits or collection of money or currency
or where money is advanced and waned.
-By Findlay Sheras

A Bank :
Accept deposits of money from public,
Pays interest on money deposited with it.
Lends or invests money
Repays the amount on demand,
Allow the money deposited to be with drawn by cheque or draft.
ORIGIN OF THE WORD BANK:16
The origin of the word bank is shrouded in mystery. According to
one view point the Italian business house carrying on crude from of banking were
called banchi bancheri" According to another viewpoint banking is derived from
German word "Branck" which mean heap or mound. In England, the issue of paper
money by the government was referred to as a raising a bank.
ORIGIN OF BANKING :
Its origin in the simplest form can be traced to the origin of
authentic history. After recognizing the benefit of money as a medium of exchange,
the importance of banking was developed as it provides the safer place to store the
money. This safe place ultimately evolved in to financial institutions that accepts
deposits and make loans i.e., modern commercial bank

FUNCTIONS OF BANKS
PRIMARY FUNCTIONS
Acceptance of Deposits
Making loans & advances
5

Loans
Overdraft
Cash Credit
Discounting of bills of exchange
SECONDARY FUNCTIONS
Agency functions
Collection of cheques & Bills etc.
Collection of interest and dividends.
Making payment on behalf of customers
Purchase & sale of securities
Facility of transfer of funds
To act as trustee & executor.
UTILITY FUNCTIONS :
Safe custody of customers valuable articles & securities.
Underwriting facility
Issuing of traveller's cheque letter of credit
Facility of foreign exchanges
Providing trade information
Provide information regarding credit worthiness of their customer.
BANKING IN INDIA20

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and
PhaseIII.
PhaseI
The General Bank of India was set up in the year 1786. Next come Bank of
Hindustan and Bengal Bank. 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. These three banks were amalgamated in 1920 and
Imperial Bank of India was established which started as private shareholders banks,
mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906
and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian
Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
During those days public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal
7

department was comparatively safer. Moreover, funds were largely given to traders.

PhaseII
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalised 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.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on
19th July, 1969, major process of nationalisation was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in
the country was nationalised.
Second phase of nationalisation Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in India
under Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.

1959: Nationalisation of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalisation of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalisation of seven banks with deposits over 200 crore.

8

After the nationalisation of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and
immense

confidence

about

the

sustainability

of

these

institutions.

PhaseIII
This phase has introduced many more products and facilities in the banking sector in
its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee
was set up by his name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being
put to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure

PROFILE OF THE ORGANISATION

HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC BANK)

INTRODUCTION28
The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set
up a bank in the private sector, as part of the RBI's liberalisation of the Indian
Banking Industry in 1994. The bank was incorporated in August 1994 in the name of
'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January 1995.13
PROMOTER
HDFC is India's premier housing finance company and enjoys an impeccable
track record in India as well as in international markets. Since its inception in
1997, the corporation has maintained a consistent and healthy growth in its
operations to remain a market leader in mortgage. With its experience in the
financial markets, a strong franchise, HDFC was ideally positioned to promote
a bank in the Indian environment.

History

10

With its registered office in Mumbai, the bank started its operations in August 1994
with commercial operations beginning from January 1995.
HDFCs particular expertise spans the segment of retail home loan catering to
different market segments, which includes a large corporate client base as well.
Armed with a large share holder baser, experience in various financial markets HDFC
positioned itself well to become part of the popular bank list in India.
HDFCs objective revolves around building sound customer franchises across distinct
businesses to achieve its goal of becoming the preferred banking partner for retail and
wholesale consumer groups.
MILESTONES
a.) February 26, 2000 - Touted as the first of its kind merger involving two private
banks of the new generation, a significant milestone was the merger with Times Bank
Limited, promoted by Bennett, Coleman & Co.
b.) May 23, 2008 - The merger of Centurion Bank of Punjab with HDFC received
formal approval from the RBI to mark the completion of the official regulatory and
approval process.
This merger created a strong deposit base of around Rs. 1.2 crore and net advances of
around Rs. 89,000 crore and a balance sheet size of over Rs. 1.6 crore. The merger led
to an increase in the number of branches, great geographic positioning, access, a huge
customer base and a talented resource pool.
OVERVIEW
With its headquarters in Mumbai, HDFC Bank now has a network of over 1416
branches across 550 Indian cities. Connected live online across branches the
customers in the over 500 locations are also provided service via telephone banking.
HDFC also has over 3382 networked ATMs across 500 Indian cities.
The banks focus is on asserting its presence in all the vital and central industrial and
commercial hubs to service their corporate clientele and on the other hand it also
aspires to ramp up its retail customer base for deposit and loan products. HDFC Bank
Limiteds retail segment currently offers HDFC personal loan, HDFC home loan,

11

HDFC car loan and HDFC credit card to its growing customer base and to other nonbanking customers as well.
Subsidiaries and associate Companies

HDFC Bank
HDFC Mutual Fund
HDFC Standard Life Insurance Company
HDFC Sales
HDFC General Insurance
Other Companies Co-Promoted by HDFC
Financial Information with regard to Subsidiary Companies

Capital Structure34
As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550 crore.
The paid-up capital as on the said date is Rs. 425, 38, 41,090/- (42, 53, 84,109 equity
shares of Rs 10/- each). The HDFC Group holds 19.38% of the Bank's equity and
about 17.70 % of the equity is held by the ADS Depository (in respect of the bank's
American Depository Shares (ADS) Issue). 27.69 % of the equity is held by Foreign
Institutional Investors (FIIs) and the Bank has about 5,48,774 shareholders.

ICICI Bank
ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment
Corporation of India) is India's largest private sector bank by market capitalisation
12

and second largest overall in terms of assets. Bank has total assets of Rs. 3,793.01
billion (US$ 75 billion) at March 31, 2009 and profit after tax Rs. 37.58 billion for
the year ended March 31, 2009.[1]. The Bank also has a network of 1,520 branches
and about 4,721 ATMs in India and presence in 18 countries, as well as some 24
million customers (at the end of July 2007). ICICI Bank offers a wide range of
banking products and financial services to corporate and retail customers through a
variety of delivery channels and specialised subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset
management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit
cards in India.[2]. ICICI Bank has got its equity shares listed on the stock exchanges at
Kolkata and Vadodara, Mumbai and the National Stock Exchange of India Limited,
and its ADRs on the New York Stock Exchange (NYSE). The Bank is expanding in
overseas markets and has the largest international balance sheet among Indian banks.
ICICI Bank now has wholly-owned subsidiaries, branches and representatives offices
in 18 countries, including an offshore unit in Mumbai. This includes wholly owned
subsidiaries in Canada, Russia and the UK (the subsidiary through which the HiSAVE
savings brand[3] is operated), offshore banking units in Bahrain and Singapore, an
advisory branch in Dubai, branches in Belgium, Hong Kong and Sri Lanka, and
representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa,
Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting the
NRI (Non-Resident Indian) population in particular.
ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in
total income to Rs. 9,712.31 crore in Q2 September 2008 over Q2 September 2007.
The bank's current and savings account (CASA) ratio increased to 30% in 2008 from
25% in 2007.[4][5]
ICICI Bank is one of the Big Four Banks of India with State Bank of India, Axis
Bank and HDFC Bank[

The bank also has a presence in around 18 countries across the globe. They offer a
wide gamut of retail products to its retail customers and as well as other banking
13

products related to the corporate segment. These include ICICI personal loan, ICICI
home loan, ICICI car loan, ICICI credit cards, ICICI LAP etc. They also offer
financial services that span asset management, venture capital, investment banking,
life and non-life insurance. ICICI equity shares finds a place in the Bombay Stock
Exchange and National Stock Exchange in India with its American depositary
receipts listed in the New York Stock Exchange.

