1

1. INTRODUCTION

One sector that has prevented the economy of any country from collapsing has been
undoubtedly the banks or the banking system. Banks play an important role in the economic
resource mobilization of an economy. The banking sector’s performance is seen as the exact
copy of economic activities of the nation and as such a healthy banking sector system act as
the basic facts of solid economic and industrial growth of a nation. Banks plays a significant
role for balanced economic growth of a country. The banking system is an important element
of overall economic system. It plays a vital role in the achievement of macro-economic
objectives and economic growth. It also plays an important role in immobilizing the nation's
savings and in channelizing them into high investment priorities. Hence, an efficient and
profitable banking system is one of the required elements for sustainable economic
development. Therefore, analysis of financial performance of banks is a matter of great
interest in the field of academic as well as industrial research.

The financial institutions operating in a country play an important role in the

economic development of that country. Banks play an important role in maintaining the
balanced economic growth of any country as they cater to all sectors of the economy of any
country. In India, banks of different kinds of ownership like public, private and foreign
dominate the financial market as they are large in numbers when compared to other financial
institutions. Over many decades, there has been changes and reforms in the way the banking
sector operates. Because of these changes and reforms, the analysis of the financial
performance of banks is considered as an important field of academic research. The analysis
of financial performance helps in assessing whether the banks have really helped in the
economic growth of the country and to what extent.

Indian Banking Regulation Act 1949 Sec 5(1)(b) defines banks as “Accepting for
the purpose of the landing of investment of deposit of money from public repayable on
demand or otherwise and withdraw able by cheques, draft, order or otherwise.” According to
Professor Kinley, “A bank is an establishment which makes to individuals such advances of
money or other means of payment as may be required and safely made and to which
individuals entrust money or means of payment when not required by them for use.”

According to Professor Crowther, “Banks are institutions that gather money from
people who have it to spare, or who save it, and then lend it to people in need.” Also, as per
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R P Kent, “Bank is a financial institution which acts as an intermediary and deals in loans
and advances.”

The Oxford English Mini Dictionary (Indian edition) defines a bank as “An
organization that keeps customer’s money and provides other financial services.” Another
way of defining what a bank is given by Cairn Cross who says that, “Bank is a financial
intermediary institution which deals in loans and advances.” W. Hock. also defined a bank
as “Bank is such an institution which creates money by money only.”

According to Sir John Paget, “Bank is such a financial institution which collects
money in current, savings or fixed deposit account; collects cheques as deposits and pays
money from the depositors’ account through cheques.” Walter Leaf also gave a definition of
a bank. He says that “A bank is a person or corporation which holds itself out to receive from
the public, deposits payable on demand by cheque.”

1.1. EVOLUTION AND GROWTH OF BANKING SYSTEM IN INDIA [1] –

In order to understand the present-day scenario of the banking system of India, it will
be in fitness to look at the development of the banking system in a somewhat longer
perspective.

In over six decades since independence, the banking system of India have passed
through five distinct phases, i.e.,

Evolutionary phase (prior to 1948)

Foundation phase (1948-1967)

Expansion phase (1968/1984)

Consolidation phase (1985-1990)

Reformatory phase (1991 and onwards)

I. Evolutionary Phase (Prior to 1948)

The enactment of the Reserve Bank of India Act, 1934 or otherwise known as
RBI Act, 1934 gave birth to scheduled banks in India, with some of these banks
having been already established around 1881. Allahabad Bank, which was set up in
1865 under European Management, was one of, if not, the most prominent banks
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during the time. Oudh Commercial Bank became the first bank to be established
under Indian ownership and management when it was formed in the year 1881. Over
the course of the 19th century, there were a total of five banks which were in
existence, they were:

a. Allahabad Bank
b. Oudh Commercial Bank
c. Ayodhya Bank (1884)
d. Punjab National Bank (1894)
e. Nedungadi Bank (1899)

Between the period 1901-1914, twelve more banks were established, amongst
them, the prominent banks were the following:

a. Bank of Baroda (1906),

b. Canara Bank (1906)
c. Indian Bank (1907)
d. Bank of India (1908), and
e. Central Bank of India (1911)

Indian Banks faced a variety of huge crisis in 1913 and also in 1929 resulting
in some of the bank even succumbing to these crises. There was low public
confidence in the banks and a heavy rush on banks grew. There were still no
commercial banks during the First World War, but there was a total of twenty
scheduled banks after the country attained independence. In 1950, 4 existing
commercial banks merged which gave birth to the United Bank of India. In that same
timeframe, certain non-scheduled banks were also included in the second schedule of
the Reserve Bank, due to which, the number of scheduled banks rose to 81. However,
due to liquidation or merger or amalgamation of as many as 23 scheduled banks. this
number quickly came down to 58 by 1968.

In 1921, a State Bank or in other words, a fully Government owned bank was
needed that would be provided with all required resources and support of the
Government. Such a bank would be able to help progress and carry the growth of
banking in the country as well as help industrial growth. The need for such a bank
was greatly felt for the country’s progress. Hence, with this objective in view, the
Government decided to establish the Imperial Bank of India. The Imperial Bank of
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India was not fully given the role of a commercial bank as it was often used by the
government to regulate the money supply in the economy but did not stand as the
country’s central bank. It adopted multiple roles, acting at times, like a commercial
bank and when needed, as a central bank for the economy.

II. Foundation Phase (1948-1967)

During the period 1948-1967, the banking scenario was such that it laid
emphasis on laying the foundation for a sound banking system in the country. It was
focused more on accent on security rather than on purpose. The period saw the
establishment of the legislative framework for facilitating reorganisation and
consolidation of the banking system in the country. As part of the objecti8ve of
building a sound foundation, the Banking Regulation Act was passed in 1949 to
conduct and control operations of the commercial banks in India. Basically, this act
was to be the legislative framework for the commercial banks. Also, this phase made
an important change that would forever affect the banking industry, it was during this
phase that transformation of the Imperial Bank to State Bank of India (SBI) took
place. This transformation redefined its role in the Indian economy and in the
strengthening of the co-operative credit structure of the country. It also redefined its
role in the setting up of institutional framework for providing long-term finance to
agriculture and industry.

During this period, the total number of commercial banks decreased hugely.
There were 566 banks as on December, 1951; out of which there were 92 scheduled
banks and the remaining 474 were non-scheduled banks. This number went down to a
considerable number of 281 at the close of 1968. The process of liquidation and
consolidation started in 1960 and continued in the subsequent years. As a result, as
many as 115 banks were either liquidated or amalgamated with other banks.

III. Expansion Phase (1968-1984)

This phase witnessed the socialisation of the banking sector in 1968. In other
words, this phase witnessed the mass nationalisation of a large number of banks.
During this period (1968-1984), all the existing banks, except SBI and its seven
associates, were in the private sector and could not be influenced towards fulfilling
their social responsibilities. Due to this reason, the nationalisation of banks started in
1969 and continued in 1980. 14 banks were nationalised in 1969 which are as follows:
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i. The United Commercial Bank Limited.

ii. The Central Bank of India Limited.
iii. The Punjab National Bank Limited.
iv. The Bank of India Limited.
v. The Bank of Baroda Limited.
vi. The Canara Bank Limited.
vii. The United Bank of India Limited.
viii. Syndicate Bank Limited.
ix. The Dena Bank Limited.
x. The Indian Bank Limited.
xi. The Union Bank of India Limited.
xii. The Bank of Maharashtra Limited.
xiii. The Allahabad Bank Limited.
xiv. The Indian Overseas Bank Limited.

