Banks performance analysis

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CHAPTER - 5
PERFORMANCE ANALYSIS OF PUBLIC
SECTOR BANKS IN INDIA
(In First and Second generation reform period-1991-92 to 2003-04)
5.1. INTRODUCTION
Having discussed the development of Indian banks and the rationale
for banking sector reforms and various reform measures undertaken to
improve productivity, efficiency and profitability of banks by freeing them from
a number of regulations and review of literature, it is felt desirable to evaluate
the performance of public and private sector banks separately and as a next
step attempt made for comparison between the relative performances of
these two groups.
This chapter deals with performance evaluation of Public Sector Banks
comprising of three Parts. The First Part covers evolution of PSBs and
examines the recent trends. The Second Part is devoted to the performance
analysis in terms of efficiency and profitability indices of PSBs for the entire
study period. The Third Part deals with period-wise analyses of performance
of PSBs and grouping of banks is carried out using principle component
analysis.
5.2 PUBLIC SECTOR BANKS – EVOLUTION
Public sector in the banking industry emerged with the nationalization
of Imperial Bank of India (1921) and creating the State Bank of India (1955)
as a part of integrated scheme of rural credit proposed by the All India Rural
Credit Survey Committee (1951). The Bank is unique in several respects and
it enjoys a position of preeminence as the agent of RBI wherever RBI has no
branches. It is the single largest bank in the country with large international
presence, with a network of 48 overseas offices spread over 28 countries
covering all the time zones. One of the objectives of establishing the SBI was

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to provide extensive banking facilities in rural areas by opening as a first step
400 branches within a period of 5 years from July 1, 1955. In 1959, eight
banking companies functioning in formerly princely states were acquired by
the SBI, which later came to be known as Associate Banks. Later, two of the
subsidiary banks', viz., the State Bank of Bikaner and Jaipur were merged to
form the State Bank of Bikaner and Jaipur, thus form eight banks in the SBI
group then making banks in the state bank group.
The Public sector in the Indian banking got widened with two rounds of
nationalization-first in July 1969 of 14 major private sector banks each with
deposits of Rs. 50 crore or more, and thereafter in April 1980, 6 more banks
with deposits of not less than Rs. 2 Crore each. It resulted in the creation of
public sector banking with a market share of 76.87 per cent in deposits and
72.92 per cent of assets in the banking industry at the end of March 2003.
With the merger of 'New Bank of India' with 'Punjab National Bank' in 1993,
the number of nationalized banks became 19 and the number of public sector
banks 27. The number of branches of public sector banks, which was 6,669
in June 1969, increased to 41874 by Mach 1990 and again to 46,752 by
March 30, 2003. The public sector banks thus came to occupy a predominant
position in the Indian banking scene. It is however, important to note that
there has been a steady decline in the share of PSB's in the total assets of
SCB's during the latter - half of 1990s. While their share was 84.5 per cent at
the end of March 1996, it declined to 81.7 per cent in 1998 and further to 81
per cent in 1999.
5.3 FINANCIAL HEALTH
Over a period of time, the financial health of PSBs continually to
deteriorate resulting in decline in their efficiency. Since so many obligations,
economic and social, are imposed on PSBs, it was thought, that their
performance should not be judged merely in terms of profits. Since 1969,
PSBs began to playa large and
dominant supplementary role to the government programmes in alleviating
poverty, employment creation and generation of fresh resources for
development.

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They have been highly successful in achieving their principal
objective of deposit and loan expansion. Their participation in priority sector
lending is highly commendable: In June 1969, on the eve of nationalization
the share of priority sector in total credit of SCBs was mere 14 per cent (Rs.
504 crore). By March 2002, with the massive involvement of PSBs their
outstanding lending to priority sector had climbed up to Rs. 1,71,185.26
crore. As a per cent of net bank credit the same was 43.1 per cent as
against the mandated 40 per cent In terms of profitability, the SBI group has
recorded a steady rise in net profits from Rs. 244 crore in 1991-92 to Rs.
2,222 crore in 200001 and Rs. 4,512 crore in 200203. In the case of 19
nationalized banks, profitability has always been low.
During 1992-93 and 1993-94 these banks actually posted huge
losses to the tune of Rs. 3,513 crore and Rs. 4,705 crore :respectively. It is
possible to defend the low profitability by 'referring to their commitment to
social obligations imposed by the Government: as for instance opening rural
branches in large numbers, financing poverty alleviation programmes at
concessional rates of interest, priority sector lending to the extent of 40 per
cent huge NPAs, etc. As a result of their involvement in social~ banking and
other factors such as directed investment, the state of health of these banks
left much to be desired. The net profit as a per cent of Total assets became
0.99 per cent in 1992-93 and 1.1 per cent in 1993-94. Similarly, the net
profit as a per cent of Total assets of 19 nationalized banks was 1.71 per
cent in 1992-93 and 9.8 per cent in 1993- 94. Prior to reform period,
profitability was not considered as the million objectives of PSBs. The return
on assets of PSBs does not compare unfavorably with that of banks
elsewhere. As per data provided by the Bank for International Settlements
(BIS) 1999, return on assets, defined as profit before tax moved from 0.08
to 1.07 in Euro area in 1998 with most countries covering around the 0.5
mark even on free tax basis.

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5.4 BUDGETARY SUPPORT FOR RE-CAPITALIZATION
The government has been making budgetary provisions year after year for
recapitalization of nationalized banks since 1984-85 their capital base has
eroded. The total recapitalization of Rs. 2446 Crore took place from 1985-86
to 2000-01. The Re-capitalisation measure was undertaken in three phases.
In the phase-I, i. e., in the pre-reform period from 1984-85 to 1992-93, all the
nationalized banks were recapitalized every year to meet their capital
requirements without any preset norm and special securities (perpetual at
interest rate of 7.75 per cent) were allotted to the banks. The annual exercise
in the Phase I period involved an allotment of Rs. 4000 Crore. Phase II was
period of two years, 1993-94 and 1994-95, when banking sector reforms were
being given a big push and recapitalization of all nationalized banks had to be
accorded priority. Under a well-designed recovery programme in general Rs.
10,987 crore were injected as cash capital into the banks to repay the
damage of the past.
Phase III of recapitalization of .nationalized bank is neither regular nor
pre-designed. The number of recapitalized banks comedown to six each
during 1995-C,'6 and 1996-97, three each only in 1997-98 and 1998-99 and
none during the last two years.2 Table 5.1 gives the three phases of re-
capitalization of nationalized banks The budgetary practice followed by the
Government for recapitalization since 1985-86 was the issue of special
securities bonds against equity addition of nationalized banks. As far as
Government is concerned there is no cash outgo from the budget but there is
an addition to the public debt.

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TABLE 5.1
PHASES OF RECAPITALIZATION OF NATIONALIZED BANKS
Period/Year No. of Banks
Recapitalized
Rs. Crore
PHASE I : REGULAR AND GENERAL
1985-86 19 400
1986-87 19 400
1987-88 18 200
1988-89 18 200
1989-90 8 700
1990-91 11 700
1991-92 15 700
1992-93 13 700
Sub Total (1985-86 to
1992-93)
4000
PHASE II : PRE-DESIGNED UNDER A RECOVERY
PROGRAMME IN GENERAL
1993-94 19 5,700
1994-95 13 5,287
Sub total (1993-94 to
1994-95)
10,987
PHASE III : CASE TO CASE BASIS
1995-96 6 850
1996-97 6 1590
1997-98 3 2700
1998-99 3 400
19992000 Nil Nil
20002001 Nil Nil
Sub Total (1995-96 to
200001)
5459
Total (1985-86 to 200001) 20446
Source: EPW, Vol. XXXVII, No. 23, June 2002, p. 2242,
A further provision of Rs. 770 Crore in the Union Budget 2002-03 was
made mostly for the weak banks. The stronger banks were asked to
approach the market for further capital. Towards this end the banking
companies (Acquisition and Transfer of undertakings) Act, 1970-80 was
amended with effect. from July 15, 1994 for permitting banks to raise capital
up to 49 per cent from the public.

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5.5 PRIVATISATION
The banking sector reforms sought to improve profitability of banks by
lowering pre-emotions and to strengthen the banking system through
institution of capital adequacy norms, in addition to income recognition, asset
classification and provisioning requirements in line with the international
standards. Competition is sought to be promoted through the entry of new
private sector banks and more liberal entry of foreign banks. PSBs had to
make lot of improvement in their work culture and in their technology etc. to
be able to compete with the new entrants with aggressive marketing
practices.
One way to satisfy capital adequacy norms for these banks is to
approach the capital market to raise equity. Until 1991-92, all PSBs are
owned by the Government. After the reform process was initiated, the
Governments stake was permitted to be reduced to 51 per cent. The
Committee on Banking Sector Reforms (1998) recommended that PSBs
should access market to meet their needs of capital and for the purpose, the
minimum shareholding by the Government/RBI should be brought down to 33
per cent from the existing statutory minimum of 51 per cent. Till 2000-01, as
many as 12 PSBs accessed capital market and raised an amount of Rs. 64
Crore. The State Bank of India alone raised through public issue over Rs.
2200 Crore by public issue of equity shares and Rs. 1,000 Crore through
bond issue in December 1993 and January 1994. The reduction in
government stake in PSBs amounts to partial privatization of banks.
5.6 BRANCH EXPANSION
Indian banking system is predominantly branch-banking system. After
nationalization of major banks, for nearly have decades there had been
massive branch expansion, primarily with the objective of covering the
unbanked centers in rural and semi-urban centers, coupled with intensive
branch network in metro urban centers to sustain profitability. In the decade
that followed 1990 (reform period) it was felt that haphazard growth should be
contained '.and there should be qualitative network in branch banking. The
Narasimham Committee-I recommended that branch licensing be abolished
and the matter of opening and closing branches are left to commercial
judgment of individual banks. This recommendation was partlyimplemented.

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Although branch licensing has not been abolished, greater operational
freedom has been given to individual banks to open certain specialized
branches as well as expanding branches in a more systematic way in its
geographical spared. Of late, the banking system has been increasingly
looking towards technology-based delivery channels and progressive
reduction of physical branches to the extent possible.
The Table 5.2 shows the trend in number of branches of PSBs during
the period 1992-2003.
TABLE 5.2
TRENDS IN NUMBER OF BRANCHES OF PSBS DURING 1992-2003
Year SBI Associate Banks Nationalised PSBs
Banks
(1) (2) (3) (4) (5)
1992-93 8736 3850 29715 42301
(%) (%) (%) (%)
1993-94 8812 3977 30472 43338
(0.86) (3.30) (2.55) (2.45)
1994-95 8839 4036 30880 43755
(0.31) (1.48) (1.33) (0.96)
1995-96 8885 4107 31342 44334
(0.52) (1.75) (1.50) (1.32)
1996-97 8888 4226 31645 44759
(0.03) (2.90) (0.97) (0.96)
1997.98 8925 4291 32077 45293
(0.42) (1.54) (1.36) (1.19)
1998-99 8982 4377 32501 45860
(0.64) (2.00) (1.32) (1.25)
19992000 9043 4439 32802 46284
(0.68) (1.42) (0.93) (0.92)
200001 9078 4481 32764 46323
(0.39) (0.95) (0.12) (0.08)
200102 9085 4508 32791 46384
(0.78) (0.60) (0.08) (0.13)
2002.03 9081 4541 33130 46752
(0.04) (0.73) (1.03) (0.79)
Average (0.46) (1.67) (0.89) (1.01)
Note : Figures in parentheses indicate Growth rate over previous years.
Source: Compiled from various issues of Statistical Tables and Data Base:
published by ISA, Mumbai.
From the Table 5.2, it is apparent that the increase in number of branches of
all groups of PSBs since 1992-93 is slow and not rapid as has happened in
the earlier two decades. Within the period, the percentage increase in the

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number of branches of all PSBs put together was 1.01 per cent, it was 0.89
per cent for the 19 nationalized banks. The Associate Banks made a bigger
contribution (1.67) than the nationalized bank and SBI for the percentage
increase in the number of branches of all PSBs.
5.7 TREND IN EMPLOYEES OF PSB’s: 1992-93 to 2002-03
In the Table 5.3 gives the number of employees in different bank
groups. An analysis of the data presented in the Table 5.3 reveals that there
has been decline in the number of staff members of all groups of PSBs during
the period under study. The decline is prominent in the case of Nationalised
Banks (1.66) than that of SBI (075) and Associate Banks (0.58). Beginning
from 1998-99 all bank groups, SB!, Associate Banks, National Banks,'
reduced the staff through VRS and the reduction in highly pronounced in
2000-01.
TABLE 5.3
TRENDS IN NUMBER OF EMPLOYEE OF PSBS (1992-03)
Year SBI Associate Banks Nationalised PSBs
Banks
1992-93 22132209 78602 567035 871846
(%) (%) (%) (%)
1993-94 229126.00 79980.00 582679.00 891785.00
(1.29) (1.72) (2.83) (2.29)
1994-95 232000 81003 581788 894791
(1.25) (1.26) (0.15) (0.33)
1995-96 233000 81252 580637 894889
(0.43) (0.31) (0.19) (0.01)
1996-97 236204 82103 570866 889173
(1.38) (1.04) (1.68) (0.64)
1997-98 239649 81513 566314 887476
(1.46) (0.72) (0.80) (0.19)
1998-99 237504 82370 562285 883648
(0.90) (1.04) (0.71) (0.43)
1999-2000 233433 82115 558021 873569
(1.71) (0.31) (0.76) (1.14)
2000-01 214845 74809 507677 797331
(-7.96) (-8.90) (-9.02) (-8.73)
2001-02 209462 74591 472572 756625
(2.51) (0.29) (-6.91) (-5.11)
2002-03 208998 73925 472514 755437
(0.22) (0.89) (0.01) (0.16)
Average (0.75) (0.58) (1.66) (1.38)

