Project report of indusland bank v/s privet bank

- Project Report on IndusInd Bank Limited -

PGDBA Semester - 2 - Page 1 -

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PREFACE A man without practical knowledge is just like a rough diamond. To shine like a real diamond one must have practical exposure of what he has learnt. For the management students, theoretical knowledge is just like lock without key, so practical knowledge is of utmost importance.

It is quite true that world outside; your cozy home is many times quite different from what you have perceived. Similarly it is possible that theoretical knowledge acquired in the classroom may differ from the practical knowledge.

This research is on performance of Private Bank V/S Nationalized Bank by CAMEL Model. I choose the leading bank in the Industry to evaluate. The study includes

The company’s distribution channel, the role of intermediaries,

promotional schemes.

The competitive scenario in the market.

The cost advantage and product differentiation strategy which has been used by the company that have a vital impact on the consumer.

To find out the Best Marketing and Promotional tools & techniques to

be adopted by the company to develop Channel especially for the Corporate & Government Sales for Ahmedabad City.

To give the effective edge and advantage in terms of Strategic Marketing to the company.



PROJECT REPORT

THIS PROJECT REPORT IS SUBMITTED FOR COMPLETE

FULFILLMENT OF PROJECT WORK ASSIGNED DURING THE

STUDING OF P.G.D.B.A. SEMESTER – 2 IN DEPARTMENT

OF BUSINESS MANAGEMENT, SAURASHTRA UNIVERSITY

RAJKOT.

DEVELOPED BY:- UNDER GUIDANCE OF:-

PRITESH RADADIYA PRO JATIN SHETH

ROLL NO: - 29

DEPARTMENT OF BUSINESS MANAGEMENT Saurashtra University, University Road, Rajkot - 360005 Phone:

(0281) 2577461, Fax: (0281) 2589640 E-M@il: [email protected], Web: www.sumba.org.in

mailto:[email protected]

http://www.sumba.org.in/



DECLARATION

I, PRITESH RADADIYA, THE STUDENT OF SEMSESTER – 2 OF

POST GRADUATE DIPLOMA IN BUSINESS ADMINISTRATION

(P.G.D.B.A.) HEREBY DECLARE THAT THE PROJECT WORK AND

REPORT PRESENTED IN THIS PROJECT IS MY OWN WORK AND HAS

BEEN CARRIED OUT UNDER THE SUPERVISION OF PRO JATIN

SHETH (PROFESSOR, DEPARTMENT OF BUSINESS

MANAGEMENT, SAURASHTRA UNIVERSITY RAJKOT). AND HAS

NOT BEEN PREVIOUSLY SUBMITTED TO ANY OTHER UNIVERSITY

FOR ANY OTHER PROGRAM FOR ANY KIND OF EXAMINATION OR

PROJECT OR PROJECT REPORT OR RESEARCH WORK.

SIGNATURE

PRITESH RADADIYA

DATE : - 04/05/2007

PLACE : - RAJKOT



ACKNOWLEDGEMENT

My project at IndusInd Bank Ltd., Rajkot has been the

perfect stepping stone to the world of professionals. We are

indebted to IndusInd Bank Ltd., Rajkot for providing me an

opportunity to work there. Especially thankful to Mr.

Bhargav Bhatt (Branch Head) who guided and enabled me to

complete the project in time.

I would like to express my sincere gratitude to Dr. Pratapsinh

L. Chauhan, The Dean & Director of Department of

Business Management, Saurashtra University for providing

me an opportunity to interact with professional people in real

corporate world. I am thankful to Pro Jatin Sheth, for being

my project guide for the project, whose expert guidance has

added value to my Project Report.

I can’t refrain my humble to my parents, friends and other

family members because of whose love, keen interest and

suggestion, I become confident

Pritesh Radadiya

(P. G. D. B. A. Part - 2)

Saurashtra University



INDEX

(1) INDUSTRY INFORMATION

History of Banking industry 09

Development of Banking industry 11

Industry outlook 14

Major Players 15

Analysis 23

(2) BANK INFORMATION

History of indusind Bank 28

Mission 28

Important milestones 28

Board of Directors 30

Current Position of indusind Bank 31

Services and Its Performance 32

(3) RESEARCH METHDOLOGY 38

(4) RESEARCH ANALYSIS & INTERPRATION OF DATA COLLECTION

(5) BIBLIOGRAPHY 69





History of Banking Industry

Without a sound and effective banking system in India it cannot have a healthy economy. The

banking system of India should not only be hassle free but it should be able to meet new challenges

posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its credit.

The most striking is its extensive reach. It is no longer confined to only metropolitans or

cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the

country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the

nationalisation of 14 major private banks of India. Not long ago, an account holder had to wait for

hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a

choice. Gone are days when the most efficient bank transferred money from one branch to other in

two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the

day.

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 Phase III.

Phase-I

The General Bank of India was set up in the year 1786. Next came 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). Reserve Bank of India was vested with extensive powers for the

supervision of banking in India as the Central Banking Authority. During those days public has

lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the

savings bank facility provided by the Postal department was comparatively safer. Moreover, funds

were largely given to traders.

Phase-II

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

nationalized Imperial Bank of India with extensive banking facilities on a large scale specially 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 nationalized 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 were nationalized.

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.

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.

Phase-III

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 liberalization 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 thanmoney.

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.

Development of Banking Industry

Banks in India are dependent, for their resource requirements, mainly on domestic deposits that are

predominantly at fixed rate, Like many other emerging market economies, credit extension by banks

in India has increased sharply in recent times. Credit expansion, which was largely in housing and



retail loans during the preceding few years now, was broad-based during FY 2005-06. While the

industrial sector joined to drive up the credit demand, agriculture also received a higher share in

credit growth reflecting various policy initiatives to improve flow of credit to this sector. Within the

industrial sector, credit flow to infrastructure industries, especially power, showed a higher growth.

Substantial increase in credit off-take was also recorded by food processing, cotton textile, drugs and

pharmaceuticals, gems and jewellary, iron and steel, other metals and metal products, automobiles

and engineering industries. The growth in credit to non-agriculture non-industrial sector continued to

be led by housing, real estate and personal loans.

Credit growth remained strong for the second successive year and outpaced deposit growth. Bank

credit registered a growth of 29.9% on top of the 27.9% growth recorded in the previous year.

The gilt portfolio of commercial banks registered a decline of Rs.15, 562 crores as on March 31,

2006 (y-o-y) in contrast to an increase of Rs.42, 473 crores (net of the conversion effect) during the

previous year. Consequently, commercial banks’ holding of Government securities declined to

nearly 32% of their net demand and time liabilities (NDTV) as on March 31, 2006 from around 38%

a year ago. Banks also liquidated their non-SLR investments (i.e. investments in commercial papers,

bonds and debentures) by Rs.12, 820 crores. Following tables shows the growth of banking.

No. of Branches

Year SBI & Associates Nationalized Banks Foreign Banks Private Sector

Banks

1990 12,074 29,800 148 3,961

1995 12,947 31,817 157 4,213

2000 13,589 33,905 237 5,437

2006 13,831 34,012 259 6,516

Group-wise share of deposits (%)


Banks

1990 28.1 63.6 4.4 3.9

1995 27.8 58.2 6.9 7.2



2000 28.5 53.4 5.5 12.6

2006 25.4 49.3 5.3 20.0

Group-wise share of credit (%)


Banks

1990 33.7 58.4 4.5 3.4

1995 30.8 54.3 7.3 7.6

2000 29.1 50.3 8.0 12.6

2006 25.4 46.5 6.7 21.4

Group-wise share of NPA (%)

Year Public Sector Banks Foreign Banks Private Sector Banks

Gross Net Gross Net Gross Net

1998 16.0 8.2 6.4 2.2 8.7 5.3

2000 14.0 7.4 7.0 2.4 8.2 5.4

2001 12.4 6.7 6.8 1.8 8.4 5.4

2002 11.1 5.8 5.4 1.9 9.6 5.7

2003 9.4 4.5 5.3 1.8 8.1 5.0

2004 7.8 3.0 4.6 1.5 5.8 2.8

2005 5.4 2.1 2.9 0.9 3.9 2.2

2006 3.7 1.3 1.9 0.8 2.5 1.0

Group-wise share Operating ratios(%)

Ratios SBI &

Associates

Nationalized

Banks

Foreign Banks New Private

Sector Banks

Old Private

Sector Banks

Net profit/ Total

assets

0.21/0.86 0.30/0.81 1.57/1.52 NA/0.97 0.57/059

Net int.

income/Total

Assets

3.80/3.08 2.86/2.89 3.92/3.52 NA/2.14 4.02/2.75



Operating

exp./Total assets

2.48/2.28 2.69/2.02 2.26/2.79 NA/2.00 2.98/2.09

Group-wise share in 2006(%)

Factor SBI &

Associates

Nationalized

Banks

Foreign Banks New Private

Sector Banks

Old Private

Sector Banks

Total Assets 25.6 45.7 7.5 15.6 5.6

Total Income 27.3 44.2 8.1 14.9 5.5

Other Income 26.9 33.7 14.3 21.4 3.7

Net Int. Income 27.6 46.2 9.2 11.7 5.3

Wage Bill 32.2 49.5 6.0 7.0 5.3

Net Profit 24.8 41.7 12.8 17.1 3.6

(Source: Business World, 28th November 2006)

Industry Outlook

So far banks have been able to finance the credit boom managing the capital requirements deftly and

have a CRAR of 12 % that is considerably higher than the 8.0 % norm under Basel I provisions and

9.0 % level stipulated by RBI, Banks are required to conform to Basel II norms by end-March 2007,

since under these norms, banks are required to adopt at least the Standardized Approach for Credit

Risk and the Basic Indicator Approach (BIA) for Operational Risk, which would need additional

capitalization. Besides, the banks securitizing their loan portfolios will be required to make higher

capital provisions in terms of RBI’s final guidelines on Securitization. Further, in view of the rapid

growth of bank credit, there may be a need for further capitalization of banks.

