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A Study on Factors Influencing the Financial Performance Analysis Selected Private Sector Banks in India

The growth of a country's banking sector has a significant impact on its economic development. The banking sector plays a critical role in determining a country's economic future. A well-planned, structured, efficient, and viable banking system is an essential component of an economy's economic and social infrastructure. In modern society, a strong banking system is required because it meets the financial needs of the modern society. In a country's economy, the banking system plays a crucial role. Because it connects surplus and deficit economic agents, the bank is the most important financial intermediary in the economy. The banking system is regarded as the economy's lifeline. It meets the financial needs of commerce, industry, and agriculture. As a result, the country's development and the banking system are intertwined. They are critical in the mobilisation of savings and the distribution of credit to various sectors of the economy. India's private sector banks play a critical role in the country's economic development. So The financial performance of private sector banks must be evaluated carefully.

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International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15
108 This work is licensed under Creative Commons Attribution 4.0 International License.
A Study on Factors Influencing the Financial Performance Analysis
Selected Private Sector Banks in India
P.Thanigaivelan1
and Dr. M.Vidya2
1
Research Scholar (Management Studies), Sri Krishna Arts and Science College Coimbatore, INDIA
2
Assistant Professor, Department of Management Sciences, Sri Krishna Arts and Science College Coimbatore, INDIA
1
Corresponding Author: thanigai5810@gmail.com
ABSTRACT
The growth of a country's banking sector has a
significant impact on its economic development. The
banking sector plays a critical role in determining a
country's economic future. A well-planned, structured,
efficient, and viable banking system is an essential
component of an economy's economic and social
infrastructure. In modern society, a strong banking system
is required because it meets the financial needs of the
modern society. In a country's economy, the banking
system plays a crucial role. Because it connects surplus and
deficit economic agents, the bank is the most important
financial intermediary in the economy. The banking system
is regarded as the economy's lifeline. It meets the financial
needs of commerce, industry, and agriculture. As a result,
the country's development and the banking system are
intertwined. They are critical in the mobilisation of savings
and the distribution of credit to various sectors of the
economy. India's private sector banks play a critical role in
the country's economic development. So The financial
performance of private sector banks must be evaluated
carefully.
Keywords-- Economic Development, Banking System,
Private Sector Banks, Financial Performance
I. INTRODUCTION
Finance is regarded as the lifeblood of the
modern economy, and it plays a critical role in any
economy. A sound financial system aids in the faster
growth of an economy. A good and sound financial
system aids in the organisation of savings surpluses and
their transmission to financial deficit sectors. Means that
a good financial system encourages people to save by
providing a diverse range of assets to those who live in
the country. Savings are typically taken from the
household sector and distributed to various sectors of the
economy. This can assist in determining the financial
system's primary goals, such as development and
growth. Following India's independence, financial
reforms laid the groundwork for a strong and healthy
banking system. And significant progress has been made
in implementing the reforms, and the banking system is
now moving into the second phase. Nonetheless, India's
banking sector has faced numerous challenges,
necessitating the development of new standards and
strategies by Indian banks. The purpose of this study is
to look into the key factors that influence the financial
performance of a few private sector banks in India.
II. REVIEW OF LITERATURE
In his article Ratio Analysis: An Effective Tool
for Performance Analysis in Banks, Jain (2006)
discussed various ratios relating to bank profitability.
Costing Ratio, Returns / Yield Ratio, and Spread Ratios
are the three categories in which the author classified the
various ratios. These ratios can be used to understand a
bank's financial situation, operations, and investment
appeal. Such a ratio analysis, he explained, can be used
to make an inter-branch comparison to investigate the
strengths and weaknesses of individual banks, allowing
them to make strategic decisions and take necessary
corrective actions. The author advocated for calculating
average cost of deposits, average cost of borrowings,
average cost of interest-bearing liabilities, average cost
of funds, and operating expenses to average working
funds as part of the costing ratio. Similarly, he calculated
yield on advances, yield on investment, average return
on interest earnings, average return on funds, and non-
interest income to average working funds and total
income in the yield/return category. He divided the ratios
into categories such as interest spread, net interest
margin, and burden ratios under the spread category. The
importance of ratio analysis as a tool for evaluating the
performance of different banks / bank branches was
discussed by the author. Aside from profitability ratios,
the author mentioned the following categories of ratios
for comparing bank performance: Productivity Ratios,
Nonperforming Asset Ratios, Efficiency Ratios, and
Shareholder Ratios (Shareholders .front)