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Source: Compiled from various issues of statistical Tables and Data case
published by ISA, Mumbai.
5.8. PROFITABILITY OFPSBS : 1992-93 TO 2002-03
Public sector banks before the initiation of reform measures in 1992 didn't
seem to consider profitability as a major performance indicator. With the
implementation of reform measures profitability as a measure come to the
forefront. The year-to-year profits of different group of PSBs are presented in
the Table 5.4.
TABLE 5.4
TRENDS IN NET PROFIT/LOSS OF PSBS (GROUP-WISE) (1992.93 to
2002.03)
Year SBI Associate Banks
Nationalised
Banks
PSBs
1992-93 212 68 3573 3293
(%) (%) (%) (%)
1993-94 275 81 4705 4349
(29.72) (19.12) (31.68) (32.07)
1994-95 715 131 269 1116
(160.00) (61.73) (105.70) (125.66)
1995-96 832 38 1165 371
(16.36) (129.01) (-533.09) (133.24)
1996-97 1349 321 1445 3115
(62.14) (944.70) (224.00) (939.60)
1997-98 1861 550 6567 4979
(37.95) (71.34) (354.46) (59.84)
1998-99 1028 438 1788 3254
(44.76) (20.36) (-72.77) (34.65)
199900 2052 428 2437 5116
(99.61) (2.28) (36.30) (57.22)
200001 1604 618 2095 4317
(21.83) (44.39) (14.03) (15.62)
200102 2432 118 4852 8301
(51.62) (64.72) (131.60) (92.29)
200203 3105 1407 7784 12295
(27.67) (38.21) (60.43) (48.11)
Average (41.85) (109.26) (26.10) (110.70)
Source: Compiled from various issues of statistical Tables and Data Base
published by IBA, Mumbai.
As can be seen from the Table 5.4, SBI and Associate Banks barring

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one year, throughout the period have made profits continuously. The
nationalized banks have sustained huge losses during the first two years, i.e.
1992-93, 1993-94. Since these amounts of losses far exceeded the profits of
SBI and Associate Banks, it resulted in losses for all the PSBs put together.
The nationalized banks have made huge profit of Rs. 6567 Crore in 1997-98
with annual growth rate of 354.46. But the turnaround has actually started in
1996-97. The last two years of the study period have brought bountiful profits
to all the constituents of PSBs group. In 2001-02, the profits of PSBs as a
whole were almost double to the figure of 2000-01 and profits in 2002-03 are
almost equal to the mined profits of the previous two years. In the initial years
of reform period, nationalized banks have sustained losses due to change in
the accounting pattern regarding income recognition and asset classification.
The accumulated bad and doubtful debts have impinged on the profitability of
nationalized banks.
The 27 public sector banks do not strictly speaking form a
homogeneous group. As a matter of fact, this group like any other group, is
heterogeneous in terms of geographical location of branches, varying
maturity, size, product sophistication, technological orientation as well as
clientele base.
The RBI's observation (2000) for the turn round in the profit front in
1996 deserves to be noted. The RBI says Developments in the subsequent
period indicate that a majority of PSBs have been able to progress
considerably towards the direction of passing“acid test" of achieving
competitive efficiency of progressively conforming to the international best
practices in various areas.
5.9. PERFORMANCE ANALYSIS OF PUBLIC SECTOR BANKS (PSB's)
In this chapter, the performance of 27 PSBs is evaluated during the
reform period 1992-93 and 2002-03. The analysis is carried out by
disaggregating 27 PSBs into 3 groups, namely, SBI (1), Associate Banks (7)
and Nationalized Banks (19). The level of efficiency of banks has been

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studied in the context of branches and employees in terms of efficiency
indicators and profitability indicators.
In a service industry like banking, it is not possible to measure physical
output in the absence of clear definition. However, most of the measures that
are used to study banks' performance can be interpreted more correctly as
measuring the banks efficiency target rather than directly measuring their
productivity. The level of efficiency of banks is commonly measured at the
level of branches and employees, which are the two important wheels on
which banking industry moves.
Considering the national priorities, involvement of banks in rural areas
and development schemes and vast infrastructure developed in terms of
branches and manpower resources, it is thought appropriate to assess the
efficiency of banks in terms of the performance at the level of branches and
employees. Further, the size of banks vary widely; hence it is more
meaningful to study the performance of parameters indicating efficiency at the
level of branch and employee.
In order to measure efficiency at the branch and employees level, the
following parameters are employed: (1) Business per Branch, (2) Operating
expenses per Branch, (3) Profit per Branch, (4) Business per Employee, (5)
Establishment expenses per Employee, and (6) Profit per Employee. The
study thus measures efficiency of a bank at the level of operational units, I e.,
branch and employee, The efficiency of each branch and employee in terms
of averages of indicators can be compared to assess the relative performance
of different banks and bank groups.
BRANCH LEVEL EFFICIENCY (PSBS)
5.9.1.BUSINESSPER BRANCH
As can be seen from the Table 5.13, the percentage changes in mean
values of business per branch of all PSBs are positive in the three periods
indicating improvements in the indicators. SBI and its associate banks have

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made remarkable improvement in percentage change in business per branch
in the three-sub periods, by comparison. The percentage growth in the mean
values of business of branches of 5 nationalized banks in period-III over
period-II decelerated compared to the percentages in period-II over period-I.
They still indicate improvements along with the remaining 15 banks which
showed larger improvements.
The percentage increase in the mean values of business per branch in period-
III (2000-03) over period-I (1992-95) is considerable and far more satisfactory.
In terms of total business mobilized, the banks, which occupy the first three
places, are ANB, SBOI and COB. The not so well performers are 18, BOB
and PNB.
5.9.2. OPERATING EXPENSES PER BRANCH (PSBS)
Operating expenses per branch includes establishment expenses, rent taxes,
lighting, printing and stationary, advertisement and publicity, depreciation. It is
the expenditure incurred to operate a branch.
When viewed at the average operating expenditure per branch, there is an
increase in it during the three periods.(Table 5-14) The overall increase in the
percentage in the case of all put)s In period-III is 147.68 per cent over the first
period. The percentage increase in period-III over period-II is less when
compared to the percentage increase in period-II over period-I. The least
percentage increase in expenditure took place in OBOC, BOB and SB. The
increase in the average value of their indicator has a negative effect on the
performance of banks.
5.9.3. PROFIT PER BRANCH (PSBS)
One of the objectives of banking sector reforms is to restore the
financial health of the banking system by improving the efficiency and.
profitability. Hence, prudential norms were introduced so that the balance
sheets of banks reflect the true picture of the real value of assets and also

108
profitability of banks. By 1992-93 several banks had accumulated non-
performing assets (NPA's) for which provisions had to be made. The
accumulated losses had also to be written off. Hence in the first four years
of reforms many nationalized banks sustained losses. However, due to their
intrinsic resilience and management savvy, the number of banks incurring
losses is reduced to three by 1996-97. Since then, all public sector banks
got improvement in key financial ratios. But the weak banks (IB, UCO)
continued to make losses per branch except in the last year when they
earned sizeable profits. The Table 5.5 indicates the profit per branch of
PSBs during the first and second part of period under study. From the table
it is evident that 10 nationalized banks made negative profits' per branch in
1992-93, in the next year, the number has increased to 12. The profit per
branch of nationalized banks in the first two years has thus been negative.
The average profit per branch of SBI and its associate banks have
been positive throughout the period (except SBOS in 1995-96). The profit
per branch of SBI increased from Rs. 2.43 lac in 1992-93 to Rs. 34.19 lac in
2002-03. The average profit per branch for the entire period is Rs. 23.28
lac. There has been a large increase in the profits of associate banks from
Rs. 1.77 lac in 1992-93 to Rs. 30.98 lac in 2002-03 and the average profit
per branch of associate banks for the entire period work out to be Rs. 10.73
lac. The growth rate of profit per branch of associate banks is Rs. 24.78 per
cent, which is higher than that of SBI, which is 5.33 per cent.
When viewed at the nationalized banks, the picture is altogether
different. The average profit per branch of 6 nationalized banks was
negative. They are CBOI, IB, IOB, PSB, UCO and UNBOI.
The growth rates of profit per branch of 6 out of first 19 nationalized
banks were negative during the period under study.
On the basis of mean values, the loss-making banks in order are IB
(Rs. 22.48 lac); UNBOI (Rs. -6.37 lac) and UCO (Rs. -6.01 lac). The Verma
Committee (1999) identified IB and UCO banks as weak banks.

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The profit-making banks in orders are COB (Rs. 28.22 lac) OBOC (Rs.
23.50 lac) and SBI (Rs. 23.28 lac). As indicated by the values of CV, there
existed alarming differences with respect to this indicator. So, there is no
stability in earning profit during the period under study.
The above analysis leads us to the conclusion that the performance on
the profit front of nationalized banks on the whole makes a dismal reading.
The losses may partly be attributed to rigorous implementation of prudential
norms in the earlier period.

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TABLE 5.5
PROFIT PER BRANCH OF PSBS : 1992-2003
(Rs. in Lacs)
No. Name 1992-93
1993-
94
1994-
95
1995-
96
1996-97 1997-981998-991999-2000 2000-01
2001-
02
2002-03 1992-03
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 2.43 3.12 8.09 93.60 15.18 20.85 11.45 22.69 17.67 26.77 34.19 23.28 1.0861 5.33
2. SBBJ 1.55 0.95 1.09 3.49 5.24 11.73 11.80 15.25 13.29 20.83 25.60 10.07 0.8322 24.02
3. SBOH 2AJ3 D 3.20 5.73 6.42 65.00 11.66 13.10 14.65 17.08 25.54 33.67 18.03 1.0129 12.31
4. SBOI 0.87 1.13 2.56 3.33 4.57 7.39 8.01 11.25 15.65 29.83 46.84 11.95 1.1967 30.72
5. SBOM 0.78 0.38 0.57 4.82 7.18 9.07 5.87 8.09 4.31 10.93 19.21 6.47 0.8519 21.16
6. SBOP 5.01 3.20 4.54 7.94 84.40 20.23 14.19 18.35 2.27 32.23 43.63 21.45 1.1488 10.72
7. SBOS 1.45 1.67 3.79 -61.01 18.68 20.31 6.25 22.03 3.43 19.95 22.46 5.36 4.4211 56.11
8. SBOT 1.30 1.41 3.25 4.00 6.12 9.55 6.48 -9.90 - 14.46 17.95 25.48 9.08 0.2855 23.34
ASS 1.77 2.04 3.25 0.93 7.60 12.82 10.01 14.15 13.79 22.58 30.98 10.73 0.9004 24.78
.9. AB -5.88 .19.95 4.10 0.32 3.44 6.88 7.17 3.65: 2.10 4.18 8.63 0.59 13.9392 307.45
10. ANB 14.70 16.72 4.54 1.12 3.70 7.64 89.50 11.89 11.86 18.90 36.64 13.21 2.2283 38.23
11. BOB 0.33 2.76 7.16 8.24 11.11 18.20 16.36 18.97 10.30 20.38 28.08 12.90 0.6434 17.29
12. BOI 13.90 46.01 2.06 11.25 14.55 14.63 8.00 6.84' 9.94 19.82 33.26 5.49 3.7490 83.90
13. BOM 17.39 26.28 3.61 1.14 4.10 4.82 4.43 7.53 3.69 11.87 18.02 0.76 16.7063 438.94
14. CB 1.27 5.75 9.55 11.54 6.50 8.78 9.46 9.85 11.85 30.76 42.04 13.40 0.8974 21.05
15. CBOI 12.59 23.25 2.73 2.40 '4.89 5.67 4.72. 4.87 1.48 5.23 9.82 .0.39 24.8419 - 589.74
16. COB 0.89 5.73 14.84 20.96 24.65 28.74 31.12 35.80 40.18 46.74 60.82 2822 0.6250 18.57
17. DB -8.06 .6.24 2.65 4.59 6.39 9.08 9.43. 5.38 22.64 0.97 10.04 1.05 9.3727 41.76
18. IB 0.51 27.77 0.97 .90.76 .26.16 .20.21 -51.97 .28.54 .19.26 2.36 13.53 22.48 .1.3058 .903
19. IOB -57.57 6.53 0.74 0.22 7.66 8.19 3.92 2.81 8.08 15.89 29.03 .0.69 33.5701 -827.91
20. OBOC 3.80 5.49 18.45 24.68 23.84 24.97 25.58 30.49 21.78 3320 46.20 23.50 0.5048 13.41
21. P&SB 25.46 25.73 1.01 .18.86 2.84 9.14 7.88 8.29 1.74 3.06 0.53 3.42 . 3.8983 83.13

111
22. PNB 1.23 2.04 2.32 2.57 6.32 12.58 9.73 10.59 11.96 14.57 20.86 8.15 0.8528 23.07
23. SB .43.00 .19.19 -5.87 1.26 4.16 5.10 8.56 12.69 13.56 14.34 19.76 1.03 17.5725 469.22
24. UCO 24.79 .30.40 4.68 13.15 -9.76 -532 3.79 2.10 1.92 9.62 12.11 .6.01 2.1819 .60.70
25. UBOI 0.59 2.64 5.55 4.00 10.64 11.98 7.55 4.73 7.55 15.52 27.38 8.92 0.8406 19.39
26. UNBOI 21.04 .46.40 .14.79 17.55 .8.55 0.75 1.13 2.33 1.44 9.13 23.48 -6.37 . 2.8918 77.55
27. VB 13.21 0.51 3.95 2.99 2.28 2.75 3.61 6.33 8.43 15.82 23.37 5.17 1.7730 46.65
NB 12.02 15.44 0.87 3.72 4.57 8.00 5.50 7.43 6.40 14.80 23.50 3.63 3.0650 84.93
PSBs -7.78 10.04 2.55 0.84 6.96 5.67 7.10 11.05 9.32 17.90 26.30 6.20 1.6902 47.91
Source: Reserve Bank Of India.