Recent guidelines of RBI, permitting banks to raise capital through instruments like innovative

perpetual debt instruments, debt capital instrument, perpetual non-cumulative preference shares and

redeemable cumulative preference shares, and also allowing investments by SEBI registered Foreign

Institutional Investors and NRIs in the aforementioned debt instruments will help banks in meeting

additional capital requirements.

Corporate investment intentions as also the proposals for capital expenditure indicate prospects of

substantial growth and consolidation during 2006-07. The growth in aggregate deposits is projected

at around Rs.3, 30,000 crore in 2006-07. Non-consolidation during 2006- 07. Non-food bank credit

including investments in bonds/debentures/shares of public sector undertaking and private corporate

sector and commercial paper (CP) is expected to increase by around 20 %. needs to be noted that this



projected growth of non-food credit implies a calibrated deceleration from a growth of above 30%,

ruling currently.

Major Players

ICICI Bank

ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3 bn) at

March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended March 31, 2006

(Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a network of about

614 branches and extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail customers through a variety of

delivery channels and through its specialized subsidiaries and affiliates in the areas of investment

banking, life and non-life insurance, venture capital and asset management.

ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of

clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank

currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore,

Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and representative offices in

the United States, United Arab Emirates, China, South Africa and Bangladesh. Our UK subsidiary

has established a branch in Belgium. ICICI Bank is the most valuable bank in India in terms of

market capitalization.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the National Stock

Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New

York Stock Exchange (NYSE).

At June 5, 2006, ICICI Bank, with free float market capitalization* of about Rs. 480.00 billion

(US$ 10.8 billion) ranked third amongst all the companies listed on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and

was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a

public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the

NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock

amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal

2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government

of India and representatives of Indian industry. The principal objective was to create a development



financial institution for providing medium-term and long-term project financing to Indian businesses.

In the 1990s, ICICI transformed its business from a development financial institution offering only

project finance to a diversified financial services group offering a wide variety of products and

services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999,

ICICI become the first Indian company and the first bank or financial institution from non-Japan

Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging

competitive scenario in the Indian banking industry, and the move towards universal banking, the

managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank

would be the optimal strategic alternative for both entities, and would create the optimal legal

structure for the ICICI group's universal banking strategy. The merger would enhance value for

ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for

earning fee-based income and the ability to participate in the payments system and provide

transaction-banking services. The merger would enhance value for ICICI Bank shareholders through

a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships

built up over five decades, entry into new business segments, higher market share in various business

segments, particularly fee-based services, and access to the vast talent pool of ICICI and its

subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger

of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services

Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by

shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad

in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in

April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both

wholesale and retail, have been integrated in a single entity.

HDFC Bank

HDFC Bank (NYSE: HDB), one amongst the firsts of the new generation, tech-savvy commercial

banks of India, was set up in august 1994 after the Reserve Bank of India allowed setting up of

Banks in the private sector. The Bank was promoted by the Housing Development Finance

Corporation Limited, a premier housing finance company (set up in 1977) of India. Net Profit for the

year ended March 31, 2006 was up 30.8% to Rs 870.8 crores.

Currently (2007), HDFC Bank has 583 branches located in 263 cities of India, and all branches of

the bank are linked on an online real-time basis. The bank offers many innovative products &

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services to individuals, corporates, trusts, governments, partnerships, financial institutions, mutual

funds, insurance companies. The bank also has over 1471 ATMs. In the next few month the number

of branches and ATMs should go up substantially.

Over a decade of its operations, HDFC Bank has been recognized, rated and awarded by a number of

organizations, which includes:

Best Domestic Bank in India in The Asset Triple A Country Awards 2005, 2004 and

2003.

“Company of the Year” Award in The Economic Times Awards for Corporate Excellence

2004-05.

Asia money’s Awards for Best Domestic Commercial Bank as well as Best Cash

Management Bank - India in 2005.

The Asian Banker Excellence in Retail Banking Risk Management Award in India for

2004.

Finance Asia “Best Bank - India” in 2005, "Best Domestic Commercial Bank – India” in

1999, 2000 and 2001 respectively and “Best Local Bank – India” in 2002 and 2003.

Business Today “Best Bank in India” in 2003 and 2004

State Bank of India

State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by the

number of branch offices and employees, the largest bank in the world. Established in 1806 as Bank

of Bengal, it remains the oldest commercial bank in the Indian Subcontinent and also the most

successful one providing various domestic, international and NRI products and services, through its

vast network in India and overseas. With an asset base of $126 billion and its reach, it is a regional

banking behemoth. The bank was nationalised in 1955 with the Reserve Bank of India having a 60%

stake. It has laid emphasis on reducing the huge manpower through Golden handshake schemes and

computerizing its operations.

The roots to the State Bank of India are traceable to the first decade of 19th century, when the Bank

of Calcutta, later renamed as the Bank of Bengal, was established on 2 June 1806. The Bank of

Bengal and two other Presidency banks, namely, the Bank of BoPGDBAy (incorporated on 15 April

1840) and the Bank of Madras (incorporated on 1 July 1843) were amalgamated on 27 January 1921,

and the reorganized banking entity was named the Imperial Bank of India. All these Presidency

banks were incorporated as joint stock companies, and were the result of the royal charters. The

Imperial Bank of India continued to remain a joint stock company. Until the establishment of a

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central bank in India the Imperial Bank and its early predecessors served as the nation's central bank

printing currency.

The Reserve Bank of India, which is the central banking organization of India, in the year 1955,

acquired a controlling interest in the Imperial Bank of India and the Imperial Bank of India was

christened on 30 April 1955 as the State Bank of India. This acquisition of the controlling interest

was done pursuant to the provisions of the State Bank of India Act 1955, an Act enacted by the

Parliament of India.

June 2, 1806: The Bank of Calcutta established.

January 2, 1809: redesignated as Bank of Bengal.

April 15, 1840: Bank of BoPGDBAy established.

July 1, 1843: Bank of Madras established.

1861: Paper Currency Act passed.

January 27, 1921: all three banks amalgamated to form Imperial Bank of India.

July 1, 1955: State Bank of India formed; becomes the first Indian bank to be nationalised.

1959: State Bank of India (Subsidiary Banks) Act passed, enabling the State Bank of India to

take over eight former State-associated banks as its subsidiaries

1980s When Bank of Cochin in Kerala faced a financial crisis, the government merged it with

State Bank of India.


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Offices of the Bank of Bengal

State Bank of India has often acted as guarantor to the Indian Government, most notably during

Chandra Shekhar's tenure as Prime Minister of India. With more than 9400 branches and a further

4000+ associate bank branches, the SBI has extensive coverage. State Bank of India has

electronically networked most of its metropolitan, urban and semi-urban branches under Core

Banking System (CBS). The bank has the largest ATM network in the country having more than

5600 in number [1]. The State Bank of India has had steady growth over its history, though it was

marred by the Harshad Mehta scam in 1992.Following its arch-rival ICICI Bank, the bank has started

Core banking process by which more than 4400+ branched have been completed so far. In recent

years, the bank has sought to expand its overseas operations by buying foreign banks. It is the only

Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating and various other

rankings. According to the Forbes 2000 listing it tops all Indian company.

UTI Bank

UTI Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promoted jointly

by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance

Corporation of India (LIC) and General Insurance Corporation Ltd. and other four PSU companies,

i.e. National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance

Corporation and United Insurance Company Ltd.

The Bank today is capitalized to the extent of Rs. 281.46 Crores with the public holding (other than

promoters) at 56.86 %. The Bank's Registered Office is at Ahmedabad and its Central Office is

located at Mumbai. Presently the Bank has a very wide network of more than 510 branch offices and

Extension Counters. The Bank has a network of over 2200 ATMs providing 24hrs a day banking

convenience to its customers. This is one of the largest ATM networks in the country. The Bank has

strengths in both retail and corporate banking and is committed to adopting the best industry

practices internationally in order to achieve excellence.

UTI Bank Ltd. has been promoted by the largest and the best Financial Institution of the country,

UTI. The Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC -

Rs. 7.5 crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each. UTI is the largest

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mutual fund in India. UTI presently occupies a special position in Indian capital market. With a

servicing and distribution network of more than 53 branch offices, 320 Chief Representatives and

about 90,000 agents, UTI provides the complete range of services to its investors.

Centurion Bank of Punjab

Centurion Bank of Punjab is a new generation private sector bank offering a wide spectrum of retail,

SME and corporate banking products and services. It has been among the earliest banks to offer a

technology-enabled customer interface that provides easy access and superior customer service.

Centurion Bank of Punjab has a nationwide reach through its network of 279 branches and 408

ATMs. The bank aims to serve all the banking and financial needs of its customers through multiple

delivery channels, each of which is supported by state-of-the-art technology architecture.

Centurion Bank of Punjab was formed by the merger of Centurion Bank and Bank of Punjab, both of

which had strong retail franchises in their respective markets. Centurion Bank had a well-managed

and growing retail assets business, including leadership positions in two-wheeler loans and

commercial vehicle loans, and a strong capital base. Bank of Punjab brings with it a strong retail

deposit customer base in North India in addition to a sizable SME and agricultural portfolio.

