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c.paramasivan Review of performance of commercial banks in tirunelveli district, tamil nadu

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  • 1. REVIEW OF PERFORMANCE OF COMMERCIAL BANKS IN TIRUNELVELI DISTRICT, TAMIL NADU Dr.C. PARAMASIVAN 1 & P. MARI SELVAM 2 ABSTRACT Commercial banks in India have traditionally focused on meeting the short-term financial needs of industry, trade and agriculture. However, given the increasing sophistication and diversification of the Indian economy, the range of services extended by commercial banks has increased significantly, leading to an overlap with the functions performed by other financial institutions. This article is focused on the Performance of commercial bank in Tirunelveli district, Tamilnadu with reference to banking network, deposits and advances positions and sector wise advances by the Commercial bank in Tirunelveli district during the study period 2010-11. Key words: Performance of commercial bank, banking network, advances and deposits, priority sectors Introduction Commercial banks play a key role in the field of Socio-economic development of the country which involve the Mobilization of savings from large segment of the people through various bank forms of accounts and deposits and channelize the investments to industrial and infrastructural developmental activities. In India, almost all the walk of human beings are directly or indirectly related with banking services at their life time. As per the RBI guidelines, Commercial banks are divided their lending and advance pattern deepens upon the needs and availability of finance. Banking sectors are closely associated with the social developmental activities like agricultural MSM sectors, SHGs, health and Education loan. In this regards, this 1 Dr.C. PARAMASIVAN, Assistant Professor & Research supervisor, Department of Commerce, Periyar EVR College, Tiruchirappalli – 620 023, Tamil Nadu, India . Cell No. 9442384207 Email: paramselp@yahoo.in 2 P. MARI SELVAM, Ph.D (FT) Research Scholar, Department of Commerce, Periyar EVR College, Tiruchirappalli – 620 023, Tamil Nadu, India. Cell No. 9976037879 Email: pmariselvam1986@gmail.com
  • 2. paper is focused on Review of Performance of Commercial Bank in Tirunelveli District of Tamilnadu during the year 2010-11. Commercial Banks in India The commercial banking industry in India started in 1786 with the establishment of the Bank of Bengal in Calcutta. The Indian Government at the time established three Presidency banks, viz., the Bank of Bengal (established in 1809), the Bank of Bombay (established in 1840) and the Bank of Madras (established in 1843). In 1921, the three Presidency banks were amalgamated to form the Imperial Bank of India, which took up the role of a commercial bank, a bankers' bank and a banker to the Government. The Imperial Bank of India was established with mainly European shareholders. It was only with the establishment of Reserve Bank of India (RBI) as the central bank of the country in 1935, that the quasi-central banking role of the Imperial Bank of India came to an end. Commercial banks in India have traditionally focused on meeting the short-term financial needs of industry, trade and agriculture. However, given the increasing sophistication and diversification of the Indian economy, the range of services extended by commercial banks has increased significantly, leading to an overlap with the functions performed by other financial institutions. Further, the share of long-term financing (in total bank financing) to meet capital goods and project-financing needs of industry has also increased over the years. A commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits. After the Great Depression, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. Commercial banking may also be seen as distinct from retail banking, which involves the provision of financial services direct to consumers. Many banks offer both commercial and retail banking services. Banking Network Network of banks providing financial services, a network of commercial, saving, and specialized bank that financial provide financial services, including accepting deposit and providing loans and credit, investment facilities.
  • 3. Table No.1 Banking Network Sl. Semi- No. Agency Rural Urban Urban Total 1 Commercial Bank 44 61 50 155 2 Regional Rural Bank 27 21 2 50 3 Co-operative Bank 15 20 10 45 4 Other Financial Institutions - - 2 2 103 112 73 288 Total Source: Lead Bank Annual Report 2010-11 The Tirunelveli District has analysed banking network. It focused that 155 Commercial bank, another 50 Regional Rural bank; 45 Co-operative bank and the remaining 2 of the other Financial Institutions. It reveals the fact that majority of 155 of Commercial Bank networking the Tirunelveli District. Sector wise Performance A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The commercial banks not only protect them but also help transfer of funds through cheques. Deposits received by the commercial banks are of various types, - fixed deposits, savings deposits, current deposits and recurring deposits. Table: 2 Sector wise performance ( Rs. in Lakhs) Sl.No Sector Amount in cores % of Share 1 Agriculture 1431.17 70.24 2 Industries 185.30 9.09 3 Services 421.17 20.67 Total 2037.64 100.00 Source: Lead Bank Annual Report 2010-11 Commercial banks provides financial assistant to agricultural sector amounted Rs.1413.17 Lakhs which constitutes 70.24 percent of Total bank credit of Rs.2037.64 Lakhs.