112
EFFICIENCY AT EMPLOYEE LEVEL (PSBS)
Employee productivity is the core of efficiency of banks. The most commonly
used measure of efficiency is the ratio of output to man-hours worked called
employee productivity. In service industry the products include deposits raised,
advances disbursed and a host of services rendered to depositors, borrowers and
others who utilize bank services. Since physical measurement in terms of output is
not possible, labour efficiency is measured in terms business per employee of
different banks in the group of PSBs. Improvement in efficiency will ultimately lead to
larger profits and lower costs. The average profit and (staff) cost per employee are
also taken as indicators to measure the efficiency of employees.
5.9.4. BUSINESS PER EMPLOYEE (PSBS)
The average business per employee is an improved measure of efficiency of
employee because the total business combines both deposits and advances. The
intermediation process between savers and borrowers becomes complete when
deposits mobilized are lent to borrowers engaged in different types of business
activities. In the Table 5.6 the average business per employee of different bank
groups and different banks belonging to the PSBs are presented. The average
business per employee has increased throughout the study period but increase is
phenomenal in the concluding three year period.
The average business per employee of all PSBs taken together increased
from Rs. 47.84 in 1992-93 to Rs. 215.60 lac in 2002-03an improvement of 4.5 times.
The nationalized banks have been able to improve average business per employee
from Rs. 48.15 lac in 1992-93 to Rs. 221.90 lac- an increase of 4.6 times. It appears
from the data that the nationalized banks have made remarkable progress in the
area of average business per employee. The average business per employee of SBI
increased from Rs. 50.40 lac in 1992-93 to Rs. 207.60 lac in 2002-03. In the case of
associate banks, the average business per employee increased from Rs. 38.31 lac
to Rs. 197.98 lac per annum during the period.
As compared to SBI and Associated Banks, the nationalized banks, on an
average, continued to register higher business per employee in the period under

113
study. Similarly, rate of growth of business per employee of nationalized banks was
higher than those of SBI and Associated Bank.
A bank-wise analysis reveals that OBOC (Rs. 168.64 lac) followed by COB
(Rs. 159.93 lac) and BOB (Rs. 141.41 lac), on an average, made the highest
business per employee during the study period. On the other hand, UCO (Rs. 81.34
lac); SBOM (Rs. 78.70 lac) and SBBJ (Rs. 76.89 lac) secured the lowest business.
Inter-bank comparison, on the basis of growth rate, revealed that ANB (19.65
per cent), DB (18.73 per cent) and SBOI (17.87 per cent) secured first three ranks
and IB (9.83 per cent), BOB (12.62 per cent) and SBOM (14.49 per cent) got bottom
three ranks in list of PSBs. There did not exist any significant variations in co-efficient
of variation.

114
TABLE 5.6
BUSINESS PER EMPLOYEE OF PSBS : 1992-2003
(Rs. in Lacs)
No. Name 1992-93
1993-
94
1994-
95
1995-
96
1996-97 1997-981998-991999-2000 2000-01
2001-
02
2002-03 19922003
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 50.40 51.46 57.61 67.07 73.26 85.68 105.85 126.34 165.90 186.84 207.60 107.09 0.5303 15.31
2. SBBJ 31.67 35.52 40.20 47.19 55.00 67.69 77.37 91.18 115.70 131.98 151.46 76.89 0.5334 15.62
3. SBOH 44.60 52.37 63.65 71.08 99.90 93.06 109.11 126.29 165.16 191.64 226.20 111.19 0.5390 15.61
4. SBOI 36.15 41.88 49.37 58.28 64.66 77.16 89.66 114.61 154.36 186.68 220.52 99.39 0.6270 17.8787
5. SBOM 34.64 37.64 46.94 53.90 61.08 65.98 74.85 88.69 119.32 136.14 146.50 78.70 0.4984 14.49
6. SBOP 42.00 50.32 59.33 69.46 78.66 90.34 104.22 121.22 154.12 191.13 245.55 109.67 0.5826 16.54
7. SBOS 35.54 39.43 51.69 61.70 73.05 79.99 92.00 110.34 136.96 157.44 184.98 93.01 0.5297 15.56
8. SBOT 41.28 49.58 62.18 68.25 77.93 87.89 97.55 118.23 147.64 172.16 269;05 102.89 0.5205 15.08
ASS 38.31 44.31 53.68 53.51 70.47 80.77 89.03 110.36 141.81 166.57 197.98 95.16 0.5581 16.08
.9. AB 51.21 53:21 58.60 65.18 72.18 85.22 98.88 116.98 141.31 166.91 194.76. 100.40 0.4873 14.04
10. ANB 39.10' 41.76 47.19 56.09 66.36 75.10 101.30 136.90 200.93 219.86 250.75 112.30 0.6929 19.65
11. BOB 73.26 83.38 90.88 96.72 106.42 128.29 142.26 160.80 175.78 245.42 252.31 141.41 0.4395 12.62
12. BOI 58.39 60.84 67.45 79.78 94.40 116.84 128.04 139.19 190.35 225.47 248.23 128.09 0.5212 15.11
13. BOM 30.70 33.23 43.92 50.26 62.16 76.85 91.65 115.91 166.44 193.61 225.56 99.12 0.6850 19.66
14. CB 217.17 53.33 62.54 72.79 84.43 100.31 111.06 129.23 180.08 203.27 236.65 116.44 . 0.5506 15.92
15. CBOI 39.74 40.22 49.40 56.01 63.21 74.55 88.81 107.08 127.12 172.65 188.98 91.62 0.5675 16.24
16. COB 45.21 60.54 89.23 88.52 103.29 142.02 185.49 208.34 245.03 276.93 314.60 159.93 0.5748 17.06
17. DB 37.16 42.80 53.16 61.88 76.27 101.01 22.24 141.58 197.08 213.81 236.21 107.56 0.7172 18.73
18. IB 74.48 69.89 77.11 77.79 77.73 84.03 92.02 103.47 135.93 156.80 178.23 102.50 0.3647 9.83
19. IOB 51.17 55.98 66.20 77.55 81.09 98.76 113.04 127.21 155.75 191.67 222.85 112.84 0.5015 14.51
20. OBOC 57.16 .65.65 82.49 101.94 110.01 136.09 169.68 218.23 263.15 313.83 336.76 168.64 0.5934 17.39
21. P&SB 39.59 45.45 61.93 69.44 74.49 88.73 111.52 126.33 169.44 182.12 194.80 105.80 0.5245 15.43

115
22. PNB 46.95 43.73 50.34 55.85 66.36 76.90 91.05 108.22 144.36 170.23 196.74 95.52 0.5564 15.86
23. SB 34.07 36.85 42.84 48.51 56.30 65.56 81.76 103.70 124.41 169.86 184.53 86.22 0.6162 17.56
24. UCO 44.63 39.84 43.65 48.02 52.17 61.01 70.04 83.24 108.42 155.10 188.61 81.34 0.6107 16.36
25. UBOI 42.02 51.79 68.86 80.64 94.35 107.87 126.66 150.51 186.83 236.92 273.33 129.07 0.5871 17.07
26. UNBOI 39.96 41.98 48.13 51.74 59.97 69.91 84.39 100.16 121.31 147.19 159.95 84.06 0.5078 14.73
27. VB 35.70 43.71 58.29 58.97 65.19 80.92 95.17 113.66 136.24 176.52 212.50 97.90 0.5804 16.61
NB 48.15 50.96 60.09 67.52 76.78 91.90 104.51 126.48 159.93 197.29 221.90 109.59 0.5473 15.76
PSBs 47.84 50.49 58.87 66.86 75.31 89.20 97.06 124.93 159.84 191.37 215.60 107.03 0.5453 15.66
Source:Reserve Bank Of India

116
TABLE 5.7
ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
No. Bank I Period II Period III Period
Percentage Change
1992-95 1996-99 20002003
Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 0.94 0.18 1.55 0.12 2.66 0.07 63.96 71.98 181.98
2. SBBJ 0.70 0.16 1.45 0.16 2.35 0.07 96.38 62.21 218.55
3. SBOH 0.76 0.16 1.52 0.23 2.27 0.07 99.56 49.67 198.68
4. SBOI 0.76 0.21 1.46 0.17 2.41 0.05 92.11 65.30 217.54
5. SBOM 0.73 0.10 1.43 0.13 2.61 0.07 96.79 82.28 258.72
6. SBOP 0.66 0.19 1.34 0.10 2.25 0.07 102.53 68.58 241.41
7. SBOS 0.77 0.22 1.55 0.15 2.11 0.07 102.17 36.34 175.65
8. SBOT 0.71 0.18 1.25 0.06 2.18 0.06 77.36 73.94 208.49
ASS 0.73 0.16 1.42 0.14 2.30 0.06 94.95 62.59 216.97
9. AB 0.72 0.17 1.28 0.13 2.47 0.07 76.50 93.21 241.01
10. ANB 0.74 0.23 1.39 0.15 2.72 0.12 87.44 94.98 265.47
11. BOB 0.91 0.19 1.59 0.16 2.66 0.06 75.00 67.65 193.38
12. BOI 0.86 0.22 1.52 0.13 2.72 0.11 76.36 79.12 215.89
13. BOM 0.76 0.22 1.62 0.14 2.63 0.12 114.10 62.14 247.14
14. CB 0.76 0.18 1.35 0.17 2.46 0.05 77.97 82.92 225.55
15. CBOI 0.76 0.19 1.47 0.14 2.76 0.11 93.86 87.10 262.72
16. COB 0.77 0.25 1.39 0.15 2.10 0.12 81.74 50.96 174.35
17. DB 0.87 0.22 1.61 0.15 3.48 0.13 85.06 116.36 300.38
18. IB 0.78 0.10 1.45 0.11 2.58 0.02 85.47 78.11 230.34
19. IOB 0.79 0.11 1.50 0.17 2.74 0.07 91.10 82.26 248.31
20. OBOC 0.73 0.19 1.31 0.14 2.34 0.10 80.28 78.63 222.02

117
21. P&SB 0.82 0.10 1.46 0.07 3.02 0.06 79.18 106.15 269.39
22. PNB 0.70 0.18 1.38 0.16 2.42 0.05 97.14 75.60 246.19
23. SB 0.82 0.22 1.45 0.12 3.13 0.08 76.83 116.09 282.11
24. UCO 0.78 0.11 1.37 0.09 2.52 0.14 76.07 83.50 223.08
25. UBOI 0.75 0.17 1.48 0.12 2.68 0.01 96.89 81.49 257.33
26. UNBOI 0.79 0.16 1.42 0.10 2.86 0.25 79.41 100.94 260.50
27. VB 0.79 0.17 1.44 0.07 2.90 0.23 81.93 100.92 265.55
NB 0.78 0.18 1.44 0.14 2.65 0.04 84.26 83.60 238.30
PSBs 0.82 0.18 1.46 0.12 2.62 0.04 79.18 79.04 220.82

118
5.9.5. ESTABLISHMENT EXPENSES PER EMPLOYEE (PSBS)
Establishment expenses (staff costs) include expenses made on salaries,
allowances, provident fund, bonus, etc. The Narasimham Committee attributed to
two factors, on income side and on expenditure side, for the poor health of banks.
Due to improper recognition of income and high costs, several banks suffered
losses. The expenses per employee increased at periodical intervals due to wage
and salary hikes, promotions, higher contribution to provident fund, etc. If the
expense per employee is high, lower will be the profit per employee.
The average expense per employee of PSBs as a group increased from Rs.
0.71 lac in 1992-93 to Rs. 2.71 lac -an increase of 3.8 times. Similarly, the average
establishment expense of nationalized banks put together increased from Rs. 0.68
lac to Rs. 2.76 lac during the period under study-an increase of four times.
The average establishment expenses of SBI increased from Rs. 0.83 lac to
Rs. 2.72 lac per annum-an increase of 3.3 times. The average establishment
expenses of Associate Banks increased from Rs. 0.63 lac to Rs. 2.33 lac. during the
study period. Inter-group analysis revealed that SBI, on an average, incurred higher
establishment expenses than the nationalized banks and associate banks. For
example, the SBI, on an average, spent Rs. 1.71 lac per employee per annum while
nationalized and associate banks spent Rs. 1.61 lac and Rs. 1.48 lac per annum
respectively. It is further observed that the rate of growth in establishment expenses
per employee of nationalized bank (13.68 per cent) is higher than that of SBI (11.70
per cent) and Associate Banks (12.84 per cent).
A bank-wise analysis reveals that establishment expenses per employee, on
an average, of SBOT (Rs. 1.38 lac) is less than of SBOP (Rs. 1.40 lac); COB (Rs.
l.4l lac, Whereas P&SB (Rs. 1.75 lac), SB (Rs. 1.75 lac) and DB (Rs. 1.92 lac) are at
the top. There did not exist any significant inter-bank variations with respect to
establishment expresses per employee.