The shares of the bank are listed on the major stock exchanges in India and also on the Luxembourg

Stock Exchange. Among Centurion Bank of Punjab's greatest strengths is the fact that it is a

professionally managed bank with a globally experienced and capable management team. The day-

to-day operations of the bank are looked after by Mr. Shailendra Bhandari, Managing Director &

CEO, assisted by a senior management team, under the overall supervision and control of the Board

of Directors. Mr. Rana Talwar is the Chairman of the Board. Some of our major shareholders viz.

Sabre Capital, Bank Muscat and Keppel Corporation, Singapore are represented on the Board.

Bank of India

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The

Bank was under private ownership and control till July 1969 when it was nationalized along with 13

other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the

Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong



national presence and sizable international operations. In business volume, the Bank occupies a

premier position among the nationalized banks.

The Bank has 2644 branches in India spread over all states/ union territories including 93 specialized

branches. These branches are controlled through 48 Zonal Offices . There are 24 branches/ offices

(including three representative offices) abroad.

The Bank came out with its maiden public issue in 1997. Total number of shareholders as on

30/09/2006 is 2, 25,704.

While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of

introducing various innovative services and systems. Business has been conducted with the

successful blend of traditional values and ethics and the most modern infrastructure. The Bank has

been the first among the nationalized banks to establish a fully computerized branch and ATM

facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member

of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/

rating its credit portfolio.

The Bank's association with the capital market goes back to 1921 when it entered into an agreement

with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that

has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository

services to the stock broking community. Bank of India was the first Indian Bank to open a branch

outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974.

The Bank has sizable presence abroad, with a network of 23 branches (including three representative

offices) at key banking and financial centers viz. London, Newyork, Paris, Tokyo, Hong-Kong, and

Singapore. The international business accounts for around 20.10% of Bank's total business.

The Bank has a strong position in financing foreign trade. Over 270 branches provide export credit.

The expertise in this area has enabled the Bank to achieve a leading position in providing export

credit in certain areas like diamond export.

The Bank has identified specialized target groups to develop core advantage for future growth. The

Bank, has specialized branches comprising of Corporate Banking Branches to undertake very large

credit business, Overseas Branches specializing in Foreign Exchange Business, NRI Branches which

specially cater to the requirements of Non-Resident Indians, Capital Market Branches which

undertake all activities relating to capital market such as collection of applications, processing of

refund orders, Merchant Banking etc. Commercial & Personal Banking Branches cater to the

http://www.bankofindia.com/home/branchnetwork/listzonaloffice.aspx

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requirements of high net worth customers. Apart from this, the Bank also has specialized Branches

for Asset Recovery, Small Scale Industries, Hi-tech Agriculture Finance, Lease Finance and

Treasury.

To effectively meet the ever-growing challenges and competition, the Bank has made a good head-

way in bringing about technological up gradation. MIS and critical functions of controlling offices

have been computerized. At present, the operations at about 2618 branches are totally computerized.

26 branches operate in partially-computerized mode besides this 1019 branches and 31 extension

counters are migrated to Core Banking Solution. New facilities such as, Telebanking, ATM &

Signature Retrieval Systems have been introduced in a progressing manner to add value to services.

Telebanking facilities with Fax on Demand facility, Remote Access Terminals for Corporate

Customers are now available at many branches. The Bank has installed ATMs in Mumbai and other

centers in the country. The Bank is a member of the RBI's VSAT Network and has installed 39

VSATs linking strategic branches/offices. The Bank is making a paradigm shift from branch

automation to bank automation and is in the process of implementing a Multi-Branch Banking

Project that facilitates City-wise Connectivity of Computerized Branches. The Bank is in the process

of installing BOINET, a Wide Area Network for providing a inter- and intra-city connectivity, as a

part of enhancing its decision support system.

The Bank's corporate personality and philosophy are fully reflected in the emblem, which is a five-

pronged Star -- a harmonious blend of traditional and the functional. The elongated prong pointing

upwards conveys the Bank's drive to achieve ascending goals. The Star is a beacon and guide to

those in need of direction.

Bank of Baroda:

It has been a long and eventful journey of almost a century across 21 countries. Starting in 1908 from

a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, is a

saga of vision, enterprise, financial prudence and corporate governance.

It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital,

princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary

contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story

that needs to be shared with all those millions of people - customers, stakeholders, employees & the

public at large - who in ample measure, have contributed to the making of an institution.



Their mission is to be a top ranking National Bank of International Standards committed to

augmenting stake holders' value through concern, care and competence.

Analysis :





(Source: Business World, 28th November 2006)



Analysis is done on the above data published in Business World, 28th November 2006. The defining

feature of 2005-06 was the huge increase in bank credit, thanks to the booming economy and the

continued expansion of retail lending. At the same time, the growth in deposits was not enough to

fund the increase in loans, and the incremental credit-deposit ratio remained above 100 per cent for

most of the year; the result was a rise in deposit rates. Bond yields also moved upwards. The

performance of banks in 2005-06 accordingly depended on how well they were able to reinvent their

strategies to adjust to the new scenario.

The ranking of the listed banks indicate how well they managed these challenges. The best banks, for

instance, were those that not only registered strong growth- that was easy in a buoyant economy-but

those that also continued to do well on the safety, efficiency and profitability parameters. Of course,

all ranking based on operational parameters have an element of subjectivity – the real arbiter for

listed banks is the stock market. It is here that the new private sector banks scored heavily-almost all

of them ranked in the top 10 so far as valuations are concerned. At the same time, it would be unfair

to merely accept market valuations as the true measure of performance, simply because the market

puts a premium on private ownership.

That’s clearly brought out by the fact that, contrary to public perception, it is not just the new private

sector banks that are doing well. There are five public sector banks among the top 10. And it’s worth

mentioning that these banks have performed so admirably in spite of the fact that they operate with

many handicaps, such as strong unions and the inability to offer market salaries and incentives. That

they have put in such an excellent performance despite carrying the baggage of the past is extremely

creditable.

Punjab National Bank’s ratio of net non-performing assets (NPAs) to net advances is much better

than many private banks. Similarly, although public sector banks are burdened with huge workforce,

Corporation Bank’s profit per employee is better than those of several private banks. And in the area

of profitability, public sector bank State Bank of Bikaner and Jaipur’s net interest margin is better

than that of many private banks.

Again, an old private sector bank, Federal Bank, has shown the biggest improvement, climbing 10

places from 24th rank in 2005 to 14th in 2006. Putting it simply, there are good and not so-good

performers among all categories of banks. HDFC Bank’s achievement is that it has secured first

place in both 2005 and 2006. This is the kind of consistent performance that has earned it such a high

valuation in the stock market.





History of IndusInd Bank

IndusInd Bank derives its name and inspiration from the Indus Valley civilization - a culture

described by National Geographic as 'one of the greatest of the ancient world' combining a spirit of

innovation with sound business and trade practices.

Mr. Srichand P. Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja

Group, conceived the vision of IndusInd Bank - the first of the new-generation private banks in India

- and through collective contributions from the NRI community towards India's economic and social

development, brought our Bank into being.

The Bank, formally inaugurated in April 1994 by Dr. Manmohan Singh, Honourable Prime Minister

of India who was then the country’s Finance Minister, started with a capital base of Rs.1, 000 million

(USD 32 million at the prevailing exchange rate), of which Rs.600 million was raised through

private placement from Indian Residents while the balance Rs.400 million (USD 13 million) was

contributed by Non-Resident Indians.

Mission

To emerge as an international bank with traditional roots

To acquire global capabilities

To provide world-class services

To maintain the highest standards of professionalism and integrity

Important Milestones

2005-06

Ranked among the top ten banks in the country in the ET500 list of leading companies in India.

Rated as “The best among the top 10 private-sector banks” in a survey covering 79 banks

conducted by Business Standard in its November 2005 issue. Ranked sixth in the overall list, the

Bank was also identified the “Most Efficient Bank” among all banks in India.

Bestowed “India’s Most Productive Bank” status by a Business Today- KPMG Survey



Presented “Outstanding Achiever of the Year 2005- Corporate” (Runner up- Banking

Technology Award) by IBA, Finacle (from Infosys) and TFCI (Trade Fair and Conference

International).

Honoured with the “Award for Corporate Social Responsibility (CSR)” at the India Brand

Summit 2005, Mumbai.

2004-05

Business Turnover crossed Rs. 22000 crores

Network grew to 115 branches, 9 extension counters and 195 ATMs, spread over 95

geographical locations.

Bestowed with highest ratings for deposits from reputed rating agencies

o Highest rating “P1+” - on Fixed Deposits from CRISIL

o Highest rating “P1+” - on Certificate of Deposits from CRISIL

o Highest rating “F1+” - on Certificate of Deposits from Fitch Ratings India Pvt. Ltd.

2003-04

Total business volume touches Rs. 19,000 crores.

Completes 10 years of banking excellence.

Ashok Leyland Finance merges with the Bank.

The first Indian Commercial Bank to achieve certification for its “Entire Network of

Branches” under the ISO 9001:2000 Quality Management System.

Launch of Debit Card- International Power Card.

Bank’s first International Representative Office in Dubai.

One of the first banks to go live on RTGS platform

2002-03

One of the first banks to implement the RBI- Electronic Funds Transfer scheme

2001-02

Total business volume touches Rs. 14,000 crores. Highest productivity in the Indian banking

sector with Rs. 16 crores of business per employee.



