EVALUATING THE PERFORMANCES OF SELECT NATIONALIZED BANKS
USING CAMEL APPROACH
DR.M.Nandhini
Associate Professor
Department of Commerce BPS
Sri Ramakrishna College of Arts & Science
Coimbatore.
ABSTRACT
Generally in India banks are classified based on their ownership patterns and they are the
public sector banks that include both 20 nationalized banks and 6 SBI & its Associates banks,
and the private sector banks that include 13 old private sector banks, 7 new private sector banks
and 46 foreign banks. Apart from these there are development and co-operative banks, rural
banks and industrial development financial institutions. Among various banks operating in India,
Nationalized banks are the major and dominant players. They are considered as the backbone of
developing countries as they are the major contributor to the country’s economic development
and National income. Since Nationalized banks have a major impact on the economy as a whole,
analysis and evaluating the performance of nationalized banking is of great importance from
several viewpoints. The present study aims to analyze the performance of select nationalized
banks, using the CAMEL model rating.
Keyword: Nationalized Banks, CAMEL, Financial Soundness.
INTRODUCTION TO THE STUDY
Commercial banks play a special role in the economic development of a nation. High
degree of macro-economic development is possible only through banking. The major role of
banking is that it acts as a mediator of resource in the economy. Modern business cannot be
carried out without well-established banking services. The three major activities performed by
banks are: first, it promotes savings habit among households and the deposited money remains
safe and also earns interest. Second, it encourages investments in industry, agriculture and trade.
Third, it promotes foreign trade.
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STATEMENT OF THE PROBLEM
Since the inception of Nationalized banks in India, the public sector banks have been
growing by leaps and bounds, catering to the needs of various segments of the society. Over this
period, the nationalized banks have experienced a paradigm shift in term of its size, business
operations, its operational efficiency and technology adoption for service enhancement. But, the
performances of all twenty nationalized banks are not observed to be same in term of growth,
profitability and productivity. Based on the past literature reviews, this study aims to evaluate the
performances of selected nationalized banks operating in India with the support of CAMEL
model.
SCOPE OF THE STUDY
In order to sustain in the era of stiff competitiveness, banks must focus on their
performance. Maintaining a stable financial stability will help the nationalized banks to improve
their banking stability and enable them to absorb the shocks during times of crises, thus
minimizing the impact and helping towards a prosperous economic growth. It is believed that the
current study will be useful to the vast spectrum of nationalized banks operating in India to draw
a bird’s eye-view on their performances based on CAMEL rating and the recommendations
proposed in this study can be used for strengthening the performance of the Nationalized banks
in India.
OBJECTIVES OF THE STUDY
To measure the Capital adequacy status of selected Nationalized Banks in India.
To identify the financial indication of Assets quality of selected Nationalized Banks in
India.
To evaluate the Managerial quality and Earning efficiency of selected Nationalized
Banks in India.
To measure the Liquidity status of selected Nationalized Banks in India.
METHODOLOGY OF THE STUDY
The present study is explorative and diagnostic in nature and makes use of secondary
data. To analyse financial soundness of the commercial banks operating in India, researcher has
adopted very simplified approach of using internationally accepted CAMEL rating parameters
for measuring the financial performance of selected nationalized banks operating in India.
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CAMEL is an acronym for five measures (Capital Adequacy, Asset Quality, Management
Soundness, Earnings and Liquidity). Through these five indicators the analysis reflects the
financial soundness of selected nationalized banks for a period of 10 years (2004-05 to 2013-14).
Thirty percent of the Nationalized banks were considered as sample i.e., six banks: Punjab
National Bank, Bank of Baroda, Syndicate Bank, Bank of India, Canara Bank and Union Bank
of India.
SOURCES OF DATA
The study is based on secondary data. The information required for study was collected
through the annual report and other relevant information from the banks. The researcher has
gone through various journals, newspapers etc., for obtaining information.
TOOLS FOR ANALYSIS
The researcher has analyzed the CAMEL Model to evaluate the performance of the
banks. With the help of some ratio analysis.