119
5.9.6. PROFIT PER EMPLOYEE (PSBS)
The data on average profit per employee in all the years of study period are
presented in Table 5.8. During the entire period, the SBI and Associate Banks
(barring SBOS in 1995-96) made profits. The profit per employee of SBI Rs. 0.09
lac in 1992-93 increased to Rs. 1.49 lac in 2002-03. The average profit per
employee during the period is a meager amount of Rs. 0.63 lac. Per employee
profit of Associate Banks which was Rs. 0.09 lac in 1992-93 increased to Rs. 1.90
lac in 2002-03. Nationalized banks get somewhat a different picture. The
nationalized banks exceptthe three, sustained losses per employee in 1992-93.
The average loss per employee of nationalized banks in 1992-93 was Rs. (-) 0.63
lac. The situation repeated in the next year as well in which the average loss per
employee was Rs 0.81 lac. This has resulted in negative average profitability of
PSBs in the first two years of the period. It has happened despite the fact that the
profitability per employee of SBI and Associate Banks was positive. The PSBs as a
whole started making Profits per employee year after year from 1996-97. The
average profit per employee of PSBs for the entire period was Rs. 0.40 lacs. In
addition to the two banks, which are declared as weak banks by Verma Committee
(IB, UCO), three more banks (BOM, CBOI, PSB) have also showed negative profits
(mean) per employee for the entire period.
The growth rate of profitability per employee of nationalized banks and all
PSBs were 70.16 per cent and 42.99 per cent respectively. The growth rate of
Profitability per employee of six out of 19 nationalized banks was also negative. In
the first three to four years of the early period of reforms, large number of banks
sustained losses due to write off of accumulated bad and doubtful debts and higher
provisioning for NPAs. There existed exceptionally high inter-bank variations with
respect to profit per employee.

120
TABLE 5.8
PROFIT PER EMPLOYEE OF PSBS : 1992-2003
(Rs. In Lacs)
No Name 1992-93 1993-94 1994.95 1995.96 1996-97 1997-98 1998-99 19992000 200001 200102 200203 19922003
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 0.09 0.12 0.31 0.36 0.57 0.78 0.43 0.88 0.75 1.16 1.49 0.63 0.6892 19.02
2. SBBJ 0.08 0.05 0.05 0.17 0.27 0.60 0.61 0.81 0.78 1.24 1.54 0.56 0.8914 26.61
3. SBOH 0.12 0.17 0.32 0.36 0.37 0.68 0.76 0.87 1.13 1.68 2.25 0.79 0.8448 22.73
4. SBOI 0.05 0.06 0.13 0.18 0.25 OAI OA5 0.65 0.98' 1.91 3.06 0.74 1.2746 32.47
5. SBOM 0.04 0.02 0.03 0.24 0.36 OA5 0.30 OA2 0.26 0.67 1.19 0.36 0.9379 22.11
6. SBOP 0.23 0.15 0.21 0.38 OA2 1.09 0.77 0.10 1.35 1.97 2.76 0.86 1.00BI 24.50
7. SBOS 0.06 0.07 0.17 2.86 0.89 0.98 0.31 1.09 0.19 1.10 1.26 0.30 3.8651 53.99
8. SBOT 0.06 0.07 0.17 0.20 0.31 OA8 0.32 0.51 0.80 0.10 1.42 0.40 1.0035 19.82
ASS 0.09 0.10 0.16 0.05 0.39 0.67 0.53 0.76 0.83 1.36 1.90 0.61 0.9689 26.11
9 AB -OA7 1.61 .0.33 0.03 0.28 0.57 0.60 0.31 0.19 OAO 0.85 0.07 9.1374 214.63
10. ANB .0.90 .0.98 0.27 0.07 0.24 0.50 0.61 0.83 0.95 1.58 3.10 0.52 2.2090 63.35
11. BOB 0.02 0.15 0.39 OA4 0.61 0.91 0.91 1.07 0.59 IAO 1.92 0.76 0.7290 19.62
12. BOI 0.06 2.05 0.09 0.51 0.68 0.70 0.38 0.33 0.57 1.16 1.97 0.39 2.5137 56.54
13. BOM 1.06 1.57 .2.34 0.08 0.28 0.34 0.32 0.56 0.32 1.03 1.58 0.04 7.5996 .69348
14. CB 0.05 0.23 0.38 OA7 0.27 0.37 0.41 OA3 0.59 1.55 2.14' 0'.63 1.0095 23.95
15. CBOI 0.74 1.30 1.63 -IA5 0.30 0.35 0.30 0.31 0.10 OAI 0.78 0.23 3.7268 .89.88
16. COB 0.04 0.30 079 1.14 1.33 1.74 1.89 2.19 2A5 2.85 3.88 1.69 0.6719 20.11
17. DB 0.55 0.42 0.18 0.33 O.7 0.70 0.74 OA4 2.43 0.10 1.0B 0.06 1.6106 51.56
18. IB 0.03 -IA6 0.05 4.91 -IA3 1.12 2.91 1.61 1.97 0.15 0.86 1.30 1 .2529 6.15
19. IOB' 0.26 1.22 0.03 0.01 0.37 0.40 0.19 0.14 OA5 0.94 1.71 0.25 2.8815 71.74
20. OBOC 0.18 0.27 0.92 1.32 1.33 1:47 1.59 1.94 1.49 2.36 3.38 1.48 0.6101 16.92
21. P&SB 1.56 1.40 .0.06 1.06 0.16 0.53 0.46 0.50 0.13 0.23 0.04 0.18 4.1923 92.12

121
22. PNB 0.06 0.10 0.12 0.13 0.35 0.72 0.57 0.63 0.80 0.97 1.43 0.51 0.9101 25.44
23. SB 1.74. 0.78 0.24 0.05 0.18 0.23 0.40 0.62 0.77 0.98 1.35 0.17 5.1994 145.05
24. UCO 1.24. 1.57 .0.24 0.69 0.52 0.29 0.21 0.12 0.11 0.65 0.83 0.28 2.6075 75.74
25. UBOI 0.03 0.15 0.32 0.24 0.70 0.81 0.52 0.33 0.55 1.22 2.15 0.64 0.9457 21.94
26. UNBOI 1.23 2.72 0.87 1.04 0.51 0.05 0.07 0.15 0.10 0.66 1.72 0.33 3.4981 -94.20
27. VB 0.71 0.03 0.23 0.17 0.13 0.16 0.21 0.37 0.53 1.11 1.68 0.32 1.9456 52.38
NB 0-63 0.81 005 0.20 0.25 0.45 0.32 0.44 0.41 1.03 1.65 0.27 2.5778 70.61
PSBs 0.38 0.49 0.12 0.04 0.35 0.56 0.37 0.59 0.54 1.10 1.63 0.40 1.5506 42.99

122
TABLE 5.9
RETURN ON ASSETS OF PSBS (1992-2003)
Percentage Change
1992-95 1996-99 2000-2003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 0.34 0.58 0.74 0.38 0.68 0.24 0.40 -0.06 0.34
2. SBBJ 0.21 0.38 0.78 0.35 0.98 0.20 0.58 0.20 0.78
3. SBOH 0.44 0.32 0.73 0.24 1.00 0.17 0.29 0.27 0.56
4. SBOI 0.23 0.33 0.56 0.17 1.27 0.39 0.33 0.71 1.04
5. SBOM 0.09 0.45 0.69 0.27 0.64 0.58 0.60 -0.05 0.55
6. SBOP 0.44 0.13 0.99 0.40 1.32 0.15 0.55 0,33 088
7. S80S 0.25 0.41 0.96 0.56 0.63 0.65 0.72 -0.33 0.38
8. S80T 0.36 0.55 0.53 0.20 0.77 0.16 0.16 0.24 0.40
ASS 0.29 0.17 0.75 0.27 0.97 0.25 0.46 0.22 0.68
9. AB -1.82 -0.88 0.68 0.28 0.36 0.57 2.50 -0.31 2.18
10. ANB -2.06 -0.59 065 0.31 1.06 0.49 2.71 0.41 3.13
11. BOB 0.26 0.96 0.78 0.17 0.74 0.40 0.52 -0.04 0.48
12. 801 -1.71 -1.22 0..86 0.12 0.75 0.46 2.57 -0.11 2.46
13. BOM -3.24 -0.73 0.47 0.12 0.60 '0.55 3.71 0.13 3.84
14. CB 0.45 0.68 0.42 0.07 0.90 0.47 -0.02 0.48 0.45
15. CBOI -2.15 -0.79 0.50 0.17 032 0.69 2.65 -0.18 2.47
16. COB 0.56 0.78 1.36 0.09 1.41 0.11 0.81 0.04 0.85

123
17. DB -0.81 -1.35 0.76 0.08 -0.29 -3.74 1.58 -1.05 0.53
18. IB -0.84 -1.86 -2.32 -0.44 -0.13 -6.21 -1.48 2.19 0.71 .
19. IOB -3.05 -1.11 0.42 0.42 0.68 0.46 3.48 0.26 3.73
20. OBOC 0.73 0.67 1.34 0.11 1.03 0.29 0.60 -0.31 0.29
21. P&SB -2.83 -0.86 0.49 0.46 0.10 0.70 3.32 -0.39 2.93
22. PNB 0.25 0.27 0.62 0.88 0.83 0.16 0.37 0.21 0.58
23. SB -3.14 -0.95 0.47 0.30 0.87 0.13 3.61 0.40 4.01
24. UCO -2.78 -0.70 -0.61 -0.60 0.41 0.62 2.17 1.02 3.19
25. UBOI 0.35 0.69 1.77 0.84 0.73 0.47 1.42 -1.04 0.38
26. UNBOI -4.31 -0.63 -0.24 -2.27 0.62 0.95 4.07 0.86 4.93
27. VB -0.65 -2.46 0.24 0.06 0.78 0.34 089 0.54 1.43
NB -1.13 -0.94 0.44 0.28 0.67 0.49 1.57 0.23 1.80
PSBs -0.60 -1.22 0.55 0.30 0.70 0.39 1.15 0.15 1.30
Source:Reserve Bank Of India.