14

The Kotak Mahindra Group31

Kotak Mahindra is one of India's leading financial organizations, offering a wide
range of financial services that encompass every sphere of life. From commercial
banking, to stock broking, to mutual funds, to life insurance, to investment banking,
the group caters to the diverse financial needs of individuals and corporates.
The group has a net worth of over Rs. 6,799 crore and has a distribution network of
branches, franchisees, representative offices and satellite offices across cities and
towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and
Singapore. The Group services around 6.4 million customer accounts.

Corporate Identity

The Story32
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance
Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak
& Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in
1986, and that's when the company changed its name to Kotak Mahindra Finance
Limited.
Since then it's been a steady and confident journey to growth and success.
1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting
2001 Matrix sold to Friday Corporation Launches Insurance Services
2003 Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian
company to do so.
15

INTRODUCTION TO TOPIC
Non-performing assets3
An asset, including a leased asset, becomes non-performing when it ceases to
generate income for the bank. A non-performing asset (NPA) was defined as a credit
facility in respect of which the interest and/or installment of principal has remained
past due for a specified of time. The specified period was reduced in a phased
manner as under:
An amount due under any credit facility is treated as past due when it has not been
paid within 30 days from the due date. Due to the improvements in the payment and
settlement systems, recovery climate, up gradation of technology in the baking
system, etc., it was decided to dispense with past due concept, with effect from
March 31, 2001. According, as from that date, a Non-performing Asset (NPA) shall
be an advance where

Interest and/or installment or principal remain overdue for a period of more

than 180 days in respect of a Term Loan,

The account remains out of order for a period of more than 180 days, in
respect of an Overdraft/Cash Credit (OD/CC),

The bill remains overdue for a period of more than 180 days in the case of
bills purchased and discounted,

Interest and/or installment of principal remains overdue for two harvest

seasons but for a period not exceeding two half years in the case of an
advance granted for agricultural purposes, and

Any amount to be received remains overdue for a period than 180 days
respects other accounts.

16

With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the 90 days overdue norms for
identification of NPAs, from the year ending March 31, 2004.
According, with effect from March 31, 2004 a non-performing asset (NPA) shall be a
loan or advance where:13

Interest and/or installment of principal remain overdue for a period of more than
90 days in respect of a term loan,

The account remains out of order for a period of more than 90 days in respect of
an overdraft/cash credit (OD/CC).

The bill remains overdue for a period of more than 90 days in the case of bills
purchased and discounted,

Interest and/or installment of principal remains overdue for two harvest seasons
but for a period not exceeding two half years in the case of an advance granted for
agricultural purposes, and

Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.

Out of Order status

An account should be treated as out of order if the outstanding balance remains
continuously in excess of the sanctioned limit/drawing power.
In cases where the outstanding balance in the principal operating account is less than
the sanctioned limit/drawing power, but there are no credits continuously for six
months as on the date of balance sheet or credits are not enough to cover the interest
debited during the same period, these accounts should be treated as Out of order

Overdue
17

Any amount due to the bank under any credit facility is overdue if it is not paid on
the due date fixed by the bank.

INCOME RECOGNITION
Income Recognition5
The policy of income recognition has to be objective and based on the record of
recovery. Internationally income from non-performing assets (NPA) is not recognized
on accrual basis but is booked as income only when it is actually received. Therefore,
the banks should not charge and take to income account interest on any NPA.
However, interest on advances against term deposits. NSCs, IVCs, KVPs and Life
policies may be taken to income account on the due date, provide adequate margin is
available in the accounts.
Fees and commission earned by the banks as a result of re-negotiations or
rescheduling of outstanding debts should be recognized on an accrual basis over the
period of time covered by the re-negotiated or rescheduled extension of credit.
If government guaranteed advances become NPA. The interest on such advances
should not be taken to income account unless the interest has been realized.
Reversal of income
If any advance, including bills purchased and discounted, becomes NPA as at the
close of any year, interest accrued and credited to income account in the
corresponding previous year should be reversed or provided for if the same is not
realized, this will apply to Government guaranteed accounts also.
In respect of NPAs, fees, commission and similar income that have accrued should
cease to accrue in the current period and should be reversed or provided for with
respect to past periods, if uncollected.

Asset Classification15
18

Categories of Non Performing Assets (Npas)

Banks are required to classify non-performing assets further into the following three
categories based on the period for which the asset has remained non-performing and
the reliability of the dues.
i.

Sub-Standard Assets.

ii.

Doubtful Assets.

iii.

Loss Assets.

Sub-Standard Assets
A sub-standard asset was one, which was classified as NPA for a period not exceeding
two years.
With effect form 31 March 2001, a sub-standard asset is one, which has remained
NPA for a period less than or equal to 18 months.
In such cases, the current network of the borrower/guarantor or the current market
value of the security charged is not enough to ensure recovery of the dues to the
banks in full.
In other words, such an asset will have well defined credit weaknesses that jeopardize
the liquidation of the debt and are characterized by the distinct possibility that the
banks will sustain some loss, if deficiencies are not corrected.
Doubtful Assets
A doubtful asset was one, which remained NPA for a period exceeding two years.
With effect from 31 March 2001, an asset is to be classified as doubtful, if it has
remained NPA for a period exceeding 18 months. A loan classified as doubtful has all
the weaknesses inherent in assets that were classified as sub-standard, with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis
of currently known facts, conditions and values highly questionable and improbable.
19

Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external
auditors or the RBI inspection but the amount has not been written off wholly. In
other words, such an asset is considered uncorrectable and of such little value that its
continuance as a bankable asset is not warranted although there may be some salvage
or recovery value.
Concept of Non-Performing Assets in its present form came into existence with the
recommendations of Narsimham committee implemented by RBI in 1992.

