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JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
- 1 -
The Journal of Sri Krishna Research & Educational Consortium
J O U R N A L O N B A N K I N G
F I N A N C I A L S E R V I C E S &
I N S U R A N C E R E S E A R C H
Internationally Indexed & Listed Referred e-Journal
CAMEL RATING SCANNING (CRS) OF
SBI GROUPS
S. SIVA*; P. NATARAJAN**
*Project Fellow UGC – MRP, Department of Commerce,
School of Management, Pondicherry University,
Puducherry.
**Professor of Commerce, Department of Commerce,
School of Management, Pondicherry University,
Puducherry.
ABSTRACT
Indian financial system has passed through second generation reforms by giving
emphasis on individual upgradation, strengthening internal system, attention to
different prudential norms viz capital adequacy, containment of NPA, functional
antennary and systemic improvements towards effecting credit delivery system. It
can be done only through proper supervisory and regulatory mechanism. The
CAMEL Methodology has been developed and practised by the North American
bank regulators to assess the financial and managerial soundness of US
commercial banks. Subsequently Basel committee on banking supervision (BCBS)
has been created in 1974 and they also accept the CAMEL as uniform financial
institution rating system to evaluate and monitor the banks. In India is adapting
the Basel I & II norms in total so has to ensure the better financial standing of
own banks & financial Institutions. This paper empirically tested the applicability
of CAMEL norms and its consequential impact on the performance of SBI
Groups.
KEYWORDS: Capital Adequacy, Asset quality, Liquidity, NPA.
INTRODUCTION
Indian financial system has passed through second generation reforms by giving emphasis on
individual upgradation, strengthening internal system, attention to different prudential norms
viz capital adequacy, containment of NPA, functional antonerry and systemic improvements
towards effecting credit delivery system. It can be done only through proper supervisory and
regulatory mechanism.
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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The CAMEL Methodology has been developed and practised by the North American
bank regulators to assess the financial and managerial soundness of US commercial banks.
Subsequently Basel committee on banking supervision (BCBS) has been created in 1974 and
they also accept the CAMEL as uniform financial institution rating system to evaluate and
monitor the banks. In India is adapting the Basel I & II norms in total so has to ensure the
better financial standing of own banks & financial Institutions. This paper empirically tested
the applicability of CAMEL norms and its consequential impact on the performance of SBI
Groups.
ORIGIN AND GROWTH OF SBI
State Bank of India (SBI) is the largest Indian banking and financial services the bank
traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806
of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The
government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank
of India taking a 60% stake, and renamed it as State Bank of India. In 2008, the government
took over the stake held by the Reserve Bank of India.
SBI offers wide a range of banking products through its vast network of branches in
India and overseas. The State Bank Group, with over 16,000 branches, has the largest banking
branch network in India with 130 branches overseas. It has an asset base of $352 billion and
$285 billion in deposits. SBI group has a major market share among Indian commercial banks
of covering 20% in deposits and loans.
The total assets of the Bank increased by 9.23% from Rs.9,64,432.08 crores at the end
of March 2009 to Rs.10,53,413.73 crores as at end March 2010. During the period, the loan
portfolio increased by 16.48% from Rs.5,42,503.20 crores to Rs.6,31,914.15 crores.
Investments increased by 3.56% from Rs.2,75,953.96 crores to Rs.2,85,790.07 crores as at the
end of March 2010.
NEED OF THE STUDY
In emerging financial markets, banking sector assets comprise well over 80 per cent of
total financial sector assets, which much lower in the developed economies. In addition,
deposits as a share of total bank liabilities have declined since 1990 in many developed
countries, while in developing countries public deposits in banks are overwhelmingly
increasing.
The solvency of financial institutions typically is at risk when their assets quality
become impaired, and hence it is important to monitor indicators of the quality of their assets
in terms of overexposure to specific risks, trends in nonperforming loans, and the health and
profitability of bank borrowers. This research paper attempted to evaluate the performance of
State Bank Groups (Eight Banks) in India by a supervisory rating of the bank's overall
condition, commonly referred as CAMEL rating.
OBJECTIVES OF THE STUDY
1. To measure the financial performance of the State Bank Group in India under
CAMEL Rating Scanning (CRS)
2. To suggest for improvement of financial position of the State Bank Groups in India
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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HYPOTHESIS OF THE STUDY
1. There is no significant difference in the performance of State bank of India Group
Banks.