In 1980, another 6 banks were nationalised, the names of the 6 nationalised

banks are as follows:

i. Corporation Bank Limited.

ii. Andhra Bank Limited
iii. Oriental Bank of Commerce Limited.
iv. New Bank of India Limited.
v. Vijaya Bank Limited.
vi. Punjab and Sind Bank Limited.

In 1975, the banking sector bear witness to the birth of Regional Rural Banks
(RRBs). Not only that, the banking sector would also witness the birth of National
Bank for Agriculture and Rural Development (NABARD) in 1982. The number of
commercial banks declined from 281 in 1968 to 268 in 1984, however, the number of
scheduled banks massively increased from 71 to 264 during the corresponding period
which was mainly due to the emergence of RRBs.

The 15 years following the nationalisation of banks in 1969 was characterized

by the fast-paced expansion of banks. As many as 50,000 bank branches were
established; three-fourths of these branches were established in the rural and semi-
urban areas.
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IV. Consolidation Phase (1985-1990)

This phase began in 1985 when a series of policy initiatives were taken with
the objective of consolidating the gains of branch expansion and of relaxing the strict
and tight regulation under which the system was operating. The weaknesses of the
previous phase were the reasons behind this consolidation phase. The prices of assets
and liabilities were fixed by the RBI; prices of services were fixed by the Indian
Banking Association (IBA); composition of assets was also somewhat fixed.

The result during this period was that the banks, instead of consolidating their
gains, ended up consolidating their losses. However, the banks continued to post
profits through antiquated accounting methods.

V. Reformatory Phase (1991 and onwards)

The banks in India which were operating in a highly protected and regulated
environment failed to meet the international standards. Due to the strict regulations
that binded the banks, they were performing below par and could not reach
international levels. During this period, the country faced an economic crisis, which
on the other hand, further reinforced the need for the reformation in the banking
sector. Even though the banking industry, as a whole expanded, there were many
hindrances and problems that developed. The growth of the banking industry was
accompanied by inefficiencies and loss of control over widely spread offices. This
was mainly due to large number of branches spread over the country without proper
guidance and supervision. There was focus on quantity rather than quality. There were
many factors behind the various inefficiencies that developed as the banking sector
expanded and progressed. Some of the factors behind these inefficiencies are as given
below:

a. The over-regulation of the banking industry led to the management function

being weakened.
b. The innovative skills of the banker were hobbled due to directed lending.
c. Customer service became the greatest casualties.
d. The banks’ assets and profitability were affected due to too much expansion at
too fast a pace.
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As a result, from 1991, a process of financial sector reform was set in 6

months and the Narasimham Committee was constituted. This committee formation
took place in order to have a broader programme of structured economy reforms
which this committee will establish and tend to.

1.2. TYPES OF BANKS [2]:

The financial requirements of individuals and institutions varies form one individual
to the other and from one institution to the other. As such, there is a need for different types
of banks. In the organised sector, banks may be classified into the following major forms:

I. Commercial Banks – In simple terms, a commercial bank may be defined as a

financial institution that accepts chequable deposits from the public and use it for
lending. These banks operate with the motive of earning profits from banking
services. They are the most common type of banks found in any country. Commercial
banks usually give short-term loans and advances, as such, they occupy a dominant
place in the money market. They form the biggest component in the banking structure
of any country. The commercial banks in India are governed by the Indian Banking
Regulation Act, 1949 brought up to date to include additional rules thereto.

Commercial banks are further classified based on two criteria:

(i) statutory, and (ii) ownership.

On the statutory basis, there may be the following types of commercial banks:

a. Scheduled Banks – Scheduled Banks are those commercial banks which

are included in the Second Schedule of the RBI Act, 1934. These banks
are entitled to enjoy the facilities of borrowings from the RBI; however,
they have to abide by all the rules and regulations and directives issues by
the RBI from time to time.
b. Non-Scheduled Banks – Non-scheduled banks, on the other hand, are
those commercial banks that are excluded from the Second Schedule of the
Reserve Bank of India Act, 1934. Due to this exclusion, these banks are
free from abiding by the rules and regulations and directives issued by the
RBI and cannot enjoy any facility of borrowings from the RBI.
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On the basis of ownership, commercial banks may be categorised into the

following types of banks:

a. Private Sector Banks - As the name suggest, these commercial banks are
primarily owned by individuals. During the first half of the 20th century,
there was a mushroom growth of private sector commercial banks. Thus,
in 1951, there was a total of 566 private sector banks of which 474 were
non-scheduled and 92 were scheduled.
b. Public Sector Banks – The Government of India entered the banking
business only in 1955 with the establishment of the SBI as the first public
sector commercial bank. This further expanded through the nationalisation
of 14 commercial banks on July 19,1969.
II. Co-Operative Banks – These are financial institutions organised under the provisions
of the Co-operative Societies Act of the States. They are essentially co-operative
credit societies organised by members to meet their short-term and middle-term
financial requirements. The main objective of these banks is to provide cheap credit to
their members. Unlike the commercial banks whose aim is to earn profit, these banks
operate on the motto, “No profit No loss”.
III. Specialised Banks – Like the name suggests, these banks are created to cater to some
special needs with its unique nature of activities. Some of them are as follows:
a. Foreign Exchange Banks: These banks are primarily meant to finance the
foreign trade of a country. They deal in foreign exchange business, buying and
selling of foreign currencies, discounting, accepting and collecting foreign
bills of exchange.
b. Industrial Banks: They are primarily meant to cater to the financial needs of
industrial undertakings. They provide long-term loans to industries for the
purchase of heavy machinery, equipments, etc.
c. Land Development Banks: These banks are meant to cater to the long- and
medium-term credit requirements of the agricultural sector in the country.
d. The Export-Import Bank of India (EXIM Bank): This bank has been instituted
for planning, promoting and developing exports and imports of the country.
e. Central Bank: A central bank is the topmost, the apex financial institution in
the financial and banking system of a country. It acts as the leader of all the
banks in the country. It supervises, controls and regulates the activities of all
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the banks under it. Being the central bank and having its control over other
banks under it, it is charged with the responsibility of carrying out the
monetary and credit policies. India’s central bank is the Reserve Bank of
India (RBI) established in 1935. RBI is in charge of the printing of currency
and has the power to control the credit of the country using the various credit
control tools. RBI, being the central bank, performs all the functions
performed by any central bank in the world.
1.3. FUNCTIONS OF COMMERCIAL BANKS [2a]:

Commercial banks perform numerous functions. These functions may be classified

into two categories, namely (a) Primary Functions, and (b) Secondary Functions.