C-Capital Adequacy
A-Asset Quality
M-Management
E-Earning and profitability
L- Liquidity
LIMITATIONS OF THE STUDY
The study was limited to six Indian public sector banks.
The study was depended only for ten years data.
The study was completely done on the basis of ratios calculated from the balance sheets.
REVIEW OF LITERATURE
Meghani et.al (2015)1 study aimed to analyse the financial position and performance of
the Bank of Baroda and Punjab National Bank in India based on their financial
characteristics with the assessment of CAMEL Model. The study findings revealed that
the two banks had succeeded in maintaining CRAR (Capital Reserve Adequacy Ratio) at
a higher level than the prescribed level, 10per cent. The study also observed that Bank of
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Baroda had maintained highest during the study period, which was considered as very
good sign for the banks to survive and to expand in future. The study also found that out
of 14 ratios used in the CAMEL model the average figures of Bank of Baroda had
recorded efficiency for six ratios followed by Punjab National Bank for five ratios. The
findings of the study concluded that Bank of Baroda was the best performing bank under
the public sector category.
Waraich et.al., (2016)2study attempted to analyse the financial performance of six
District Central Cooperative Banks (DCCBs) of Patiala cooperative division of Punjab
with the help of CAMEL model. The performance of these six banks were studied with
respect to five parameters i.e. Capital Adequacy, Asset Quality, Managerial Efficiency,
Earning Capacity and Liquidity for eight years period (2006-2013). The study found that
in terms of capital adequacy, Ludhiana, Ropar and SAS Nagar DCCB were effectively
managing its capital adequacy and had attained the CAR above the recommended rate. In
Patiala division all the six selected DCCBs had successfully managed to curtail their
NPAs at low level and had registered very good percentage of assets invested in earning
assets. The study stated in case of managerial efficiency, all the six DCCBs had
registered good managerial capability. Similarly, in earning capacity too all the DCCBs
in Patiala division had recorded very less percentage of net profits to owned funds. The
study concluded by stating that all the six DCCBs were successful in maintaining a good
percentage of liquid assets of its total assets compositions.
REFERENCE
1. Kishore Meghani, Hari Krishna Karri and Bharti Meghani Mishra (2015), A Comparative
Study on Financial Performance of Public Sector Banks in India: An Analysis on Camel
Model, MPRA Paper No. 62844, posted 17. March 2015.
2.Sukhmani Waraich,Anu Dhawan and Sukhmani Waraich (2016), Supervision of Banks
Through CAMEL Model: A Case Study of DCCBs of Patiala Cooperative Division,
International Journal of Research in IT & Management (IJRIM), Volume.No.6,
Issue.No.3,ISSN 2231-4334, PP: 162 -172, March.
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CAMEL MODEL
The main endeavour of CAMEL system is to detect problems in banks before they harm
the banking operation and the economy. The RBI (Reserve Bank of India) has instituted this
mechanism for critical analysis of the balance-sheet of banks by themselves and presenting such
analysis for the internal assessment of banks performances. The analysis report, which is
submitted to RBI, forms a supplement for monitoring the performances of banks in India. Thus,
the prime objective of the CAMEL model of rating banking institutions is to assess the
comparative performance of various banks and to suggest necessary measures to improve the
weakness of a bank.
ANALYSIS
1. Capital Adequacy (Quality of Capital)
TABLE: 1
RATIO OF ADVANCES TO TOTAL ASSETS
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years National Bank of
Baroda India Bank Bank
Bank India
2004-05 45.85 58.46 54.78 47.85 51.29 55.38
2005-06 52.84 58.05 59.80 51.37 59.71 59.89
2006-07 58.42 60.02 59.35 59.47 57.88 60.76
2007-08 59.41 63.45 59.4 60.04 59.79 59.92
2008-09 63.20 63.37 62.93 62.65 62.59 59.97
2009-10 62.89 61.28 63.96 62.91 65.02 61.14
2010-11 63.81 60.68 63.22 63.99 68.21 63.98
2011-12 64.24 64.71 62.14 64.12 67.75 67.84
2012-13 59.98 63.93 58.73 64.47 68.60 66.73
2013-14 63.16 63.60 62.41 64.85 68.02 65.89
Mean 59.38 61.76 60.67 60.17 62.89 62.15
SD 5.88 2.39 2.79 5.91 5.72 3.86
CV 9.91 3.87 4.60 9.82 9.10 6.22
CGR 2.74 1.00 0.90 3.01 2.91 1.89
Source: Annual Reports of RBI
INFERENCE
The study observed that Bank of Baroda (Mean of 59.38), Punjab National Bank (Mean
of 60.17) and Canara Bank (Mean of 60.67) have preferred to lend low risk advances.