In his article titled "Indian Bank: Banking on
Growth," Bharathi (2007) stated that as the banking
sector approaches exponential growth, consolidation,
reforms, and compliance remain the most important
factors on the boardroom agenda of Indian banks. He
stated that India has the world's second fastest growing
economy, and that a strong banking system would be
critical in boosting the economy's levels of activity. The
author stated that the Indian banking sector is growing at
a steady pace as a result of liberalisation, improving
economic conditions, changing consumer demographics,
and expanding market opportunities, and that it is
currently ranked among the most preferred banking
International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15
109 This work is licensed under Creative Commons Attribution 4.0 International License.
destinations in the world. This industry has emerged as a
critical enabler for the Indian economy's continued
growth. SBI topped the league chart, maintaining its 6th
place from the previous year, according to The analyst
500 ranking based on net sales. ICICI Bank, India's
largest private sector bank, has risen three places to ninth
place. PNB and CANARA Bank, meanwhile, have
climbed one position each to occupy the 24th and 27th
positions, respectively. The author stated that banks are
preparing for a number of challenges that the IBS will
face in providing financial services to all segments of
society, including financial inclusion, capital adequacy
(Basel-I and Basel-II) standard requirements, effective
competition with foreign banks, and consolidation
movement to achieve global competitiveness.
Monika Sharma and Kajal Chaudhary (2011),
India's economic reforms began in the early 1990s, but
the results are now visible. Only after liberalisation,
globalisation, and privatisation did India's banking
system undergo significant changes. It has become
essential to research and compare the services of public
and private sector banks. Increased competition, new
information technologies and, as a result, lower
processing costs, the eroding of product and geographic
boundaries, and less restrictive government regulations
have all helped Public Sector Banks in India compete
more effectively with Private and Foreign Banks. This
paper attempted to assess how well public and private
sector banks have managed nonperforming assets
(NPAs). For trend projection, they used statistical tools.
Numerous studies have considered the
implications of corporate governance structures on
company performance, according to Pandya Hemal
(2017). Although the existing literature does not all
come to the same conclusion, the overwhelming
consensus is that there is a link between governance
structures and firm performance. The goal of this study
is to see if corporate governance structures, specifically
board structure and CEO duality, have any impact on the
performance of selected Indian banks. Using statistical
techniques, this study examines the relationship between
CEO duality and the proportion of independent directors
on firm performance as measured by return on assets
(ROA) and return on equity (ROE) using samples of
public and private banks operating in India. The findings
reveal that there is no significant link between corporate
governance structures and bank financial performance.
III. RESEARCH METHODOLOGY
According to the RBI and the CMIE (Centre for
Monitoring Indian Economy) corporate database, there
are 20 public sector banks (including state bank group)
and 22 private sector banks operating in India, all of
which are listed on the Bombay Stock Exchange (BSE)
and the National Stock Exchange (NSE) (NSE). The top
three private sector banks based on total assets were
chosen for the study, and data for all ten banks is
available for the past ten years. As a result, they were
chosen as the study's sample units. The following are the
sample banks that were taken into consideration for this
study.
List of Private Sector Banks Selected for the Study
Sl.No BANK NAME
Total
Assets in crores
1 ICICI Bank Ltd(ICBL) 1127929
2 HDFC Bank Ltd(HDBL) 1103233
3 Axis Bank Ltd(AXBL) 703842.6
Source: RBI and CMIE
Table 1: Factor Loading of ICICI Bank Ltd(ICBL)
Measurement Scale Items on Extracted Factors
FACTORS
Component
1 2 3 4
Non Interest Income / Total Funds (%) -0.965 -0.061 -0.139 -0.024
Net Assets/Net Worth 0.938 -0.129 0.170 0.098
Investment / Deposit (%) 0.922 0.027 0.129 0.353
Other Income / Total Income (%) -0.912 -0.216 0.212 -0.166
Sales/Net Assets -0.823 0.246 -0.459 -0.041
PBIDT/Sales(%) 0.842 0.083 -0.213 0.476
Profit before Provisions / Total Funds (%) -0.722 0.598 0.019 -0.069
PAT/PBIDT(%) 0.173 0.912 0.185 0.159
ROE(%) 0.281 0.885 -0.196 0.255
Net Interest Income / Total Funds (%) -0.393 0.863 -0.068 -0.236
Net Profit / Total funds (%) 0.362 0.845 -0.087 0.318
International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15
110 This work is licensed under Creative Commons Attribution 4.0 International License.
Credit-Deposit(%) -0.187 0.795 -0.382 0.354
RONW (%) 0.471 -0.742 0.098 0.377
Cash / Deposit (%) 0.346 -0.709 0.235 0.432
Interest Expended / Interest Earned (%) 0.498 -0.660 -0.315 0.459
Price/Cash EPS (P/CEPS) -0.037 -0.190 0.954 -0.184
Price Earning (P/E) -0.048 -0.281 0.935 -0.148
Market Cap/Sales 0.300 0.229 0.893 0.105
Interest Income / Total Funds (%) 0.168 0.398 -0.827 0.335
Price to Book Value ( P/BV) 0.202 0.493 0.815 0.109
Interest Expended / Total Funds (%) 0.427 -0.223 -0.730 0.475
PBDIT/Net Assets -0.547 0.342 -0.713 0.185
Operating Expenses / Total Funds (%) -0.470 0.163 -0.664 -0.470
Operating Expenses / Total Income (%) -0.134 -0.165 0.138 -0.910
EV/EBIDTA -0.513 -0.070 0.458 -0.718
"Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization."
a. Rotation Converged in 7 Iterations.