IMPACT OF NON- PERFORMING ASSETS19

IMPACT ON PROFITABILITY
Impact of non- performing assets on the performance of banks, keeping in mind the
multifacious assets as independent, is determined in the present study. As expected
non- performing assets and profitability have negative relationship. In this analysis,
gross non- performing assets as percentage of total advances is taken rather than net
non- performing advances because it depicts actual amount of non- performing assets
during the respective period.
IMPACT ON CAPITAL ADEQUACY
With the presence of non- performing assets beyond a reasonable level, the banks find
it difficult to adhere to requirements of capital adequacy. More weights are to be
assigned to these risky assets, which increases the amount of weighted assets hence
more capital requirement. With presence of these assets in the total risk weighted
assets there would be shrinkage in earning base, whereas distribution base is
broadened by infusing more capital to adhere to the capital adequacy norms.
Shrinkage of earning base and broadening of distribution base along with decrease in
profitability further leads to fall in earning per share. On the other hand with a lower
level of NPAs not only lesser capital requirements would be there but higher amount
of income will also be available and banks would be required to make lesser
provision thereby increasing the profitability.
20

THEORETICAL FRAMEWORK
CONSTRUCT: Impact of NPAs on profitability, capital adequacy & credit
deployment in comparison of three private banks.

VARIABLES: There are basically two types of Variables, as follows:

Independent Variable

Dependent Variable

The following are the variables of the study.

DEPENDENT VARIABLE: 1. Profitability,

2. Capital adequacy &
3. Credit deployment

INDEPENDENT VARIABLE: Non-Performing Assets

LITERATURE REVIEW:
BOOKS:
Hair & Bush1(2000, 3rd edition) Marketing Research, Tata McGraw Hill
edition, new delhi,Chapter-9 PP.308-312, Chapter-10 PP.344-346, 516-529
21

(From this book I have taken the meaning of hypothesis and about the hypothesis
testing and how to apply the hypothesis.)

Gupta Shashi.k2(1999,5th edition) Management Accounting, Kalyani

Publishers, New Delhi, PP. 23.1-23.9,17.2-17.37,3.1-3.20 (From this book I have
cleared my financial concepts and their meanings)

Pathak,V.Bharti3(2002, second edition), The Indian Financial System

second edition, Pearson publication, New Delhi ch.17, pp.577-589
(This defines meaning of non-performing assets in banks, tools to manage these
assets like compromise schemes, lok adalats, debt recovery tribunals and the
SARFAESI Act, 2002)

Kaptan S.S., Telang S.A.4(2003,1st edition), Innovative Concepts in Finance

1st edition published by Sarup & Sons, New Delhi, ch 2, pp..28-47
(This defines meaning of securitization, parties involved in it and the processing
of this in banks and its advantages to banks and other financial institutions)

Khan M Y, Jain P K5(2005, fifth edition )Financial Management Tata Mc

Graw Hill Publishing company, New delhi, ch .23 pp..17-24
(This helps to know securitization, its benefits, process of securitization and other
methods of credit enhancement)

Kothari C.R.6 (2007, Second Edition), Research Methodology Methods and

Techniques, New Age International Publishers, Ansari Road, Daryaganj, New
Delhi-110002. Chapter 4, PP 55-58, Chapter 6, PP. 95,100,111, Chapter 11, PP
256-275

Goel D.K7 (2006, 10th edition),

Analysis of financial statement, Avichal

Publishing Company, Delhi, PP 2.1-2.38,ch 3 PP.3.3- 3.14 (ratio analysis)

Pandey8, I.M (2008,3rd edition) Financial Management, Vikas Publication

House Pvt. Ltd., New Delhi, P.No.73-97, PP.256-264

22

(long term financial position or solvency in this I studied about debt ratio, fund
debt to total capitalization ratio, equity ratio etc, sources of owned and borrowed
funds.)

Donald R. Cooper and Pamela S. Schindler9 (2006, Eighth Edition)Business

Research Methodology, Tata McGraw Hill Publishing Company Limited, New
Delhi. Chapter 3, PP 82, 86, 87. Chapter 4, PP.101,102 (helped in research
design)

Beri G.C.10( 2005,3rd edition) Marketing Research: Marketing Research: Tata

Mc Graw Hill Publications, 2005, PP 95-98,233
(This book helped in understanding the different research designs and analytical
tools used here.)

Jain, T.R., and Aggarwal, Dr. S.C.11(2008, 2nd edition) Statistics For M.B.A,
VK publication, PP 1-3 Part b, P.No. 131-134 , PP1-3 Part b, pp 88-130
(By going through this book got information about how to calculate Regression
Analysis and its application in the business studies.)

Sekaran Uma12 (2008,4th edition) Research Methods for Business, Wiley &
Sons publications, New delhi, India edition, PP. 116-125 (for the process of
research)

OBJECTIVES OF RESEARCH STUDY

1. To compare and analyse the performance of three private banks, Hdfc, Icici and
Kotak.

23

2. To examine the impact of NPAs on profitability in respect to three banks.

3. To examine the impact of NPAs on capital adequacy in respect to three banks.
4. To examine the impact of NPAs on credit deployment in respect to three banks.

RESEARCH METHODOLOGY13:
"Research comprises of defining & redefining hypothesis or suggested
solutions, collecting, organizing & evaluating data making deductions &
reaching conclusion"-Clifford Woody.
24

The term research Methodology here comprises of all research activities

carried on in connection with the study of research statement.
The basic purpose of research methodology is to describe the research
procedure. It helps the researches to adopt the right way to move on for carrying the
study.

Meaning of Research:
Research is defined as a scientific and systematic search for pertinent information on
a specific topic. Research is an art of scientific investigation. Research is a
systematized effort to gain now knowledge. It is a careful investigation or inquiry
especially through search for new facts in any branch of knowledge. Research is an
academic activity and this term should be used in a technical sense. Research
comprises defining and redefining problems, formulating hypothesis or suggested
solutions. Making deductions and reaching conclusions to determine whether they if
the formulating hypothesis. Research is thus, an original contribution to the existing
stock of knowledge making for its advancement. The search for knowledge through
objective and systematic method of finding solutions to a problem is research.

THE RESEARCH PROCESS:2

25

So we should consider the following steps in research methodology

Problem statement
Research design
Sample design
Data collection
Organization Of Data
Presentation Of Data
Analysis and Interpretation of data

26

RESEARCH DESIGN9
A research design is like arrangement of conditions for collections & analysis of data
in a manual that aims to combine relevance to the research purpose with economy in
procedures.
A research design is purely & simply the framework of plans for a study that
guides the collections & analysis of data the research design is the conceptual
structure within which the research is conducted. It constitutes the blue print for the
collection, measurement & analysis of the data.
The research design with help to answer the following questions:
*

Why the study is being made?