METHODOLOGY
It is an evaluatory type of research relates with 8 Constituents of
SBI Groups (viz) (State Bank of India, State Bank of Mysore, State Bank of Travancore, State
Bank of Patiala, State Bank of Hyderabad, State Bank of Indore, State Bank of Saurasthra
State Bank of Jiapur). State Bank of India Group has been purposefully taken up to identify
the effectiveness and financial standing of the mammoth public sector bank in the interest of
all stakeholders. This study is based on time series Secondary data for a period of 8 years
2003-10. Secondary data has been collected through RBI Bulletin & CMIE Prowess Package.
Having undertaken CAMEL Rating scanning, the researchers have applied ANOVA and
tested the difference in the performance of study units and prescribed some suggestions.
CAMEL FRAMEWORK
"CAMEL" as acronym CAMEL refers to the five components of a bank's financial
condition Viz., Capital adequacy, Asset quality, Management, Earnings, and Liquidity
characters of a commercial bank. CAMEL is basically a ratio-based model for evaluating the
performance of the banks periodically. Various ratios forming this model have been explained
individually and collectively.
C- CAPITAL ADEQUACY
Capital base of financial institutions facilitates depositors in forming their risk
perception about the institutions. The most widely used indicator of capital adequacy is capital
to risk-weighted assets ratio (CRWA). According to Bank Supervision Regulation Committee
(The Basle Committee) of Bank for International Settlements, a minimum 9 percent CRWA is
required.
Capital adequacy determines how well financial institutions can cope with shocks to
their balance sheets. Thus, it is useful to track capital-adequacy ratios that take into account
the most important financial risks—foreign exchange, credit, and interest rate risks—by
assigning risk weightings to the institution‘s assets
A – ASSET QUALITY
Asset quality determines the healthiness of financial institutions against loss of
value in the assets. The weakening value of assets, being prime source of banking problems,
directly pour into other areas, as losses are eventually written-off against capital, which
ultimately expose the earning capacity of the institution. The asset quality is gauged in
relation to the level and severity of non-performing assets, adequacy of provisions, recoveries,
distribution of assets etc. Popular indicators include nonperforming loans to advances, loan
default to total advances, and recoveries to loan default ratios.
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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M – MANAGEMENT EFFICIENCY
Management of financial institution is generally evaluated in terms of capital
adequacy, asset quality, earnings and profitability, liquidity and risk sensitivity ratings. In
addition, performance evaluation includes compliance with set norms, ability to plan and react
to changing circumstances, technical competence, leadership and administrative ability of the
bank.
Sound management is one of the most important factors behind financial institutions‘
performance. Indicators of quality of management, however, are primarily applicable to
individual institutions, and cannot be easily aggregated across the sector.
E –EARNING ABILITY
Earnings and profitability, the prime source of increase in capital base, is related with
regards to interest rate policies and adequacy of provisioning. Further, it also helps to support
present and future operations of the institutions. The single best measure used to earning is the
Return on Assets (ROA), which is net income after taxes to total asset ratio. Good earnings
and profitability of banks reflects the ability to support present and future operations.
Specifically, this determines the capacity to absorb losses, finance its expansion, pay
dividends to its shareholders, and build up an adequate level of capital.
L – LIQUIDITY
An adequate liquidity position refers to a situation, where institution can obtain
sufficient funds, either by increasing liabilities or by converting its assets quickly at a
reasonable cost. It is, therefore, generally assessed in terms of overall assets and liability
management, as mismatching gives rise to liquidity risk. The term liquidity is used in various
ways, all relating to availability of, access to, or convertibility into cash. An institution is said
to have liquidity if it can easily meet its needs for cash either because it has cash on hand or
can otherwise raise or borrow cash.
RATIO TAKEN FOR THE STUDY
C Capital Adequacy ratio,
Capital Adequacy ratio (Tier I)
A Priority sector advances to total advances ,
Secured advances to total advances, Non-performing assets (NPAs)
M Business per employee, Profit per employee,
Return on equity, Return on advances
E Interest Income ratio, Net Interest Margin ratio,
Operating Profit ratio, Return on Assets ratio
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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L Cash-deposit ratio,
Credit-deposit ratio
CAPITAL ADEQUACY RATIO OF STATE BANK GROUPS
Maintaining adequate capital fund is the mandatory norms for all the commercial
banks. It helps to impose confidence in the minds of stake holders. The capital adequacy
affects the financial position of the bank. The international banking regulators, BCBS (Basel
Committee for Banking Supervision) have stipulated a minimum Capital Adequacy Ratio
(CAR) of 8 percent. In India, the minimum CAR is stipulated as 9 percent by the Reserve
Bank of India. To assess the capital adequacy of the State Bank parameter under ‗CAMEL‘
framework, viz. (i) Capital Adequacy Ratio, and (ii) Capital Adequacy Ratio–Tier I.