  • 4. Service sector constitutes 20.67 percent of total credit of Commercial banks which amounted to Rs.421.17 Lakhs and credit to industrial sectors performed in third position which amounted to Rs.185.30 Lakhs (9.09%). Agency wise Allocations Finance is one of the essential requirements of any enterprise. The Commercial bank has provided the allocation of funds in the agency wise classification. The bank operation and expansion of business and commercial activities depends a great deal on the availability of sector wise loans / advances from commercial banks. Finance assistance to bank, sector wise loans and advances, cash credits issued by various sectors. Table: 3 Agency wise Allocations ( Rs. in Lakhs) Sl.No Agency Amount in cores % of Share 1 Commercial Banks 1541.47 75.65 2 Regional Rural Bank (PGB) 383.55 18.82 3 Co-operative Banks 112.62 5.53 Total 2037.64 100.00 Source: Lead Bank Annual Report 2010-11 In Tirunelveli district, Commercial bank has distribute to amounted in Agency wise allocation during the 2010-11. The agency wise allocation to commercial bank amounted in Rs.154.47 crores and the percentage of 75.65 percent. Regional Rural Bank allocacted 383.55 Lakhs (18.82) percentage and Coperative banks allocated to 112.62 Lakhs (5.53) percent. Commercial banks allocated more credit to Agriculture & Industrial sectors than the Regiona Rural Bank & Coo-operative banks. Targets & Achievements under Annual Credit Plan The Lead bank scheme was introduced by Reserve Bank in Dec.1969 on the basis of recommendations of a study group appointed by the National Credit Council. The Commercial bank provides loans for integrated rural and urban areas development. The presently many financial institutions are activity contributed to the Achievements and Target of the Credit plan.
  • 5. Table No.4 Targets & Achievement under Annual Credit Plan ( Rs. in Lakhs) Year Target Achievement % of Achievement 2005-06 778.80 865.27 111 2006-07 955.00 1445.23 151 2007-08 1225.88 1314.08 107 2008-09 1490.01 1394.79 94 2009-10 1883.84 1515.49 80.45 Source: Lead Bank Annual Report 2010-11 Table No.3 reveals that the banking sector wise achievements under the Annual Credit plan in Tirunelveli district during the year 2010-11. During the year 2005-06, achievement were more than the targeted credit plan which constituted 111 percent and it has increased to 151 percent in 2007-08. From the year 2008-09, Achievement of credit plan was less than the targeted credit plan. It shows that 107 per cent in 2008-09 and 80.45 percent in 2009-10. there is a negative correlation ( -0.24) between the target and achievement of credit under annual credit plan of the commercial banks in Tirunelveli district . Sector wise Achievement The Commercial bank can establish its sector wise achievements in the agriculture, Industrial and service sector. The banks provide Institutional credit to service sector, they accept long term, deposit from public Industries such banks discount bills of exchange and make advances to trade and industry. Table No.5 Sector wise Achievement ( Rs. in Lakhs) Agriculture Targ Ach. Industries % 2005- 576.0 654.0 114 Ach t et Targe 67.9 Total . 66.97 Service % Target Ach. % Target Ach. % 10 135.85 143.62 106 778.80 865.27 111
  • 6. 0 1 691.0 941.7 0 1 831.8 934.0 6 8 1045. 1021. 57 75 1215. 1010. 88 97 06 5 1 97.0 11 6 6 152. 15 09 6 110.3 84.4 77 0 1 83.1 234.8 173. 73. 5 3 71 97 200607 136 84.00 180.00 406.46 226 955.00 1445.2 151 3 200708 112 97.65 296.37 230.91 78 1225.8 1317.0 8 8 1490.0 1394.7 1 9 76.3 1883.8 1515.4 8 4 107 9 200809 94 334.15 288.64 86 94 200910 433.13 330.82 80.45 Source: Lead Bank Annual Report 2010-11 Target and achievement performance were very high (226) percent in the year 2006-07 in relation with service sectors. As regards, agricultural sectors, it shows that 136 percent and industrial sectors, it shows that 156 percent. From the year 2008-09 to 2009-10, Target & achievement performance has reduced to less than 100 percent. Bank wise Achievement in ACP Bank wise achievement in Annual Credit Plan is one of the important considerations for understanding the banking performance. The loans and advances are generally sanctioned up to 50-70 percent of the value of assets offered as security including those created out of the loans. Table No. 6 Bank wise Achievement in ACP ( Rs. in Lakhs) 2005-06 Sl. Bank N0. wise 1 Com. 2006-07 Banks Amt. % 2007-08 Amt Amt. % 2008-09 % . 557.89 64 1025 .18 2009-10 Amt % Amt. % 67.78 1052.3 69.44 . 71 1032.3 4 78.38 945. 39 3