From where the data needed can be collected?

What time is required for the study to be competed & how much material is
needed.

What will be the technique for data collections?

How the data can be analyzed?

How the answers to above questions can be found with minimum efforts, time
& money?

RESEARCH DESIGN CAN BE CATEGORIZED:

27

Exploratory research design

Exploratory research design is termed as formulating research studies. The main
purpose of study is that of formulating a problem. The major emphasis in such study
is on discovery of new ideas and insights. As such the research design appropriate for
such studies must be flexible enough to provide opportunity for considering different
aspects of problem.
Descriptive and diagnostic research design
Descriptive research designs are those design which are concerned with describing
the characteristics of particular individual or of the group whereas diagnostic research
studies determine the frequency with which something occurs or its association with
some thing else. In descriptive and diagnostic study the researcher must be able to
define clearly what he wants to measure and must find adequate method for
measuring it.
Experimental research design
These are those studies where the researcher tests the hypothesis of casual
relationship between variables. Such study requires procedure that will not only
reduce biasness and increase reliability but will permit drawing influence about
causality. Usually experiments meets this requirement, hence these research designs
are prepared for experiment.
Research design in study
In the study the researcher will apply descriptive research design. As descriptive
research design is the description of state of affairs, as it exists at present. In this type
of research the researcher has no control over the variables; he can only report what
ahs happened or what is happening.

TIME HORIZON:

CROSS-SECTIONAL STUDIES

LONGITUDINAL STUDIES

28

A study can be done in which data are gathered just once, perhaps a period of days or
weeks or month, in order to answer a research question. Such studies are called one
shot or Cross-Sectional Studies.
On the other hand, when the researcher tries to collect Data at more than one point of
time it is known as longitudinal studies.
Here, in this study Cross-Sectional Design is to be used as data for study will be
gathered just once.

STUDY SETTING:
TYPES OF
STUDY
STUDY
NONCONTRIVED

CONTRIVED

CONTRIVED STUDY: A Contrived Setting with researcher interference to

an excessive degree. In this study, researcher has control on the study like the
experiments in the laboratory takes place.

NON-CONTRIVED STUDY: A Non contrived Setting with researcher

interference with minimal degree or moderate extent. In this type of study, researcher
does not have any control on study of research like research taken place in the open
field.
In this Study, the study setting will be Contrived Setting due to high degree of
interference of researcher & influences by a no. of variables.

HYPOTHESIS TESTING1
29

The main object of the sampling theory is the study of the Tests of hypothesis or tests
of significance. In many circumstances, we are to make decisions about the
population on the basis of only sample information for example, on the basis of
sample data
i. A quality control manager is to determine whether a process
is working properly
ii. A drug chemist is to decide whether a new drug is really
effective in curing a disease
iii. A statistician has to decide whether a given coin is unbiased,
etc.
Such decisions are called statistical decisions. The theory of testing of
hypothesis employs various statistical techniques to arrive at such decisions on the
basis of the sample study.
Concepts of Hypothesis Testing
1) Hypothesis: in attempting to arrive at decisions about the population on the
basis of sample information it is necessary to make assumption about the
population parameters involved. Such an assumption is called a statistical
hypothesis which may or may not be true.
There are two types of hypothesis

a) Null Hypothesis
b) Alternative Hypothesis

Null Hypothesis: In test of hypothesis we always begin with an

assumption or hypothesis, this is called Null Hypothesis. It is denoted by
H0

Alternative hypothesis: Any hypothesis different from, the null hypothesis

is called an alternative hypothesis and is denoted by the symbol H1

30

1. NULL HYPOTHESIS: Let null hypothesis be that there is insignificant difference

of impact of NPAs ( in context of sub-standard, doubtful and loss assets) on
profitability of banks.
ALTERNATE HYPOTHESIS: Let alternate hypothesis be that there is significant
difference of impact of NPAs (in context of sub-standard, doubtful and loss assets) on
profitability of banks.
2. NULL HYPOTHESIS: Let null hypothesis be that there is insignificant difference
of impact of NPAs ( in context of sub-standard, doubtful and loss assets) on capital
adequacy ratio of banks
ALTERNATE HYPOTHESIS: Let alternate hypothesis be that there is significant
difference of impact of NPAs (in context of sub-standard, doubtful and loss assets) on
capital adequacy ratio of banks
3.NULL HYPOTHESIS:Let null hypothesis be that there is insignificant difference
of impact of NPAs ( in context of sub-standard, doubtful and loss assets) on credit
deployment of banks.
ALTERNATE HYPOTHESIS: Let alternate hypothesis be that there is significant
difference of impact of NPAs (in context of sub-standard, doubtful and loss assets) on
credit deployment of banks.

SAMPLING DESIGN:22
31

A sample design is a definite plan for obtaining a sample from the sampling frame. It
refers to the technique or the procedure that is adopted in selecting the sampling units
from which inferences about the population is drawn. Sampling design is determined
before the collection of the data.
Several decisions have to be taken in context to the decision about the appropriate
sample selection so that accurate data is obtained and efficient results are drawn.

Following questions have to be considered while sampling design

What is the relevant population?

What is the parameter of interest?

What is the sampling frame?

What is the type of sample?

What sample size is needed?

How much will it cost?

SAMPLE SIZE:
The sample size for study will be last five years i.e. from 2005-2009.

DATA COLLECTION6
After the research problem has been identified and selected the next step is to gather
the requisite data. While deciding about the method of data collection to be used for
the researcher should keep in mind two types of data VIZ. primary and secondary.

32

TYPES
OF

DATA

PRIMARY
DATA

SECONDARY
DATA

PRIMARY DATA14: The primary data are those, which are collected afresh and for the first time, and thus
happened to be original in character. We can obtain primary data either through
observation or through direct communication with the company members and finance
manager or another through personal interview with employees of organization.

METHODS OF
PRIMARY DATA

OBSERVATION

METHOD

QUESTIONAIRE
METHOD

INTERVIEW
METHOD

SECONDARY DATA: 33

SCHEDULE
METHOD

The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes.
When the researcher utilizes secondary data then he has to look into various sources
from where he can obtain them for e.g. Books, magazine, newspaper, Internet,
publications and reports. In the present study the researcher have made use of
secondary data collected from their website and from their internal records as
balance sheets and other financial reports.

Analysis and Interpretation of Data

The data collected in the aforesaid manner have been tabulated in condensed from to
draw the meaningful results. The different techniques are adopted to analyze the data.
All the data and material is arranged through internal resources and the last part of the
project consists of the conclusions drawn from the report, a brief summary and
recommendation and giving the final touch to the report by stating a conclusion.