TABLE 1 CAPITAL ADEQUACY RATIO
Years/ Bank SBI SBJ SBH SBE SBM SBP SBS SBT
2003 13.5 13.08 14.91 13.09 11.62 13.57 13.68 11.3
2004 13.53 12.93 14.29 12.39 11.53 13.56 14.53 11.36
2005 12.45 12.6 11.74 11.61 12.08 14.21 11.45 11.05
2006 11.88 12.08 12.08 11.4 11.37 13.55 12.03 11.15
2007 12.34 12.89 12.51 11.77 11.47 12.38 12.78 11.68
2008 13.54 12.51 12.35 11.29 11.73 13.56 12.34 13.53
2009 14.25 14.52 11.53 13.46 12.99 12.60 na 14.03
2010 13.39 13.30 14.90 13.53 12.42 13.26 na 13.74
Mean 13.11 12.99 13.04 12.32 11.90 13.34 12.80 12.23
Rank 2 4 3 6 8 1 5 7
Capital Adequacy ratio (Tier I)
2003 8.81 10.52 9.84 9.4 7.23 10.39 11.66 6.8
2004 8.34 9.03 8.42 8.31 7.18 9.87 10.99 6.23
2005 8.04 7.95 7.58 6.67 7.12 11.05 8.68 6.17
2006 9.36 8.5 8.95 7.55 7.44 9.84 9.02 7.24
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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2007 8.01 7.79 8.25 6.74 6.62 8.36 8.17 7.55
2008 9.14 6.95 7.24 7.01 6.54 7.31 8.06 7.41
2009 9.38 8.46 7.14 7.91 7.15 6.94 na 8.59
2010 9.45 8.35 8.64 8.58 7.59 8.16 na 9.24
Mean 8.82 8.44 8.26 7.77 7.11 8.99 9.43 7.40
Rank 3 4 5 6 8 2 1 7
Source: Complied from RBI Bulletin and CMIE Prowess
Table 1 exhibits the CAR of State Bank Groups in India over the eight years‘ period
under study. It is observe that the highest average CAR has been that of SBP (State Bank of
Patiala) is 13.34%, and is followed by State Bank of India (SBI) with an average CAR of
13.11%. Least performance by State of Mysore (SBM) is 11.90 %. Further it shows the CAR
(Tier I) of State Bank Groups in India over the eight years under study. It finds that for CAR
(Tier I) the highest average CAR goes to SBT (State Bank of Saurashtra) with 9.43 %, and is
followed by SBP (State Bank of Patiala) is 8.99%. State bank of Mysore having lowest ratio
of 7.11 % in CAR (Tier I) among the State bank groups.
ASSET QUALITY OF STATE BANK GROUPS
Asset quality of commercial banks helps to diagonise the efficieny viability of the
assets held by the banks. It could be measured by parameters like: (i) the ratio of priority
sector advances to total advances, (ii) the ratio of secured advances to total advances, (iii) the
ratio of non-performing assets (NPAs) in the total advances of State bank.
TABLE 2 PRIORITY SECTOR ADVANCE RATIO
Years/ Bank SBI SBJ SBH SBE SBM SBP SBS SBT
2003 25.49 43.16 32.54 43.94 36.46 40.98 40.81 33.6
2004 27.04 43.86 39.51 46.32 36.52 39.39 42.67 37.22
2005 28.59 45.1 39.69 43.69 40.45 44.04 38.96 38.36
2006 30.58 41.3 41.68 42.85 42.45 37.87 41.61 41.1
2007 30.24 41.03 38.99 37.46 36.31 34.58 41.64 39.54
2008 28.61 40.99 32.78 37.93 31.85 31.60 39.55 41.73
2009 26.48 38.80 31.97 34.69 33.22 32.15 NA 39.92
2010 26.99 37.94 33.79 41.88 30.55 38.47 NA 36.64
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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Mean 28.00 41.52 36.37 41.10 35.97 37.38 40.87 38.51
Rank 8 1 6 2 7 5 3 4
Secured Advances ratio
2003 86.46 91.69 88.65 93.68 95.62 89.27 92.89 87.1
2004 83.15 90.03 86.94 88.48 94.74 87.28 87.54 86.67
2005 77.06 87.39 78.54 89.16 91.9 83.56 77.35 83.26
2006 76.74 88.23 80.12 88.61 86.09 84.83 76.15 85.98
2007 75.61 86.01 79.70 89.04 88.40 90.31 74.48 87.04
2008 73.06 82.64 82.92 87.85 86.43 91.42 77.26 84.57
2009 79.01 80.02 81.70 88.88 89.08 93.03 NA 80.25
2010 78.50 79.23 85.46 86.01 87.80 96.73 NA 79.82
Mean 78.70 85.66 83.00 88.96 90.01 89.55 80.94 84.34
Rank 8 4 6 3 1 2 7 5
NPA ratio
2003 4.5 4.13 3.25 2.66 5.19 1.49 3.53 3.06
2004 3.48 1.24 0.65 0 2.96 0 0 1.39
2005 2.65 1.61 0.61 1 0.92 1.23 1.4 1.81
2006 1.87 1.18 0.36 1.83 0.74 0.99 1.16 1.47
2007 1.56 1.09 0.22 1.04 0.45 0.83 0.70 1.08
2008 1.78 0.83 0.16 0.73 0.43 0.60 0.91 0.94
2009 1.79 0.85 0.38 0.89 0.50 0.60 NA 0.58
2010 1.72 0.77 0.55 1.13 1.02 1.04 NA 0.91
Mean 2.42 1.46 0.77 1.16 1.53 0.85 1.28 1.41
Rank 8 6 1 3 7 2 4 5
Source: Complied from RBI Bulletin and CMIE Prowess
Table 2 shows the ratio of Priority sector Advances of State Bank Groups in India.