It can be observed from table that there are 7
prime factors are accounted by Factor I which includes
Non Interest Income / Total Funds (%),Net Assets/Net
Worth, Investment / Deposit (%), Other Income / Total
Income (%), Sales/Net Assets, PBIDT/Sales(%) and
Profit before Provisions / Total Funds (%).
Similarly, it is seen that there are eight factors
influencing factor 2 which includes PAT/PBIDT(%),
ROE(%), Net Interest Income / Total Funds (%),Net
Profit / Total funds (%), Credit-Deposit(%) RONW (%),
Cash / Deposit (%) and Interest Expended / Interest
Earned (%)
It is also observed that Factor 3 is influenced by
eight variables namely Price/Cash EPS (P/CEPS),Price
Earning (P/E),Market Cap/Sales Interest Income / Total
Funds (%),Price to Book Value ( P/BV),Interest
Expended / Total Funds (%) PBDIT/Net Assets and
Operating Expenses / Total Funds (%).
Factor 4 is primarily influenced by Operating
Expenses / Total Income (%) and EV/EBIDTA
Table 2: Factor Loading of HDFC Bank Ltd(HDBL)
Measurement Scale Items on Extracted Factors
FACTORS
Component
1 2 3 4
Price Earning (P/E) -0.936 -0.142 -0.222 0.073
Profit before Provisions / Total Funds (%) 0.934 -0.167 -0.071 0.181
Price/Cash EPS (P/CEPS) -0.913 -0.185 -0.234 0.237
PAT/PBIDT(%) 0.902 0.271 0.059 0.245
Net Profit / Total funds (%) 0.840 0.238 0.314 0.278
ROE(%) 0.798 0.460 0.293 0.130
EV/EBIDTA -0.696 -0.124 -0.678 -0.131
PBIDT/Sales(%) 0.666 0.196 0.660 0.189
RONW (%) 0.222 0.938 -0.125 -0.211
Sales/Net Assets -0.189 -0.922 -0.047 -0.103
Credit-Deposit(%) -0.391 -0.897 -0.156 -0.029
Operating Expenses / Total Funds (%) 0.001 0.894 -0.033 0.063
Net Assets/Net Worth 0.201 0.890 0.287 -0.182
PBDIT/Net Assets 0.344 -0.824 0.400 -0.032
Non Interest Income / Total Funds (%) 0.567 0.709 -0.124 -0.111
Net Interest Income / Total Funds (%) 0.601 -0.669 0.005 0.409
Interest Expended / Total Funds (%) 0.162 0.017 0.975 -0.029
Interest Expended / Interest Earned (%) -0.114 0.258 0.921 -0.196
Interest Income / Total Funds (%) 0.324 -0.174 0.918 0.095
Operating Expenses / Total Income (%) -0.478 0.375 -0.756 -0.003
International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15
111 This work is licensed under Creative Commons Attribution 4.0 International License.
Other Income / Total Income (%) 0.267 0.653 -0.658 -0.130
Investment / Deposit (%) 0.481 0.487 0.542 0.451
Cash / Deposit (%) -0.362 0.339 -0.503 -0.422
Market Cap/Sales 0.070 -0.079 -0.037 0.952
Price to Book Value ( P/BV) 0.094 -0.030 0.005 0.944
"Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization."
a. Rotation converged in 5 iterations.
It can be observed from table that there are 8
prime factors are accounted by Factor I which includes
Price Earning (P/E),Profit before Provisions / Total
Funds (%), Price/Cash EPS (P/CEPS), PAT/PBIDT(%),
Net Profit / Total funds (%), ROE(%), EV/EBIDTA and
PBIDT/Sales(%)
Similarly, it is seen that there are eight factors
influencing factor 2 which includes RONW (%),
Sales/Net Assets, Credit-Deposit(%), Operating
Expenses / Total Funds (%), Net Assets/Net Worth,
PBDIT/Net Assets, Non Interest Income / Total Funds
(%) and Net Interest Income / Total Funds (%)
It is also observed that Factor 3 is influenced by
7 variables namely Interest Expended / Total Funds
(%), Interest Expended / Interest Earned (%),Interest
Income / Total Funds (%),Operating Expenses / Total
Income (%),Other Income / Total Income
(%),Investment / Deposit (%) and Cash / Deposit (%).