ANALYTICAL & STATISTICAL TOOLS10

34

Introduction:An educated citizen needs an understanding of basic statistical tool to function in a

world that is becoming increasingly dependant on quantitative information. Statistics
means numerical description to most people. In fact the term statistics is generally
used to mean numerical facts and figures such as agriculture production during a year,
rate of inflation and so on. However as a subject of study, statistics refers to the body
of principles and procedures developed for the collection, classification,
summarization and interpretation of numerical data and for the use of such data.
MEANING:Broadly speaking, the term statistics has been generally used in two senses:

Plural Sense

Singular Sense

Plural sense refers to the numerical data. Singular Sense refers to a Science in
which we deals with the techniques of collecting, classifying, presenting, analyzing
and interpreting the data, the concept in its singular sense, refers to Statistical
Method.

PURPOSE:-Without the assistance of Statistical Method, an organization would

find it impossible to make sense of the huge data. The purpose of statistics is to:

Manipulate

Summarize

investigate

The data so that useful decision making information results could be found out. In
fact, every business manager needs a sound background of statistics. Statistics is a set
of Decision Making techniques which aids businessman in drawing inferences from
the available data.

35

RATIO ANALYSIS2:
Absolute figures expressed in monetary terms in financial statements by themselves
are meaningless. These figures often do not convey much meaning unless expressed
in relation to other figures.

MEANING OF RATIO:
Relationship between two figures expressed in arithmetical terms is called a ratio.

CLASSIFICATION OF RATIOS7:
INVESTMENT VALUATION RATIO
PER SHARE RATIO
PROFITABILITY RATIO
LEVERAGE RATIO
LIQUIDITY RATIO
BALANCE SHEET RATIO

EARNING PER SHARE

36

HDFC

ICICI

KOTAK
MAHINDRA

2009

27.55

27.22

6.84

2010

35.64

28.55

3.73

2011

43.29

34.59

4.22

2012

44.87

37.37

8.4

2013

52.77

33.78

7.93

(SOURCE: SECONDARY)

Interpretation: The earning per share of Kotak Mahindra is too low than from the
HDFC bank and ICICI bank, which shows that HDFC bank and ICICI bank plays a
significant role in the economy with a increasing earning per share as compare to
2009, As it shows the increment of near about 30%.

37

DIVIDEND PER SHARE

HDFC

ICICI

KOTAK
MAHINDRA

2009

4.50

8.50

9.5

2010

5.50

8.50

6.0

2011

10

7.0

2012

8.5

11

7.5

2013

10

11

7.5

(SOURCE: SECONDARY)

Interpretation: The graph shows the increasing trend of dividend per share of
HDFC bank & ICICI bank but it shows the decreasing trend in Kotak
Mahindra bank. It means that the retaining of the two banks are high.
OPERATING PROFIT PER SHARE
38

HDFC

ICICI

KOTAK
MAHINDRA

2009

41.65

36.37

10.53

2010

52.56

36.75

6.51

2011

86.19

42.19

7.10

2012

107.32

51.29

16.32

2013

92.36

48.60

13.08

(SOURCE: SECONDARY)

Interpretation: The operating profit per share of HDFC bank is higher than both
the banks from the past trend also. It means shareholders can earn more.

GROSS PROFIT
39

HDFC

ICICI

KOTAK
MAHINDRA

2009

30.79

17.64

19.64

2010

26.35

15.10

18.87

2011

30.50

11.41

12.35

2012

28.58

12.99

18.13

2013

18.05

12.36

11.72

(SOURCE: SECONDARY)

Interpretation: The gross profit ratio of HDFC bank is 30% and of ICICI bank &
Kotak Mahindra bank has only 10% gross profit ratio, which shows that there is a
difference of near about 20%.

40

RETURN ON LONG TERM FUNDS

HDFC

ICICI

KOTAK
MAHINDRA

2009

50.77

70.54

41.30

2010

60.06

56.24

59.26

2011

74.91

82.46

54.27

2012

62.34

62.34

47.47

2013

83.31

56.72

50.50

(SOURCE: SECONDARY)

Interpretation: In 2009, HDFC bank gave high return on long term funds & also
there was a big difference between Kotak Mahindra bank and HDFC bank, but in
2011, 2013 there is not so much difference.

41

STATISTICAL TOOLS11:Statistical tools are the basic measures, which helps in defining the relation between
different items, present, past and future trend of the future trend of the particular
business etc. A wide variety of statistical tools are available and any of them can be
used by any businessman depending upon the nature of his trade. Various statistical
tools are:1. CAMEL MODEL
2. ANOVA
3. T-TEST

CAMELSG MODEL
The Federal Financial Institutions Examination Council (FFIEC) proposed the system
for banks rating based on security and completeness. These ranks are from one to five
levels according to five valuation attributes, including Capital adequacy(C), asset
quality (A), management quality (M), Earnings (E), and liquidity (L), hence the
CAMEL rating system. The market risk sensitivity (S) was added in 1997 and these
six valuations make up the CAMELS system. Because in this paper we will also
consider the growth potential for the operation of finance holding companies, we
incorporate the growth potential (G) in this paper for comparison. These valuations
are shown below.

42

Table 1: Base description for CAMEL

Capital Adequacy (C)
Liabilities Ratio = Total Liabilities / Total
Assets(1)
Capital Adequacy Ratio = Capital/ Risk Asset
@ 8% (2)
Asset Quality (A)
Overdue Loan Ratio = Non-Performing
Loans / Total Loans (3)
Coverage Ratio= (Shareholder Capital+
Allowances for Bad Debts - Non-Performing
Management Quality (M)
Asset Turnover Ratio= Net Sales / Asset (5)
Efficiency Ratio = non-interest cost/ (net
interest income + non-interest income and so
on
Earnings (E)
Return on Assets Ratio = net income/average
capital (7)
Operating Income Ratio = (Sales - Cost Of
Goods Sold - Operating Expenses) /
Sales100 %( 8)
Liquidity (L)
Current Ratio = current assets/current liability
(9)
Asset Liquidity = current assets/total asset
(10)
Market risk sensitivity (S)
Ratio of interest-rate sensitive gap to net
worth = interest rate sensitive asset- interest
rate sensitive liability (11)
Growth
potential (G)
Sales Growth Rate = (this issue of earning same time last year earning)/last year earning
(12)

43

CAPITAL ADEQUACY TEST:

CAPITAL ADEQUACY RATIO:- CAPITAL/ RISK ASSETS

HDFC BANKTIER 1 CAP

TIER 2 CAP

RISK

CAPITAL

WEIGHTED

ADEQUACY

ASSETS

RATIO

2009

396216

105473

4127103

12.16%

2010

514991

172021

6021762

11.41%

2011

635271

333999

7408192

13.08%

2012

1106296

354837

10744799

13.60%

2013

1369028

660492

13453075

15.09%

TIER 1 CAP

TIER 2 CAP

RISK

CAPITAL

WEIGHTED

ADEQUACY

ASSETS

RATIO

ICICI BANK-

2009

102463

191815

1350168

11.78%

2010

56566

86611

2085936

13.35%

2011

215033

123928

2899930

11.69%

2012

381340

121212

3367547

14.92%

2013

420098

129715

3453378

15.92%

TIER 1 CAP

TIER 2 CAP

RISK

CAPITAL

WEIGHTED

ADEQUACY

KOTAK BANK:

44

ASSETS

RATIO

2009

50310

13347

497226

12.80%

2010

65802

26104

815770

11.27%

2011

133856

70570

1518878

13.46%

2012

308269

89307

2131864

18.65%

2013

340611

81863

2127326

19.86%

INTERPRETATION: As, CRR ratio of Kotak bank is 19.86%, which is quite more
and risky than CRR ratio of Icici bank and Hdfc bank which is having moderate risk.
However, a sound capital base strengthens confidence of depositors.
ASSET QUALITY TEST:
OVERDUE LOAN RATIO:- NON-PERFORMING LOANS/ TOTAL LOANS,
Or, = PERCENTAGE (%) OF NET PERFORMING ASSETS TO NET ADVANCES
HDFC BANK

ICICI BANK

KOTAK BANK

2009

0.20%

1.95%

0.37%

2010

0.44%

0.71%

0.24%

2011

0.43%

0.98%

1.98%

2012

0.47%

1.49%

1.78%

2013

0.63%

1.96%

2.39%

INTERPRETATION: As, the asset quality ratio is more, it describing the poor management of
funds. Higher GNPA is indicative of poor credit decision-making. Kotak bank is having more
ratio and thus facing poor asset quality.

EARNINGS(E):
RETURN ON ASSET RATIO = NET INCOME/AVERAGE CAPITAL

45

HDFC BANK

ICICI BANK

KOTAK BANK

2009

2.56%

1.25%

1.56%

2010

1.38%

1.11%

1.39%

2011

1.33%

1.09%

0.94%

2012

1.32%

1.12%

1.10%

2013

1.28%

0.98%

1.03%

INTERPRETATION: It can be measured as the return on asset ratio

46

ANOVA
Analysis of variance abbreviated as ANOVA. The ANOVA technique is important in
the context of all those situations where, researchers want to compare more than 2
populations and when multiple sample cases are involved. By this, researcher can
investigate any number of factors which are hypothesized or said to influence the
dependent variable. Researcher investigates the differences amongst various
categories within each of these factors which may have a large number of possible
values. If researcher take only one factor and investigate the differences amongst its
various categories having numerous possible values, then it is one- way ANOVA and
when researcher investigate 2 factors at the same time, then it is two- way ANOVA.
1.) HO: Let null hypothesis be that there is insignificant difference of impact of
NPAs ( in context of sub-standard, doubtful and loss assets) on profitability of banks.
H1: Let alternate hypothesis be that there is significant difference of impact of NPAs
(in context of sub-standard, doubtful and loss assets) on profitability of banks.
HDFC BANK:
ANOVAb
Model
1

Sum of Squares
Regression
Residual
Total

df

Mean Square

1.527E10

1.527E10

6.185E8

2.062E8

1.589E10

F
74.070

Sig.
.133a

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: profitability

INTERPRETATION
This showing the significance level is more than .05 i.e. .133, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on
profitability of Hdfc bank.
ICICI BANK:
47

ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

2.152E10

2.152E10

4.575

.122a

Residual

1.411E10

4.703E9

Total

3.563E10

a. Predictors: (Constant), non_performing_assets (in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: profitability

INTERPRETATION
This showing the significance level is more than .05 i.e. .122, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on
profitability of Icici bank.
KOTAK BANK:
ANOVAb
Model
1

a.

Sum of Squares

Df

Mean Square

Sig.

Regression

1.336E9

1.336E9

2.363

.222a

Residual

1.695E9

5.651E8

Total

3.031E9

Predictors:

(Constant),

non_performing_assets(in

context

of

sub

-standard, doubtful and loss assets)

b. Dependent Variable: profitability

INTERPRETATION This showing the significance level is more than .05 i.e. .222,
which implies that null hypothesis is rejected and outcome is non performing assets
have impact on profitability of Kotak bank.
2.) HO: Let null hypothesis be that there is insignificant difference of impact of
NPAs (in context of sub-standard, doubtful and loss assets) on capital adequacy
requirement of banks.
48

H1: Let alternate hypothesis be that there is significant difference of impact of NPAs
( in context of sub-standard, doubtful and loss assets)on capital adequacy requirement
of banks.
HDFC BANK:
ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

6.570

6.570

14.337

.232a

Residual

1.375

.458

Total

7.945

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: capital_adequacy

INTERPRETATION
This showing the significance level is more than .05 i.e. .232, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on capital
adequacy of Hdfc bank
ICICI BANK:
ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

11.060

11.060

10.827

.145a

Residual

3.065

1.022

Total

14.125

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: capital_adequacy

49

INTERPRETATION
This showing the significance level is more than .05 i.e. .145, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on capital
adequacy of Icici bank.
KOTAK BANK:
ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

48.159

48.159

14.907

.212a

Residual

9.692

3.231

Total

57.850

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: capital_adequacy

INTERPRETATION
This showing the significance level is more than .05 i.e. .212, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on capital
adequacy of Kotak bank.
3.) HO: Let null hypothesis be that there is not insignificant difference of impact of
NPAs (in context of sub-standard, doubtful and loss assets) on credit deployment by
banks.
H1: Let alternate hypothesis be that there is insignificant difference of impact of
NPAs (in context of sub-standard, doubtful and loss assets) on credit deployment by
banks.

50

HDFC BANK:
ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

3.278E13

3.278E13

179.469

.112a

Residual

5.480E11

1.827E11

Total

3.333E13

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: credit_advances

INTERPRETATION
This showing the significance level is more than .05 i.e. .112, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on credit
deployment by Hdfc bank.
ICICI BANK:
ANOVAb
Model
1

Sum of Squares Df

Mean Square

Sig.

Regression

5.220E13

5.220E13

2.557

.208a

Residual

6.124E13

2.041E13

Total

1.134E14

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: credit_advances

INTERPRETATION
This showing the significance level is more than .05 i.e. .208, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on credit
deployment by Icici bank.

51

KOTAK BANK:
ANOVAb
Model
1

Sum of Squares

df

Mean Square

Regression

1.698E12

1.698E12

Residual

1.689E11

5.631E10

Total

1.867E12

F
30.149

Sig.
.119a

a. Predictors: (Constant), non_performing_assets(in context of sub

-standard, doubtful and loss assets)
b. Dependent Variable: credit_advances

INTERPRETATION
This showing the significance level is more than .05 i.e .119, which implies that null
hypothesis is rejected and outcome is non performing assets have impact on credit
deployment by Kotak bank.