2000-01

Total business volume crosses Rs. 10,000 crores

1998-99

IndusInd again rated as one of the Top Performing Banks in various survey reports, for the

second year in succession

1997-98

IndusInd rated as one of the Top Performing Banks in various survey reports.

1996-97

Pioneer in launching Internet Banking

1994-95

IndusInd Bank comes into existence. Completes first profitable year of operations.

Board of Directors

Dr. Ram Buxani Prominent NRI from Dubai.

Mr. R. Sundararaman A Professional Banker

Mrs. Kanchan U. Chitale A Chartered Accountant

Mr. T. Anantha Narayanan Retired Banker and Expert in Agriculture & Rural Economy

Dr. T. T. Ram Mohan Professor, Finance & Accounting

Mrs. Pallavi S. Shroff Practising Lawyer

Mr. Premchand Godha Managing Director of Ipca Laboratories Ltd., having

practical experience of SSI and Agriculture.

Mr. Ajay Hinduja Businessman



Core Team

Mr. Bhaskar Ghose Managing Director

Mr. S Nagarajan Joint Managing Director

Current Position of IndusInd Bank

The merger with the Bank in June 2004 of Ashok Leyland Finance Ltd., among the largest leasing

finance and hire purchase companies in India, set in motion a process of consolidation through the

combined customer base of the merged entity and its increased geographical penetration. IndusInd

Bank has become one of the fastest-growing banks in the Indian banking sector today with its branch

network expanding from 61 as on March 31, 2004 to 137 as on March 31, 2006 – reflecting an

increase in excess of 125% in 24 months. The Bank has approximately 150 ATMs of its own, and

has concluded multilateral arrangements with other banks with a total network of 15,000 ATM

outlets. All the outlets of the Bank, including its branches and ATMs, are connected via satellite to

its central database that operates on the latest version of IBM’s AS400-720 series hardware and

Midas Kapiti (now, Misys) software.

IndusInd Bank’s broad lines of business include Corporate Banking, Retail Banking, Treasury and

Foreign Exchange, Investment Banking, Capital Markets, Non-Resident Indian (NRI) / High

Networth Individual (HNI) Banking, and (through a subsidiary) Information Technology.

IndusInd Bank provides multi-channel facilities including ATMs, Net Banking, Mobile Banking,

Phone Banking, Multi-city Banking and International Debit Cards. It was one of the first banks to

become a part of RBI’s Real Time Gross Settlement (RTGS) system. It has implemented an

enterprise-wide risk management system encompassing global best practices in the area of Risk

Management, with help from KPMG. This has enabled the Bank to remain in the forefront in

complying with the requirements of Basel II. It is the first bank in India to receive ISO 9001:2000

certification for its Corporate Office and its entire network of branches.

With its roots in Indian tradition and emphasis on customer care, IndusInd Bank’s service philosophy

is well reflected in the communication tagline “We Care… Dil Se”.



Services and Its Performance

Retail Banking:

The effect of the new branches opened during the preceding financial year has been distinctly visible

in retail banking business. Retail customer base of the bank ( in respect of deposits ) has improved

from 3.40 lakh to 4.80 lakh during the current financial year, recording a growth of 41%. Retail

deposits have moved from Rs. 2550 crores to Rs. 4045 crores with a growth of 58.63%. The share of

Current Accounts and Savings Accounts (CASA) has increased from 11% to 13% of the total

deposits. On retail advances front (excluding vehicle loans), the bank has shown a growth of 107% ,

i.e., from Rs. 574 crores to Rs. 1105 crores.

During the current financial year, Bank has introduced several new products such as – ‘Indus

Suraksha’ (Insurance linked Current and Saving Bank Accounts), ‘Young Saver Deposit’, ‘Indus

Easy Saving’ (No frills Savings Bank Account), Card-to-Card domestic funds transfer facility, etc.

The retail banking customers are provided with the facility of on-lint shopping. For distribution of

mutual funds products to its customers, Bank has entered into arrangements with 27 leading AMCs.

Distribution of life and non-life insurance products has augmented the fee-based income of the bank.

Tie-ups for access to ATM networks have been finalized with State Bank of India, MITR network

and NFS Network, whereby 45% of the ATM population of the country in accessible to the

customers of the Bank.

NRI Business has been one of the focus areas of the Bank since inception. Your Bank offers non-

discretionary Portfolio Investment Services to NRIs enabling them to participate in the Indian capital

market. The strategic alliances with Doha Bank, Qatar and Union National Bank, UAE would

accelerate the growth of NRI business of the Bank. HNI Banking has been another thrust area during

the year, and the Bank has introduced special products and services for catering to the segment.

Vehicle Finance & Personal Products:

The bank has a robust infrastructure to cater to financing of motor vehicles - commercial and

personal. Apart from their vehicle finance needs, other personal finance requirements of these

customers are also catered to through this set-up. A massive processing and document warehousing



centre located at Karappakkam near Chennai, attends to processing and documentation of these

loans.

Disbursements of two-wheeler loans increased to Rs. 675 crores representing a growth of 12% over

last year. The number of accounts has swelled from 2, 00,000 registering a growth of 15%. In the car

loan segment, the disbursement was Rs. 634 crores as against Rs. 345 crores during the preceding

year and correspondingly, the number of accounts increased by 45% to 21,000 from 14,460.

The quality of service to the customers as well as the back office facilities have been extensively

improved resulting in enhanced customer satisfaction.

Priority Sector Banking:

Priority Sector advances aggregated Rs. 3173.16 crores at the end of March 2006 and represented

35.13% of your Bank’s Net Bank Credit (NBC) compared to 34.94% at the end of March 2005.

During the year, your Bank financed over 16200 agriculturists and direct agriculture advances

represented 7.34% of its NBC at the end of March 2006. Other priority sector advances such as

finance to Small Road Transport Operators and Individual Loans witnessed growth over the previous

year.

Investment Banking:

During the year, Bank set up an Investment Banking Division to seize the significant opportunities

opening up on this front and enhance fee-based income, as also to help in the growth of corporate

banking business. The division, manned by a team of experienced professionals, has been bolstered

further through alliances with USA and Europe-based investment banks. Bank picked up several

important investment banking assignments during the year, domestic as well as cross-border, relating

to M&A, structured debt syndication, corporate advisory, equity placement, etc.

Transaction Banking Business:

The Bank is alive to the immense opportunities that exist in the area of transaction banking and have

taken effective steps to capture business related to the same. Cash Management, introduced recently

by the Bank, is a step in this direction. There are also other products in this segment, like remittance

through RTGS, anywhere banking, etc., all of which have been built on the strength of technology.



Asset Management:

The Bank continued is an effective effort for recovery of NPA / Written Off accounts using the

forum of Debt Recovery Tribunal (DRT), the provisions of Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, and other remedies

available to the banks.

As a result of continuous efforts to improve the asset quality, and to recover NPAs, the ratio of net

NPAs has come down to 2.09% at year-end compared to 2.71% at the beginning of the year.

Wholesale Banking:

With twin objective of meeting growing market competition and improving customer profitability,

Bank has restructured its wholesale business operations into separate vertical business lines,

consisting of four Strategic Business Units (SBU) viz.,

Corporate Banking Division

Capital & Commodities Markets Division

Treasury & Investments Division

International Division

Corporate Banking Division (CBD):

The division caters to the banking and financial needs of Corporates & Institutions, Small &

Medium Enterprises, Co-operative Banks, and Financial Institutions. The objective is to enlarge,

broad base and build granular relationship team and Product specialists has been put in place - at

National level and branch level – thereby increasing the feet-on-street sales force for customer

acquisition. The objective is also to service the full value chain of customer requirements and

enhancing customer profitability through zero cost Current Account balances and non-interest

income. This division also aggressively cross-sells retail products to the employees of corporate

entities.

A customer-focused structure as described has enabled a significant increase in corporate business;

however, its full benefit will accrue from the following year onwards. The deposits of CBD grew

during the year by 8% from Rs. 7372 crores to Rs. 7992 crores. The advances portfolio, that was



churned to reduce low yielding assets, stood at Rs. 4473 crores at year-end against Rs. 6814 crores at

the beginning of the year.

Treasury & Investments Division (TID):

Treasury continued to remain an active participant in the market during the year under review. The

Bank has a fully integrated dealing room based on functions rather than the markets - Foreign

Exchange, Domestic Money, Domestic Money, Commodities and Capital Markets. Accordingly,

RID has Three distinct sections viz.,

Corporate desk, catering to the needs of the corporates and branches

Trading desk, engaged in trading in the above said markets

Balance Sheet desk, managing the resource, to meet the statutory requirements of maintaining

CRR/SLR, Non-SLR investments, besides managing the liquidity and ALM functions.

The Corporate desk provides advisory services to the Bank’s clients who run multi-currency balance

sheets, to hedge interest and exchange rate risks. The aggressive positioning in International Trade

Finance, Letters of Credit, Export Finance and bullion consignment business has helped to achieve a

52% growth in foreign exchange turnover from Rs. 14,883 crores to Rs. 22,605 crores. Bank

provides investment advisory services covering Government and Corporate Debts through

Constituent SGL accounts. Bank continues to do well in the bullion consignment business and

registered a turnover of Rs. 2500 crores on sale of around 40 tones of gold.

Activity at the Trading desk was low key in the absence of opportunities in the fixed income and

derivatives segment. Hardening interest rate scenario, with benchmark 10Y yield moving from

6.70% to 7.55%, did not provide opportunity to stay invested for appreciation, However, the trading

desk managed to achieve reasonable profit from foreign exchange currency trading activity and from

corporate cover operations.