124
PROFITABILITY INDICATORS (PSBS)
The analysis makes use of indicators relating to income side to measure the
profitability of PSBs. The indicators used in the analysis are 1. Return on assets
(ROA), 2. Return on equity (ROE), 3. Net-interest Margin (spread) as a percentage
to Working Fund (NIM), 4. Non-interest Income as a percentage to total income (NIl),
and 5 credit-deposit Ratio (COR). The behavior of these parameters during the study
period is analyzed in this regard.
5.9.7 RETURN ON ASSETS (PSBS)
ROA is defined as net profit divided by average total assets. This ratio
measures a banks profit per currency unit of assets. This is the main indicator of
profitability used in international comparisons and it is one among the guidelines of
RBI for balance sheet analysis of banks. The return on assets of different banks
and different categories of public sector banks is shown in the Table
5.9.(percentage change).
It may be noted that immediately after introduction of reforms, the PSBs have
registered negative returns in the years 1992-93, 1993-94 and 1995-96. It is so
because the practice of booking income on accrual basis came to end with the
introduction of reform measures. However, since 1996-97 the situation has
changed for the better. In the year 1997-98 the return on assets of PSBs said to
0.73 per cent but in the following years, because of net losses registered by some
banks, the ROA fell and in 1999-2000, it stood at 0.57 per cent. The last two years
saw a significant improvement of ROA of PSBs. As per the data provided by the
banks for international settlement (BIS 1999), the ROA of PSBs doesn't compare
unfavorable with banks in certain other countries. There were fluctuations in the
year-to-year percentages but on the last two years it picked up to 0.7 per cent and
0.96 per cent respectively. The average return for the entire period is 0.23 per cent,
which compares very unfavorably with market of interest. The average returns of
the 19 nationalized banks exhibit the same type of behavior as that of PSBs as a
whole. SBI and the Associate banks achieved positive rate of return on assets
throughout the period, when the average return on assets of SBI is 0.60 per cent

125
and that of associate banks is 0.62 per cent.
Similarly, an Inter-banks growth rate reveals that Associate Banks (16.20 per
cent) growth is higher when compared to the growth rates of SBI (8.33 per cent)
and nationalized banks (0.01 per cent). COB (1.69 per cent) followed by OBOC
(1.48 per cent); SBOP (0.86 per cent) on an average recorded the highest ROA
while, IB (1.30 per cent), UNBOI (0.33 per cent) and UCO (0.28 per cent) on an
average, posting negative ROA. When a comparison of growth rates of different
banks is made, BOI (394.87 per cent); BOB (71.96 per cent) and SBOM (19.89 per
cent) are in the top of the PSBs list while ANB (2458.82 per cent), DB (392.86 per
cent) and VB (156.28 percent) were in the bottom. There existed large variations
among :the PSBs with regard to this indicator throughout the study period.
5.9.8. RETURN ON EQUITY (PSBS)
ROE is an indicator of the profitability of banks from the shareholders point 01
view. It is a measure of accounting profits of book equity capital. The price of
shares largely depends upon ROE, in the absence of speculation. The ability of the
banks to attract fresh capital in the market depends upon this indicator. Data
relating to ROE for the study period are presented in the Table 5.10. The ROE of
SBI and Associate banks has been on the positive side throughout the period while
that of several nationalized banks were on the negative side during the first three
years. The ROE of SBI, which was 106 per cent and 58 per cent in 1992-93 and
1993-94 respectively, shoot up throughout the remaining period (except in 1998-
99) and reached 590.30 per cent. The mean value of ROE of SBI was 276.71 per
cent while that of nationalized banks was only 2.61 per cent. The ROE of SBI
group is remarkably better than that of nationalized banks. The data on ROE
indicates that the profit earnings of nationalized banks have been poor during the~
study period, The table further reveals that growth rates of different bank groups
show the highest growth rate of nationalized banks (402.40 per cent) when
compared with associate banks (15.47 per cent) and SBI (16.00 per cent).

126
TABLE 5.10
RETURN ON EQUITY OF PSBS : 1992-2003
(Rs. in Lacs)
No Name 1992-93 1993-941994.951995.961996-971997-98 1998-99 19992000 200001 200102 200203 1992-2003
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 106.00 58.02 150.84 175.53 256.46 353.80 195.44 390.11 304.94 462.36 590.30 276.71 0.5855 16.00
2. SBBJ 52.38 33.33 38.10 72.22 111.11 180.00 184.00 240.00 210.00 330.00 406.00 168.83 0.7279 20.88
3. SBOH 100.00 141.18 258.82 294.12 305.88 570.59 658.82 752.94 882.35 13241 1770.59 642.25 0.8161 23.00
4. SBOI 33.33 44.44 100.00 66.67 94.44 155.56 172.22 250.00 355.56 694.44 1111.11 279.80 1.1987 291190
5. SBOM 33.33 16.67 25.00 72.22 111.11 141.67 94.44 133.33 72.22 183.33 322.22 109.60 0.8000 19.56
6. SBOP 120.00 80.00 116.00 208.00 236.00 572.00 404.00 524.00 644.00 932.0 1288.00 465.82 0.8185 22.70
7. SBOS -50:00 60.00 140.00 -73.25 22.61 24.84 7.96 28.34 4.46 26.11 29.62 29.15 1.7249 14.20
8. SBOT 40.00 45.00 105.00 74.29 114.29 126.00 86.00 132.00 194.00 242.00 342.00 136.42 0.6654 17.67
ASS 60.18 71.68 115.93 -7.90 66.74 107.84 85.88 123.14 121.18 199.61 275.88 110.92 0.6757 15.47
9. AB -61.27 139.92 12.28 0.77 25.91 52.23 54.66 27.94 16.19 32.39 47.84 . 4.04 14.4458 315.79
10. ANB 153.26 -66.94 10.33 2.58 6.09 12.69 25.86 34.77 26.89 44.89 100.75.. 2.18 30.0632 797.76
11. BOB 2.42 8.93 23.75 35.36 109.06 156.66 143.20 171.09 93.54 185.71 262.93 108.42 0.7781 21.17
12. BOI -70.58 -98.64 2.56 47.42 121.21 57.21 31.50 27.12 39.50 103.48 174.39 39.56 1.9923 46.28
13. BOM .106.49 -88.66 -6.13 1.74 6.28 7.48 15.71 27.19 13.60 43.81 67.07 1.67 30.9806 824.42
14.. CB 12.50 20.37 34.58 52.16 29.70 35.12 38.93 40.83 49.31 128.20 248.54 62.75 1.0939 23.79
15. CBOI 209.29 .105.79 6.44 .5.67 8.37 9.70 8.09 8.37 2.55 14.50 2722 21.41 3.3445 71.32
16. COB 5.97 24.11 65.18 93.75 122.55 139.17 160.00 193.33 218.33 215.38 290.91 138.97 0.6325 18.88
17. DB -61.22 25.27 10.60 35.37 35.27 50.72 53.14 30.43 128.50 5.31 55.07 5.54 10.3008 48.38
18. IB 3.45 .92.43 2.14 - 204.28 .59.48 12.56 31.07 .17.05 10.94 0.87 4.13 37.93 1.6581 17.74
19. IOB 203.51 32.65 0.75 0.22 31.44 33.83 16.47 11.98 26.07 51.69 93.48 2.71 27.9177 640.96
20. OBOC 26.92 25.00 59.07 89.64 93.26 108.81 119.17 144.56 105.18 166.32 236.79 106.79 0. 4.265 16.08
21. P&SB .94.20 .47.96 1.45 23.74 2.83 921 23.05 25.10 5.35 9.47 1.65 8.25 157 93.51
22. PNB 20.21 '20.60 23.63 26.37 67.81 236.14 175.47 192.45 218.87 265.09 397.17 144.64 0.9173 25.10

127
23. SB 421.38 35.64 -8.23 1.55 5.19 6.43 41.21 45.76 49.79 53.18 72.88 17.20 8.0145 165.13
24. UCO -88.80 .52.75 -5.42 1427 1026 4.65 .3.00 1.63 1.46 7.28 34.56 1220 2.6748 68.27
25. UBOI 7.97 '14.79 31.36 23.67 63.91 7396 47.34 29.88 45.86 92.90 12022 50.17 0.6909 16.54
26. UNBOI -77.50 106.92 17.64 17.04 -6.66 058 0.83 1.71 1.05 6.57 16.84 18.02 2.1387 51.84
27. VB .77.17 2.08 12.60 -9.84 3.42 4.14 5.40 20.46 19.78 3922 1 04.79 11.35 3.7563 91.44
NB -85.36 48.65 1.91 -8.84 11.23 17.07 13.37 18.46 15.51 34.72 59.24 2.61 15.1278 402.40
PSBs -73.19 42.39 7.60 2.63 22.46 30.98 22.59 35.94 29.68 55.29 86.73 15.73 2.7869 77.04

128
The average NIM for all PSBs was 2.80 per cent for nationalized banks, it was
2.72 per cent, which is higher than 2.02 per cent in 1992-93. The average for SBI
was 2.89 per cent while that of associate banks was on the higher side at 3.29 per
cent. One peculiar feature is that in the years 1995-96 and 1996-97 for most of the
banks, the Net-Interest margin is more than three per cent. The general conclusion is
the NIM had been on the lower side during the first two years for PSBs.
Net-interest margin as a percentage to working funds, on an average, was
more in Associate Banks (3.29 per cent) when compared to SBI (2.89 per cent) and
nationalized banks (2.72 per cent).
Bank group-wise analysis, on the basis of growth rate revealed that SBI (1.73
per cent) have registered lower negative growth rate with regard to this indicator
when compared to nationalized (2.21 per cent) and Associate Banks (0.30 per cent).
An insight reveals that SBOP (3.64 per cent) followed by SBOI (3.49 per cent)
and SBOM (3.47 per cent) on an average, registered the l1ighest NIM when
compared to IB (1.41 per cent); UNBOI (1.83 per cent) and UCO (1.96 per cent),
which registered hover margins.
The Inter-bank analysis on the basis of growth rates revealed that UNBOI
(13.14 per cent), UCO (7.65 per cent) and AB (6.13 per cent) secured top ranks
whereas CB (2.36 per cent), SBOS (1.79 per cent) and SBIOI (1.73 per cent) got
lower ranks. There exist hardly any significant variations in CV with respect to this
indicator.
5.9.9. NON INTEREST INCOME AS PERCENTAGE OF TOTAL INCOME (PSBS)
Total income of banks comprises of interest income and non-interest income.
Non-interest income consists of:
(i) Commission, exchange and Brokerage,
(ii) Profit on 'sale of investments (net),
(iii) Profit on revaluation of investments,
(iv) Profit/loss on sale of land, buildings and other asserts,
(v) Profit on exchange transactions (net),
(vi) Miscellaneous however, forms 15 per cent of the total income of the
banks.With the deregulation of interest rates, banks are finding it tough
to earn steady income from interest sources. Thus, this made banks in
India to diversify their activities.

129
TABLE 5.11
NON-INTEREST INCOME AS A PERCENTAGE TO TOTAL INCOME OF PSBS : 1992-2003
(Rs. in Lacs)
No Name 1992-93
1993-
94
1994.951995.96
1996-
97
1997-98 1998-99 19992000200001 200102 200203 1992-2003
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 13.08 14.58 15.96 17.54 15.02 15.08 14.67 1385 12.93 12.28 15.59 14.60 0.1037 0.89
2. SBBJ 13.72 1531 1695 15.05 14.83 16.05 14.55 16.47 15.88 18.14 19.12 16.01 0.0998 2.12
3. SBOH 13.60 14.82 16.32 15.28 13.27 14.13 13.42 15.27 14.54 16.00 18.27 14.99 0.0990 1.40
4. SBOI 12.85. 13.81 1634 13.44 12.21 15.13 15.24 1931 18.64 2364 23.45 16.73 0.2413 6.22
5. SBOM 12.35 16.35 1560 15.26 12.70 13.61 14.69 17.01 15.75 19.37 22.09 15.89 0.1801 3.84
6. SBOP 7.34 8.4 6.48 12.00 9.22 9.44 11.48 12.88 11.24 14.95 16.41 10.90 02833 7.43
7. SBOS 14.81 14.42 15.25 17.26 14.15 15065 13.17 14.06 12.75 17.07 19.21 15.25 0.1266 1.05
8. SBOT 11.33 15.04 14.33 13.22 12.02 13.16 13.05 14.40 1287 13.67 15.92 13.55 0.0974 1.11
ASS 1203 13.85 14.19 14.33 12.51 1.64 13.50 15.36 14.31 17.09 18.76 14.51 0.1343 310
9. AB 10.80 8.34 11.24 11.99 12.40 13.56 11.59 12.22 10.34 14.48 16.93 12.17 0.1857 3.86
10. ANB 9.47 11.29 15.36 10.37 11.11 11.28 12.25 13.45 9.84 1303 21.58 12.64 0.2710 4.19
11. BOB 8.46 1665 12.84 11.67 10.87 11.52 10.70 11.65 10.93 14.29 17.15 12.43 0.2116 209
12. BOI 9.98 12.03 11.73 12.71 12.24 12.84 11.12 14.23 13.95 16.44 21.69 13.54 0.2363 5.69
13. BOM 8.72 8.23 9.54 9.43 8.53 8.59 870 11.20 11.53 13.34 14.74 10.23 0.2140 538
14.. CB 11.32 13.00 13.57 13.68 11.76 13.72 12.46 14.70 14.04 18.32 18.51 14.10 0.1668 3.97
15. CBOI 8:58 9.46 11.75 11.15 10.75 10.74 9.61 10.44 9.91 11.42 9.85 10.33 00917 0.58
16. COB 12.35 17.32 15.97 14.15 11.88 12.30 13.18 14.45 13.93 16.41 20.20 14.74 0.1718 1.97
17. DB 8.96 10.61 12.01 10.74 9.80 13.15 9.30 12.53 10.39 17.12 19.78 12.22 0.2779 5.81
18. IB 8.72 10.82 12.85 11.30 12.19 12.13 10.91 12.65 12.83 17.95 17.17 12.68 0.2126 5.20
19. IOB 16.98 20.09 11.53 7.90 9.34 9.45 9.84 9.60 9.77 14.34 12.98 11.98 0.3152 3.42
20. OBOC 7-71. 8.51 9.87 8.95 7.70 8.67 8.50 8.25 8.85 13.48 14.10 9.51 0.2317 4.63
21. P&SB 9.23 10.89 10.55 10.12 11.12 12,02 10.19 12.06 11.85 15.28 19.30 12.06 0.2364 5.64
22. PNB 7.32 13.21 11.91 9.05 11.37 13.75 10.92 12.38 11.72 12.82 14.31 11.71 0.1750 2.99