A. Primary Functions:
The primary functions of the banks maybe as follows.
a. Acceptance of deposits: This function is arguably the most important function of
the banks. By accepting deposits, the banks are able to operate and mobilise the
savings of the general public. Banks accept deposits through the following
accounts –
i. Savings Account – This account is mostly popular amongst the general
public as it encourages savings of the household. With that being said,
there are certain restrictions regarding the number of withdrawals during a
period and the amount withdrawn at a time. Banks pay a certain rate of
interest on this account as prescribed by the central bank.
ii. Current Account – This account is popular amongst businessmen and
traders as there are no restrictions with regards to the number of
withdrawals during a period or amount withdrawn at a time. This account
provides the much-needed liquidity to businessmen and traders. Deposits
in this account are withdrawable by the depositors at any time without
prior notice, as such, the deposits are known as “Demand deposits”
iii. Fixed Account – Deposits in fixed account are tie deposits, i.e., they
cannot be withdrawn until the maturity of the fixed period. However, a
premature withdrawal is permitted only at the cost of forfeiture of the
interest payable, at least partly.
b. Lending of funds: Another important function of these bank is to extend loans
and advances. These banks are able to perform such functions by lending out the
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deposits that come to them through deposits. Bank advances to customers may be
made to the customers in many ways –
i. Overdraft - This facility allows an account holder to withdraw an amount
exceeding the balance held in the account, up to the extent of stipulated
limit. This is only available to current account holders.
ii. Cash Credit – Banks give credit in cash to business firms against pledge or
hypothecation of goods, or personal guarantee given by the borrowers.
This is the most popular mode of advances in the Indian banking system.
iii. Discounting Trade Bills – Another mode of advances done by banks are
through discounting of trade bills (bills of exchange). The bank will pay
the endorser the amount of the bill minus amount of discount, and when
the bill matures, the banks will claim the amount from the drawee. This
method is adopted for two reasons: (a) such loans are self-liquidatory in
character; and (b) these trades bills are rediscountable with the central
banks.
iv. Money at Call or Very Short-term Advances – Banks also grants loans for
a very short period, generally not exceeding 7 days to the borrowers
against collateral securities. Such advances are repayable immediately at
short notice hence, they are described as money at call or call money
v. Term Loans – These loans have a maturity period that varies between 1-10
years and are given against collateral securities.
vi. Consumer Credit – These are credits given by banks to households to buy
durable consumer goods or to meet personal expenses. Such credits are
repayable in instalments in a short time.
vii. Miscellaneous Advances – This includes packing credits given to
exporters, export bills purchased/discounted, import finance, finance to
self-employed, credit to the public sector, etc.
c. Use of cheque system: The use of the cheque system has been preferred during
this modern era of business transaction. There may be two types of cheques – (a)
Bearer cheques which are encashable immediately at the bank by its possessor,
and (b) Cross cheque which are crossed by two parallel lines on its face at the left-
hand corner and are not encashable immediately.
d. Remittance of funds: Commercial banks on account of their network of branches
throughout the country, also provide facilities to remit funds from one place to
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another for their customers by issuing bank drafts, amil transfers or telegraphic
transfers on nominal commission charges.
B. Secondary Functions: Apart from the above-mentioned primary functions of
commercial banks, there are several more functions performed by commercial banks.
These functions are mainly non-banking functions which may be classified as under -
1. Agency Services: Bankers perform certain functions for and on behalf of their
clients, such as,
i. Collection and payments: Collection and making of payments for bills,
cheques, promissory notes, interest, dividends, rents, subscriptions,
insurance premium, etc. For such services, the banks usually levy some
charges.
ii. Acts as trustee and executor: The commercial banks as trustees on
behalf for their customers. They also act as executors and attorney for
the customer’s will.
iii. Correspondents/Agents: Commercial banks often acts as
correspondents or agents or representatives.
iv. Remit funds: Commercial banks also provide the agency service of
remitting funds on behalf of their clients by drafts or mail or
telegraphic transfers.
2. General Utility Services: Modern commercial banks usually perform certain
general utility services for the community, such as –
i. Letters of Credit: Commercial banks give letters of credits at the behest
of the importer in favour of the exporter.
ii. Transfer of funds: In order to provide facilities for transfer of funds
from one part of the country to another, commercial banks issue bank
drafts and travellers’ cheques.
iii. Foreign Exchange: Commercial banks also deals in foreign exchange
or finance foreign trade by accepting or collecting foreign bills of
exchange. Through this it is able to earn foreign exchange for the
country and contribute towards foreign trade.
iv. Acts as Referees: These banks also act as referees with respect to the
financial standing, business reputation, and respectability of customers.
v. Underwriting: Commercial banks also underwrites shares floated by
government, public bodies and corporations.
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1.4. CHOSEN BANKS OF PUBLIC AND PRIVATE SECTOR: A BRIEF

OVERVIEW OF AXIS BANK AND UCO BANK:

PRIVATE SECTOR BANK:

AXIS BANK [3] -

OVERVIEW:

Axis Bank is the third largest private sector bank in India. The Bank offers the entire
spectrum of financial services to customer segments covering Large and Mid-Corporates,
MSME, Agriculture and Retail Businesses. The Bank has a large footprint of 4,758 domestic
branches (including extension counters) with 10,990 ATMs & 5,972 cash recyclers spread
across the country as of 31st March 2022.

The Bank has 6 Axis Virtual Centres with over 1,500 Virtual Relationship Managers
as of 31st March 2022. The Overseas operations of the Bank are spread over eight
international offices with branches in Singapore, Dubai (at DIFC), and Gift City-IBU;
representative offices in Dhaka, Dubai, Abu Dhabi, Sharjah and an overseas subsidiary in
London, UK. The international offices focus on Corporate Lending, Trade Finance,
Syndication, Investment Banking, Liability Businesses, and Private Banking/Wealth
Management offerings.

Axis Bank is one of the first new generation private sector banks to have begun
operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of
Unit Trust of India (SUUTI) (then known as Unit Trust of India), Life Insurance Corporation
of India (LIC), General Insurance Corporation of India (GIC), National Insurance Company
Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd., and
United India Insurance Company Ltd. The shareholding of Unit Trust of India was
subsequently transferred to SUUTI, an entity established in 2003.

History -

Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an Indian

banking and financial services company headquartered in Mumbai, Maharashtra. The bank
was founded on 3 December 1993 as UTI Bank, opening its registered office
in Ahmedabad and a corporate office in Mumbai. The bank was promoted jointly by the
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Administrator of the Unit Trust of India (UTI), Life Insurance Corporation of India (LIC),
General Insurance Corporation, National Insurance Company, The New Assurance Company,
The Oriental Insurance Corporation and United India Insurance Company. The first branch
was inaugurated on 2 April 1994 in Ahmedabad by Manmohan Singh, the then finance
minister of India. On 30 July 2007, UTI Bank changed its name to Axis Bank.

Subsidiaries and step-down subsidiaries:

The Bank at present has following 9 subsidiaries and 2 step-down subsidiaries:

o Its 9 subsidiaries –
a. Axis Capital Ltd. (ACL),
b. Axis Securities Ltd. (ASL),
c. Axis Trustee Services Ltd. (ATSL),
d. Axis Asset Management Company Ltd. (AAMC),
e. Axis Mutual Fund Trustee Ltd. (AMFT),
f. Axis Finance Ltd. (AFL),
g. A. TREDS Ltd. (ATL),
h. Axis Bank UK Ltd. (ABUK), and
i. Freecharge Payment Technologies Private Ltd. (Freecharge).
o Its step-down subsidiaries –
a. Axis Capital USA LLC (subsidiary of Axis Capital Ltd), and
b. Axis Pension Fund Management Ltd. (subsidiary of Axis Asset Management
Company Ltd.)
Capital structure:
The Bank has an authorized share capital of Rs. 850 crores comprising 4,250,000,000 equity
shares of Rs.2/- each as on 31st March 2022. The Bank has issued, subscribed and paid-up
equity capital of Rs. 613.95 crores, constituting 306,97,47,836 equity shares of Rs. 2/- each
as on 31st March 2022. The Bank’s shares are listed on the National Stock Exchange of India
Limited and the BSE Limited. The GDRs issued by the Bank are listed on the London Stock
Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the
Singapore Stock Exchange.
Vision and values:
To be the preferred financial solutions provider excelling in customer delivery through
insight, empowered employees and smart use of technology.
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Core Values:
a. Customer Centricity
b. Ethics
c. Transparency
d. Teamwork
e. Ownership

PUBLIC SECTOR BANK:

UCO BANK (United Commercial Bank Ltd.) [4] –

Overview –

Founded in 1943, UCO Bank is a commercial bank and a Government of India

Undertaking. Its Board of Directors consists of government representatives from the
Government of India and Reserve Bank of India as well as eminent professionals like
accountants, management experts, economists, businessmen, etc.