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Whereas, Bank of India (Mean of 61.76), Syndicate Bank (Mean of 62.89) and Union Bank
of India (Mean of 62.15) have taken higher risk by lending more loans.
TABLE: 2
RATIO OF GOVERNMENT SECURITIES TO TOTAL ASSETS
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years National Bank of
Baroda India Bank Bank
Bank India
2004-05 29.62 20.16 26.28 32.63 35.69 21.87
2005-06 22.03 19.53 23.05 23.01 25.19 22.17
2006-07 17.74 17.84 22.49 22.55 25.25 21.82
2007-08 18.68 18.47 23.72 22.22 23.47 22.44
2008-09 17.71 18.86 23.14 22.08 20.98 21.65
2009-10 17.76 20.68 23.71 22.24 20.34 21.86
2010-11 16.54 19.18 21.17 21.01 19.36 19.66
2011-12 15.47 18.61 23.72 21.77 20.00 19.25
2012-13 18.65 17.56 24.73 22.47 18.67 19.81
2013-14 16.80 18.54 23.28 21.44 19.01 19.83
Mean 19.10 18.94 23.53 23.14 22.80 21.04
SD 4.09 0.97 1.34 3.38 5.15 1.23
CV 21.39 5.14 5.70 14.62 22.60 5.86
CGR -4.34 -0.65 -0.39 -2.56 -5.62 -1.61
Source: Annual Reports of RBI
INFERENCE
The study has observed that all the sample banks have, to a maximum extent have maintained
adequate investment in term of government securities. This in turn supports the banks to
maintain higher CRAR positions.
II. Asset Quality (Quality of Assets)
TABLE: 3
RATIO OF NET NPAs TO NET ADVANCES
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 1.45 2.80 1.88 0.20 1.56 2.64
2005-06 0.87 1.49 1.12 0.29 0.86 1.56
2006-07 0.60 0.95 0.94 0.76 0.76 0.96
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2007-08 0.47 0.52 0.84 0.64 0.97 0.17
2008-09 0.31 0.44 1.09 0.17 0.77 0.34
2009-10 0.34 1.31 1.06 0.53 1.07 0.81
2010-11 0.35 0.91 1.11 0.85 0.97 1.19
2011-12 0.54 1.47 1.46 1.52 0.96 1.70
2012-13 1.28 2.06 2.18 2.35 0.78 1.61
2013-14 1.52 2.00 1.96 2.85 1.56 2.33
Mean 0.77 1.40 1.36 1.02 1.03 1.33
SD 0.48 0.74 0.48 0.93 0.30 0.80
CV 61.58 52.97 34.93 91.49 29.19 59.98
CGR 1.10 2.57 5.00 30.57 0.49 5.39
Source: Annual Reports of RBI
INFERENCE
The study observed that Co-efficient of Variance of Syndicate Bank has registered lowest
NNPANA ratio 29.19 per cent and highest in case of PNB. In terms of overall mean score, Bank
of Baroda has recorded least amount of Net NPA to Net Advances.