Factor 4 is primarily influenced by Market
Cap/Sales Price to Book Value (P/BV).
Table 3: Factor Loading of Axis Bank Ltd(AXBL)
Measurement Scale Items on Extracted Factors
Rotated Component Matrix
FACTORS
Component
1 2 3
Operating Expenses / Total Funds (%) 0.968 -0.084 0.193
Non Interest Income / Total Funds (%) 0.948 -0.098 -0.138
Sales/Net Assets 0.936 0.183 0.171
Operating Expenses / Total Income (%) 0.902 0.385 0.142
Other Income / Total Income (%) 0.898 0.290 -0.182
PBDIT/Net Assets 0.898 -0.043 0.224
Profit before Provisions / Total Funds (%) 0.882 0.381 0.028
PBIDT/Sales(%) -0.830 -0.517 0.020
Net Assets/Net Worth -0.804 -0.521 0.018
ROE(%) -0.753 -0.555 0.166
Net Profit / Total funds (%) 0.661 0.441 0.468
Net Interest Income / Total Funds (%) 0.660 0.477 0.521
Investment / Deposit (%) -0.599 -0.529 0.471
EV/EBIDTA 0.143 0.965 -0.122
Market Cap/Sales 0.210 0.917 0.218
Interest Income / Total Funds (%) -0.224 -0.914 0.215
Interest Expended / Total Funds (%) -0.356 -0.904 0.060
Price Earning (P/E) 0.093 0.891 0.297
Price/Cash EPS (P/CEPS) 0.077 0.887 0.318
PAT/PBIDT(%) 0.516 0.838 0.057
Price to Book Value ( P/BV) -0.270 0.834 0.434
Interest Expended / Interest Earned (%) -0.532 -0.809 -0.129
Credit-Deposit(%) 0.614 0.675 0.192
Cash / Deposit (%) 0.078 -0.106 -0.894
RONW (%) -0.304 -0.129 -0.873
"Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization."
a. Rotation converged in 4 iterations.
International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15
112 This work is licensed under Creative Commons Attribution 4.0 International License.
It can be observed from table that there are 13
prime factors are accounted by Factor I which includes
Operating Expenses / Total Funds (%),Non Interest
Income / Total Funds (%),Sales/Net Assets, Operating
Expenses / Total Income (%), Other Income / Total
Income (%), PBDIT/Net Assets, Profit before Provisions
/ Total Funds (%), PBIDT/Sales(%), Net Assets/Net
Worth, ROE(%),Net Profit / Total funds (%),Net Interest
Income / Total Funds (%) and Investment / Deposit (%)
Similarly, it is seen that there are 10 factors
influencing factor 2 which includes EV/EBIDTA,
Market Cap/Sales, Interest Income / Total Funds (%),
Interest Expended / Total Funds (%), Price Earning
(P/E), Price/Cash EPS (P/CEPS), PAT/PBIDT(%),Price
to Book Value ( P/BV), Interest Expended / Interest
Earned (%) and Credit-Deposit(%)
It is also observed that Factor 3 is influenced by
two variables namely Cash / Deposit (%) and RONW
(%).
IV. CONCLUSION
Any banking institution's performance is
measured by its long-term viability, efficiency in
managing funds, and ability to earn returns through
proper application of available resources.
Simultaneously, banks must have sufficient liquid assets
to meet the needs of their customers and the economy.
Furthermore, in order to avoid adverse loan impairment,
bank disbursements must be secured. As a result, the
bank's strategies must be able to balance the risks in
business operations. The findings of this study, which
used a multiple criteria decision making approach, took
into account the major components of financial
performance in order to understand the managerial
ability of banks, and it was discovered that banks that
effectively reduce their risks earn more profit and
maintain consistency in their business. The selected
private sector banks have to focus the given factors
which influences the financial performance.
REFERENCES
[1] C. Goel & C.B. Rekhi. (2013). A comparative study
on the performance of selected public sector and private
sector banks in India. Journal of Business Management
and Social Sciences Research, 2(7), 46-56.
[2] D. Jha & D. Sarangi. (2011). Performance of new
generation banks in India: A comparative study.
International Journal of Research in Commerce and
Management, 2(1), 12-17.
[3] Khushboo Bhatia et al. (2015). Comparative study of
performance of public and private sector bank.
International Journal of Core Engineering and
Management, 2(1), 306-317.
[4] M. Kumar, V. Charles & C.S. Mishra. (2016).
Evaluating the performance of Indian banking sector
using DEA during post-reform and global financial
crisis. Journal of Business Economics and Management,
17(1), 156-172.
[5] G.S. Kumari & M. Prasad. (2015). A comparative
study of the financial performances of selected public
and private sector banks. IUP Journal of Bank
Management, 14(4), 1-7.