130
23. SB 10.11 8.46 9.79 9.43 8.93 11.51 11.58 11.15 9.16 8.74 14.69 10.32 0.1764 2.52
24. UCO 12.96 7.76 11.51 10.73 8.89 11.75 9.95 11.19 11.57 18.66 17.90 12.08 0.2803 5.30
25. UBOI 9.86 9.56 9.17 8.66 7.95 7.66 8.40 8.27 7.70 11.06 16.08 9.49 0.2548 3.06
26. UNBOI 6.36 8.01 10.71 10.66 8.89 9.63 7.33 7.63 7.86 16.22 16.80 10.01 0.3486 6.29
27. VB 14.75 12.96 14.74 8.80 7.95 9.15 9.83 8.90 10.33 10.93 17.15 11.41 0.2654 0.61
NB 9.88 12.13 11.94 10.85 10.55 11.61 10.53 11.71 11.15 14.50 16.68 11.96 0.1656 3.26
PSBs 11.04 12.98 13.30 13.13 12.01 12.75 11.96 12.65 11.95 14.10 16.56 12.95 0.1123 1.93

131
The components of interest income and non-interest income of SCBs show
that interest income on advances and discounts has been falling during 1997-2003.
Interest income from investments has been increasing. This goes to show that
banks are preferring safe government securities rather than advancing loans where
lower risks are involved. Their investment in government securities far exceeds the
SLR of 25 per cent. Non-interest income is still lagging behind interest income of all
groups of banks. In the case of SBI and associates and nationalized banks, the per
cent of non-interest income is 86 and 97 per cent respectively. The importance of
non-interest income is that it could exert a stabilizing influence on banks results by
off setting the fluctuations in the interest income. The Non-interest income as a
percentage to total income of PSBs for different years in the study period is
presented in the Table. 5.11.
Non-interest income as a percentage of total income of PSBs increased from
11.04 per cent in 1992-93 to 13.13 per cent by 1995-96 and then started declining
slowly. But in the last two years it picked up to 14.1 and 16.56 per cent respectively
giving an average of 12.95 per cent for the entire period. Nationalized banks are just
one step behind the PSBs, their average being, 11.96 per cent comparatively, SBI
is a better performer followed' by associate banks. Till 1995-96, there has been an
increase in the percentage and it started declining till 2001-02, perhaps because of
tough competition posed by new private sector banks. The Associate banks
improved their percentage in the last three years to 14.31 per cent and 17.09 per
cent and 18.76 per cent respectively. The average per cent of non-interest income
to total income of SBI was 14.6 and that of associate banks was 14.51 per cent,
which is higher than that of nationalized banks. Inter-bank group analysis, on the
basis of growth rates reveals that nationalized banks (3.26 per cent) have registered
higher growth compared to nationalized banks (3.10 per cent) and SBI even
registered negative growth (0.89 per cent).
Bank-wise analysis showed that the first three ranks are occupied by SBOI
(16.73 per cent); SBBJ (16.01 per cent) and SBOM (15.89 per cent) with regard to
this indicator while UBOI (9.49 per cent), OBOC (9.51 per cent) and UNBOI (10.01
per cent) are in the bottom of the list of PSBs.

132
When we consider the growth rate of different banks SBOP (7.43 per cent),
SBOI (6.22 per cent) and UNBOI (6.29 per cent) were at the top while IOB (3.42 per
cent), SBI (0.89 per cent) and VB (0.61 per cent were at the bottom of the list.
5.9.10. CREDIT - DEPOSIT RATIOS (PSBS)
This ratio indicates the deployment of bank resources by way of loans and
advances. The ratio of 60 per cent is considered as a norm for banks. The CD ratios
for all PSBs during the reform period (1992-93 to 200203) are shown in theTable
5.12.
From the data it is evident that CD ratios of SBI and associate banks are
higher than those of Nationalised banks in all the years. Consequently while the
average CD ratio of nationalized banks was 48.26 per cent, the average CD ratio of
SB! was 54.06 and that of associate banks 54.83 per cent. For most of the years,
the CD ratio of nationalized banks is less than 60. Even in the case of SBI the CD
ratio exceeded 60 per cent only in two years, i.e., 1992-93, 1995-96.
For PSBs as a whole, the CD ratio touched an all time low figure of 46.50 per
cent in the year 1998-99. The rapid increase in investments and deposit ratio since
1992 provides the reason for low credit-deposit ratio of PSBs. These banks are
making larger investments in zero risk-weighted assets than statutorily
required.Inter-Bank analysis, on an average, with respect to this indicator reveals
that SBOI (56.75 per cent), SBOS (56.56 per cent) and SBOT (56.36 per cent)
occupied top three ranks with higher CD ratio while BOM (41.87 per cent), VB (41.11
per cent) UNBOI (33.28 per cent) were in the bottom. . COB (4.63 per cent) followed
by SB (2.93 per cent) and .ANB (1.59 per cent) have registered higher growth rates
as far as CD ratio is concerned, whereas IS (4.41 per cent), SB! (3.85 per cent) and
UNBOI (2.88 per cent) posted lower growth rates.
The inter-bank variations (CV) with regard to this indicator did not exhibit huge
variations.

133
TABLE 5.12
CREDIT-DEPOSIT RATIO OF PSBS : 1992-2003
(Rs. in Lacs)
No Name 1992-93
1993-
94
1994.951995.96
1996-
97
1997-98 1998-99 19992000200001 200102 200203 19922003
Mean CV GR
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
1. SBI 71.92 54.31 57.01 6206 56.22 56.63 48.72 49.84 46.78 44.65 46.52 54.06 0.1489 3.85
2. SBBJ 58.49 51.78 52.37 52.52 5560 56.10 49.62 48.50 50.05 50.86 51.18 52.46 0.0587 1.07
3. SBOH 57.96 49.33 59.36 63.63 55.83 53.54 SO 2.3 46.54 47.76 46.40 46.91 52.87 0.1056 2.23
4. SBOI 61.86 58.01 60.79 59.65 57.45 56.45 52.63 55.77 51.17 54.17 56.23 56.75 0.0582 1.36
5. SBOM 58.91 51.34 54.70 53.66 55.12 55.19 53.56 56.16 56.34 57.65 58.37 55.55 0.0406 0.50
6. SBOP 60.84 49.11 52.34 53.21 52.39 53.06 54.41 56.71 59.04 62.23 60.13 55.77 0.0764 1.27
7. SBOS 62.56 53.45 58.54 57.68 56.26 60.05 56.94 55.36 53.88 54.07 51.36 56.56 0.0581 1.18
8. SBOT 59.10 56.28 65.27 61.75 56.61. 53.57 49.11 50.39 55.28 55.24 57.59 56.36 0.0869 1.17
ASS 59.60 52.10 57.50 57.56 55.57 54.86 51.68 52.38 53.11 54.38 54.20 54.83 0.0460 0.75
9. AB 51.43 44.01 45.90 47.45 42.79 42.27 44.46 47.73 47.66 48.50 49.26 46.50 0.0616 0.30
10. ANB 45.54 39.11 45.37 43.24 41.00 41.62 43.34 38.66 40.58 52.34 54.66 44.13 0.1171 1.59
11. BOB 56.17 54.73 56.56 56.44 51.39 50.61 47.28 47.57 SO.71 54.47 53.26 52.65 0.0642 0.95
12. BOI 59.16 50.99 49.87 56.66 57.35 55.96 52.67 55.10 62.26 64.16 66.14 57.32 0.0915 1.85
13. BOM 47.87 40.32 43.88 45.09 42.24 39.64 37.17 39.17 39.19 43.15 42.88 41.87 0.0744 0.98
14.. CB 48.84 41.76 48.40 49.90 45.84 44.22 46.55 49.06 47.12 51.74 56.14 48.14 0.0795 1.35
15. CBOI 49.26 37.53 44.24 45.07 38.13 40.49 41.76 44.06 45.36 45.16 45.26 43.30 0.0806 0.32
16. COB 43.24 34.56 33.66 42.59 45.18 46.01 49.88 54.46 52.33 58.06 55.37 46.85 0.1728 4.63
17. DB 47.97 43.83 49.68 52.52 51.44 50.89 54.23 53.57 48.05 48.99 51.16 50.21 0.0590 0.66
18. IB 67A5 56.86 61.81 59.13 47.91 47.08 43.85 42.92 43.49 45.38 45.44 51.03 0.1695 4.41
19. IOB 56.53 49.42 52.24 51.44 45.42 44.84 46.17 47.59 47.77 47.67 47.54 48.78 0.0705 1.35
20. OBOC 51.89 49.00 52.88 53.63 48.60 48.39 45.87 42.21 44.88 49.70 52.59 49.06 0.0739 0.79

134
21. P&SB 45.78 42.15 46.20 47.47 43.75 41.87 43.17 45.14 43.52 44.68 44.56 44.39 0.0386 0.18
22. PNB 54.36 45.00 47.01 46.75 45.66 45.61 46.71 47.54 49.96 53.60 53.06 48.66 0.0715 0.74
23. SB 47.68 39.77 37.54 42.44 39.02 41.39 46.76 51.60 52.27 52.14 53.18 45.80 0.1303 2.93
24. UCO 58.12 49.23 47.21 43.54 38.87 38.79 38.29 41.55 46.83 47.69 50.80 45.54 0.1338 0.97
25. UBOI 48.18 43.74 46.29 48.52 45.83 44.57 38.80 48.25 50.18 53.74 57.02 47.74 0.1028 1.68
26. UNBOI 47.51 39.37 35.00 32.44 29.26 28.01 26.48 27.18 31.06 34.79 34.96 33.28 0.1854 2.8
27. VB 48.53 42.51 40.14 40.81 36.26 39.25 38.88 42.78 45.28 42.21 35.58 41.11 0.0917 0.97
NB 53.34 45.77 48.00 49.28 45.57 45.33 44.95 46.74 48.34 51.17 52.32 48.26 0.0612 0.23
PSBs 58.47 48.41 50.95 53.10 49.02 48.88 46.50 48.02 48.28 49.62 . 50.89 50.19 0.0651 0.24
Source: RBI bulletin

135
5.10. PERIOD-WISE EVALUATION OF PSBs
The study period of first 11 years from 1992-93 to 2002-03 is divided into
three sub-periods of three years each with a time lag of one year between second
and third sub-periods. The three sub-periods are: (i) March end 1992 to March end
1995, (ii) March end 1996 to March end 1999, and (iii) March end 2000 to March end
2003. There after the study of second part 0f 8 years from 2003-04 to 2010-11 has
been done. .
This division into three sub-periods is necessitated for the following reasons.
The implementation of reforms started in the year 1992-93. The first period (1992-
95) is the most difficult period of response and adjustment for banks to reformat
measures. The new guidelines relating to prudential norms of income recognition,
asset classification and capital adequacy had to be implemented by banks afresh.
The impact of these measures was assumed to be felt during the second three year
period (1996-99) which commences with a time lag of one year and with the year in
which data relating to new private sector banks being published. In the year 1998,
the Committee on Banking Sector Reforms (Narasimham II) was constituted to
review the progress of the reform measures so far undertaken and to make fresh
suggestions for improving the performance of banks. Hence, after giving a time lag
of one year, the third period is made to commence from April 1, 1999. By the end of
third period, (March 2000-03), the reform measures assumed to have exerted their
full impact so that one can assess the improvements made by the banking sector in
its efficiency and profitability over the entire period.
Percentage changes in the mean values of select indicators at branch and employee
levels, are calculated for period-II over period-I, period-III over period-II and period-III
over period. This exercise enables us to analyse the percentage changes in the
mean values of indicators period-wise and thereby find out improvements from one
period to the next' in the indicators relating to efficiency and profitability.
IMPACT OF REFORMS ON EFFICIENCY INDICATORS (PSBS)
The efficiency of PSBs at the branch and employees level are analyzed by

136
comparing the percentage changes in the mean values of each of the six selected
indicators in one period with that of the earlier periods. If the percentage changes in
period II are more than that in period-I and the percentage changes in period-III are
higher than that in period-II, we can conclude that reform measures have
improved the efficiency of banks. The percentage changes in the mean values of
six indicators at the branch and employee level in period-II over period-I, period-III
over period-II and period-III over period-I are shown in the Table 5.13 to Table 5.17.
a) BRANCH LEVEL EFFICIENCY (PSBS)
5.10.1 BUSINESS PER BRANCH
As can be seen from the Table 5.13, the percentage changes in mean values
of business per branch of all PSBs are positive in the three periods indicating
improvements in the indicators. SBI and its associate banks have made remarkable
improvement in percentage change in business per branch in the three-sub periods,
by comparison. The percentage growth in the mean values of business of branches
of 5 nationalized banks in period-III over period-II decelerated compared to the
percentages in period-II over period-I. They still indicate improvements along with
the remaining 15 banks which showed larger improvements.
The percentage increase in the mean values of business per branch in period-III
(2000-03) over period-I (1992-95) is considerable and far more satisfactory. In terms
of total business mobilized, the banks, which occupy the first three places, are ANB,
SBOI and COB. The not so well performers are 18, BOB and PNB.
5.10.2. OPERATING EXPENSES PER BRANCH (PSBS)
Operating expenses per branch includes establishment expenses,rent taxes,
lighting, printing and stationary, advertisement and publicity, depreciation. It is the
expenditure incurred to operate a branch.
When viewed at the average operating expenditure per branch, there is an increase
in it during the three periods.(Table 5-14) The overall increase in the percentage in
the case of all put)s In period-III is 147.68 per cent over the first period. The