History -

The idea of a truly Indian bank was first conceived of by Mr. G.D Birla, the doyen of
Indian Industrial renaissance, after the historic "Quit India" movement in 1942. Soon this
nascent idea came into reality and, on the 6th of January 1943, The United Commercial Bank
Ltd. was born with its Registered and Head Office at Kolkata. The very first Board of
Directors was represented by eminent personalities of the country drawn from all walks of
life, and this all-India character of the Bank has been assiduously maintained till date not only
in the composition of its Board but also in the geographical spread of its more than 3000 in
the country as well as in its overseas centres in Singapore and Hong Kong.

Having traversed periods of expansion and consolidation, the Bank was nationalized
by the Government of India on the 19th July 1969 whereupon 100 per cent ownership was
taken over by the government in UNITED COMMERCIAL BANK. This historic event
brought about a sea-change in the entire fabric of the bank's thinking and activities,
commensurate with the government's socio-political approach of mass banking as against
class banking hitherto practised. The Bank had gone for Rs.200 crore of IPO during the year
2003-04 and is now a listed Company. As on 31.03.2012 Government Share-holding of the
 15

Bank was 65.19 per cent. Branch expansion started at a fast pace, particularly in rural areas,
and the bank achieved several unique distinctions in Priority Sector lending and other social
uplift activities. To keep pace with the developing scenario and expansion of business, the
Bank undertook an exercise in organizational restructuring in the year 1972. This resulted
into more functional specialization, decentralization of administration and emphasis on
development of personnel skill and attitude. Side by side, whole hearted commitment into the
government's poverty alleviation programmes continued and the convenorship of State Level
Bankers' Committee (SLBC) was entrusted on the Bank for Odisha and Himachal Pradesh in
1983.

The year 1985 opened a new chapter for the Bank as the name of the Bank changed to
UCO BANK by an Act of Parliament. The customer friendly and socially committed
character, however, remained even with this change in name which has, over the years, been
regarded as one of the well-known and vibrant banks in the country. Today, with all its inner
strengths, UCO Bank has come a long way to symbolize friendliness for customers and
efficiency in its banking business.

Organisation structure -

Headquartered in Kolkata, the Bank has 42 Zonal Offices spread all over India.
Branches located in a geographical area report to the Zonal Office having jurisdiction over
that area. These Zonal Offices are headed by Senior Executives ranging up to the rank of
General Manager, depending on size of business and importance of location. The Zonal
Offices report to the respective Head Office Departments headed by General Managers/senior
Deputy General Managers.

Vision and Mission statement of UCO -

To emerge as the most trusted, admired and sought-after world class financial
institution and to be the most preferred destination for every customer and investor and a
place of pride for its employees. The mission statement are as below:

• To be a Top-class Bank to achieve sustained growth of business and

profitability, fulfilling socio-economic obligations, excellence in customer
 16

service; through upgradation of skills of staff and their effective participation

making use of state-of-the-art technology.

• Global banking has changed rapidly and UCO Bank has worked hard to adapt
to these changes. The Bank looks forward to the future with excitement and a
commitment to bring greater benefits to you.

• UCO Bank, with years of dedicated service to the Nation through active
financial participation in all segments of the economy - Agriculture, Industry,
Trade & Commerce, Service Sector, Infrastructure Sector etc., is keeping pace
with the changing environment. With a countrywide network of more than
3000 service units which includes specialised and computerised branches in
India and overseas, UCO Bank has marched into the 21st Century matched
with dynamism and growth.

1.5. FINANCIAL PERFORMANCE & FINANCIAL ANALYSIS [5]:

Financial performance is a very subjective concept and measure that evaluates the
company’s financial health through the analysis of its financial statements. It may also be
defined subjective measure of how well a firm can use assets from its primary mode of
business and generate revenues. Financial performance is an important concept as it concerns
itself with the past, present, and the future of a firm’s financial capabilities. It covers a wide
array of areas such as assets, liabilities, equity, revenue, profitability etc. It is of utmost
importance for any firm to be able to determine its financial performance as it will be a guide
for the future operations of the firm.

Importance of financial performance:

a. It is important for the various stakeholders of the firm/company as well as interested

individuals or organisations.

b. For management, the financial performance gives an insight into internal control,
future opportunities, higher returns, and so on.

c. Trade creditors are interested in getting insight into the financial performance,
particularly the liquidity of the firm, to ensure less financial risk.
 17

d. As for investors, a financial performance will give insight into the returns or earnings
of the firm and the possibilities of a higher or lower return or earnings in the future.

Financial Statement Analysis [6]:

In order to assess a company’s financial performance, a financial statement analysis

has to be carried out. This includes the process of assessing the financial statements of a firm
such as Balance Sheet, Profit & Loss Account and so on, in such a way that a better
understanding of the company’s performance may be gained. In other words, a financial
statement analysis is nothing but a financial analysis of the financial statements of a firm.

In short, a financial statement analysis is the complete evaluation and examination of

a firm’s financial statements.

According to John N. Myers “Financial statement analysis is largely a study of

relationships among the various financial factors in a business, as disclosed by a single set of
statements and a study of the trends of these factors as shown in a series of statements.”

Also, “Financial analysis consists in separating facts according to some definite plan,
arranging them in groups according to certain circumstances and then presenting them in a
convenient and easily read and understandable statements.” was the definition given by
Finney and Miller on financial analysis.

Main features of financial analysis:

a. To present the complex data contained in financial statements in simple and

understandable form.
b. To classify the items contained in financial statements in convenient and rational
groups.
c. To make comparisons between various groups to draw various conclusions.

Types/Methods of Financial Analysis of Financial Statements:

1. Horizontal Analysis - This type of analysis consists of reviewing and analysing

financial statements for a number of years. Figures of 2 or more years are analysed in
this type of analysis and the figures are placed side-by-side to facilitate comparison.
 18

Since this type of analysis is based on the data from year-to-year rather than only one
year, it is also known as “Dynamic Analysis”.
2. Vertical Analysis – In this type of analysis, the financial statements of the business
firms for a single year or on a particular date are reviewed or analysed with the help
of proper devices like ratios. This analysis allows the study of the quantitative
relationship among various items of the Balance Sheet or the Statement of Profit &
Loss of a single period. Since this type of analysis is based on the data of a single
year, it is also known as ‘Static Analysis’. This analysis is helpful in comparing the
performance of several companies in the same group or departments in the same
company.

Purpose of Financial Analysis of Financial Statements/Financial Analysis:

1. To measure the Earning Capacity or Profitability: According to Robert Anthony,

“The overall objective of a business is to earn a satisfactory return on the funds
invested in it, consistent with maintaining a sound financial position”. Financial
analysis is being carried out with the objective of ascertaining whether adequate
profits are being earned on the capital invested in the business. It is through the
analysis of financial statements that the growth or decline in the earnings of the
company or firm can be ascertained.