[6] Karthikeyan, P. & Shangari, B. (2014). Calibrating
financial soundness among selected private sector banks
in India by using camel model. International Journal of
Management Research and Review, 4(4), 449-45.
[7] Manvinder Tandon, Bimal Anjum & Julee. (2014). A
study on financial performance of selected Indian Banks.
International Journal of Research in Management,
Science & Technology, 2(3), 81-92.
[8] Nishanthini, A. & Meerajancy, J. (2015). Trade-off
between liquidity and profitability: A comparative study
between state banks and private banks in Sri Lanka.
Research on Humanities and Social Sciences, 5(7), 78-
85.
[9] Vijay Hemant Sonaje & Shriram S. Nerlekar. (2017).
Financial performance analysis of selected banks using
CAMEL approach. IMR (Indira Management Review),
XI(II), 17-24.

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A Study on Factors Influencing the Financial Performance Analysis Selected Private Sector Banks in India

  • 1. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15 108 This work is licensed under Creative Commons Attribution 4.0 International License. A Study on Factors Influencing the Financial Performance Analysis Selected Private Sector Banks in India P.Thanigaivelan1 and Dr. M.Vidya2 1 Research Scholar (Management Studies), Sri Krishna Arts and Science College Coimbatore, INDIA 2 Assistant Professor, Department of Management Sciences, Sri Krishna Arts and Science College Coimbatore, INDIA 1 Corresponding Author: thanigai5810@gmail.com ABSTRACT The growth of a country's banking sector has a significant impact on its economic development. The banking sector plays a critical role in determining a country's economic future. A well-planned, structured, efficient, and viable banking system is an essential component of an economy's economic and social infrastructure. In modern society, a strong banking system is required because it meets the financial needs of the modern society. In a country's economy, the banking system plays a crucial role. Because it connects surplus and deficit economic agents, the bank is the most important financial intermediary in the economy. The banking system is regarded as the economy's lifeline. It meets the financial needs of commerce, industry, and agriculture. As a result, the country's development and the banking system are intertwined. They are critical in the mobilisation of savings and the distribution of credit to various sectors of the economy. India's private sector banks play a critical role in the country's economic development. So The financial performance of private sector banks must be evaluated carefully. Keywords-- Economic Development, Banking System, Private Sector Banks, Financial Performance I. INTRODUCTION Finance is regarded as the lifeblood of the modern economy, and it plays a critical role in any economy. A sound financial system aids in the faster growth of an economy. A good and sound financial system aids in the organisation of savings surpluses and their transmission to financial deficit sectors. Means that a good financial system encourages people to save by providing a diverse range of assets to those who live in the country. Savings are typically taken from the household sector and distributed to various sectors of the economy. This can assist in determining the financial system's primary goals, such as development and growth. Following India's independence, financial reforms laid the groundwork for a strong and healthy banking system. And significant progress has been made in implementing the reforms, and the banking system is now moving into the second phase. Nonetheless, India's banking sector has faced numerous challenges, necessitating the development of new standards and strategies by Indian banks. The purpose of this study is to look into the key factors that influence the financial performance of a few private sector banks in India. II. REVIEW OF LITERATURE In his article Ratio Analysis: An Effective Tool for Performance Analysis in Banks, Jain (2006) discussed various ratios relating to bank profitability. Costing Ratio, Returns / Yield Ratio, and Spread Ratios are the three categories in which the author classified the various ratios. These ratios can be used to understand a bank's financial situation, operations, and investment appeal. Such a ratio analysis, he explained, can be used to make an inter-branch comparison to investigate the strengths and weaknesses of individual banks, allowing them to make strategic decisions and take necessary corrective actions. The author advocated for calculating average cost of deposits, average cost of borrowings, average cost of interest-bearing liabilities, average cost of funds, and operating expenses to average working funds as part of the costing ratio. Similarly, he calculated yield on advances, yield on investment, average return on interest earnings, average return on funds, and non- interest income to average working funds and total income in the yield/return category. He divided the ratios into categories such as interest spread, net interest margin, and burden ratios under the spread category. The importance of ratio analysis as a tool for evaluating the performance of different banks / bank branches was discussed by the author. Aside from profitability ratios, the author mentioned the following categories of ratios for comparing bank