137
percentage increase in period-III over period-II is less when compared to the
percentage increase in period-II over period-I. The least percentage increase in
expenditure took place in OBOC, BOB and SB. The increase in the average value of
their indicator has a negative effect on the performance of banks.
A close look at the table reveals that the operating expenses per branch of
SBI, Associate banks, Nationalised banks are lower than the respective the mean,
value up to 1997-98. From 1998-99 onwards, they were higher than the averages for
all the groups of banks. It means that in the last five-year period the rate of growth is
higher. The average operating expenditure per branch of all PSBs put together was
Rs. 24.12 lac in 1992-95 period and Rs. 59.74 lac in 2000-03, representing an
increase of almost 2.5 times.It is thus observed that the operating expenses per
branch have increased almost three-fold during the ll-year period. This is perhaps
one of the important reasons for low profitability of nationalized banks.
It appears that by and large the banks with small business per branch (AB,
BOM, UNBOI and DB) incurred the lowest operating expenditure per branch while
the banks whose branches did more business (SBI, CB, BOI and BOB) also incurred
more operating expenses. The co-efficient of variation revealed that hardly any
disparities exist with respect to the aforesaid indicator.
5.10.3. PROFIT PER BRANCH (PSBS)
Coming to profitability indicator, the mean values of profit per branch of three
nationalized banks are negative in period-II indicating thereby that they have made
losses. In period-III, barring the three banks, the average profit per branch of the
remaining PSBs is positive (Table 5.15). It means that in period-III these banks have
been able to wipe out losses and make substantial profits. It is a healthy sign in the
sense that as reform process continued banks have been able to well adjust to new
situation. In period-III, except the Indian Bank, the two other banks also have been
able to make profit along with other banks (except Dena Bank which sustained
losses).

138
It may be noted that public sector banks as a group made improvements in
earning profits in each period-over its preceding period. The SBI and assonate banks
recorded substantial improvement in profits during the third period. The two weak
banks made huge losses in period-II but in period-III g they made profits (except
UCO).

139
TABLE 5. 13
BUSINESS PER BRANCH OF PSBS PERIOD-WISE AN ALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 1385.00 0.08 2348.67 0.18 4337.33 0.10 69.58 84.67 213.16
2. SBBJ 732.67 0.13 1135.33 0.30 2233.00 0.13 54.96 96.68 204.78
3. SBOH 983.67 0.16 1623.67 0.14 2933.67 0.15 65.06 80.68 198.24
4. SBOI 813.00 0.14 1388.00 0.15 2920.00 0.15 70.73 110.37 259.16
5. SBOM 807.33 0.17 1337.33 0.10 2187.00 0.09 65.65 63.53 170.89
6. SBOP 1084.00 0.16 1723.33 0.10 3172.33 0.21 58.98 84.08 192.65
7. SBOS 946.67 0.17 1693.67 0.10 2893.33 0.14 78.91 70.83 205.63
8. SBOT 1015.67 0.20 1743.33 0.11 3172.67 0.17 71.64 81.99 212.37
ASS 916.67 0.16 1548.67 0.12 2782.33 0.15 68.95 79.66 203.53
9. AB 677 .33 0.06 1033.67 0.15 1756.33 0.12 52.61 69.91 159.30
10. ANB 713.67 0.11 1218.67 0.20 2705.67 0.08 70.76 122.02 279.12
11. BOB 1509.67 0.10 2281.33 0.13 3437.33 0.10 51.12 50.67 127.69
12. BOI 1395.33 0.08 2397.67 0.14 3778.67 0.12 71.83 57.60 170.81
13. BOM 580.00 0.15 1095.67 0.17 2252.33 0.14 88.91 105.57 288.33
14. CB 1594.67 0.07 2328.33' 0.12 4096.67 0.13 46.01 75.95 156.90
15. CBOI 740.67 0.11 1212.00 0.15 2174.00 0.10 63.64 79.37 193.52
16. COB 1252.00 0.31 2440.67 0.24 4447.67 0.12 94.94 82.23 255.24
17. DB 648.67 0.17 1307.00 0.20 2016.00 0.09 101.49 54.25 210.79
18. IB 1386.67 0.04 1528.67 0.07 2513.00 0.13 10.24 64.39 81.23
19. IOB 1265.33 0.12 2002.67 0.15 . 3282.33 0.15 58.27 63.90 159.40
20. OBOC 1388.33 0.17 2336.67 0.16 4281.67 0.09 68.31 83.24 208.40
21. P&SB 865.67 0.27 1577.67 0.20 2409.00 0.05 82.25 52.69 178.28

140
22. PNB 878.33 0.03 1369.00 0.14 2241.00 0.13 55.86 63.70 155.14
23. SB 926.00 0.11 1500.33 0.15 2461.67 0.10 62.02 64.07 165.84
24. UCO 834.67 0.07 1112.67 0.13 2304.67 0.20 33.31 107.13 176.12
25. UBOI 937.67 0.24 1625.67 0.13 3018.00 0.15 73.37 85.65 221.86
26. UNBOI 738.33 0.09 1178.67 0.16 2018.00 0.09 59.64 71.21 113.32
27. VB 822.00 0.22 1367.67 0.18 2552.00 0.15 66.38 86.60. 210.46
NB 1008.33 0.11 1623.33 0.15 2524.67 0.34 60.99 55.52 150.38
PSBs 1076.33 0.11 1759.33 0.15 3119.33 0.12 63.46 77.30 189.81

141
TABLE 5. 14
OPERATING EXPENSES PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS
No. Bank I Period IIPeriod III Period
Percentage Change
1992-95 1996-99 2000-2003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 34.60 0.17 56.78 0.14 86.10 0.07 64.10 51.63 148.83
2. SBBJ 20.11 0.14 36.94 0.15 53.77 0.06 83.68 45.55 167.34
3. SBOH 21.08 0.17 32.66 0.02 49.57 0.05 54.93 51.78 135.15
4. SBOI 22.07 0.17 37.96 0.14 55.43 0.04 71.98 46.04 151.17
5. SBOM 20.68 0.11 37.30 0.12 54.61 0.05 80.37 46.42 164.09
6. SBOP 21.66 0.19 34.14 0.08 51.64 0.04 57.63 51.26 138.43
7. SBOS 24.15 0.15 42.22 0.13 59.09 0.04 74.85 39.97 144.73
8. ST 19.95 0.16 34.27 0.05 52.58 0.05 71.80 53.42 163.58
ASS 21.14 0.16 36.63 0.12 53.18 0.04 73.25 45.17 151.51
9. AB 13.97 0.18 22.85 0.07 39.76 0.18 63.59 73.98 184.61
10. ANB 19.38 0.28 28.86 0.11 47.33 0.14 48.94 64.01 144.28
11. BOB 26.33 .' 0.19 41. 72 0.13 59.48 0.02 58.46 42.59 125.94
12. BOI 26.66 0.18 46.70 0.09 64.45 0.07 75.15 38.01 141.72
13. BOM 16.09 0.16 29.06 0.10 41.85 0.06 80.59 43.98 160.02
14. CB 29.22 0.16 45.61 0.12 69.23 0.04 56.09 51.77 136.89
15. CBOI 18.02 0.14 30.98 0.14 47.17 0.03 71.95 52.25 161 .79
16. COB 22.81 0.21 39.82 0.10 59.81 0.14 74.55 50.20 162.17
17. DB 16.67 0.21 29.00 0.12 44.71 0.09 73.93 54.18 168.17
18. IB 24.22 0.11 34.80 0.08 52.99 0.03 43.67 52.28 118.79
19. IOB 25.08 0.10 41.14 0.15 62.77 0.05 64.00 52.58 150.23
20. OBOC 26.41 0.23 36.86 0.11 56.59 0.04 39.57 53.54 114.30
21. P&SB 20.35 0.18 35.67 0.08 53.02 0.04 75.27 48.64 160.52

142
22. PNB 19.28 0.16 31.34 0.13 48.62 0.04 62.57 55.11 152.16
23. SB 26.61 0.18 40.70 0.09 61.11 0.03 52.96 50.14 129.65
24. UCO 19.83 0.09 30.54 0.08 47.62 0.08 54.01 55.93 140.14
25. UBOI 19.14 0.18 33.30 0.10 49.28 0.03 73.97 47.96 157.41
26. UNBOI 17.26 0.13 28.66 0.07 48.31 0.18 66.04 68.53 179.82
27. VB 20.28 0.13 34.35 0.10 56.35 0.15 69.33 64.07 177.83
NB 21.49 0.16 35.11 0.11 53.37 0.04 63.35 52.02 148.33
PSBs 24.12 0.16 39.52 0.12 59.74 0.04 63.86 51.15 147.68

143
TABLE 5. 15
PROFIT PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 2000-2003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 4.55 0.68 15.83 0.30 26.21 0.32 248.09 65.61 476.47
2. SBBJ 1.20 0.26 9.59 0.39 19.91 0.31 701.39 107.58 1563.51
3. SBOH 3.75 0.47 29.92 1.02 25.43 0.33 697.16 15.01 577 .53
4. SBOI 1.52 0.60 6.66 0.28 30.77 0.51 337.94 362.29 1924.56
5. SBOM 0.58 0.35 7.37 0.22 11.48 0.65 1178.06 55.74 1891.33
6. SBOP 4.25 0.22 19.61 0.98 26.04 0.82 361 .92 34.25 512.78
7. SBOS 2.30 0.56 15.08 0.51 15.28 0.68 554.70 1.33 563.39
8. SBOT 1.99 0.55 7.38 0.26 19.30 0.29 271.64 161.35 871.31
ASS 2.35 0.33 10.14 0.26 22.45 0.38 331.02 121.33 853.97
9. AB -9.98 0.87 5.83 0.36 4.97 0.67 158.44 14.75 149.82
10. ANB 11.99 0.54 33.61 1.44 22.47 0.57 380.42 33.16 287.43
11. BOB 3.42 1.01 15.22 0.24 19.59 0.46 345.56 28.66 473.27
12. BOI 19.28 1.27 12.39 0.31 21.01 0.56 164.27 69.50 208.94
13. BOM -15.76 -0.72 4.45 0.08 11.19 0.64 -128.24 151.54 -171.02
14. CB 5.52 0.75 8.25 0.19 28.22 0.54 49.31 242.16 410.86
15. CBOI -12.86 -0.80 5.09 0.10 5.51 0.76 -139.62 8.18 -142.86
16. COB 7.15 0.99 28.17 0.12 49.25 0.21 293.80 74.82 588.44
17. DB -3.88 -1.48 8.30 0.20 -3.88 -4.35 -313.73 -146.71 -0.17
18. IB -8.76 -1.88 -32.78 -0.52 -1.12 -14.84 274.06 -96.57 -87.18
19. IOB -27.79 -1.05 6.59 0.35 17.67 0.60 -123.72 168.08 -163.58
20. OBOC 9.25 0.87 24.80 0.04 33.73 0.36 168.17 36.01 264.74

144
21. P&SB -17.40 -0.82 6.62 0.50 1.78 0.71 -138.05 -73.16 -110.21
22. PNB .1.86 0.30 9.54 0.33 15.80 0.29 412.16 65.53 747.76
23. SB -22.69 -0.83 5.94 0.39 15.89 0.21 -126.18 167.45 -170.03
24. UCO -19.96 -0.68 -6.29 -0.49 7.88 0.67 -68.48 -225.33 -139.50
25. UBOI 2.93 0.85 10.06 0.23 16.82 0.59 243.62 67.22 474.60
26. UNBOI -27.41 -0.61 -2.22 -2.47 11.35 0.99 -91.89 -610.49 -141.41
27. VB -2.92 -3.11 2.88 0.23 15.87 0.47 -198.74 451.16 -644.23
NB -8.86 -0.97 6.02 0.29 14.90 0.57 -167.96 147.37 -268.11
PSBs -5.09 -1.32 6.58 0.12 17.84 0.48 -229.21 171 .26 -450.49

145
b) EMPLOYEE LEVEL EFFICIENCY (PSBS)
5.10.4. BUSINESSPER EMPLOYEE (PSBS)
As far as percentage change in average business per employee in period-II
over I and period-III over II are concerned in the case of all PSBs they are positive
and encouraging.(Table 5.16) When the mean values of the three indicators in
period-III with those in period-I are compared, the percentage improvement is far
more satisfactory. The percentage improvement is 260.57 per cent of all PSBs in
period-III over 1. The SBI associate banks have recorded a higher percentage
improvement (271.50 per cent)
when compared to SBI (251.38 per cent) and nationalized banks (263.77 per cent).
Among the SBI associate banks, SBOI (340.78 per cent) and among the nationalized
banks, BOM (442.99 per cent), ANB (424.44 per cent) and DB (386.10 per cent) are
top performers (Table 5.16).
5.10.5. ESTABLISHMENT EXPENSES PER EMPLOYEE (PSBS)
An insight into the data reveals that the Establishment expenses per
employee have increases in the three periods. When expenditure per employee of
PSBs as a group is considered, it is found that the percentage increase in period-II
over I and in III over II is about 79. When percentage change in period-III over
period-II is compared with that of period-II over I, there is deceleration ir the case of
all associate banks and 9 nationalized banks. The percentage increase in staff cost
in the last period, it amount to 220.82. It means that the staff costs have been going
on increasing during the entire period under study.(Table 5.17)
This will have an adverse impact of profitability. The least increase in staff
cost over the period relate to SBOS (175.65 per cent), and SBOH (198.68 per cent)
among the associate banks. Among the nationalized banks, the least percentage in
staff cost took place in COB (174.35) and, BOB (193.38), DB (300.38 per cent) and
SB (282.11 per cent) take first and second places in percentage increase in
expenditure over the entire period.