TABLE: 4
RATIO OF GROSS NPAs TO GROSS ADVANCES
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 7.30 5.50 3.90 6.00 5.20 5.00
2005-06 3.90 3.70 2.30 4.10 4.00 3.80
2006-07 2.50 2.40 1.50 3.50 3.00 2.90
2007-08 1.80 1.70 1.30 2.70 2.70 2.22
2008-09 1.27 1.71 1.56 1.77 1.93 1.96
2009-10 1.64 3.31 1.53 1.71 2.43 2.25
2010-11 1.62 2.64 1.47 1.79 2.65 2.37
2011-12 1.89 2.91 1.75 3.15 2.75 3.16
2012-13 2.40 2.99 2.57 4.27 1.99 2.98
2013-14 2.94 3.15 2.49 5.25 2.62 4.08
Mean 2.73 3.00 2.04 3.42 2.93 3.07
SD 1.78 1.09 0.80 1.49 0.98 0.97
CV 65.37 36.35 39.24 43.64 33.58 31.52
CGR -7.60 -2.14 -1.29 -1.63 -6.63 -1.66
Source: Annual Reports of RBI
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INFERENCE
The study observed that on an average over the last ten years the Gross NPAs to
Net Advances is lower in case of Canara bank (2.04 per cent) and higher in case of Union
Bank of India (3.07 per cent).
III Management Efficiency (Quality of Operational Management)
TABLE: 5
RATIO OF BUSINESS PER BRANCH TO TOTAL ASSETS
(Amount in ₹.lakhs)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 44.95 50.32 59.76 39.63 38.33 47.66
2005-06 55.32 59.41 74.22 46.91 45.64 58.77
2006-07 74.16 74.27 89.68 56.73 58.41 64.55
2007-08 90.94 92.58 97.14 68.41 72.74 75.10
2008-09 111.90 106.68 114.07 80.35 84.26 87.64
2009-10 130.83 120.54 128.05 86.22 85.40 98.39
2010-11 154.95 142.77 149.99 105.59 92.40 112.21
2011-12 168.36 138.71 150.94 116.56 99.56 119.84
2012-13 183.25 153.49 155.86 117.16 109.48 128.92
2013-14 183.48 156.52 165.52 120.05 110.62 128.63
Mean 119.81 109.53 118.52 83.76 79.68 92.17
SD 52.21 39.12 37.21 30.32 25.44 29.92
CV 43.58 35.72 31.39 36.20 31.93 32.46
CGR 17.71 13.85 11.79 13.82 12.25 12.10
Source: Annual Reports of RBI
INFERENCE
In the case of business per employee the study observed that business per brand of Bank
of Baroda was higher in comparison to all other banks considered for the study, followed by
Canara Bank and Bank of India and in the second and third position. The study observed that
Syndicate Bank is least efficient in realising more business per branch. Performance of branch in
earning higher business in case of Union Bank of India, and Punjab National Bank are observed
to be moderate.
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TABLE: 6
RATIO OF RETURN ON NET WORTH TO TOTAL ASSETS
(Values in Per cent)
Bank of Bank of Canara Punjab Syndicate Union Bank
Years Baroda India Bank National Bank Bank of India
2004-05 48.91 14.73 210.44 42.63 81.77 29.19
2005-06 21.94 17.59 304.76 19.55 92.77 19.90
2006-07 94.92 19.95 83.63 71.74 47.10 21.75
2007-08 41.84 23.23 61.67 34.54 58.60 23.56
2008-09 17.26 13.92 15.24 19.33 21.94 17.35
2009-10 20.29 11.99 29.91 15.15 10.95 20.08
2010-11 15.79 15.56 22.86 11.86 15.50 16.91
2011-12 18.65 11.76 23.43 120.06 16.30 14.12
2012-13 20.26 12.58 19.89 159.94 16.03 12.73
2013-14 18.49 12.99 21.71 29.78 15.57 14.44
Mean 31.84 15.43 79.35 52.46 37.65 19.00
SD 24.85 3.77 98.91 50.16 30.50 5.00
CV 78.06 24.45 124.65 95.62 81.01 26.32
CGR -11.53 -4.43 -25.34 6.64 -20.19 -7.28
Source: Annual Reports of RBI
INFERENCE
It is evident from the above data discussion that except PNB, all other banks have
registered negative growth rate in term of return on networth ratio. A lower return on equity for
the banking industry is a sign that the industry is safer, and that its profits are more sustainable.