INTRODUCTION OF T TEST18
T test is small sample test. It was developed by William Gosset in 1908. He published
this test under the pen name of Student therefore, it is known as Students t-test for
applying t-test, the value of t static is computed. & the calculated value is compared
with tabular value of t for given degrees of freedom at certain specified level of
significance.

Application of t-test
1. Test of hypothesis about the population mean
2. Test of hypothesis is about the difference between the two means in case of
independent samples.
3. Test of hypothesis is about the difference between the two means with two
dependent samples.
4. Test of hypothesis about an observed coefficient of correlation.

52

T-Test Tool
1.) H0: Let null hypothesis be that there is insignificant difference between profits
before npas and profits after npas
H1: Alternate hypothesis be that there is significant difference between profits
before npas and profits after npas
HDFC BANK:
Paired Samples Test
Paired Differences
95% Confidence
Interval of the
Difference
Std.

Std. Error

Mean Deviation
Pair profits_before_np
1

aprofits_after_npa

Mean

Sig. (2Lower

Upper

1.496 4152.270 1856.951 9807.475 20118.92

32E4

61

87

08

492

8.058

df

tailed)

.129

INTERPRETATION
This showing the significance level is more than .05 i.e. .129, which implies that null
hypothesis is rejected and outcome is there is significant difference between profits
before npas and profits after npas.

ICICI BANK:
53

Paired Samples Test

Paired Differences
95% Confidence
Interval of the
Difference
Std.
Mean Deviation
Pair profits_before_np
1

a-

Std. Error
Mean

Sig. (2Lower

Upper

3.1365 14494.90 6482.3177 13367.800 49363.399

profits_after_npa

6E4

318

56

44

4.839

df

tailed)

.218

INTERPRETATION
This showing the significance level is more than .05 i.e. .218, which implies that null
hypothesis is rejected and outcome is there is significant difference between profits
before npas and profits after npas.

54

KOTAK BANK:

Paired Differences
95% Confidence
Interval of the
Difference
Std.

Std. Error

Mean Deviation
Pair profits_before_np
1

a-

Mean

Lower

5.6822 5345.449 2672.7249

profits_after_npa

9E3

83

Sig. (2-

Upper
-

2823.5085
4

14188.098
54

2.126

df

tailed)

.123

INTERPRETATION
This showing the significance level is more than .05 i.e. .218, which implies that null
hypothesis is rejected means there is significant difference among profits.

55

LIMITATIONS OF THE STUDY

LACK OF PRIMARY DATA:

Conduction of study in lack of primary data makes unable to analyze the data
properly as per the huge financial market and forces to rely upon secondary data
collected through different sources which prevented the researcher to do research in a
more explorative manner. Hence various areas and various people belong to different
profession remained uncovered.
TIME CONSTRAINTS
Time has also affected the research due to less availability of number of days
information was conducted in few days.
.
RESOURCE CONSTRAINT
Availability of data was a constraint due to only those mutual funds data is
considered, which is available, and also there are some MFs whose data was not
available so their duration was shortened.
PERIOD OF ANALYSIS
Generally longer period gives us more accurate estimates of beta. In this case period
of analysis is only 5 years.
COMPLEX CALCULATIONS
Though every - "precaution has taken due to large data and complex calculations
there may be chances of error.

56

FINDINGS
PROFITABILITY: Gross Profit ratio of Hdfc bank is quite high in all
years as compared to Kotak bank and also Icici bank, which earns the lowest
of gross profits. However, the performance is quite fluctuating over last two
years of the three banks.
PER SHARE PERFORMANCE: Earning per share of Hdfc bank and
Icici bank is providing much return to its shareholders, while performance
of Kotak bank is quiet low. Dividend per share of Hdfc bank and Icici bank
is more as compared to Kotak bank, which provide dividend in 2009 only
more than other two banks.
RETURN ON LONG TERM FUNDS: In 2009, HDFC bank gave
high return on long term funds, but Icici also provide high returns in 2009
and 2011 and the returns of Kotak Mahindra bank is low in beginning, but
still increasing.
LIQUIDITY: As the current ratio of ICICI has near to 1% and Kotak
Mahindra has 0.5 and HDFC bank have ratio of about 0.25%. ICICI bank
thus is playing a significant role in the economy, having more liquidity.
CAPITAL ADEQUACY RATIO: Capital adequacy ratio of Kotak bank
is 20%, more than Hdfc and Icici bank having 15%. High capital
requirement questions liquidity of banks, but ensures stability of operations.
NPAS AND PROFITABILITY: ANOVA results showed that nonperforming assets(in context of doubtful, standard & loss assets) of Hdfc,
Icici and Kotak banks have significant impact on the profitability of banks.
NPAS AND CAPITAL ADEQUACY: ANOVA results showed that
npas (in context of doubtful, standard & loss assets) of Hdfc, Icici and
Kotak banks have significant impact on capital adequacy requirement.
NPAS AND CREDIT DEPLOYMENT: ANOVA results showed that
npas (in context of doubtful, standard & loss assets) of Hdfc, Icici and
Kotak banks have significant impact on the credit deployment of banks.
57

RECOMMENDATIONS
ENSURING GENUINE PROPOSALS: Banks need to ensure that
only genuine proposals are accepted and projects having inherited
weaknesses are rejected at first instance.
UPGRADE CREDIT APPRAISAL SKILLS: Economic viability,
technical feasibility, quality of management and financial position of
borrower should be evaluated properly.
FOLLOW-UP & SUPERVISION: After sanctioning and disbursement of
loans the bank should follow up, monitor and supervise the credit closely
and intelligently. Proper credit monitoring mechanism should be adopted.
DEBT- RECOVERY TRIBUNALS: DRTs should be established for the
quick disposal of recovery and adequate infrastructure in terms of space,
location, and manpower also to be provided for speedy recovery of banks
overdue.
SECURITISATION ACT,2002: Indian government has taken step by
passing The Securitization and Reconstruction of Financial Assets
Ordinance,2002, but still that should be properly implemented upto its use.
ASSET RECONSTRUCTION COMPANIES: More asset reconstruction
companies are to be set up so that NPAs are to be transferred to these arcs
and banks would be able to concentrate properly on their important
functions.
NOT TO PROVIDE UNVIABLE OFFERS: Banks should not induce or
attract public by unviable offers by announcing loan melas and loan waiver
schemes, etc.
58