Among the State Bank Groups State of Bank Jaipur (SBJ) secured First Position with 41.52 %
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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State Bank of Indore (SBE) has took the second position with 41.10% and State bank of India
(SBI) hold last position by holding 28%. It explains the ratio of secured advance to total
advance by the State Bank Groups from 2003 – 10. State Bank of Mysore (SBM) has highest
average sore secured advance to total advance of 90.01%, followed by State Bank of Patiala
(SBP) of 89.55 %. State Bank of India (SBI) has secured advance to total asset at least with
78.70%.It reveals the ratio of NPA of Banks in India, Banks has lower NPA; there is better
performance in Asset Quality. State of Hyderabad (SBH) has lower rate of NPA at 0.77,
followed by State bank of Patiala (SBP) with 0.85 % from the year 2003 – 2010. SBI has
more NPA 2.42 % when compare to rest of the bank.
MANAGEMENT EFFICIENCY OF STATE BANK GROUPS
Management efficiency of a bank could be measured by parameter like: (i) business
per employee, (ii) Profit per employee (iii) RoE (iv) Return on advances. SBI group‘s
management efficiency has been derived with the help of these ratios and the results are given
in table 3.
TABLE 3 BUSINESS PER EMPLOYEE VALUE
Years SBI SBJ SBH SBE SBM SBP SBS SBT
2003 191 145.64 226.2 220.52 146.49 246.37 167.87 217.68
2004 210.56 169.82 265.86 230.77 162.81 305 193.16 271.78
2005 243.08 220.29 339.74 293.88 203.54 361.15 249.6 346.25
2006 299.23 276.85 414.34 429.32 289.93 493.01 303.94 381.19
2007 357.00 355.89 473.64 476.67 398.00 599.54 343.00 506.13
2008 456.00 445.45 599.08 604.37 495.00 759.82 396.00 558.65
2009 556.00 555.39 839.82 701.53 602.00 910.24 NA 658.00
2010 636.00 627.67 755.62 763.51 672.00 895.21 NA 696.00
Mean 368.61 349.63 489.29 465.07 371.22 571.29 275.60 454.46
Rank 6 7 2 3 5 1 8 4
Profit per Employee
2003 1.47 1.63 2.25 3.06 1.19 2.76 1.25 1.51
2004 1.77 5.52 2.87 3.45 1.82 4 2.4 2.16
2005 2.08 5.98 1.91 2.07 2.16 2.48 0.56 2.21
2006 2.17 1.2 3.26 2.09 2.22 2.66 0.64 2.34
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
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2007 2.37 2.57 3.92 2.91 2.60 3.24 1.21 2.96
2008 3.73 2.73 4.35 3.73 3.28 3.70 0.74 3.40
2009 4.74 3.55 4.87 4.44 3.48 4.68 NA 5.00
2010 4.46 3.96 5.58 4.83 4.41 4.45 NA 6.00
Mean 2.85 3.39 3.63 3.32 2.65 3.50 1.13 3.20
Rank 6 3 1 4 7 2 8 5
Return on Equity
2003 19.15 24.56 26.8 40.21 29.63 25.22 15.51 25.66
2004 19.67 29.39 26.99 32.94 34.83 27.39 25.47 29.68
2005 19.43 16.81 15.03 15.73 30.82 15.21 5.27 24.05
2006 17.04 10.73 22.01 14.48 25.62 14.26 6.79 21.02
2007 15.41 19.99 21.72 17.31 24.00 15.52 8.66 22.26