III. Earnings Ratio/Profitability (Quality of Profitability)
TABLE: 7
RATIO OF RETURN ON ASSETS
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 0.75 0.38 1.01 1.17 0.82 1.10
2005-06 0.79 0.68 1.01 1.09 0.91 0.84
2006-07 0.80 0.88 0.98 1.03 0.91 0.92
2007-08 0.89 1.25 0.92 1.15 0.88 1.26
2008-09 1.09 1.49 1.06 1.39 0.81 1.27
2009-10 1.21 0.70 1.30 1.44 0.62 1.25
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2010-11 1.33 0.79 1.42 1.34 0.76 1.05
2011-12 1.24 0.72 0.95 1.19 0.81 0.79
2012-13 0.90 0.65 0.77 1.00 1.07 0.79
2013-14 0.75 0.51 0.54 0.64 0.78 0.52
Mean 0.98 0.81 1.00 1.14 0.84 0.98
SD 0.22 0.33 0.25 0.23 0.12 0.25
CV 22.77 41.38 24.68 20.19 14.07 25.52
CGR 2.71 -3.24 -3.68 -2.88 -0.37 -5.02
Source: Annual Reports of RBI
INFERENCE
The average profits of these banks during the ten years of study were recorded at 0.98
per cent and the banks had experienced an annual growth of 2.71 per cent in terms of CGR
measures. Union bank of India though had earned same amount of profitability, it had
experienced a negative growth of -5.02 per cent. On an average Punjab National Bank had
earned highest profitability of 1.14 per cent, but this bank’s year-on-year growth in profit had
reduced to a margin of -2.88 per cent per annum.
TABLE: 8
RATIO OF INTEREST INCOME TO TOTAL INCOME
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 83.04 83.92 83.06 83.46 86.43 86.65
2005-06 85.62 85.57 86.34 88.27 87.25 90.37
2006-07 88.71 85.45 88.68 86.66 90.72 91.49
2007-08 85.21 85.37 86.52 87.71 89.88 89.68
2008-09 84.55 84.27 88.11 86.87 91.76 88.91
2009-10 85.61 87.23 86.77 85.58 89.59 87.07
2010-11 88.63 89.17 89.08 88.19 92.6 88.97
2011-12 89.66 89.56 91.33 89.67 93.42 89.57
2012-13 90.65 89.44 91.53 90.86 93.58 90.78
2013-14 89.33 89.19 90.81 89.38 92.96 89.86
Mean 87.10 86.92 88.22 87.67 90.82 89.34
SD 2.58 2.26 2.66 2.15 2.53 1.52
CV 2.97 2.60 3.01 2.45 2.78 1.71
CGR 0.75 0.77 0.87 0.60 0.83 0.13
Source: Annual Reports of RBI
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INFERENCE
The study observed that the interest income of the Syndicate Bank was observed
to be highest in comparison to the other five sample banks. The interest rate margins of
this bank may be higher in comparison to other banks which in turn had resulted in better
interest income returns. Followed by Syndicate Bank, Union bank of India had realised
higher ratio of interest income to total income. The performance of all other banks was
deemed to be moderately efficient.
IV. Liquidity Ratio (Quality of Liquidity)
TABLE: 9
RATIO OF OTHER APPROVED SECURITIES TO TOTAL ASSETS
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 1.39 0.87 0.71 1.75 0.45 0.79
2005-06 1.14 0.72 0.50 0.84 0.28 0.59
2006-07 0.87 0.56 0.39 0.61 0.20 0.48
2007-08 0.64 0.41 0.29 0.4 0.14 0.31
2008-09 0.43 0.29 0.22 0.27 0.09 0.18
2009-10 0.29 0.17 0.13 0.17 0.05 0.09
2010-11 0.15 0.09 0.07 0.10 0.03 0.04
2011-12 0.04 0.02 0.00 0.05 0.01 0.00
2012-13 0.02 0.00 0.00 0.04 0.01 0.00
2013-14 0.03 0.01 0.02 0.08 0.02 0.00
Mean 0.50 0.31 0.23 0.43 0.13 0.31
SD 0.49 0.31 0.24 0.53 0.14 0.29
CV 98.72 100.30 102.97 123.86 113.14 92.21
CGR -39.52 - - -33.05 -35.18 -
Source: Annual Reports of RBI
INFERENCE
It has been clearly observed that the liquidity position of the banks is in a downturn and
has registered negative growth rate during the ten years study period. The study findings
indicated that overall liquidity position of the banks have been depleted during the study period
from 2004-05 to 2014-13. It is noticeable during the global economic period and inflation period
of 2009-10 till the end of the study period. The study further observed that Bank of Baroda
suffered from higher liquidity crunch in comparison to all other five sample banks.