2. To measure the Solvency: The analysis of financial statements helps the firm in
ascertaining its solvency, i.e., the ability of the firm to pay its short-term and long-
term liabilities in time.

3. To make comparative study with other firms: Another purpose of financial analysis is
to enable the comparative study of two firms in the same industry regarding its
profitability, sales, etc.

4. To identify the trend of the business: A financial statement analysis indicates the
direction in which the business is moving. It enables the firm to identify the trend of
the business and helps in ascertaining whether the business is progressing or not.
 19

5. To provide useful information to management: The management is able to ascertain

the shortcomings of the business through the various useful information provided by
financial analysis.

6. To measure the capability of Payment of Interest and Dividend: One of the main
reasons behind analysis is to be able to evaluate whether the firm has sufficient profits
to pay interest and dividends.

7. To measure the financial strength: Another purpose of analysis of financial statements

is to be able to evaluate the financial potential of the business.

Significance of Financial Analysis

1. Significance to management: Financial analysis enables the management to draw

significant conclusion from the data obtained through the analysis of the financial
statements. These conclusions can be about the solvency, profitability or liquidity. In
order to allow the management to draw conclusions and take effective measure
towards writing any wrong in the business, financial analysis is important. In the
words of Gerstenberg, “The management can measure the effectiveness of its own
policies and decisions, determine the advisability of adopting new policies and
procedures and document to owners, the results of their managerial efforts”

2. Significance for Investors: Investors mainly concern themselves with the future
prospects of the business, its ability to progress and its earning capacity. Through
financial analysis, the investors will be able to ascertain the information they desire to
help them take decisions.

3. Significance for Researchers: Analysis of financial statements of a company is of

much importance to a researcher who is conducting research in respect of the
profitability, efficiency, financial soundness and future growth potential of that
company.

4. Significance for financial institutions: All financial institutions that have provide
finance to a business/company will be desirous of knowing the progress, profit
 20

earning capacity and its long-term solvency. Such information can be obtained
through the analysis of the financial statements of the business/company.

Uses of Financial Analysis

1. For taking Investment Decisions: An investor is an individual who is constantly

keeping tabs on the financial performance of the business. As such, the analysis of the
financial statements helps an investor in ascertaining whether the firm is meeting his
expectations with regards to payment of dividends, safety of his investments. It helps
the investors in taking decision about continuation or discontinuation of his
investment in the business firm.

2. For taking Credit Decisions: The analysis of financial statements help in making
decision with regards to granting or extending credit to a customer.

3. For taking Dividend Decisions: An analysis of the financial statements is useful in

ascertaining the portion of the profit that is to be paid out as dividends and the portion
to be retained.

4. For estimating trend of the business: An important use of the financial statements
analysis of a number of years lies in the fact that it can be used to estimates the trend
of the business. It helps in evaluating the future growth potential of the firm.

5. For taking various managerial decisions: The liquidity, solvency and profitability of
the business firm can be ascertained through the analysis of the financial statements.
This helps in locating the weaknesses of the business and guides the management in
taking the required managerial decisions.
 21

2. LITERATURE REVIEW

Review of literature has become a common part of any research study, particularly in
the field of social science including Commerce. There have been numerous research works
undertaken by various academicians and researchers with a view to evaluate the efficiency,
profitability and productivity of different types of banks. Studies based on the financial
performance of the banking sector have been undertaken in India and across the world. The
Reserve Bank of India (2003) stated that “As regards the linkage between ownership and
performance, international evidence suggest that ownership has limited impact on economic
efficiency”

In an international and national level, several studies have been conducted in order to
analyse the different aspects of commercial banks’ performance. Literature review is
important so as to eliminate the repetition of a study and to help open new aspects for the
study. Moreover, it adds a new dimension in the literature. This review of literature is an
attempt to build a connection between any previous research/study that have been undertaken
by different researchers.

In light of these importance, the research papers and articles that is in one form or
another related/concerned to the present area of study has been reviewed. In order to be able
to recognise any potential research gap as well as to comprehend study methods, study
findings, etc the different studies have been critically examined.

(Dhanabhakyam & Kavitha, 2012)[7]. Titled ‘Financial performance of selected

public sector banks in India’, this study attempted to see the financial performance of public
sector banks in India, namely, Bank of India, Indian bank, Indian overseas bank, Canara
bank, Union bank of India and State bank of India. The essential role of a bank is to connect
those who have capital with those seeking capital. The study’s objective is to analyse the
financial positions of the selected public sector banks. The study covers a period ranging
from 2001 to 2010 and the performances of the selected banks were analysed using tools and
techniques such as Ratio Analysis, Correlation, Regression. During the study period, it was
found that the selected public sector banks showed good performance with regards to the
growth and financial efficiency meaning that these banks have been progressing during the
period under study.
 22

( Dhanaraj & Ponmani, 2020)[8]. The research “Performance Evaluation of Indian

Commercial Banks – A CAMEL Approach (With Special Reference to Selected Private and
Public)” studied Canara Bank, State Bank of India, Indian Bank, Bank of Baroda, Bank of
India for the public sector banks and HDFC, Axis, Yes Bank, City Union Bank and Indusind
Bank for the private sector banks. The banking sector is the backbone of the economy and the
deposits and money collected through this source works as the lifeblood of the economy in a
country. Foreign banks are gaining popularity as it has offered more facilities that the new
generation are eager to try. The study’s objectives are to compare the earning of the selected
banks and to evaluate and examine the financial performance of the selected banks. The study
covers a period of 5 financial years from 2016 to 2020 and uses statistical tools of Mean,
ANOVA and Correlation. This study attempts to apply the CAMEL model on the selected
commercial banks in India. The study actively compares the performance of the public as
well as the private sector banks. The study found that there is no significant difference among
both the sector of banks during the study period in terms of capital adequacy ratio, debt
equity ratio and NPA/Net advances ratio. It also concluded that the total advance to assets
ratio have the same compositions for both sector of banks during the study period. This study
is useful for the bankers and shareholders and other parties as it provides adequate
information about determination of commercial banks’ performance.

( Goel & Rekhi, 2013)[9] stated that due to greater reforms, increasing consumer
demands and intense competition, the banking sector needs efficiency and profitability. This
study, “A Comparative Study on the Performance of Selected Public Sector and Private
Sector Banks in India” attempts to measure the relative performance of Indian banks by using
public sector banks and private sector banks. Different proxy indicators are used for
measuring productivity of banking sector. Segmentation of the banking sector in India was
done on bank assets size. The study suggested that the key to performance was ROA (Return
on Assets), ROE (Return on Equity), NIM (Net Interest Margin). From the analysis, it I
concluded that the in terms of efficiency, the new banks are better than the old ones. Als, in
terms of profitability, the public sector banks are comparatively less profitable than the other
banks. The study found that there is an interrelation between efficiency and profitability. As
per the analysis, the results varied for each and every bank regardless of the sector. The CDR,
NIM varied depending on the bank but irrespective of the sector.
 23

(Gupta & Sundram, 2015)[10]. “Comparative study of public and private sector
banks in India: An empirical analysis” research aimed at examining and comparing the
performance of selected public sector banks (Bank of Baroda, Punjab National Bank, Central
Bank of India) and private sector banks (ICICI Bank, HDFC Bank, Axis Bank) during 2009-
10 to 2013-14. Banks have played a huge role and especially the public and the private sector
banks are the dominant players that have contributed to the growth of the Indian economy.
This research used 9 variables, Return on Assets, Cash to Deposit Ratio, Credit to Deposit
Ratio, Ratio to Term Deposit to Total Deposit, Ratio to Priority Sector to Total Advance,
Ratio of Interest Income to Total Assets, Ratio of Non-Interest to Total Assets, Ratio of net
Interest Margin and Interest expanded to total Assets, to analyse the profitability of selected
banks. The study found that the earning capacity of Punjab National Bank was better than
that of Bank of Baroda and Central Bank of India. In the private sector banks, the earning
capacity of HDFC was better than the other banks and that the Return on Assets ratio of
Punjab National Bank and HDFC bank was higher in the public sector and private sector
bank respectively. All in all, the study concluded that the private sector banks were much
more efficient in utilising their resources such as assets, deposits, advances and investments,
yet, the public sector banks could not utilise their resources optimally. Thus, the public sector
banks needed to pay more attention to their productivity or efficiency.