performance: Productivity Ratios, Nonperforming Asset Ratios, Efficiency Ratios, and Shareholder Ratios (Shareholders .front) In his article titled "Indian Bank: Banking on Growth," Bharathi (2007) stated that as the banking sector approaches exponential growth, consolidation, reforms, and compliance remain the most important factors on the boardroom agenda of Indian banks. He stated that India has the world's second fastest growing economy, and that a strong banking system would be critical in boosting the economy's levels of activity. The author stated that the Indian banking sector is growing at a steady pace as a result of liberalisation, improving economic conditions, changing consumer demographics, and expanding market opportunities, and that it is currently ranked among the most preferred banking
  • 2. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15 109 This work is licensed under Creative Commons Attribution 4.0 International License. destinations in the world. This industry has emerged as a critical enabler for the Indian economy's continued growth. SBI topped the league chart, maintaining its 6th place from the previous year, according to The analyst 500 ranking based on net sales. ICICI Bank, India's largest private sector bank, has risen three places to ninth place. PNB and CANARA Bank, meanwhile, have climbed one position each to occupy the 24th and 27th positions, respectively. The author stated that banks are preparing for a number of challenges that the IBS will face in providing financial services to all segments of society, including financial inclusion, capital adequacy (Basel-I and Basel-II) standard requirements, effective competition with foreign banks, and consolidation movement to achieve global competitiveness. Monika Sharma and Kajal Chaudhary (2011), India's economic reforms began in the early 1990s, but the results are now visible. Only after liberalisation, globalisation, and privatisation did India's banking system undergo significant changes. It has become essential to research and compare the services of public and private sector banks. Increased competition, new information technologies and, as a result, lower processing costs, the eroding of product and geographic boundaries, and less restrictive government regulations have all helped Public Sector Banks in India compete more effectively with Private and Foreign Banks. This paper attempted to assess how well public and private sector banks have managed nonperforming assets (NPAs). For trend projection, they used statistical tools. Numerous studies have considered the implications of corporate governance structures on company performance, according to Pandya Hemal (2017). Although the existing literature does not all come to the same conclusion, the overwhelming consensus is that there is a link between governance structures and firm performance. The goal of this study is to see if corporate governance structures, specifically board structure and CEO duality, have any impact on the performance of selected Indian banks. Using statistical techniques, this study examines the relationship between CEO duality and the proportion of independent directors on firm performance as measured by return on assets (ROA) and return on equity (ROE) using samples of public and private banks operating in India. The findings reveal that there is no significant link between corporate governance structures and bank financial performance. III. RESEARCH METHODOLOGY According to the RBI and the CMIE (Centre for Monitoring Indian Economy) corporate database, there are 20 public sector banks (including state bank group) and 22 private sector banks operating in India, all of which are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) (NSE). The top three private sector banks based on total assets were chosen for the study, and data for all ten banks is available for the past ten years. As a result, they were chosen as the study's sample units. The following are the sample banks that were taken into consideration for this study. List of Private Sector Banks Selected for the Study Sl.No BANK NAME Total Assets in crores 1 ICICI Bank Ltd(ICBL) 1127929 2 HDFC Bank Ltd(HDBL) 1103233 3 Axis Bank Ltd(AXBL) 703842.6 Source: RBI and CMIE Table 1: Factor Loading of ICICI Bank Ltd(ICBL) Measurement Scale Items on Extracted Factors FACTORS Component 1 2 3 4 Non Interest Income / Total Funds (%) -0.965 -0.061 -0.139 -0.024 Net Assets/Net Worth 0.938 -0.129 0.170 0.098 Investment / Deposit (%) 0.922 0.027 0.129 0.353 Other Income / Total Income (%) -0.912 -0.216 0.212 -0.166 Sales/Net Assets -0.823 0.246 -0.459 -0.041 PBIDT/Sales(%) 0.842 0.083 -0.213 0.476 Profit before Provisions / Total Funds (%) -0.722 0.598 0.019 -0.069 PAT/PBIDT(%) 0.173 0.912 0.185 0.159 ROE(%) 0.281 0.885 -0.196 0.255 Net Interest Income / Total Funds (%) -0.393 0.863 -0.068 -0.236 Net Profit / Total funds (%) 0.362 0.845 -0.087 0.318