2008 16.75 18.71 21.28 18.77 25.31 15.92 4.75 23.28
2009 17.05 21.46 20.87 19.36 18.47 18.20 NA 30.64
2010 14.80 20.39 22.02 18.07 18.06 16.01 NA 26.88
Mean 17.41 20.26 22.09 22.11 25.84 18.47 11.08 25.43
Rank 7 5 4 3 1 6 8 2
Return on Advance
2003 8.69 10.29 10.05 10.27 10.38 10.13 9.55 9.51
2004 7.62 8.99 8.93 8.57 9.65 8.33 8.46 8.55
2005 7.24 8.73 8.09 8.05 8.7 7.9 7.61 7.79
2006 7.63 8.59 8.15 8.09 8.5 8.03 7.62 7.9
2007 8.29 9.40 9.03 8.78 9.00 8.72 8.35 8.65
2008 9.34 10.14 9.83 10.11 10.16 10.20 9.86 9.84
2009 9.68 10.89 10.57 10.57 10.84 11.25 NA 10.45
2010 8.62 9.58 9.71 9.37 9.87 10.25 NA 9.47
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
Sri Krishna International Research & Educational Consortium http://www.skirec.com
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Mean 8.39 9.58 9.29 9.23 9.64 9.35 8.57 9.02
Rank 8 2 4 5 1 3 7 6
Source: Complied from RBI Bulletin and CMIE Prowess
Table 3 shows the values of Business per employee of State Bank groups for period 8
years. It is noted that State bank of Patiala (SBP) comes first with the highest value 571.29
Lakhs. It is followed at a by State Bank of Hyderabad (SBH) 489.29 Lakhs, and State Bank
of Sarursathra (SBS)has got lowest value 275.60. Further it exhibits that Profit per employee
by the State Bank Groups in India. It is observed that State Bank of Hyderabad (SBH) comes
first with an average Profit per employee of Rs. 3.63 lakhs and is distantly followed by State
Bank of Patiala (SBP) with3.50 lakhs. Among the Groups the worst performer is a State bank
of Sarursatha (SBS) with an average value of just Rs. 1.13 lakhs. It shows that Return of
Equity (ROE) for 8 Banks in the State Bank Groups in India. It noted that State Bank of
Mysore (SBM) with a highest average of ROE of 25.84 % got first position and is closely
followed by State Bank of Travancore (SBT) with 25.43% and in the last place State Bank of
Sarursatha (SBS) with 11.08%. In addition shows that Return on Advance ratios of State Bank
Groups in India. It is finds that State Bank of Mysore (SBM) with a ratio 9.64 % and State
Bank of Jaipur (SBJ) with 9.58% by holding first and second position respectively. The
lowest performance is Sate Bank of India (SBI) with 8.39%.
EARNING ABILITY OF STATE BANK GROUPS
To survive in the competitive financial environments, banks have to generate adequate
earnings to meet out all the non operating expense and to maintain adequate spread by
avoiding burden. Earning ability of a commercial bank could be ascertained by computing the
various ratios interest Income ratio, Net Interest Margin ratio, Operating Profit ratio, Return
on Assets. Earning ability of the SBI group is given in the table 4.