(Gupta & Kumari, 2017)[11] stated that the banking sector is one of the highest
growing areas and a lot of money is invested in it and that today’s banking structure is
becoming more complex. There are so many models to examine the performance of the
banks, but for the research the CAMEL Model was selected to estimate the financial
performance of the banks. It is the most excellent model because it measures the performance
of the banks from each factor i.e., Capital, Assets, Management, Earnings and Liquidity. The
research aimed at making a comparative analysis of the selected public sector banks (Bank of
India, State Bank of India, Oriental Bank of Commerce, Punjab National Bank, IDBI) and
private sector banks (ICICI, HDFC, Yes Bank, Axis Bank, Kotak Mahindra Bank). The
selected banks were studied for a period of 5 financial years starting from 2012-13 till 2016-
17. The study showed in public sector Banks, BOI bank, OBC bank finance through equity
than debt as compare to YES bank, AXIS bank in private sector bank. It also showed that in
public sector Banks, BOI bank, PNB bank invest more in government securities which is a
safe and regular source of income of banks as compare to private sector banks. Also, non–
performing assets of YES bank, HDFC bank in case of private sector Banks are less as
 24

compare to public sector banks which raise their performance as compare to SBI bank, BOI
bank in case of public sector banks. Hence, risk taking capacity of private sector banks is
much better than public sector banks.

(Jaiswal & Jain, 2016)[12] in his entitled research “A Comparative Study of

Financial Performance of SBI and ICICI Banks in India”, the banks’ role as finance
depositor and finance provider have grown and in the current scenario, banks play many roles
in the development of the economy due to the many policies and technical changes. The
study is an attempt to analyse the financial performance of SBI (which is a public sector
bank) and ICICI (which is a private sector bank) in a descriptive and analytical nature. The
comparison of both the banks’ financial performance was carried out on the basis of ratio
analysis while the examination of both banks’ financial performance was based on the
CAMEL (Capital adequacy, Assets quality, Management quality, Earnings quality and
Liquidity) variables, which is regarded as the best method of evaluating performance and
health of banks a it considers all areas of banking operations. The study compares the
performance of SBI and ICICI for the period of 2010-11 to 2014-15. The study showed that
SBI is financially sound as compared to ICICI bank and that it has more profitability as it
entered into the industry as well as commercial market. ICICI has circulated more advances
when compared to SBI which is one of the reasons which increases the bad debts of ICICI
when compared to that of SBI. The study concluded that the reason for the better financial
performance of SBI when compared to ICICI was due to it being a public sector banks and is
the older bank as compared to ICICI and thus capturing the larger market.

(Jha, 2018)[13] stated that private sector banks originated into existence to
supplement the performance of public sector banks and serve the needs of the economy
better. The financial performance of a bank is often measured as the achievement of the bank
in terms of profitability position, service quality, customer satisfaction and other relevant
aspects. However, things have transformed; at present, banks are known for technical and
financial changes People are more satisfied from the private sector banks because of their
better services provided by them in terms of speedy transactions, totally computerized
facilities, more operating hours, smart investment consultative services, efficient and co-
operative employees, and better approach to client relationship management. In this paper, an
effort had been made to assess and compare the financial performances of one of the major
public sector Bank (PNB) and Private Sector bank (ICICI) in India for operating period 2011-
 25

2018. Using a statistical approach of mean and standard deviation, the research aims at
assessing in addition to comparing the economic soundness of the selected banks. Net profit
margin and dividend pay-out ratio was significantly higher with ICICI bank when compared
with PNB bank. Whereas debt-equity ratio and interest expended to interest earned ratio was
significantly lower with ICICI bank when compared with PNB bank. The study concluded
that the bank customers have high trust in public sector banks as compared to private sector
banks. People preferred PNB bank to require loans and advances as compare to ICICI bank.
However, PNB bank has lower operational efficiency comparatively than ICICI bank. In case
of dividend pay-out ratio, debt-equity ratio and Interest expended to interest earned, ICICI
bank has performed sounder as compare to PNB bank.

(Dr. Veena K.P. & Pragathi K.M., 2018)[14] banking sector is another phase of the
development of economy. The development of the economy and financial sectors leads to the
investor to know more about the performance of the banking sector and to take necessary step
on their investment by comparing and evaluating the profitability of the banking sectors. The
development of a country is linked, integrally, with the advancement in the banking sector.
The research titled “A Comparative Study of Financial Performance of Canara Bank and
Union Bank of India” aims to highlight the theoretical background and profile of selected
banks in India and to examine the capital adequacy ratio performance of Canara Bank and
Union Bank and to study the level of gross NPAs and net NPAs of Canara Bank and Union
Bank and to assess the performance ROA, ROE and EPS analysis of both selected banks. The
purpose of the study is to compare the financial performance of the selected banks between
the year 2012-13 to 2016-17. Quantitative Analysis is undertaken to measure the financial
performance of the bank. Each of the bank’s performance is compared by using descriptive
statistical analysis such as mean, co-efficient of variation and standard deviation. As per the
study, Canara bank must concentrate in controlling their Non-Performing Assets. The study
found that Canara Bank is in a stronger position than Union Bank. The study indicated that
there is no significant difference between the selected banks. The study also indicates that
Union Bank of India faces a problem of generating profitability as compared to Canara Bank.
Overall, the study concluded that the financial performance of Canara Bank is good and that
it is performing well in comparison to that of the financial performance of Union Banks of
India.
 26

(Koundal, 2022)[15] highlighted that efficiency and profitability has assumed the
primary importance in the banking sector of India due to intense competition, greater
customer demands and changing banking reforms. The study attempts to measure the relative
performance of Indian banks. In this study the public sector banks, old private sector banks,
new private sector banks and foreign banks have been selected. We know that production in
the service sector is difficult to measure because it is intangible. Therefore, various proxy
indicators are used to measure the productivity of the banking sector. Ratio analysis method
is used to compare the performance of the selected sector banks. The segmentation of the
banking sector in India has been done on the basis of number of banks, branches, number of
employees, business per employee, deposits per employee, advances per employee, size of
bank assets, non-performing assets etc. Overall, the analysis supports the conclusion that
foreign banks are, on average, are the most efficient, and that the new banks are more
efficient than old ones. Public sector banks are not as profitable as other sectors. Smaller
banks are globally efficient, but large banks are locally efficient. This means that efficiency
and profitability are linked. True, productivity is not the only factor, but it is an important
factor that affects profitability. The key to improving profitability is to increase productivity.