  • 3. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15 110 This work is licensed under Creative Commons Attribution 4.0 International License. Credit-Deposit(%) -0.187 0.795 -0.382 0.354 RONW (%) 0.471 -0.742 0.098 0.377 Cash / Deposit (%) 0.346 -0.709 0.235 0.432 Interest Expended / Interest Earned (%) 0.498 -0.660 -0.315 0.459 Price/Cash EPS (P/CEPS) -0.037 -0.190 0.954 -0.184 Price Earning (P/E) -0.048 -0.281 0.935 -0.148 Market Cap/Sales 0.300 0.229 0.893 0.105 Interest Income / Total Funds (%) 0.168 0.398 -0.827 0.335 Price to Book Value ( P/BV) 0.202 0.493 0.815 0.109 Interest Expended / Total Funds (%) 0.427 -0.223 -0.730 0.475 PBDIT/Net Assets -0.547 0.342 -0.713 0.185 Operating Expenses / Total Funds (%) -0.470 0.163 -0.664 -0.470 Operating Expenses / Total Income (%) -0.134 -0.165 0.138 -0.910 EV/EBIDTA -0.513 -0.070 0.458 -0.718 "Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization." a. Rotation Converged in 7 Iterations. It can be observed from table that there are 7 prime factors are accounted by Factor I which includes Non Interest Income / Total Funds (%),Net Assets/Net Worth, Investment / Deposit (%), Other Income / Total Income (%), Sales/Net Assets, PBIDT/Sales(%) and Profit before Provisions / Total Funds (%). Similarly, it is seen that there are eight factors influencing factor 2 which includes PAT/PBIDT(%), ROE(%), Net Interest Income / Total Funds (%),Net Profit / Total funds (%), Credit-Deposit(%) RONW (%), Cash / Deposit (%) and Interest Expended / Interest Earned (%) It is also observed that Factor 3 is influenced by eight variables namely Price/Cash EPS (P/CEPS),Price Earning (P/E),Market Cap/Sales Interest Income / Total Funds (%),Price to Book Value ( P/BV),Interest Expended / Total Funds (%) PBDIT/Net Assets and Operating Expenses / Total Funds (%). Factor 4 is primarily influenced by Operating Expenses / Total Income (%) and EV/EBIDTA Table 2: Factor Loading of HDFC Bank Ltd(HDBL) Measurement Scale Items on Extracted Factors FACTORS Component 1 2 3 4 Price Earning (P/E) -0.936 -0.142 -0.222 0.073 Profit before Provisions / Total Funds (%) 0.934 -0.167 -0.071 0.181 Price/Cash EPS (P/CEPS) -0.913 -0.185 -0.234 0.237 PAT/PBIDT(%) 0.902 0.271 0.059 0.245 Net Profit / Total funds (%) 0.840 0.238 0.314 0.278 ROE(%) 0.798 0.460 0.293 0.130 EV/EBIDTA -0.696 -0.124 -0.678 -0.131 PBIDT/Sales(%) 0.666 0.196 0.660 0.189 RONW (%) 0.222 0.938 -0.125 -0.211 Sales/Net Assets -0.189 -0.922 -0.047 -0.103 Credit-Deposit(%) -0.391 -0.897 -0.156 -0.029 Operating Expenses / Total Funds (%) 0.001 0.894 -0.033 0.063 Net Assets/Net Worth 0.201 0.890 0.287 -0.182 PBDIT/Net Assets 0.344 -0.824 0.400 -0.032 Non Interest Income / Total Funds (%) 0.567 0.709 -0.124 -0.111 Net Interest Income / Total Funds (%) 0.601 -0.669 0.005 0.409 Interest Expended / Total Funds (%) 0.162 0.017 0.975 -0.029 Interest Expended / Interest Earned (%) -0.114 0.258 0.921 -0.196 Interest Income / Total Funds (%) 0.324 -0.174 0.918 0.095 Operating Expenses / Total Income (%) -0.478 0.375 -0.756 -0.003
  • 4. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15 111 This work is licensed under Creative Commons Attribution 4.0 International License. Other Income / Total Income (%) 0.267 0.653 -0.658 -0.130 Investment / Deposit (%) 0.481 0.487 0.542 0.451 Cash / Deposit (%) -0.362 0.339 -0.503 -0.422 Market Cap/Sales 0.070 -0.079 -0.037 0.952 Price to Book Value ( P/BV) 0.094 -0.030 0.005 0.944 "Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization." a. Rotation converged in 5 iterations. It can be observed from table that there are 8 prime factors are accounted by Factor I which includes Price Earning (P/E),Profit before Provisions / Total Funds (%), Price/Cash EPS (P/CEPS), PAT/PBIDT(%), Net Profit / Total funds (%), ROE(%), EV/EBIDTA and PBIDT/Sales(%) Similarly, it is seen that there are eight factors influencing factor 2 which includes RONW (%), Sales/Net Assets, Credit-Deposit(%), Operating Expenses / Total Funds (%), Net Assets/Net Worth, PBDIT/Net Assets, Non Interest Income / Total Funds (%) and Net Interest Income / Total Funds (%) It is also observed that Factor 3 is influenced by 7 variables namely Interest Expended / Total Funds (%), Interest Expended / Interest Earned (%),Interest Income / Total Funds (%),Operating Expenses / Total Income (%),Other Income / Total Income (%),Investment / Deposit (%) and Cash / Deposit (%). Factor 4 is primarily influenced by Market Cap/Sales Price to Book Value (P/BV). Table 3: Factor Loading of Axis Bank Ltd(AXBL) Measurement Scale Items on Extracted Factors Rotated Component Matrix FACTORS Component 1 2 3 Operating Expenses / Total Funds (%) 0.968 -0.084 0.193 Non Interest Income / Total Funds (%) 0.948 -0.098 -0.138 Sales/Net Assets 0.936 0.183 0.171 Operating Expenses / Total Income (%) 0.902 0.385 0.142 Other Income / Total Income (%) 0.898 0.290 -0.182 PBDIT/Net Assets 0.898 -0.043 0.224 Profit before Provisions / Total Funds (%) 0.882 0.381 0.028 PBIDT/Sales(%) -0.830 -0.517 0.020 Net Assets/Net Worth -0.804 -0.521 0.018 ROE(%) -0.753 -0.555 0.166 Net Profit / Total funds (%) 0.661 0.441 0.468 Net Interest Income / Total Funds (%) 0.660 0.477 0.521 Investment / Deposit (%) -0.599 -0.529 0.471 EV/EBIDTA 0.143 0.965 -0.122 Market Cap/Sales 0.210 0.917 0.218 Interest Income / Total Funds (%) -0.224 -0.914 0.215 Interest Expended / Total Funds (%) -0.356 -0.904 0.060 Price Earning (P/E) 0.093 0.891 0.297 Price/Cash EPS (P/CEPS) 0.077 0.887 0.318 PAT/PBIDT(%) 0.516 0.838 0.057 Price to Book Value ( P/BV) -0.270 0.834 0.434 Interest Expended / Interest Earned (%) -0.532 -0.809 -0.129 Credit-Deposit(%) 0.614 0.675 0.192 Cash / Deposit (%) 0.078 -0.106 -0.894 RONW (%) -0.304 -0.129 -0.873 "Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization." a. Rotation converged in 4 iterations.