The balance Sheet desk managed the liquidity and ALM position efficiently even during tight

liquidity conditions. The average market borrowing for the year was Rs. 440 crore at 6.02%, which

helped in reducing the average cost of funds. Bank has achieved an optimum immunity in the

investment portfolio from interest rate risks with Rs. 3650 crore in HTM portfolios and the balance

of Rs. 366 crore in AFS/ HFT portfolio with duration of 1.41 years. Despite this, the yield on total

SLR investments improved from 5.78% to 7.12% during the year under repot.



Capital and Commodities Markets Division (CCMD):

The CCMD is focused on providing services to Capital and Commodities market participants

covering broker relationships and individuals. Bank’s Fort branch is the all-India nodal branch for

this purpose. Bank is one of the few banks enjoying the Clearing and Settlement bank status with all

the four principal stock and commodity exchanges of the country, viz. NSE, BSE, NCDEX and

MCX. During the year, Bank also became an empanelled Depository Participant for both NSDL and

CDSL, thereby offering DP services to both commodities and securities segments. Bank now offers a

complete range of facilities covering fund-based credit, non-fund based credit, end-to-end

collection/payment solutions to members and participants of the said four exchanges. Bank is also

registered as a debenture trustee for providing this service for corporate customers.

Bank has launched e-broking through Payment Gateway technology with select brokers to facilitate

provision of thee-in-one account facility to the customers, and to enable them to undertake on-line

trading equity market.

Bank also concluded arrangement with seven Mutual Funds offering direct credit facility for

redemption and income distribution. This arrangement, business enhancing Bank’s ability to cross-

sell mutual fund schemes, greatly adds to customer convenience.

International Division (ID):

This division performs a dual task of controller and facilitator of international business across the

branch network. While the branches with authorized dealer status have dedicated Forex desks,

operations of ‘C’ category branches are centralized at ID. ID also acts as one-point contact for our

representative offices in Dubai and London for business and operational matters.

This division is actively involved in product development and in creation of new business lines.

Some notable developments are provision of on-line, real-time NRI remittance products in tie-up

with Exchange Houses (covering GCC) and with Bank of New York (for USA). Similar tie-ups are

being considered to cover UK, Europe, South East Asia and Africa to achieve a global coverage.

‘Suvarna Mudra’ – retail sale of gold coins and provision of metal loans to the wholesale and retail

jewelers are some of the products initiated by ID. Bank currently has a global correspondent network

with 325 banks and also has adequate lines of credit to support its Trade Finance and Foreign

Exchange business







INTRODUCTION

A sound financial system is essential for a healthy and vibrant economy. The banking sector

constitutes a predominant component of the financial services industry and the performance of any

economy, to a large extent, is dependent on the performance of banks. Banking institutions in our

country have been assigned a significant role in financing the process of planned economic growth.

In 1969, fourteen banks were nationalized with the objectives of extending the credit facilities to all

segments of the economy and also to mitigate seasonal imbalances in its availability. Since

nationalization the banking system of India has witnessed structural and dimensional changes. A

number of steps were taken in close succession, enabling the nationalized banks to play an active

role in economic development. The second step in the process of nationalizing the banks was taken

in 1980, when six other major banks were nationalized. Directed interest rates on deposits and

lending, exchange controls, directed credit became hallmark of this tightly regulated new structure.

Following the balance of payments crisis in 1991-92, wide ranging reforms were initiated in almost

all the spheres of the economy including real sector, external sector, agricultural and industrial

sector, macro-economic policy, public sector disinvestment etc. The objectives of the financial sector

reforms were to bring about greater efficiency and competitiveness in all the spheres of the economic

activity.

A decade and a half have gone since the initiation of banking sector reforms in India. Over this

period, the Indian banking sector has experienced a paradigm shift. Hence, it is high time to make

performance appraisal of this sector. It is against the above background that the present study has

been conducted. A study such as this is important because enhancing performance of banks has been

the key objective of financial sector reforms in many countries. And India is not the exception to the

above.

The issues that I have addressed in this study are: How the banks (i.e. public and private sector) have

fared in the four years of twenty first century? Is there any significant variation between the

performances of these banks? Whether the performance of these four banks in terms of various

parameters such as Capital Adequacy, Assets Quality, Management Efficiency & Liquidity have

improved in the recent Past?



RESEARCH PROBLEM:

Evaluation of the performance of selected Private Banks and Nationalized Bank by

Camel Model

OBJECTIVES:

1. To know the financial efficiency of selected Banks.

2. To analyzed any significant variation between the performances of these banks

3. To examine the performance of these four banks in terms of various parameters such as

Capital Adequacy, Assets Quality, Management Efficiency & Liquidity have improved in the

Recent past.

4. To summarize the main findings of the study by offering suitable suggestions

5. To find out the financially strong and weak points of selected Banks.

HYPHOTHESIS FOR THE RESEARCH:

(1) The Null Hypothesis (H0):

“The performance of Private Banks is better than Nationalized Banks”

(2) The Alternate Hypothesis (H1):

“The performance of Nationalized Banks is better than Private Banks”

SCOPE OF THE STUDY:

1. The scope of this research is limited to selected four banks.

2. This research will be helpful to banks while doing competitors analysis.

3. This will help the banks to frame effective Financial Strategy.

DATA COLLECTION:

REVIEW OF LITERATURE AND PROBLEM STATEMENT

Basel II accord is already in vogue for implementation by March 2007. The accord stands on three

pillars: (a) Risk Management, (b) Supervisory Function, (iii) Discipline. The supervisory strategy in

India at present comprises both off-site surveillance and on-site inspections and control system



internal to banks. A detailed off-site surveillance system based on ‘prudential' supervisory reporting

framework on a quarterly basis covering capital adequacy, asset quality, loan concentration,

operational results and connected lending has been made operational. This is combined with a

verification of prudent practices and financial condition of banks through on-site examination. The

approach to on-site inspection of banks in accordance with the recommendations of the

Padmanabhan Working Group (1995) has been adopted from the cycle of inspections commencing

July 1997. It focuses on the mandated aspects of solvency, liquidity, financial and operational

health, based on a modified version of the CAMEL model viz., CAMELS, which evaluates banks'

Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Systems and Control,

shedding the audit elements under the existing inspection system.

Padmanabhan Working Group (1995), on On-Site Supervision in its report recommended for

supervisory interventions and introduction of a rating methodology for banks on the lines of CAMEL

model with appropriate modification to suit Indian conditions. The Working Group has

recommended six rating factors namely- Capital Adequacy, Assets Quality, Management, Earnings,

Liquidity, Systems and Controls (i.e. CAMELS) and for Foreign Banks four rating factors, namely –

Capital Adequacy, Assets Quality, Compliance, Systems and Controls (i.e. CACS). Narasimham

Committee (1998) made several important recommendations like introduction of internationally

accepted prudential norms relating to income recognition, assets classification, provisioning and

capital adequacy. Accordingly, a framework for the evaluation of the current strength of the system

and of the operations and performance of banks has been provided by Reserve Bank’s measuring rod

of “CAMELS” which stands for Capital Adequacy, Assets Quality, Management, Earnings,

Liquidity and internal Control Systems.

Thus the present supervisory system in banking sector is a substantial improvement over the earlier

system in terms of frequency, coverage and focus as also the tools employed. Nearly one-half of the

Basle Core Principles for Effective Banking Supervision has already been adhered to and the

remaining is at different stages of implementation. Two Supervisory Rating Models based on

CAMELS and CACS (Capital adequacy, Asset quality, Compliance and Systems) factors for rating

of Indian commercial banks and foreign banks operating in India respectively, have been worked out

on the lines recommended by the Padmanabhan Working Group (1995). These ratings would enable

the Reserve Bank to identify the banks whose condition warrants special supervisory attention.

To build the conceptual framework for the application of CAMEL Model we may draw on the

following literature:



Barr and Siems (1996) tried to predict bank failures in US, using the data from December 1984 to

June 1987 using CAMEL Model. They used technical efficiency measure using DEA in their

prediction model. Along with their DEA results which represent Management Quality “M” in the

CAMEL rating, they used financial ratios representing soundness of Capital, Asset Quality, Earnings

and Liquidity. They found that using the DEA Efficiency Score in the regression increased the

accuracy of the classification results from 89% to 92.4% and the new model was superior to the

earlier early-warning models.

Godse (1996) examined the application of new model CAMEL i.e. “Capital Adequacy, Assets

Quality, Management, Earning Quality, Liquidity, Systems and Control” for evaluating the

performance of banks.

Rao and Datta (1998) made an attempt to derive rating based on CAMEL. In their study, based on

these five groups (C-A-M-E-L), in all 21 parameters were developed. After deriving separate rating

for each parameter a combined rating was derived for all nationalized banks (19) for the year 1998.

The study found that Corporation Bank has the best rating followed by Oriental Bank of Commerce,

Bank of Baroda, Dena Banks and Punjab National Bank etc. And the worst rating was found to be of

Indian Bank preceded by UCO Bank, United Bank of India, Syndicate Banks and Vijaya Bank.

Prasuna (2004) analyzed the performance of Indian banks by adopting CAMEL Model. The

performance of 65 banks was studied for the period 2003-04. The author concluded that the

competition is tough and consumers are benefited from it. Better services quality, innovative

products, better bargains are all greeting the Indian customers. The coming fiscal will prove to be a

transition phase for Indian banks, as they will have to align their strategic focus to increasing interest

rates.