(Karim & Alam, 2013)[16] in their research titled “An Evaluation of Financial
Performance of Private Commercial Banks in Bangladesh: Ratio Analysis” mentions that
bank play an important role in the economic development of every nation, they control a
large portion of the money supply in the economy. The study aimed at assessing the financial
performance of five selected private sector banks. These banks are listed on both the Dhaka
Stock Exchange and Chittagong Stock Exchange, in Bangladesh. Annual time series data
from 2008-2012 of the selected banks from their respective audited annual reports were
employed in multiple regression analysis to recognize the impact of bank size, credit risk,
operational efficiency and asset management on financial performance measured by the three
indicators, namely, Internal-based performance measured by Return on Assets, Market-based
performance measured by Tobin’s Q model (Price/Book ratio) and Economic-based
performance measured by Economic Value add has been used to measure financial
performance of the selected banks. The findings of the research highlighted that with increase
in asset management, there has been increase in ROA, and that asset management has very
strong positive correlation with ROA, as it is logical that with increase in efficient asset
management, the return on assets will be higher. Moreover, the study showed that Asset size,
Credit risk, operational Efficiency and Asset management have significant impact on internal
 27

financial performance of private sector commercial banks measured by ROA. It also

concluded that Bank size, Credit Risk, Asset management and operational efficiency have
impact on market-based performance (Tobin’s Q) of Bangladeshi private sector commercial
banks and on the economic-based performance (EVA) of Bangladeshi Private Sector
commercial banks.

(Padma & Arulmathi, 2013)[17]. The banking sector of India is considered to be one
of the fastest growing financial institutions. It supplies the lifeblood-money that supports and
produces growth in the industries present in the economy. The study explained that the
growth of the banking sector is measured by the increase in the number of banks’ branches,
deposits, credit, etc. and that by analysing the banking sector, the direction in which the
country’s economy is moving may be comprehended. The major objective of the banking
reforms has been to increase the efficiency and profitability of the banks. The research
“Financial Performance of State Bank of India and ICICI Bank – A comparative
Study” stated that the operational efficiency is an indicator which will help not only the
public but to the management, regulators, and supervisor to understand and judge the relative
efficiency of those in the banking sector. The research carried out covered a period of five
years, i.e., from 2006-01 to 2010-11 and relied on annual report from sources that are
secondary in nature. The major tools that were extensively utilised for the analysis of the data
were ratios, percentages and t-test. According to the analysis, both of the banks maintained
the required standards and were running profitably. The study concluded that there were
major differences between the performance of SBI and ICICI in terms of Deposits, Advances,
Investments, Net Profit and Total Assets. Also, the study and analysis provided enough
information to conclude that State Bank of India, when compared to ICICI bank, has a greater
and larger operation. This study will help in enhancing any further research on the subject by
researchers and academicians.

(Parmar & Kulkarni, 2017)[18] mentioned that the evaluation of the financial
performance of the banking industry is a sure, effective and efficient measure as well as a
proper indicator of checking the soundness of economic activity of the country. The
liberalisation and globalisation policy brought about significant changes in the whole banking
sector. A good reflection of the development of the economy is the stage of development of
the banking industry. The role of employees is of great significance and it is the ability of the
employees that enables the bank to deliver quick and courteous service to the customers. In
 28

their paper titled “Analysis of Productivity of Indian Banks: A Comparative Study of

Selected Public and Private Banks” attempts have been made to draw conclusions
regarding banks’ profitability in terms of its employees’ productivity. The study selected 16
banks out of a total of 37 public and private sector banks in India and have analysed and
compared the selected banks’ productivity over the last 10 years. This research has analysed
the productivity of the of the selected banks in India during 2005-06 to 2014-15. It grouped
the selected banks into public, old and new private sector banks. The study found that the
public sector banks had the highest business per employee among the three groups and that it
has the highest fluctuating trend during the research period. Thus, the research shoes that the
public sector banks and the new private sector banks have been going head-to-head and that
the public sector banks had a better business per employee while the new private sector banks
had a better profit per employee.

Research of (Patel & Patel, 2021)[19] titled “A Comparative Financial

Performance Analysis of Selected Public Sector Banks in India” examines the financial
performance of selected public sector banks and makes a comparative analysis of the selected
public sector banks. The banks in mentioned are SBI, PNB, BOB and BOI. These banks have
been extensively assessed using statistical tools, namely, ROA (Return on Assets), ROE
(Return on Earnings), EPS (Earnings Per Share), CDR (Credit Deposit Ratio) and NIM (Net
Interest Margin). Their research cover 9 financial years ranging from 2011-2019. The study
found that the selected banks have a good performance as to the mobilisation of savings into
productive channel. As per the research, amongst the selected banks, SBI performed the best
with its ROA, ROE, EPS and NPM showing better results compared to the other selected
banks.

(SakthiVadivel & Ayyappan, 2013)[20]. There are over 67,000 bank branches in
India, which are divided into two categories: non-scheduled banks and scheduled banks.
Scheduled banks consist of commercial banks and co-operative banks. Public sector banks
dominate the Indian banking industry, accounting for over 78 percent of it. Although private
sector banks entered the market later, they compete equally with public sector banks due to
their customer service and user-friendly banking features. As a result, it is crucial to examine
the factors that influence their financial performance, which will help them determine where
to focus their efforts. In this article, we examined the correlation between return on total
assets and other financial variables for selected private and public banks in India. Their paper
 29

titled “Financial Efficiency of Selected Public and Private Sector Banks in India” aimed at
identifying the best bank group and to ascertain the crucial factors that are responsible for the
profitability of commercial banks in India. It also tried to assess the financial criteria which
determines the profitability of the selected commercial banks in India. The study analysed
ICICI bank, HDFC bank, UBI and OBC. The research concluded that there is a significant
relationship between the selected banks/variables and return on total assets of the banking
sector.

(Shah & Jan, 2014)[21] carried out research to study the financial performance of
private banks in Pakistan. The top ten private commercial banks in Pakistan were taken for
the study. Return on Assets, Interest Income, Bank Size, Asset Management and Operational
Efficiency were taken as both dependent and independent variables respectively for the study.
The statistical tool correlation analysis is adopted for the study. The study explains the
imperative nature of the financial sector for the economy’s growth and progress while
highlighting the current nature of banking in Pakistan. The study concluded that the ROA of
the banks were negatively and strongly affected by the bank size. The results concerning the
interest income were statistically significant and showed that there exists a negative relation
with the operational efficiency. The study also found that the interest on income was
positively and strongly affected by the bank size and is statistically significant.