  • 5. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.15 112 This work is licensed under Creative Commons Attribution 4.0 International License. It can be observed from table that there are 13 prime factors are accounted by Factor I which includes Operating Expenses / Total Funds (%),Non Interest Income / Total Funds (%),Sales/Net Assets, Operating Expenses / Total Income (%), Other Income / Total Income (%), PBDIT/Net Assets, Profit before Provisions / Total Funds (%), PBIDT/Sales(%), Net Assets/Net Worth, ROE(%),Net Profit / Total funds (%),Net Interest Income / Total Funds (%) and Investment / Deposit (%) Similarly, it is seen that there are 10 factors influencing factor 2 which includes EV/EBIDTA, Market Cap/Sales, Interest Income / Total Funds (%), Interest Expended / Total Funds (%), Price Earning (P/E), Price/Cash EPS (P/CEPS), PAT/PBIDT(%),Price to Book Value ( P/BV), Interest Expended / Interest Earned (%) and Credit-Deposit(%) It is also observed that Factor 3 is influenced by two variables namely Cash / Deposit (%) and RONW (%). IV. CONCLUSION Any banking institution's performance is measured by its long-term viability, efficiency in managing funds, and ability to earn returns through proper application of available resources. Simultaneously, banks must have sufficient liquid assets to meet the needs of their customers and the economy. Furthermore, in order to avoid adverse loan impairment, bank disbursements must be secured. As a result, the bank's strategies must be able to balance the risks in business operations. The findings of this study, which used a multiple criteria decision making approach, took into account the major components of financial performance in order to understand the managerial ability of banks, and it was discovered that banks that effectively reduce their risks earn more profit and maintain consistency in their business. The selected private sector banks have to focus the given factors which influences the financial performance. REFERENCES [1] C. Goel & C.B. Rekhi. (2013). A comparative study on the performance of selected public sector and private sector banks in India. Journal of Business Management and Social Sciences Research, 2(7), 46-56. [2] D. Jha & D. Sarangi. (2011). Performance of new generation banks in India: A comparative study. International Journal of Research in Commerce and Management, 2(1), 12-17. [3] Khushboo Bhatia et al. (2015). Comparative study of performance of public and private sector bank. International Journal of Core Engineering and Management, 2(1), 306-317. [4] M. Kumar, V. Charles & C.S. Mishra. (2016). Evaluating the performance of Indian banking sector using DEA during post-reform and global financial crisis. Journal of Business Economics and Management, 17(1), 156-172. [5] G.S. Kumari & M. Prasad. (2015). A comparative study of the financial performances of selected public and private sector banks. IUP Journal of Bank Management, 14(4), 1-7. [6] Karthikeyan, P. & Shangari, B. (2014). Calibrating financial soundness among selected private sector banks in India by using camel model. International Journal of Management Research and Review, 4(4), 449-45. [7] Manvinder Tandon, Bimal Anjum & Julee. (2014). A study on financial performance of selected Indian Banks. International Journal of Research in Management, Science & Technology, 2(3), 81-92. [8] Nishanthini, A. & Meerajancy, J. (2015). Trade-off between liquidity and profitability: A comparative study between state banks and private banks in Sri Lanka. Research on Humanities and Social Sciences, 5(7), 78- 85. [9] Vijay Hemant Sonaje & Shriram S. Nerlekar. (2017). Financial performance analysis of selected banks using CAMEL approach. IMR (Indira Management Review), XI(II), 17-24.