The present study seeks to examine the trends in the financial performances of 15 banking companies, major players in the Indian money market, during the period 1996-97 to 2006-07. In this study 8 major public sector banks and 7 private sector banks in India have been selected. The performances of public sector banks have become more market driven with growing emphasis placed on profitability. Though there is a phenomenal development in both public and private sector banks in India after reforms yet the private sector is still lagging behind comparatively in this study.
With the nationalization of the most of the major commercial banks in 1969, restrictions on entry and expansion of private and foreign banks were gradually increased. The Reserve Bank of India (RBI) also began enforcing uniform interest rates, spreads and service changes among nationalized banks. The success of our giant five year plan is dependent, among other things on the smooth and satisfactory performance of the role by banking industry of our country. Banks thus pay special attention in financing business of innovation for providing cheap and adequate credit. And this is done by different private and public sector banks in money market in our country.
Since 1992-93, the structure of the Indian banking system has undergone significant changes in terms of scope, opportunities and operational buoyancy. The commercial banks have been facing and increasing degree of competition in the intermediation process from term lending institutions, non-banking intermediaries, chit funds and the capital market. Besides, new banking services like ATM and internet banking have been emerged due to the advancement of computers and information technology.
Contents
1. Introduction
2. Review of literature
3. Significance or relevance of this study
4. Objectives of the study
5. Data source and methodology of the study
6. A brief history of Indian banking industry
6.1 The post-reform era
6.2 A short history and background of selected public and private sector banks
7. Analysis and interpretation of results
7.1 Comparison in performance between public and private sectors banks
7.2 Analysis of profits and profitability
7.3 Analysis of earnings and expenses of selected banks
7.4 Analysis of responsiveness of earnings to expenses
7.5 Analysis of productivity of selected public and private sector banks
7.6 Analysis of Non-performing assets (NPA)
8. Suggestions to improve the performance
9. Conclusion
Research Objectives and Core Themes
This study aims to conduct a comparative analysis of the financial performance of 15 selected public and private sector banks in India between 1996-97 and 2006-07, specifically identifying their operational strengths and weaknesses to propose performance improvement strategies.
- Comparative analysis of financial performance indicators.
- Application of ratio analysis for evaluating bank efficiency.
- Assessment of the post-reform era impact on Indian banking.
- Evaluation of productivity and profitability trends.
- Investigation of Non-performing assets (NPA) management.
Excerpt from the Book
6.2 A short history and background of selected public and private sector banks
Allahabad Bank (ABL), the oldest joint stock bank, was set up in 1865 by a group of Europeans. In 1920, the bank was taken over by P&O Banking Corporation at a bid price of Rs 436 per share. The head office and the Registered Office of the bank were then shifted to Kolkata in 1923 for business considerations and operational convenience. In 1927 the bank went into the fold of Chartered Bank that acquired the controlling interest in the P&O Banking Corporation. However, in 1969 along with 13 other major commercial banks, ABL too was nationalized. At the time of nationalization, the bank had a network of 151 branches. In 1989 United Industrial Bank was amalgamated with the bank.
The bank made a foray into merchant banking activity in 1984 and subsequently transferred the merchant banking activities to All Bank Finance (AFL), a wholly-owned subsidiary in 1991. Consequent to the SEBI Rules and Regulation the company surrendered its merchant banking registration in 1998 and got itself registered as an NBFC with RBI. ABL, wholly owned by the government of India (GOI), came out with its first initial public offer (IPO) in Oct 2002 for 10,00,00,000 equity shares of Rs 10 each at par aggregating Rs 100 crore through the fixed price route. The main object of the issue is to augment the long-term resources of the bank and the capital base of the bank to meet its future capital adequacy requirements. After the issue, the shareholding of GOI will come down to around 71.2%.
Summary of Chapters
1. Introduction: Discusses the vital role of the banking system in the Indian economy and the core functions of commercial banks as engines of economic growth.
2. Review of literature: Analyzes existing studies on bank efficiency, government ownership, and privatization in the Indian banking context.
3. Significance or relevance of this study: Highlights the necessity of evaluating bank performance given the changing competitive landscape in post-reform India.
4. Objectives of the study: Outlines the specific goals, including performance comparison and identification of strengths and weaknesses through ratio analysis.
5. Data source and methodology of the study: Describes the secondary data sources used and the statistical techniques applied to evaluate bank performance.
6. A brief history of Indian banking industry: Provides a historical overview of banking institutions and the development of the Indian financial sector.
6.1 The post-reform era: Details the structural shifts and reforms initiated in the Indian banking sector since 1991.
6.2 A short history and background of selected public and private sector banks: Offers profiles of the 15 specific banks selected for this study.
7. Analysis and interpretation of results: Presents the primary quantitative findings regarding the performance of public and private sector banks.
7.1 Comparison in performance between public and private sectors banks: Contrasts key performance indicators between the two ownership groups.
7.2 Analysis of profits and profitability: Examines profit trends and the definition of profitability metrics in banking.
7.3 Analysis of earnings and expenses of selected banks: Investigates the relationship between income growth and expenditure growth.
7.4 Analysis of responsiveness of earnings to expenses: Measures the elasticity of earnings relative to operational costs.
7.5 Analysis of productivity of selected public and private sector banks: Evaluates input-output efficiency based on operating expenses and earnings.
7.6 Analysis of Non-performing assets (NPA): Reviews the trends and impact of non-performing assets on asset management efficiency.
8. Suggestions to improve the performance: Recommends strategic changes to enhance the performance and operational viability of banks.
9. Conclusion: Summarizes the study’s findings regarding the tradeoff between stability and efficiency under government ownership.
Keywords
Indian Banking, Public Sector Banks, Private Sector Banks, Financial Performance, Ratio Analysis, Profitability, Non-performing Assets, Banking Reforms, Capital Adequacy, Asset Management, Operational Efficiency, Economic Growth, Financial Intermediation, Banking Regulations, Productivity.
Frequently Asked Questions
What is the core focus of this research?
This research evaluates and compares the relative financial performance of 15 major public and private sector banks in India over the period of 1996-97 to 2006-07.
What are the primary areas of analysis in this study?
The study examines profitability, productivity, interest spreads, intermediation costs, capital adequacy, and the management of non-performing assets.
What is the main objective of the author?
The primary goal is to assess the strengths and weaknesses of public and private sector banks and to provide actionable recommendations for improving their performance.
Which scientific methods are utilized?
The author employs ratio analysis and simple statistical techniques, such as measures of central tendency and t-tests, to evaluate the collected secondary data.
What is the thematic content of the main chapters?
The main chapters cover historical context, reforms in the post-1991 era, detailed profiles of selected banks, and comprehensive statistical analysis of financial performance indicators.
Which keywords best describe this study?
Key concepts include Indian Banking, Financial Performance, Profitability, Non-performing Assets, and Banking Reforms.
How does the study define the "post-reform era" in Indian banking?
It refers to the period starting in 1991, characterized by the deregulation of interest rates, increased entry for private and foreign banks, and the introduction of international accounting and capital norms.
What does the study conclude regarding the performance of public vs. private sector banks?
The study finds that while public sector banks dominate the market, private sector banks have shown significant growth, though they still face challenges related to operational costs and infrastructure investment.
Why are Non-performing assets (NPAs) considered a critical issue?
NPAs represent assets that fail to generate income, thereby impacting the overall profitability and financial health of banks, which in turn affects the broader economic growth of the country.
- Quote paper
- Dr. Jayanta Kumar Nandi (Author), 2009, A Comparative Study on Measuring Relative Performance of Indian Banks, Munich, GRIN Verlag, https://www.grin.com/document/947965