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TABLE: 10
CASH DEPOSIT RATIO
(Values in Per cent)
Punjab Union
Bank of Bank of Canara Syndicate
Years Baroda India Bank
National
Bank
Bank of
Bank India
2004-05 3.33 4.95 5.15 9.17 5.81 5.90
2005-06 3.56 5.95 6.78 19.55 5.87 5.92
2006-07 5.13 6.00 6.39 8.85 8.36 6.95
2007-08 6.16 7.83 8.67 9.17 10.90 9.10
2008-09 5.51 4.70 5.37 8.13 10.82 6.48
2009-10 5.62 6.79 6.70 7.35 6.14 7.33
2010-11 6.50 7.29 7.49 7.60 7.70 8.70
2011-12 5.63 4.71 5.44 4.87 5.58 5.22
2012-13 2.84 5.75 4.33 4.57 4.37 4.08
2013-14 3.27 4.00 5.27 4.93 5.99 6.19
Mean 4.76 5.80 6.16 8.42 7.15 6.59
SD 1.36 1.24 1.30 4.30 2.24 1.52
CV 28.54 21.32 21.03 51.12 31.36 23.03
CGR -0.66 -1.93 -2.37 -11.10 -3.23 -2.17
Source: Annual Reports of RBI
INFERENCE
Due to the monetary policy change the CRR of the banks have registered negative growth
rate between the years 2004-05 to 2013-14. The lower Cash-deposit ratio of the banks indicated
their efficiency in operations. Bank of Baroda has been observed to be highly efficient in
managing its cash-deposit ratio at 4.76 per cent.
FINDINGS
The study observed that Bank of Baroda (Mean of 59.38), Punjab National Bank
(Mean of 60.17) and Canara Bank (Mean of 60.67) have preferred to lend low risk
advances. Whereas, Bank of India (Mean of 61.76), Syndicate Bank (Mean of 62.89)
and Union Bank of India (Mean of 62.15) have taken higher risk by lending more
loans.
The study observed that Co-efficient of Variance of Syndicate Bank has registered
lowest NNTNA ratio 29.19 per cent and highest in case of PNB. In terms of overall
mean score, Bank of Baroda has recorded least amount of Net NPA to Net Advances.
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The study observed that on an average over the last ten years the Gross NPAs to Net
Advances is lower in case of Canara bank (2.04 per cent) and higher in case of Union
Bank of India (3.07 per cent).
In the case of business per employee the study observed that business per brand of
Bank of Baroda was higher in comparison to all other banks considered for the study,
followed by Canara Bank and Bank of India and in the second and third position. The
study observed that Syndicate Bank is least efficient in realising more business per
branch. Performance of branch in earning higher business in case of Union Bank of
India, and Punjab National Bank are observed to be moderate.
It is evident from the above data discussion that except PNB, all other banks have
registered negative growth rate in term of return on networth ratio. A lower return on
equity for the banking industry is a sign that the industry is safer, and that its profits
are more sustainable.
The average profits of these banks during the ten years of study were recorded at 0.98
per cent and the banks had experienced an annual growth of 2.71 per cent in terms of
CGR measures. Union bank of India though had earned same amount of profitability,
it had experienced a negative growth of -5.02 per cent. On an average Punjab
National Bank had earned highest profitability of 1.14 per cent, but this bank’s year-
on-year growth in profit had reduced to a margin of -2.88 per cent per annum.