(Sharma, Nigam, & Maheshwari, 2017)[22] research paper titled “Financial

Analysis of Public Sector Undertaking: A Case Study of Allahabad Bank” had the
analysis of the concept of financial analysis, profitability position and Balance Sheet position
of Allahabad Bank s its objectives. The current banking scenario has been significantly
shaped by the economic reforms introduced by the Indian Government in the year 1990. The
possibility of the existence of private banks was initiated due to the introduction of
Liberalisation and the development of the private banks paved way for competition in the
banking industry. The research adopted financial ratios like Net Profit Ratio, Operating
Expense Ratio, Current Assets Turnover Ratio, Current Liabilities Turnover Ratio and Fixed
Assets Turnover Ratio for the analysis of the financial performance of Allahabad Bank. It
was discovered in the analysis that Allahabad Bank had an over-investment in fixed assets.
Moreover, the analysis showed that the bank focuses on the investments in fixed assets which
are not capable of being transformed into sales.
 30

(Singh & Tandon, 2012)[23] compared one of, if not the most, popular bank and the
largest bank SBI with ICICI Bank in their paper “A Study of Financial Performance: A
Comparative Analysis of SBI and ICICI Bank”. The paper mentions that the banking
sector plays an important role in developing the economy of a country followed by the
overview of the selected banks, i.e., SBI and ICICI Bank. The study covers the period of 5
years i.e., from year 2007-08 to year 2011-12. In the present study, an attempt has been made
to measure, evaluate and compare the financial performance of SBI and ICICI Bank which
one related to the public sector and private sector respectively. In order to analyse the data of
the study and to compare the trends prevailing in the business sector and also the financial
performance of the mentioned banks, Ratio Analysis was applied. Moreover, in order to
analyse the trends in banking business profitability statistical tools have also been deployed.
The said tools are Mean and Compound Growth Rate (CGR). The paper covers and studied a
variety of parameters including Credit Deposit Ratio, Interest Expenses to Total Expenses,
Net Profit Margin, Net Worth Ratio, Percentage change in Net Profit, Total Income, Total
Expenditure, Percentage change in Deposits, Advances, Other Income to Total Income and
Interest Income to Total Income. The analysis showed that SBI (public sector bank) has
utilised its resources more efficiently as compared to ICICI while the general public show
preference to ICICI with regards to investing their savings. It also pointed out that ICICI has
comparatively better operational efficiency than SBI while SBI has performed well as
compared to ICICI based on the Net Profit Margin. The study concluded that the general
public has more faith in the public sector banks as compared to the private sector banks.

The study made by ( Srinivasan & Britto, 2017)[24] in their paper “Analysis of
Financial Performance of Selected Commercial Banks in India” gave importance to the
management of solvency and liquidity. It states that solvency and liquidity are very
significant for banks. The optimum level of liquidity guarantees that a bank will meet their
short-term debts and that there will be proper management of flow can be promised by a
profitable business. The management of liquidity and solvency ratios are essential for
commercial banks as these ratios are associated with the banks’ performance and reputations.
Maintaining a healthy financial performance has become a great challenge for the banks due
to fluctuating monetary policies, technological advancements, larger and competition etc. The
study attempts to evaluate the financial performance of selected Indian commercial Banks for
a period ranging from 2012-13 to 21016-17. The study selected 16 commercial banks made
up of 11 public sector banks and 5 private sector banks whose financial performance were to
 31

be examined through the financial ratios viz. the liquidity ratio, the profitability ratio, the
turnover ratio and the solvency ratio. The analysis finds that the private sector banks have a
relatively better current ratio, return on equity, earnings per share, return on assets than the
public sector banks. It showed that the both the public sector banks and the private sector
banks have a steady and constant asset turnover ratio. Their study concluded that during the
selected time period, the private sector banks’ financial performance is relatively better than
that of the public sector banks.

(Tripath, Meghani, & Mahajan, 2014)[25] studied the banking system in the post
reform era in their paper “Financial Performance of Axis Bank and Kotak Mahindra
Bank in the Post Reform Era: Analysis on CAMEL Model”. The banking reforms aimed
at making banks more efficient and viable as their performance were viewed as the economic
activities of the economy. After liberalization, a few private sector banks came to be known
as New Generation Technology. The study covered a period of 10 years from 2004 to 2013
and selected the world-renowned CAMEL model (with minor modification) with the t-test as
its tool to evaluate the financial performance of Axis Bank and Kotak Mahindra Bank. The
CAMELS’ analysis, the study found that there was no significant difference between the two
banks. However, that being said, the study concluded that the Kotak Mahindra Bank’s
financial performance was slightly lesser as compared to the financial performance of Axis
Bank.

(Velnampy.T & Anojan.V, 2014)[26] study’s main purpose is to compare the

financial performance of state and private sector banks during war and post was scenarios of
Sri Lanka. In Sri Lanka, three types of banks exist which is one of the major service sectors
in the country. Their paper “Financial Performance of State and Private Sector
Commercia; Banks: A Comparative study during war and post war scenarios of Sri
Lanka” aims to evaluate and compare the financial performance of the state and private
sector banks during and post war. The study covered a period of 2007 to 2012 where the
period 2007-09 was considered as pre war scenarios and 2010-12 was considered as post war
scenarios. The data collected in the study was analysed through ratio analysis, graph,
descriptive statistics and independent sample T-Test. Gross Profit Ratio, Net Profit Ratio,
Return on Equity, Return on Assets were the ratios used in the study to compare both sector
banks. The results of the analysis pointed out that the private sector banks had performed
better and had higher profitability levels as compared to the state banks during the war
 32

period. The study concluded that within the given period of study, the private sector banks
had better financial performance when compared to the financial performance of the state
banks. Also, the ratio analysis revealed that both sector of banks had a higher level of
financial performances in the post war scenarios than it had during the war.

(Kumbirai & Webb, 2010)[27]. In their paper entitled “A financial Ratio Analysis of
Commercial Bank Performance in South Africa”. The commercial banks in South Africa
were facing rising competition and increasing costs due to several regulatory requirements,
financial and technological innovation. Not only those, large foreign banks entered the
banking industry of South Africa and existing financial crisis developed further challenges
for the commercial banks in the country. The study’s objective is to evaluate and investigate
the performance of the commercial banks in South Africa. The study employed the financial
ratio analysis to measure and evaluate the banks’ performance in terms of profitability,
liquidity as well as credit quality. For the study, 5 big South African based commercial banks
are taken and the period of the study covers 2005 to 2009. The study found that during the
first two years of analysis, the overall banks’ performance rise considerably. However, in
2007, the global financial crisis started and as such there was a tremendous change in the
trend regarding the performance of the banks. In 2008-09, the crisis reaches its climax
resulting in the South African based banking sector experiencing falling profitability, low
liquidity and deteriorating credit quality.

(Kumar & Rinku, 2013)[28] The banking industry, as the lifeline of any economy was
discussed with reference to the soundness of the chosen Indian private and public banks. The
study is based on the leading banks of Private Sector and Public Sector in India which are
engaged in different activities of the financial service. In this study, nine parameters have
been used, namely, Operating Expenses, Business per Employee, Investment Deposit Ratio,
Provision and Contingencies, Investment Advances, Deposit and NPA. The study chose SBI,
PNB, BOB and Allahabad Bank as representatives of the public sector banks and HDFC
Bank, Axis Bank, YES Bank and ICICI Bank as representatives of the private sector banks.
The study concluded that the private sector banks is working towards maximising profits. The
public sector banks on the other hand, are responsible for growth and welfare.
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(Verma & Bodla, 2006)[29] The current banking sector supervisory system, compared
to the earlier system is a huge improvement. This mentioned improvement is in terms of
frequency, coverage and focus and also the tools employed. Basic Core Principles for
Effective Banking Supervision is yet to be fully adhered to as only one-half has been adhered
to and the remaining are at the stage of implementation. This paper studies two banks,
namely, SBI and ICICI for the period 2000-01 to 2004-05. The study is done using the
CAMEL model. The study found that in terms of Capital Adequacy, SBI has an edge over
ICICI bank. However, the study found that ICICI bank has a better performance in relation to
assets quality, earning quality and management quality. It also found that both the banks’
liquidity position are good and there is no significant difference between the two.