Veni (2004) studied the capital adequacy requirement of banks and the measures adopted by them to

strengthen their capital ratios. The author highlighted that the rating agencies give prominence to

Capital Adequacy Ratios of banks while rating the bank’s certificate of deposits, fixed deposits and

bonds. They normally adopt CAMEL Model for rating banks. Thus Capital Adequacy is considered

as key element of bank rating.

Satish, Jutur and Surender (2005) adopted CAMEL model to assess the performance of Indian

banks. The author analyzed the performance of 55 banks for the year 2004-05 by using CAMEL

Model. They concluded that the Indian Banking system looks sound and Information Technology



will help the banking system grow in strength going into future. Banks Initial Public Offer will be

hitting the market to increase their capital and gearing up for the Basel II norms.

The period for evaluating performance through CAMEL in this study, ranges from 2002-03 to 2005-

06 i.e. for 4 years. The data is collected from various sources such as Annual Reports of the Banks,

Indian Banking Association Journal, Reserve Bank of India (RBI) Bulletin, Journal of Banking

Studies, Journal of Accounting and Finance and Indian Journal of Commerce. Internet has been an

important source of secondary data. The site assessed for this research is www.rbi.org.in.

CAMEL MODEL

C- Capital Adequacy - Capital Adequacy Ratio

- Debt-Equity Ratio

- Advances to Assets

- G-Secs to Total Investments

A- Assets Quality - Gross NPAs to Net Advances

- Net NPAs to Net Advances

- Total Investments to Total Assets

- Percentage change in Net NPAs

- Net NPAs to Total Assets

M- Management - Profit per Branch

- Total Advances to Total Deposits

- Business per Employee

- Profit per Employee

E- Earning Quality - Operating Profits to Average Working Funds

- Percentage Growth in Net Profits

- Spread

- Net Profit to Average Assets

- Interest Income to Total Income

- Non-Interest Income to Total Income

L- Liquidity

- Liquid Assets to Total Assets

- G-Secs to Total Assets

- Liquid Assets to Demand Deposits

- Liquid Assets to Total Deposits

http://www.rbi.org.in/



CAPITAL ADEQUACY:

It is important for a bank to maintain depositors’ confidence and preventing the bank from going

bankrupt. Capital is seen as a cushion to protect depositors and promote the stability and efficiency

of financial system around the world. Capital Adequacy reflects the overall financial condition of the

banks and also the ability of the management to meet the need for additional capital. It also indicates

whether the bank has enough capital to absorb unexpected losses. Capital Adequacy Ratios acts as

indicators of bank leverage. The following ratios measure Capital Adequacy:

Capital Adequacy Ratio (CAR):

The banks are required to maintain the Capital Adequacy Ratio (CAR) as specified by RBI from time

to time. As per the latest RBI norms, the banks in India should have a CAR of 9 percent. It is arrived

at by dividing the sum of Tier-I, Tier-II and Tier-III capital by aggregate of Risk Weighted Assets

(RWA). Symbolically:

CAR= (Tier-I + Tier-II + Tier-III)/RWA

Tier-I capital includes equity capital and free reserves.

Tier-II capital comprises of subordinate debt of 5-7 years tenure, revaluation reserves, general

provisions and loss reserves, hybrid debt capital instruments and undisclosed reserves and

cumulative perpetual preference shares..

Tier-III capital comprises of short-term subordinate debt.

The higher the CAR, the stronger is considered a bank as it ensures high safety against bankruptcy.

Capital to Risk weighted Assets Ratio of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06

Average

ICICI Bank 13.5 13.53 12.45 11.88 12.84

SBI Bank 11.1 10.36 11.78 13.35 11.65

IndusInd Bank 12.13 12.75 11.62 10.54 11.76

Dena Bank 6.02 9.48 11.91 10.62 9.51



0

2

4

6

8

10

12

14

Ratio

ICICI

Bank

SBI

Bank

IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

As per the latest RBI norms, the banks in India should have a CAR of 9%. Table prescribed that all

banks capable enough to maintain 9% during last 4 years except in 2002-03 while Dena bank can’t

maintain that but it shows healthy improvement in 2003-04 than last year. Here all banks shows

fluctuation in marinating but all have the good margin than required. The higher the CAR, the

stronger is considered a bank as it ensures high safety against bankruptcy. So we can say that ICICI

is highest CAR from 2002-03 to 2004-05 but in last year SBI takes its position by marinating CAR

13.35%.

Debt-Equity Ratio:

This ratio indicates the degree of leverage of a bank. It indicates how much of the bank business is

financed through debt and how much through equity. This is calculated as the proportion of total

outside liability to net worth. Outside Liabilities includes total borrowings, deposits and other

liabilities. Net Worth includes equity capital and reserves and surplus. Higher ratio indicates less

protection for the creditors and depositors in the banking system.

Debt-Equity Ratio (times) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 11.32 11.82 10.34 12.19 11.42

SBI Bank 17.75 16.41 16.04 15.03 16.31

IndusInd Bank 6.48 17.85 17.84 19.5 15.38

Dena Bank 19.19 20.00 20.77 18.82 19.70



0

5

10

15

20

25

Ratio

ICICI Bank SBI Bank IndusInd

Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

Higher ratio indicates less protection for the creditors and depositors in the banking system. Here al l

the four banks are marinating the below 50, it indicates that all banks are not over leveraged. Dena

bank is marinating higher than the other banks means it is not giving secure than other banks.

Advances to Assets Ratio:

This is the ratio of the Total Advances to Total Assets. This ratio indicates a bank’s aggressiveness in

lending which ultimately results in better profitability. Higher ratio of advances/deposits (assets) is

preferred to a lower one. Total advances also include receivables. The value of Total Assets is

excluding the revaluation of all the assets.

Advances to Assets Ratio (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 49.88 49.59 54.52

55.03 52.26

SBI Bank 36.65 38.73 44.01

45.63 41.26

IndusInd Bank 54.01 48.40 57.61

52.83 53.21

Dena Bank 41.83 42.47 47.06 53.61 46.24



0

10

20

30

40

50

60

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

In the year 2004-05 IndusInd bank is highest by providing 57.61% advances against the assets, while

in the next year ICICI took its place by 55.03%. Here, we can interprete that private banks are

aggressive in lending than nationalized banks which ultimately give the higher profitibality.

Government Securities (G-Secs) to Total Investments:

The percentage of investment in government securities to total investments is a very important

indicator which shows the risk-taking ability of the bank. It indicates a bank’s strategy as being high

profit- high risk or low profits-low risk. It also gives a view as to the availability of alternative

investment opportunities. Government Securities are generally considered as the most safe debt

instrument, which as a result carries the lowest return. Since government securities are risk free, the

higher the G-Secs to investment ratio, the lower the risk involved in a bank’s investments.

G-sec to Total Investment Ratio (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 72.05 69.96 68.31 69.53 69.96

SBI Bank 83.61 84.85 87.24 88.19 85.97

IndusInd Bank 79.68 84.10 83.68 84.72 83.05

Dena Bank 70.34 78.07 81.97 82.03 78.10



0

20

40

60

80

100

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

This ratio indicates many things that strategy of the banks, risk taking capacity and profitability.

ICICI bank and Dena bank follow the high profit - high risk strategy, while SBI bank and IndusInd

bank ICICI bank and Dena bank follow the low profit – low risk strategy. SBI bank gives the highest

safety than the other banks but with low return. We can say that SBI and IndusInd bank is more

conservative than the ICICI bank and Dena bank. In the year 2004-05 SBI bank is highest by

investing 88.19% in government security , the highest fluctuation shows in year 2003-04 in Dena

bank from 70.34% to 78.07% and IndusInd bank from 79.6% to 84.10%.

ASSETS QUALITY:

The quality of assets is an important parameter to gauge the strength of the bank. The prime motto

behind measuring the assets quality is to ascertain the component of non-performing assets (NPA) as

a percentage of the total assets. This indicates what types of advances the bank has made to generate

interest income. Thus, assets quality indicates towards the type of the debtors the bank is having. The

following ratios are necessary to assess assets quality:

Gross NPAs to Net Advances:

It is a measure of the quality of assets in a situation, where the management has not provided for loss

on NPAs. Here the Gross NPAs are measured as a percentage of Net Advances. The lower the ratio,

the better the quality of advances.



Gross NPAs to Net Advances Ratio (%) of Selected Banks

0

5

10

15

20

Ratio

ICICI BankSBI Bank IndusInd

Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

Data describe that IndusInd bank and ICICI bank give better quality of advances than other banks

which interprets that quality of assets is better with private banks than nationalized banks.

Net NPAs to Net Advances:

It is most standard measure of assets quality. In this ratio, Net NPAs are measured as a percentage of

Net Advances. Net NPAs are Gross NPAs net of provisions on NPAs and interest in suspense

account

Net NPAs to Net Advances Ratio of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 9.44 4.91 3.03 4.83 5.55

SBI Bank 9.80 8.02 6.15 7.05 7.76

IndusInd Bank 4.98 3.55 3.56 2.89 3.75

Dena Bank 19.16 15.77 6.67 10.15 12.94

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 5.21 2.21 1.65 0.72 2.45

SBI Bank 4.5 3.48 2.65 1.48 3.03

IndusInd Bank 3.18 2.9 1.78 1.37 2.31

Dena Bank 2.31 2.97 1.35 1.83 2.12



0

1

2

3

4

5

6

Ratio

ICICI

Bank

SBI

Bank

IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

The above Data describes that ICICI bank has better results of Net NPA’s to Net advances than other

banks which interprets that quality Net Profitability and Productivity is far better than any other

Bank. This Ratio is more accountable especially for any Bank in this Competitive era especially in

Cooperative Banks, like few Bank has started to be Accountable with Zero Net NPA.