TABLE 4 INTEREST INCOME RATIO
Years/ Bank SBI SBJ SBH SBE SBM SBP SBS SBT
2003 8.59 8.56 8.57 9.21 9.56 9.13 8.93 8.92
2004 7.77 8.22 7.8 8.57 8.42 7.84 8.25 8.09
2005 7.47 7.98 7.09 7.41 7.71 7.31 8.12 7.6
2006 7.51 7.72 7.28 7.03 7.5 6.75 7.45 7.57
2007 7.02 7.66 7.50 7.33 7.69 6.91 7.32 7.70
2008 7.60 8.07 7.96 8.27 8.33 8.09 7.75 8.39
2009 7.57 8.71 8.25 8.70 8.83 9.02 NA 8.84
2010 7.04 7.91 7.66 8.00 8.29 8.20 NA 8.05
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
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Mean 7.57 8.10 7.76 8.07 8.29 7.91 7.97 8.14
Rank 8 3 7 4 1 6 5 2
Net Interest Margin ratio
2003 2.76 3.28 3.1 3.43 3.56 4.09 3.16 2.94
2004 2.85 3.74 2.96 3.71 3.62 3.41 3.41 3.18
2005 3.21 3.98 2.94 3.35 3.59 3.34 3.64 3.39
2006 3.28 3.9 2.9 2.88 3.41 2.73 3.03 3.15
2007 2.84 3.03 2.74 2.36 2.96 2.27 2.36 2.84
2008 2.64 2.48 2.01 2.13 2.54 1.67 1.81 2.34
2009 2.48 2.52 2.12 2.35 2.28 1.75 NA 2.75
2010 2.35 2.41 2.25 2.36 2.88 2.11 NA 2.57
Mean 2.80 3.17 2.63 2.82 3.11 2.67 2.90 2.90
Rank 6 1 8 5 2 7 3.5 3.5
Operating Profit ratio
2003 2.15 2.62 3.14 3.93 3.25 3.83 2.83 2.56
2004 2.44 3.56 3.57 4.36 3.39 4.17 3.82 3.26
2005 2.53 3.34 2.18 2.35 2.98 2.92 2.64 3.03
2006 2.37 2.33 2.3 2.23 2.44 2.01 1.94 2.22
2007 1.89 2.19 2.24 1.72 2.04 1.78 1.41 2.03
2008 2.04 1.75 1.79 1.68 1.89 1.46 0.88 1.73
2009 2.13 2.04 1.88 2.00 1.78 1.50 NA 2.27
2010 1.82 1.80 2.08 1.97 2.18 1.80 NA 1.94
Mean 2.17 2.45 2.40 2.53 2.49 2.43 2.25 2.38
Rank 8 3 5 1 2 4 7 6
Return on Assets
2003 0.86 1.13 1.15 1.76 1.02 1.51 0.85 0.9
JBFSIR Volume 1, Issue 7 (October, 2011) ISSN 2231-4288
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2004 0.94 1.49 1.25 1.73 1.28 1.6 1.38 1.02
2005 0.99 0.88 0.72 0.79 1.25 0.91 0.27 0.86
2006 0.89 0.53 1.13 0.76 1.23 0.73 0.31 0.86
2007 0.84 1.00 1.14 0.87 1.10 0.77 0.46 0.86
2008 1.01 0.87 1.00 0.88 1.08 0.83 0.28 0.89
2009 1.04 0.92 0.91 0.88 0.91 0.83 NA 1.30
2010 0.88 0.93 1.03 0.91 1.06 0.79 NA 1.26
Mean 0.93 0.97 1.04 1.07 1.12 1.00 0.59 0.99
Rank 7 6 3 2 1 4 8 5
Source: Complied from RBI Bulletin and CMIE Prowess
Table 4 explains the ratio of interest Income to Total Assets of State Bank Groups in
India. State bank of Mysore (SBM) with an average ratio of 8.29% come first position;
followed State bank of Travancore (SBT) with 8.14%. State Bank of India (SBI) has the
lowest average ratio of Interest Income with 7.57%. It exhibits the ratios of Net Interest
Margin to the 8 Banks in the State Banks Groups. It observes that State bank of Jaipur (SBJ)
with ratio of 3.17 % and State Bank of Mysore (SBM) with 3.11 holding first and second
position respectively. The lowest performance is State of Hyderabad (SBH) with 2.63%. It
shows that ratios of operating profits to total assets of State Bank groups in India for period of
8 years (2003-2010). It is noted that State Bank of Indore (SBE) with highest average score of
2.53% comes first, while State of Bank of India (SBI) with lowest average score of 2.18 % in
last rank among the 8 banks. It reveals that Return on Asset (ROA), It shows that State Bank
of Mysore (SOM) with the highest average ratio of 1.12% has got first position, followed by
State bank of Indore (SBE) with average ratio of 1.07 % and State Bank of Sarursatha (SBS)
hold last position with 0.59 %
LIQUIDITY OF STATE BANK GROUPS
An adequate liquidity position refers to a situation, where institution can obtain
sufficient funds, either by increasing liabilities or by converting its assets quickly at a
reasonable cost. Liquidity of the Banks is measured by the ratios like (i) Cash-deposit ratio (ii)
Credit-deposit ratio