BIBLIOGRAPHY
BOOKS:
1. Hair & Bush(2000, 3rd edition) Marketing Research, Tata McGraw Hill
edition, new delhi,Chapter-9 PP.308-312, Chapter-10 PP.344-346, 516-529
2. Gupta Shashi.k(1999,5th edition) Managemenet Accounting, Kalyani
Publishers, New Delhi, PP. 23.1-23.9,17.2-17.37,3.1-3.20
3. Pathak,V.Bharti(2002, second edition), The Indian Financial System

second edition, Pearson publication, New Delhi ch.17, pp.577-589

4. Kaptan S.S., Telang S.A.(2003,1st edition), Innovative Concepts in
Finance 1st edition published by Sarup & Sons, New Delhi, ch 2, pp..28-47
5. Khan M Y, Jain P K(2009, fifth edition )Financial Management Tata Mc
Graw Hill Publishing company, New delhi, ch .23 pp..17-24
6. Kothari C.R. (2011, Second Edition), Research Methodology Methods and
Techniques, New Age International Publishers, Ansari Road, Daryaganj, New
Delhi-110002. Chapter 4, PP 55-58, Chapter 6, PP. 95,100,111, Chapter 11, PP
256-275
7. Goel D.K (2010, 10th edition), Analysis of financial statement, Avichal
Publishing Company, Delhi, PP 2.1-2.38,ch 3 PP.3.3- 3.14
8. Pandey, I.M (2012,3rd edition) Financial Management, Vikas Publication
House Pvt. Ltd., New Delhi, P.No.73-97, PP.256-264
9.

Donald R. Cooper and Pamela S. Schindler (2010, Eighth

Edition)Business Research Methodology, Tata McGraw Hill Publishing
Company Limited, New Delhi. Chapter 3, PP 82, 86, 87. Chapter 4, PP,
101,102

10. Beri G.C.( 2009,3rd edition) Marketing Research: Marketing Research: Tata
Mc Graw Hill Publications, 2009, PP 95-98,233

59

11. Jain, T.R., and Aggarwal, Dr. S.C.(2012, 2nd edition) Statistics For M.B.A,
VK publication, PP 1-3 Part b, P.No. 131-134 , PP1-3 Part b, pp 88-130
12. Sekaran Uma (2012,4th edition) Research Methods for Business, Wiley &
Sons, India edition, PP. 116-125

WEBSITES:
13. Arora Sandeep(2010), Report-on-Npa-by-Sandeep-Arora
http://www.scribd.com/doc/20704682/Report-on-Npa-by-Sandeep-Arora
14. Dhariwal Sandeep(2010), Study on npa with special reference to ICICI
bank http://www.scribd.com/doc/11444735/study-on-npa-with-specialreference-to-ICICI-bank-by-swaroop-dhariwal
15. http://www.thehindubusinessline.com/2009/11/14/stories/2009111450990400.
htm
16. http://www.hdfcbank.com/personal/loans/default.htm
17. http://www.icicibank.com/pfsuser/loans/loans.htm
18. http://www.icicibank.com/Pfsuser/aboutus/resultsann/2009_10_Q2_FY2010_
PR2.pdf
19. http://www.kotak.com/Kotak_BankSite/personal/loans/default.htm
20. http://www.kotak.com/Kotak_GroupSite/investor/financial_results.htm
21. http://money.rediff.com/companies/hdfc-bank-ltd/14030055/ratio
22. http://www.hdfcbank.com/aboutus/cg/Financial_Information.htm

60

ANNEXURES
HDFC BANK:

61

PROFIT & LOSS A/C:2009

62

BALANCE SHEET:2010, 2011

63

BALANCE SHEET:2012, 2013

64

ICICI BANK: BALANCE SHEET 2009,2010

65

KOTAK BANK: BALANCE SHEET

66

(Rs in Crs)
Year
SOURCES OF FUNDS :
Capital
Reserves Total
Equity Share Warrants
Equity Application Money
Minority Interest
Deposits
Borrowings
Other Liabilities & Provisions
TOTAL LIABILITIES
APPLICATION OF FUNDS :
Cash & Balances with RBI
Balances with Banks & money at Call
Investments
Advances
Fixed Assets
Other Assets
Miscellaneous Expenditure not written
off
TOTAL ASSETS
Contingent Liability
Bills for collection

Mar 13

Mar 12

Mar 11

Mar 10

345.67
9,914.92
0
0
62.86
13,822.78
11,059.98
5,027.63
40,233.84

344.67
8,320.85
0
0
51.23
13,691.93
12,772.81
5,415.68
40,597.17

326.16
4,586.65
0
0
30.94
9,660.97
9,985.91
4,040.18
28,630.81

309.29
2,977.37
0
0
270.87
5,616.68
5,797.89
2,995.24
17,967.34

1,007.03
430.47
13,313.03
22,497.62
341.76
2,643.93

1,764.22
1,605.13
12,569.68
21,984.68
336.45
2,337.01

791.95
1,350.58
9,128.47
15,573.44
238.77
1,547.60

449.62
617.98
5,048.74
10,419.88
178.86
1,252.26

0
40,233.84
60,478.35
317.58

0
40,597.17
122,601.84
290.88

0
28,630.81
101,213.20
219.44

0
17,967.34
39,539.10
92.76

HDFC TABLES:
HDFC NPA ON ANOVA TEST:
Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

B
(Constant)
non_performing_assets

Std. Error

54049.837

10938.084

2.833

.329

a. Dependent Variable: profitability

67

Coefficients
Beta

.980

Sig.

4.941

.016

8.606

.003

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

Std. Error

(Constant)

1.869E6

325588.980

non_performing_assets

131.281

9.800

Coefficients
Beta

.992

Sig.

5.742

.010

13.397

.001

a. Dependent Variable: credit_advances

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

B
(Constant)
non_performing_assets

Std. Error

11.487

.516

5.877E-5

.000

Coefficients
Beta

.909

Sig.

22.276

.000

3.786

.032

a. Dependent Variable: capital_adequacy

ICICI TABLES OF ANOVA TOOL:

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

B
(Constant)
non_performing_assets

Std. Error

143557.075

81891.319

5.927

2.771

a. Dependent Variable: profitability

68

Coefficients
Beta

.777

Sig.

1.753

.178

2.139

.122

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

Std. Error

(Constant)

9.851E6

5.395E6

non_performing_assets

291.939

182.561

Coefficients
Beta

.678

Sig.

1.826

.165

1.599

.208

a. Dependent Variable: credit_advances

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

B
(Constant)
non_performing_assets

Std. Error
9.850

1.207

.000

.000

Coefficients
Beta

.885

Sig.

8.162

.004

3.290

.046

a. Dependent Variable: capital_adequacy

KOTAK BANK TABLES OF ANOVA TOOL

Coefficientsa
Standardized
Unstandardized Coefficients
Model
1

B
(Constant)
non_performing_assets

Std. Error

37108.259

16842.678

.011

.007

a. Dependent Variable: profitability

69

Coefficients
Beta

.664

Sig.

2.203

.115

1.537

.222