Total Investments to Total Assets Ratio:

Total investment to total assets indicates the extent of deployment of assets in investment as against

advances. This ratio is used as a tool to measure the percentage of total assets locked up in

investments, which by conventional definition, does not form part of the Core Income of a bank. A

higher level of investment means lack of credit off-take in the economy. This ratio is calculated by

dividing total investments by total assets of a bank. A higher ratio means that the bank has

conservatively kept a high cushion of investments to guard against NPAs. However, this affects its

profitability adversely.

Total Investments to Total Assets Ratio (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 33.20 34.13 30.11 32.15 32.40

SBI Bank 45.85 45.53 42.86 43.65 44.47

IndusInd Bank 25.60 30.19 26.05 30.70 28.14

Dena Bank 42.16 43.94 40.36 32.29 39.69



0

10

20

30

40

50

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

SBI and Dena bank invest more to manage NPA but it cause the lack of credit off-take and ultimately

it affects the profitability of the bank. SBI invest highest than other banks in last 4 years but it give

more safety. The Result shows high ratio for SBI due to Government Sector Bank, while the same is

very low for Private Sector Bank.

Percentage change in Net NPAs:

It is very important indicator of the way the bank is working on the recovery of its NPAs or writing

off these NPAs and improving the balance sheet. This measure presents the movement in Net NPAs

on year-to-year basis. The lower the percentage change, the better the quality of assets. It is given by

the following formula:

Net NPAs at the beginning _ Net NPAs at the end

% Change in Net NPAs = of the year of the year

_________________________________________

Net NPAs at the beginning of the year



Percentage change in Net NPAs Ratio (%) of Selected Banks

-60

-40

-20

0

20

40

Ratio


Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From the table we can say that SBI bank is improving its balance sheet by year-to-year basis and

quality of the assets of SBI bank is better than other banks because the changes in net NPA is very

low. While the IndusInd bank and ICICI bank can not manage its NPA properly, it fluctuates very

highly.

Net NPAs to Total Assets:

This ratio indicates the efficiency of the bank in assessing credit risk and to an extent recovering the

debts. This ratio is arrived by dividing the Net NPAs by Total Assets. Total assets considered are net

of revaluation reserves. Lower the ratio better is the performance of the bank.

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank -49.61 5.76 30.06 -4.60

SBI Bank 9.21 11.98 1.71 8.27 7.79

IndusInd Bank 38.08 6.59 -15.04 20.18 12.45

Dena Bank 10.59 11.32 33.17 26.76 20.46



Net NPAs to Total Assets Ratio (%) of Selected Banks

0

1

2

3

4

5

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From data we can interpret that SBI bank is capable enough to assess credit risk and to an extent

recover the debts, while Dena bank is not so capable. From the year 2002-03 ICICI bank and

IndusInd bank improving in performance , it can be judge by data that ratio is decreasing every year .

Here we can tell that all banks are capable enough to manage credit risk and to recover but than also

in year 2002-03 Dena bank performance was some what poor.

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 2.64 1.14 0.90 1.23 1.48

SBI Bank 1.64 1.33 1.16 1.19 1.33

IndusInd Bank 2.80 1.41 1.56 1.11 1.72

Dena Bank 4.95 3.99 2.46 1.63 3.26



MANAGEMENT EFFICIENCY:

Management efficiency is another important element of the CAMEL Model. The ratios in this

segment involve subjective analysis to measure the efficiency and effectiveness of management. The

management of the bank takes crucial decisions depending on its risk perception. It sets vision and

goals for the organization and sees that it achieves them. This parameter is used to evaluate

management efficiency as to assign premium to better quality banks and discount poorly managed

ones. The ratios used to evaluate management efficiency are described as under:

Profit per Branch:

This ratio measures the efficiency of the employees at the branch level. It also gives valuable inputs

to assess the real strength of a bank’s branch network. The higher the ratio, the higher the efficiency

of management. However, it is advisable to look at the number of branches too, as a bank with fewer

branches can figure among the top players in this category despite earning a lower net profit.

Profit per Branch Ratio (Lakhs) of Selected Branch

050

100150200250300350400

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 34.23 40.42 46.99 47.54 42.30

SBI Bank 330.41 390.69 386.32 385.62 373.26

IndusInd Bank 49.26 53.19 54.36 57.12 53.28

Dena Bank 146.94 152.64 155.36 159.19 153.53



Analysis:

SBI’s performance is best from last year than the other banks, it gives average Rs 373.26 lakhs while

comparatively, ICICI bank’s performance is very poor. So, we can predicate that nationalized bank’s

performance is better than the private bank.

Total Advances to Total Deposits:

This ratio measures the efficiency and ability of the bank’s management in converting the deposits

available with the bank (excluding other funds like equity capital etc) into high earning advances.

Total Deposits include demand deposits, saving deposits, term deposits and deposits of other banks.

Total Advances also includes the receivables.

Total Advances to Total Deposits Ratio (%) of Selected Banks\

0

20

40

60

80

100

120

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From the above data we can tell that SBI bank has better capacity to convert deposits into advances,

it gives higher profit than the other banks. Data shows that ICICI bank and Dena bank is trying to

perform well from year-to-year basis. In 2005-06, the performance of IndusInd bank was lower than

previous year; it decreases from 68.53% to 62.01%. While ICICI bank and Dena bank’s performance

is similar in last year.

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 46.52 49.57 55.24 54.23 51.37

SBI Bank 110.61 91.17 91.57 92.15 96.38

IndusInd Bank 62.20 65.19 68.53 62.04 64.52

Dena Bank 51.15 51.29 54.12 60.24 54.20



Business per Employee:

This ratio shows the productivity of human forces of the bank. It is used as a tool to measure the

efficiency of all the employees of a bank in generating business for the bank. It is arrived at by

dividing the total business by total number of employees. Higher the ratio better it is for the bank. By

business we mean the sum of Total Deposits and Total Advances in a particular year.

Business per Employee Ratio (Lakhs) of Selected Banks

0

24

6

810

12

14

Ratio

ICICI

Bank

SBI Bank IndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

This ratio shows the ability of employee to take business in the bank, data shows that both IndusInd

bank and ICICI bank’s employee gives better business than the Dena bank and SBI bank. In the year

2002-03, IndusInd bank gives highest business than other bank. The performance of private bank is

better than public bank just because of the efficiency and ability of employees. While SBI and Dena

bank are trying to perform good, its business year to year increase while ICICI and IndusInd

performance year by year decrease.

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 11.2 10.10 8.80 9.05 9.79

SBI Bank 1.91 2.10 2.43 2.99 2.36

IndusInd Bank 12.84 10.80 9.26 8.80 10.43

Dena Bank 2.42 2.74 3.13 3.64 2.98



Profit per Employee:

This ratio shows the surplus earned per employee. It is arrived at by dividing the Profit after Tax

(PAT) earned by the bank by total number of employees. Higher the ratio higher the efficiency of

management.

Profit per Employee Ratio (Lakhs) of Selected Banks

00.020.040.060.080.1

0.120.140.16

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

In the year 2005-06, IndusInd bank’s profitability decrease from Rs. 10,000 to Rs. 2,000 means its

performance in 2005-06 is very poor. From 2003-04 to 2005-06 , ICICI bank, IndusInd bank and

Dena bank’s performance is decrease year to year basis but only SBI bank can maintain its

profitability

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 0.11 0.12 0.11 0.10 0.11

SBI Bank 0.01 0.02 0.02 0.02 0.02

IndusInd Bank 0.10 0.15 0.10 0.02 0.09

Dena Bank 0.01 0.02 0.01 0.01 0.02



EARNING QUALITY:

The quality of earnings is very important criterion that will determine the ability of a bank to earn

consistently, going into the future. It basically determines the profitability of the banks. It also

explains the sustainability and growth in earnings in the future. This parameter gains importance in

the light of the argument that much of a bank’s income is earned through non-core activities like

investments, treasury operations, corporate advisory services and so on. The following ratios try to

assess the quality of income in terms of income generated by core activity- income from lending

operations:

Operating Profits to Average Working Funds Ratio:

This ratio indicates how much a bank can earn from its operations net of the operating expenses for

every rupee spent on working funds. This is arrived at by dividing the operating profits by average

working funds. Average Working Funds (AWF) are the total resources (total assets or liabilities)

employed by a bank. It is daily average of total assets/ liabilities during a year. The higher the ratio,

the better it is. This ratio determines the operating profits generated out of working funds employed.

Better utilization of fund will result in higher operating profits. Thus, this ratio will indicate how a

bank has employed its working funds in generating profits. Banks which use their assets efficiently

will tend to have a better average than the industry average.

Operating Profits to Average Working Funds Ratio (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 2.49 2.09 2.18 2.39 2.29

SBI Bank 2.27 2.50 2.61 2.27 2.41

IndusInd Bank 4 3.74 2.87 1.38 2.99

Dena Bank 2.61 3.41 1.94 2.48 2.61



00.5

11.5

22.5

33.5

4

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

ICICI bank and SBI bank maintain its profit form operation during last 4 years but IndusInd bank

and Dena bank fluctuate. We can say that performance of IndusInd bank is decrease while ICICI is

increase. But we can interpret that all banks get good profit from its operation work.

Percentage Growth in Net Profits:

Percentage change in net profit over the previous year is another parameter of earning quality

measurement.