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TABLE 5 CASH DEPOSIT RATIO
Years/ Bank SBI SBJ SBH SBE SBM SBP SBS SBT
2003 4.3 6.64 8.87 6.76 5.16 6.58 6.35 5.2
2004 5.98 8.06 7.5 5.3 6.41 4.84 6.88 4.86
2005 4.58 4.86 4.81 4.1 6.93 6.3 6.76 8.55
2006 5.7 7.52 6.69 6.88 4.56 4.47 5.97 4.76
2007 6.68 12.83 6.92 6.71 9.52 5.66 7.02 7.95
2008 9.59 11.46 11.07 6.80 9.69 8.84 11.22 9.26
2009 7.49 9.17 8.69 6.18 5.27 6.20 NA 5.54
2010 7.62 8.03 7.00 5.70 7.11 6.17 NA 6.82
Mean 6.49 8.57 7.69 6.05 6.83 6.13 7.37 6.62
Rank 6 1 2 8 4 7 3 5
Credit Deposit ratio
2003 46.52 51.18 46.91 56.23 58.37 60.14 51.36 57.58
2004 49.57 54.96 48.7 61.49 56.9 58.23 49.09 56.45
2005 55.14 63.08 53.92 65.48 64.64 57.97 53.23 61.53
2006 68.84 73.27 61.32 71.28 71.81 65.66 61 72.57
2007 77.46 72.07 67.73 76.85 74.77 73.42 70.11 79.49
2008 77.55 73.52 71.54 73.79 76.57 74.94 75.71 79.59
2009 73.11 76.10 69.94 76.28 77.82 72.64 NA 77.55
2010 78.58 76.47 72.69 77.31 75.97 71.80 NA 75.59
Mean 65.85 67.58 61.59 69.84 69.61 66.85 60.08 70.04
Rank 6 4 7 2 3 5 8 1
Source: Complied from RBI Bulletin and CMIE Prowess
Table 5 explains the Cash deposit ratio of State bank Groups in India. It is noted the
State Bank of Jaipur (SBJ) with highest ratio of 8.57 % distantly followed by State Bank of
Hyderabad (SBH) with 7.69%. The worst performance by State bank of Indore (SBE) with
6.05%.It defines that Credit deposit ratio of State bank Groups in India from the year 2003 –
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2010. It is finds that State Bank of Travancore (SBT) with highest average score of 70.04%
comes first, while State of Bank of Sarursatha (SBS) with lowest average score of 60.08 % in
last rank among the 8 banks.
OVERALL CAMEL RATING OF SBI GROUPS
Having diagnosed the character wise performance of SBI group overall assessment of
performance of all 8 SBI commercial banked were done and ranked as given in the table 6.
TABLE 6 OVERALL CAMEL RATING OF SBI GROUPS
Ratio‘s/ Banks SBI SBJ SBH SBE SBM SBP SBS SBT
Capital Adequacy
CAR 2 4 3 6 8 1 5 7
CAR Tier - I 3 4 5 6 8 2 1 7
Mean 2.5 4 4 6 8 1.5 3 7
Rank 2 4.5 4.5 6 8 1 3 7
Asset Quality
Priority sector advances 8 1 6 2 7 5 3 4
Secured advances 8 4 6 3 1 2 7 5
Net NPA 8 6 1 3 7 2 4 5
Mean 8 3.7 4.3 2.67 5 3 4.7 4.7
Rank 8 3 4 1 7 2 5.5 5.5
Management Efficiency
Business per employee 6 7 2 3 5 1 8 4
Profit per employee 6 3 1 4 7 2 8 5
R O E 7 5 4 3 1 6 8 2
R O Advance 8 2 4 5 1 3 7 6
Mean 6.75 4.25 2.75 3.75 3.5 3 7.75 4.25
Rank 7 5.5 1 4 3 2 8 5.5
Earning Ability
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Interest Income 8 3 7 4 1 6 5 2
Net Interest Margin 6 1 8 5 2 7 3.5 3.5
Operational profit 8 3 5 1 2 4 7 6
R O A 7 6 3 2 1 4 8 5
Mean 7.25 3.25 5.75 3 1.5 5.25 5.88 4.13
Rank 8 3 6 2 1 5 7 4
Liquidity
Cash-deposit 6 1 2 8 4 7 3 5
Credit deposit 6 4 7 2 3 5 8 1
Mean 6 2.5 4.5 5 3.5 6 5.5 3
Rank 7.5 1 4 5 3 7.5 6 2
Overall CAMEL Mean 6.1 3.53 4.27 4.08 4.3 3.75 5.36 4.61
Overall CAMEL Ranking 8 1 4 3 5 2 7 6
Overall CAMEL Grade P E G G G G M M
Source: Calculated and Complied by author from the Table 1 to 5
Table 6 explains the Group Ranking of the State Bank Groups in India from the year
(2003-2010). It is observed that under the Capital Adequacy State Bank of Patiala (SBP)
Come first position, followed by State Bank of India (SBI) while State Bank of Mysore got
last position. Under the Asset Quality, State Bank of Indore (SBE) holds the first while State
bank of India holds the last. It is noted that first rank taken by State Bank of Hyderabad
(SBH) final rank taken by State Bank of Sarursatha (SBS) under the Management aspects.