  • 7. 2 R.R.B 199.71 23 236. 16 274.42 20.80 41 3 Co-op. 101.75 12 Bank 4 Other 179. 374. 26.84 359.86 23.74 4.92 103.31 6.82 32 12 8.31 0.63 92 68.6 7 5.92 1 3.72 1 2.01 0.15 6.40 0.46 -- -- 865.27 100 1445 100 1317.0 100 1394 100 1515.4 100 F.I Total .23 8 .79 9 Source: Lead Bank Annual Report 2010-11 Bank wise achievements in ACP presented in the Table No. 5. Commercial Banks are the major contributor of the ACP in Tirunelveli district during the study period 2005-06 to 200910. In the year 2005-06, Commercial banks contributed to ACP shows that 64 percent, followed by Regional Rural Banks (23) per cent, Co-operative Banks (12) per cent and other Financial Institutions (1) per cent of the total annual credit of Rs.865.27 Lakhs. As regards Commercial banks contributed to ACP shows that 71 per cent, followed by Regional Rural Banks (16) per cent, Co-operative Banks (12) per cent and other Financial Institutions (1) per cent of the total annual credit of Rs.1445.23 Lakhs in the year 2006-07. During the year 2007-08 Commercial banks contributed to ACP shows that 64 per cent, followed by Regional Rural Banks (20.80) per cent , Co-operative Banks (0.63) per cent and other Financial Institutions (0.15) per cent of the total annual credit of Rs.1317.08 Lakhs. Commercial banks contributed to ACP shows that 67.78 per cent, followed by Regional Rural Banks (26.84) per cent , Co-operative Banks (4.92) per cent and other Financial Institutions (0.46) per cent of the total annual credit of Rs.1394.79 Lakhs. During the year 2009-10, Commercial Bank contributed to ACP shows that 69.44 percent, followed by Regional Rural Bank (23.74) per cent, Co-operative Bank 6.82 percent and other Financial Institutions none of the total annual Credit of Rs.1515.49 Lakhs. Hence, it is evidence that, commercial banks are the major player is the ACP achievements which constitute more than 65 percent of ACP.
  • 8. Major findings The major findings of the present study as well as relevant discussion of performance commercial bank in the study area were presented here. Commercial Banks in Tirunelveli district consist of 155 commercial banks , 50 Regional Rural Banks , 45 Co-operative Banks and 2 other Financial Institutions. As regards Commercial banks it playa key role to provide financial assistance to agricultural sectors, industrial sector, and service sector during the study period. Flow of credit to Agricultural sectors constituted (70.24) per cent, followed by service sector (20.89) per cent and Industrial sectors (9.09) per cent. As regards the agency wise allocation commercial bank played first and followed by Regional Rural Bank and Co-operative Bank. Relationship between target and achievement performance were more than 100 per cent in the years 2005-06, 2006-07 and 2007-08, and less than 100 per cent in the years 2008-09 and 2009-10. Service sector recorded highest sector wise achievement (226) per cent the year 2006-07 and industrial sector recorded lowest achievement (73) percentage in the year 2009-10. Conclusion ACP is one of the key plans which help to fix the target to each and every sector and measure the achievements. Performances of banking sector in a particular district were considered which lead is by the commercial banks in the concerned district. In this regards, this study made an analysis with the ACP report, it concluded that, commercial banks are provided mere financial assistance to all the sectors during the study period and flow credit to agricultural sectors constituted more than 100 percent during the study period. But, which type of agriculture sector, benefited the flow of audit is not clear. Hence, the banks must concentrate clearly about their lending pattern which is really benefited to the priority sector of the society. Reference books Arora, U., Vashisht, B. and Bansal, M. (2009), An Analytical Study of Growth of Credit Schemes of Selected Banks. The Icfai University Journal of Services Marketing, Vol. VII, No. 1, pp. 51-65, March 2009. Bhasin, N. (2008), Banking Developments in India 1947 to 2007, New Delhi, Century Publications.
  • 9. Bhide, M.G., A Prasad, and S. Ghosh, (2002), ‘Banking Sector Reform: A Critical Overview’, Economic and Political Weekly, February 2. Desai,V. (2007), Indian Banking-Nature and Problems, Himalaya Publishing House, Bombay. Gardon & Natarajan “ Financial markets and Services “ , Himalaya Publishing house New Delhi. Gupta S.P. “ Statistical Methods” S Chand, New Delhi Publisher 1990. Kothari.C.R (1991): “Investment Banking and Customer Service”, Vol. II, Arihant publishers, Jaipur. Lead Bank Annual Credit Plan Report 2010-11. Milind Sathya (2005), Privatization, Performance, and Efficiency: A study of Indian Banks, Vikalpa (1):23-28. Mohan. R (2003): ‘Transforming Indian Banking – In search of a better tomorrow’, Reserve Bank of India Bulletin, January. Parameshwaran, Indian Banking Sultan Chand Publications New Delhi, 2005. Report on Trend and Progress of Banking in India, 2009-10.