Percentage Growth in Net Profits of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 367.44 35.74 22.48 26.67 113.08

SBI Bank 27.67 18.55 16.95 2.37 16.39

IndusInd Bank 77.67 190.63 -19.81 -82.48 41.50

Dena Bank 905.19 101.86 -73.54 19.66 238.29



-200

0

200

400

600

800

1000

Ratio


Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From data we can say that IndusInd bank and Dena bank have to bear a loss means they didn’t

increase their profit but decrease. While SBI bank and ICICI bank didn’t fluctuate so much.

Spread or Net Interest Margin (NIM):

NIM being the difference between the interest income and the interest expended as a percentage of

total assets shows the ability of the bank to keep the interest on deposits low and interest on advances

high. It is an important measure of a bank’s core income (income from lending operations). A higher

spread indicates the better earnings given the total assets. The interest income include dividend

income and interest expended include interest paid on deposits, loan from RBI, and other short term

and long term loans.

Spread or Net Interest Margin of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 1.33 1.50 1.69 1.83 1.59

SBI Bank 2.65 2.74 3.03 3.19 2.90

IndusInd Bank 1.80 3.17 4.15 3.15 3.07

Dena Bank 5.68 5.92 6.87 7.23 6.43



012345678

Ratio

ICICI

Bank

SBI BankIndusInd

Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

Dena bank getting highest spread, its shows its ability to get high interest on deposit and have to pay

low on advances. ICICI bank and SBI bank improving its position year-to-year basis. But in the year

2005-06, IndusInd bank decreased from 4.15 to 3.15 so IndusInd have to take care for future.

Net Profit to Average Assets:

Profit to average assets indicates the efficiency of the banks in utilizing their assets in generating

profits. A higher ratio indicates the better income generating capacity of the assets and better

efficiency of management. It is arrived at by dividing the net profit by average assets, which is the

average of total assets in the current year and previous year. Thus, this ratio measures the return on

assets employed. Higher ratio indicates better earning potential in the future.

Net Profit to Average Assets (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 1.14 1.41 1.37 1.45 1.34

SBI Bank 0.86 0.94 0.99 1.03 0.96

IndusInd Bank 1.03 0.98 1.05 1.11 1.04

Dena Bank 0.79 0.83 0.95 1.01 0.90



00.20.40.60.8

11.21.41.6

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From Table we can tell that ICICI bank has better income generating capacity of the assets and better

efficiency of management. We can’t tell that IndusInd bank hasn’t income generating capacity of the

assets but it hasn’t efficient management which shows by figure which fluctuate while SBI bank and

Dena bank are trying to improve every year.

Interest Income to Total Income:

Interest Income is a basic source of revenue for banks. The interest income to total income indicates

the ability of the bank in generating income from its lending. In other words, this ratio measures the

income from lending operations as a percentage of the total income generated by the bank in a year.

Interest income includes income on advances, interest on deposits with RBI, and dividend income.

Interest Income to Total Income (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 74.78 74.37 73.37 75.59 74.53

SBI Bank 84.41 80 82 83.92 82.58

IndusInd Bank 74.24 74.09 81.90 84.01 78.56

Dena Bank 80.22 73.76 84.72 79.32 79.51



65

70

75

80

85

Ratio


Bank

Dena

Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

SBI bank gets highest interest than other banks. While in the year of 2004-05 Dena bank improves

from 73.76 to 84.72, its good improvement. All banks fluctuate but overall income of interest from

total income is good. IndusInd bank done well, it improves every year. It improves from 80% to 82%

in the year 2004-05 and 82% to 83.92% in the year 2005-06.

Non-Interest Income to Total Income:

Fee based income account for a major portion of the bank’s other income. The bank generates higher

fee income through innovative products and adapting the technology for sustained service levels.

This stream of revenue is not dependent on the bank’s capital adequacy and consequent potential to

generate income is immense. Thus this ratio measures the income from operations other than lending

as a percentage of total income. Non-interest income is the income earned by the banks excluding

income on advances and deposits with RBI. The higher ratio of non-interest income/total income

indicates the increasing proportion of fee based income.

Non-Interest Income to Total Income (%) of Selected Banks

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 25.22 25.63 26.63 25.69 25.79

SBI Bank 15.59 20 18 17.93 17.88

IndusInd Bank 25.76 25.91 18.10 15.99 21.44

Dena Bank 19.78 26.24 15.28 20.68 20.50



0

5

10

15

20

25

30

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

From the above data we can tell that ICICI providing innovative products and adapting the

technology for sustained service levels. All bank can’t maintain stability, it may be cause of the

competition or any other reason. Here we can see that IndusInd bank loosing its level in last two

years, it decrease from 18.10% to 15.99%, while ICICI bank decreases only by 0.7%. In the year

2005-06, Dena bank improves from 15.28% to 20.68%, which because of by providing different

innovative services.



LIQUIDITY:

Liquidity is very important for any organization dealing with money. Banks have to take proper care

in hedging liquidity risk while at the same time ensure that a good percentage of funds are invested

in higher return generating investments, so that banks can generate profit while at the same time

provide liquidity to the depositors. Among assets cash investments are the most liquid of a bank’s

assets. The ratios suggests to measure liquidity under CAMEL model are as follows:

Liquid Assets to Total Assets: Liquid Assets include cash in hand, balance with RBI, balance

with other banks (both in India and abroad), and money at call and short notice. Total assets include

the revaluations of all the assets. The proportion of Liquid assets to Total Assets indicates the overall

liquidity position of the bank.

Liquid Assets to Total Assets Ratio (%) of Selected Banks

0

20

40

60

80

100

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 6.08 6.76 7.71 8.12 7.17

SBI Bank 12.02 10.68 8.55 9.61 10.22

IndusInd Bank 91.24 92.50 91.05 91.93 91.68

Dena Bank 91.20 92.96 94.83 95.33 93.58



Analysis:

Data shows that IndusInd bank and Dena bank capable enough to maintain liquidity, it maintains

more than 90% in last four year while ICICI bank and SBI bank is poor to maintain. But to maintain

better liquidity affects the profitability of the banks.

G-Secs to Total Assets:

Government securities are the most liquid and safe investments. This ratio measures the G-Secs as a

proportion of total assets. Banks invests in government securities primarily to meet their SLR

requirements which are around 25 percent of net demand and time liabilities. This ratio measure the

risk involved in the assets held by a bank

G-Secs to Total Assets Ratio (%) of Selected Banks

05

10152025303540

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 23.92 23.88 20.57 21.85 22.56

SBI Bank 38.34 38.63 37.39 38.63 38.25

IndusInd Bank 20.40 24.99 21.80 26.01 23.30

Dena Bank 29.65 34.30 33.08 26.49 30.88



Analysis:

From the above data we can tell that SBI bank is safest bank than others because it invests more than

35% in 4 last year. While ICICI bank and IndusInd bank maintain average, it is not safe. Dena bank

is decrease investment in Government securities year by year and it may be profitable but not safe.

Liquid Assets to Demand Deposits:

This ratio measures the ability of a bank to meet the demand from deposits in a particular year. It is

arrived at by dividing the liquid assets by total demand deposits. Demand deposits offer high

liquidity to the depositor and so banks have to invest these assets in a highly liquid form. The liquid

assets includes cash in hand, balance with RBI, balance with other banks (both in India and abroad),

and money at call and short notice.

Liquid Assets to Demand Deposits Ratio (%) of Selected Banks

0

50

100

150

200

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 175.90 116.70 100.72 103.56 124.22

SBI Bank 100.91 86.63 69.46 71.53 82.13

IndusInd Bank 109.85 162.89 159.20 134.85 141.70

Dena Bank 108.20 106.13 109.04 107.12 107.62



Analysis:

The above data shows that the Liquidity part for SBI Bank is very low due to the cause that it is in

Government sector, so the trust is higher than any other private sector bank.

Liquid Assets to Total Deposits:

This ratio measures the liquidity available to the deposits of a bank. Total deposits include demand

deposits, saving deposits, term deposits and deposits of other financial institutions. Liquid assets

includes cash in hand, balance with RBI, balance with other banks (both in India and abroad), and

money at call and short notice.

Liquid Assets to Total Deposits Ratio (%) of Selected Banks

02468

10121416

Ratio


Bank

Dena Bank

Banks

2002-03

2003-04

2004-05

2005-06

Analysis:

The above data shows that ICICI bank gives much better quality of Total deposits of a bank. Total

deposits include demand deposits, saving deposits, term deposits and deposits of other financial

Bank 2002-03 2003-04 2004-05 2005-06 Average

ICICI Bank 13.47 12.44 12.95 14.19 13.26

SBI Bank 15.26 13.67 10.71 11.56 12.80

IndusInd Bank 10.51 12.46 10.85 10.80 11.15

Dena Bank 11.05 11.23 10.91 10.71 11.06



institutions. Which shows that even being a private sector bank, the trust is greater than any other

banks for ICICI bank.

Bibliography:

(1) I M Pandey, Financial Management, New Delhi, Vikas Publication, Ninth

Edition.

(2) Internet - Websites

www.indsind.com

www.icicibank.com

www.ficci.com

www.hdfcbank.com

www.onlinesbi.com

www.google.com

www.economictimes.indiatimes.com

www.rbi.org.in

www.business-standard.com

http://www.indsind.com/

http://www.icicibank.com/

http://www.ficci.com/

http://www.hdfcbank.com/

http://www.onlinesbi.com/

http://www.google.com/

http://www.economictimes.indiatimes.com/

http://www.rbi.org.in/

http://www.business-standard.com/

Education

Project report of indusland bank v/s privet bank