State bank of Mysore (SBM) have best rank in the Earning capability while State Bank of
India (SBI) took the worst position. Under the Liquidity State bank of Jaipur (SBJ) has Best
position and worst Position taken both the State Bank of India (SBI) and State Bank of Patiala
(SBP). Based on the overall ranking score (Mean = 4.50; Std = 0.851) the researcher classified
score into 4 Grade namely, Excellent (E), Good (G), Moderate (M), and Poor (P).
Performances of the Banks are indicated by the Grade in the above table.
PERFORMANCE OF VARIANCE
In order to determine difference among the ratios of CAMEL of State Banks groups,
one way ANOVA has been used. To ensure the application of one-way ANOVA
independence of sample, Normality, Homogeneity of population were duly considered and the
results were derived accordingly.
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TABLE 7: TESTS OF NORMALITY
Shapiro-Wilk
Statistic df Sig.
SBI .851 5 .199
SBJ .947 5 .719
SBH .966 5 .852
SBE .929 5 .587
SBM .941 5 .672
SBP .925 5 .563
SBS .987 5 .967
SBT .902 5 .419
The table 7 reveals that, Shapiro Wilk Test assess whether there is a significant of
normality in population distribution for each of the eight groups, the null hypothesis states that
the population distribution is normal. Since the P – Values are greater than .05; the null
hypothesis of ―population distribution is normal‖ could be accepted.
TABLE 8: TEST OF HOMOGENEITY OF VARIANCES
Levene Statistic df1 df2 Sig.
.936 7 32 .493
The table 8 denotes that, Levene‘s test of Homogeneity of variances assesses whether
the population variance for the ratios are significantly different from the each other. The null
hypothesis states that the population variances are equal. Since P-Value is greater than .05
support the null hypothesis.
TABLE 9: ANOVA RESULTS OF RATIOS OF STATE BANK GROUPS
Sum of
Squares df Mean Square F Sig.
Between Groups 45.687 7 6.527 2.31 .000
Within Groups 90.233 32 2.820
Total 135.920 39
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The table 9 observes the significant difference in ratios of CAMEL among the State
Bank Groups in India. The test statistics (F- Value) equal 2.31 with a corresponding P – Value
of .000. Hence, reject the null hypothesis & state that there is significant difference in ratios of
CAMEL among the State Bank Groups in India. The difference in the performance may be
due to age of the bank, investment size, no. of. branches, no. of employees etc.
CONCLUSION
The study observed that there is significant difference in ratio‘s in CAMEL among the
State Bank Groups in India. In this part all parameters (C, A, M, E, L) are ranked together and
final ranking (CAMEL Rating) was computed. The study reveals that State Bank of Jaipur
(SBJ) comes First rank having excellent performance followed by State bank of Patiala (SBP).
Whereas the State Bank of India (SBI) has secured last rank in terms of performance. It has to
improve its Asset quality, Management efficiency, Liquidity position. In the same line, the
State bank of Sarursatha should take necessary steps to increase the Management efficiency,
earning capacity; State bank of Travancore has to increases its CAR, & Earning. State bank of
Patiala need improvement in Earning & Liquidity management State bank of Mysore need to
improve its CAR & Assets quality. State bank of Indore must increase its CAR; State bank of
Hyderabad has to concentrate on increase Earning; thus annual CAMEL scanning helps the
commercial bank to diagnose its financial health and alert the bank to take preventive steps for
its sustainability.
REFERENCES
1. Annual reports of State Bank of India (2009-2010)
2. Amandeep, (1983), Profits and Profitability in Commercial Banks, Deep and Deep
Publications Pvt. Ltd., Rajouri Gardens, New Delhi – 110 027.
3. Angadi and Devraj, (1983), ―Profitability and Productivity of Banks in India‖,
Economic and Political Weekly, Vol. 18 (Nov. 26).
4. Banerjee, A. and Singh, S. K (Ed.), Banking and Financial Sector Reforms in India,
Deep & Deep Publications Pvt. Ltd., New Delhi, 2002.
5. CMIE Prowess packages
6. Goldsmith, R. W., Financial Structure and Development, New Haven: Yale University
Press, First Edition, 1969.
7. Reserve Bank of India (RBI), Trend and Progress of Banking in India,
8. Uppal, R. K. and Pooja, Transformation in Indian Banks, Sarup Book Publishers Pvt.
Ltd., New Delhi– 2, 2009.
9. Uppal, R. K, Indian Banking Industry and Information Technology, New Century
Publications, New Delhi – 2, 2006.
10. Official Website of the Reserve Bank of India, www.rbi.org.in