The study observed that the interest income of the Syndicate Bank was observed to be
highest in comparison to the other five sample banks. The interest rate margins of this
bank may be higher in comparison to other banks which in turn had resulted in better
interest income returns. Followed by Syndicate Bank, Union bank of India had
realised higher ratio of interest income to total income. The performance of all other
banks was deemed to be moderately efficient.
It has been clearly observed that the liquidity position of the banks is in a downturn
and has registered negative growth rate during the ten years study period. The study
findings indicated that overall liquidity position of the banks have been depleted
during the study period from 2004-05 to 2014-13. It is noticeable during the global
economic period and inflation period of 2009-10 till the end of the study period. The
13
study further observed that Bank of Baroda suffered from higher liquidity crunch in
comparison to all other five sample banks.
Due to the monetary policy change the CRR of the banks have registered negative
growth rate between the years 2004-05 to 2013-14. The lower Cash-deposit ratio of
the banks indicated their efficiency in operations. Bank of Baroda has been observed
to be highly efficient in managing its cash-deposit ratio at 4.76 per cent.
SUGGESTIONS:
The study has observed that all the sample banks have, to a maximum extent have
maintained adequate investment in term of government securities. This in turn supports
the banks to maintain higher CRAR positions.
Moreover, the bank official have to realise the fact that the capital adequacy focuses on
the total risk weighted capital intended to protect the depositors from the potential shocks
of losses that a bank might incur.
Though all the six sample banks have maintained adequate investment in terms of
government securities, they are suggested to further invest in government securities. This
in turn supports the banks to maintain higher CRAR positions.
To reduce its gross and net NPAs margin to maximum lowest points to prove it be more
competitive and also to reduce its credit risk and stress related to it.
It was observed that the banks that tend to invest more in Government securities have less
gross and net NPAs. Thus, PNB have to focus more of its investment in government
securities.
By adopting proper training and motivating the employees to achieve higher targets of
both in terms of business and profit.
Similarly, the branch operations of these banks have to slim down by adopting
technologically advanced services to increase its branch business.
Any hindrances in e-banking transaction or in operation of ATM facilities, which require
higher cash reserves or liquidity status to be maintained by banks.
The banks are suggested to increase its deposit mobilisation practices along with effective
loan recovery strategies to meet the liquid crises, in days and week of money market
operations.
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CONCLUSION
Around 40per cent of the gross national savings are deployed in bank deposits, and the
role of the banking system as a source of credit is crucial. However, with the deregulation of
interest rates and the rise of capital markets, the exposure of the banks’ market risk assets have
increased. The absence of adequate capital to absorb market risk is manifested through price
volatility in mark to market assets and thus can further accentuate the problems of the banking
sector. The recent global financial crisis found this cause in the sustained under-estimation of
risk as well as the deteriorating levels of equity capital. Indian banking system, though perceived
to have been insulated from global financial crisis to a considerable extent, is at present in an
important crossroad, – as it has to maintain a balance between growth and the need for additional
capital.
BIBLIOGRAPHY
Khan M.K. Jain. P.K, Financial Management, Tata Megraw- Hill Publishing
Company Ltd.,2010.
Kothari. C. R, Research Methodology, New Delhi, New age International private Ltd.,
Publishers, 2009.
Mariappan .P, Lakshmi .S and Sreeaarthi .G (2013), A Study on Performance
Efficiency of Nationalized Banks of India: A DEA Approach, PAK Publishing Group,
Growing Knowledge for Future, Proceedings Book of ICEFMO, 2013, Malaysia
Handbook on the Economic, Finance and Management Outlooks ISBN: 978-969-9347-
14-6.
WEBSITES
http://www.eurojurnals.com/finance.htm.
http://www.bcentral.cl/eng/studies/working-papers/pdf/dtbc183.pdf.
https://www.bddk.org.tr/websitesi/turkce/Raporlar/Calisma_Raporlari/12732001-6.pdf.
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