146
5.10.7. PROFIT PER EMPLOYEE (PSBS)
On the profitability front, it is observed that 13 out of 19 nationalized banks on
an average sustained losses per employee in I period. Although, the mean values of
State Bank group are somewhat positive, the public sector banks as a group have
sustained losses per employee in period-I. In period-II, the three showed losses per
employee. In the case of IB, the loss per employee increased by 295.65 per cent in
period-II over I. In the case of other two banks, there are declines in percentage
changes in losses by -66.56 per cent in the case of UCO bank and by - 91.91 per
cent in the case of UNBOI The State Bank group as a whole made more profits per
employee in period-II over I (Table 5.18)

147
TABLE 5.16
BUSINESS PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 53.16 0.07 88.26 0.19 186.78 0.11 66.04 111.62 251.38
2. SBBJ 35.80 0.12 66.95 0.16 133.05 0.13 87.02 98.74 271.67
3. SBOH 53.54 0.18 94.02 0.16 194.33 0.16 75.61 106.69 262.97
4. SBOI 42.47 0.16 77.16 0.16 187.19 0.18 81.70 142.60 340.78
5. SBOM 39.74 0.16 67.30 0.10 133.99 0.10 69.36 99.08 237.16
6. SBOP 50.55 0.17 91.07 0.14 196.93 0.23 80.16 116.24 289.58
7. SBOS 42.22 0.20 81. 68 0.12 159.79 0.15 93.46 95.63 278.48
8. SBOT 51.01 0.21 87.79 0.11 176.28 0.18 72.09 100.80 245.56
ASS 45.43 0.17 80.09 0.12 168.79 0.17 76.28 110.75 271.50
9. AB 54.34 0.07 85.43 0.16 167.66 0.16 57.21 96.26 208.54
10. ANB 42.68 0.10 80.92 0.22 223.85 0.11 89.58 176.63 424.44
11. BOB 82.51 0.11 125.66 0.14 224.50 0.19 52.30 78.66 172.10
12. BOI 62.2.3 0.08 113.09 0.15 221.35 0.13 81.74 95.72 255.72
13. BOM 35:95 0.20 76.89 0.19 195.20 0.15 113.87 153.88 442.99
14. CB 54.35 0.14 98.60 0.14 206.67 0.14 81.43 109.60 280.27
15. CBOI 43.12 0.13 75.52 0.17 162.92 0.20 75.15 115.72 277 .82
16. COB 64.99 0.34 143.60 0.29 278.85 0.12 120.95 94.19 329.05
17. DB 44.37 0.18 66.51 0.61 215.70 0.09 49.88 224.33 386.10
18. IB 73.83 0.05 84.59 0.08 156.99 0.13 14.58 85.58 112.64
19. IOB 57.78 0.13 97.63 0.16 190.09 0.18 . 68.96 94.70 228.97
20. OBOC 68.43 0.19 138.59 0.22 304.58 0.12 102.52 119.77 345.08
21. P&SB 48.99 0.24 91.58 0.20 182.12 0.07 86.94 98.86 271.75

148
22. PNB 47.01 0.07 178.10 0.16 170.44 0.15 66.15 118.23 262.59
23. SB 37.92 0.12 67.87 0.19 159.60 0.20 78.99 135.14 320.89
24. UCO 42.71 0.06 61.07 0.15 150.71 0.27 43.01 146.77 252.90
25. UBOI 54.22 0.25 109.63 0:15 232.36 0.19 102.18 111.96 328.52
26. UNBOI 43.36 0.10 71.42 0.17 1 2.2 0.14 64.73 99.96 229.40
27. VB 45.90 0.25 80.43 0.19 1f175.09 0.22 75.22 117.70 281 .45
NB 53.07 0.12 91.06 0.15 ,,0 193.04 0.16 71.60 111.98 263.77
PSBs 52.40 0.11 87.19 0.13 188.94 0.15 66.39 116.70 260.57

149
TABLE 5.17
ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
Mean CV Mean CV Mean CV I Vs II III Vs II III Vs I
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 0.94 0.18 1.55 0.12 2.66 0.07 63.96 71.98 181.98
2. SBBJ 0.7' 0.16 1.45 0.16 2.35 0.07 96.38 62.21 218.55
3. SBOH 0.76 0.16 1.52 0.23 2.27 0.07 99.56 49.67 198.68
4. SBOI 0.76 0.21 1.46 0.17 2.41 0.05 92.11 65.30 217.54
5. SBOM 0.73 0.10 1.43 0.13 2.61 0.07 96.79 82.28 258.72
6. SBOP 0.66 0.19 1.34 0.10 2.25 0.07 102.53 68.58 241.41
7. SBOS 0.77 0.22 1.55 0.15 2.11 0.07 102.17 36.34 175.65
8. SBOT 0.71 0.18 1.25 0.06 2.18 0.06 77.36 73.94 208.49
ASS 0.73 0.16 1.42 0.14 2.30 0.06 94.95 62.59 216.97
9. AB 0.72 0.17 1.28 0.13 2.47 0.07 76.50 93.21 241.01
10. ANB 0.74 0.23 1.39 0.15 2.72 0.12 87.44 94.98 265.47
11. BOB 0.91 0.19 1.59 0.16 2.66 0.06 75.00 67.65 193.38
12. BOI 0.86 0.22 1.52 0.13 2.72 0.11 76.36 79.12 215.89
13. BOM 0.76 0.22 1.62 0.14 2.63 0.12 114.10 62.14 247.14
14. CB 0.76 0.18 1.35 0.17 2.46 0.05 77.97 82.92 225.55
15. CBOI 0.76 0.19 1.47 0.14 2.76 0.11 93.86 87.10 262.72
16. COB 0.77 0.25 1.39 0.15 2.10 0.12 81.74 50.96 174.35
17. DB 0.87 0.22 1.61 0.15 3.48 0.13 85.06 116.36 300.38
18. IB 0.78 0.10 1.45 0.11 2.58 0.02 85.47 78.11 230.34
19. IOB 0.79 0.11 1.50 0.17 2.74 0.07 91.10 82.26 248.31
20. OBOC 0.73 0.19 1.31 0.14 2.34 0.10 80.28 78.63 222.02
21. P&SB 0.82 0.10 1.46 0.07 3.02 0.06 79.18 106.15 269.39

150
22. PNB 0.70 0.18 1.38 0.16 2.42 0.05 97.14 75.60 246.19
23. SB 0.82 0.22 1.45 0.12 3.13 0.08 76.83 116.09 282.11
24. UCO 0.78 0.11 1.37 0.09 2.52 0.14 76.07 83.50 223.08
25. UBOI 0.75 0.17 1.48 0.12 2.68 0.01 96.89 81.49 257.33
26. UNBOI 0.79 0.16 1.42 0.10 2.86 0.25 79.41 100.94 260.50
27. VB 0.79 0.17 1.44 0.07 2.90 0.23 81.93 100.92 265.55
NB 0.78 0.18 1.44 0.14 2.65 0.04 84.26 83.60 238.30
PSBs 0.82 0.18 1.46 0.12 2.62 0.04 79.18 79.04 220.82

151
When profit/loss in period-III over period-I is compared, the losses per employee of
DB and IB experienced percentage increases. The PSBs as a group made
substantial improvements of 536 percentage points in profit per employee in period-
III compared to I. The outstanding achievement is that of employees in associate
banks of SBI who improved their profitability by 354.29 per cent in period-II over
period-I, 157.23 in period-III over period-II and 1068.57 per cent in period-III over
period-I. These banks have shown consistency in improvement in all the indicators in
each sub-period over the preceding period (Table 5.18).
5.11. IMPACT ON PROFITABILITY INDICES (PSBS)
5.11.1.RETURN ON ASSETS (PSBS)
To compare the performance of PSBs at profit front, changes in percentage
points in five indicators (which are expressed in percentages) in each period over
earlier periods are calculated and presented in the Tables 5.19 to 5.23.
When PSBs a whole are considered, the rate of return on assets in period-II
over period-I improved by 1.15 percentage points. There is an increase in
percentage points of ROA of all PSBs in period-II over I barring CB (-0.02),
IB (-1.48). When ROA in period-III is compared with that in period-II, there is an
improvement of 0.15 percentage points of all PSBs taken together. But this
improvement is less than that in period-II over period-I. The ROA of SBI, SBOM,
AB, BOB, BOI, CBOI, DB, OBOC, P&SB and UBOI have decreased in period-III
compared to those in period-II. When improvements in period-III over period-I is
considered, all the 27 PSBs (including three weak banks) have made improvement
in ROA. The highest increase is found in the case of UNBOI and SB with increase
of more than four percentage points (Table 5.19).
5.11.2. RETURN ON EQUITY (PSBS)
When return on equity (ROE) is taken into consideration, the mean values of
percent of ROE of 13 natioanlised banks in period-I is negative.

152
In period-II it is negative only in the case of three banks-UCO, 6 IB (-34.37)
and UNBOI (-1.75). In period-III, the mean value of ROE is negative in the case of
DB and IB. Against this background the period-wise comparative picture (Table 5.27)
reveals that the ROE in period-II over period-I is positive in the case of all banks,
except two banks SBOS (-64.86 percentage points) and 18 (-5.42 percentage
points). The ROE of SBOH is the highest showing an improvement of 345.10
percentage points indicating thereby that ROE which was negative in period-I has
become positive, in period-II. In period-III compared to period-II, the changes in
percentage points are less than those of period-II over I. This is a usual feature of all
profitability parameters. Obviously, period-III showed improvements over period-I
and the reform measures had full impact.
In the concluding third period over period-I, SBOH (160.78), SBOI (661.11)
and SBI (347.58) have experienced highest increases. The banks which experienced
decline in percentage points of ROE was SBOS (-63.27) alone.(Table 5.20)
5.11.3. NET INTEREST MARGIN (SPREAD) (PSBS)
The Net interest margin (spread) asa percentage to working funds of
natioanlised banks, improved by 0.60 percentage points in period-II over period-I.
While it is 0.4 percentage points for all PSBs taken together. There is a decline in the
case of three banks-BOB (-0.07), CB (-0.26) and IB (-1.03) in period-II. When NIM in
period-III over period-II is compared, there is a decline in 18 PSBs. The percentage
points improvement in period-III over period-I is less than that in period-II over
period-I. In the case of 8 banks NIM in period-III is less than that of period-I. The
decline is because of deregulation of interest rates, which led to a decline in both
deposit rates and lending rates of banks.
When viewed at the interest income, there is a larger declines in period-II
compared to those in period-I and also in period-III compared to period-I. The NIM
therefore in period-III of all PSBs has become negative when compared to that in
period II. In period-III compared to period-II and period-I, it is negative only in the
case of three banks-UCO, 6 IB (-34.37) and UNBOI (-1.75). In period-III, the mean
value of ROE is negative in the case of DB and IB. This is perhaps due to reduction

153
in the rates of interest on loans and advances.( Table 5.21)
5.11.4. NON-INTEREST INCOME (PSBS)
Since interest income has been declining due to reform measures, banks had
to take steps to increase non-interest income by enlarging their services. When the
data of Non Interest Income (NII) is viewed in Table 5.22, it appears that NII made
an improvement in period-III compared to period-II considerably. When the total
period is taken into consideration, the improvement is again considerable. But when
we compare the figures in period-II over period-I , there is a decline in NIl of 15
banks.( Table 5.22)
5.11.5. CREDIT DEPOSIT RATIO (PSBS)
If the Credit Deposit (CD) ratio is higher, a larger percentage of deposits
mobilized is lent to different sectors and it will lead to an improvement in profitability
of banks. The CD ratio in period II of almost all banks is less when compared period-
I. It means that the banks became conservative in their lending policies. In period-III
as well, the SBI and associate banks have reduced their CD ratio when compared to
those in period-I and period II. When the data of PSBs as a whole is considered, the
CD ratio in period-III is less than that in period-I. Exceptions are AB, ANB, BOI, CB,
CBOI, COB, DB and PNB, etc. (Table 5.23). The data for the entire period shows
that CD ratio is less than 60 percent in all the years. It means that the banks have
not been able to hit the acceptable level. The corporate sector started raising funds
from one another and in the market; hence they did not borrow from banks on the
same level as they used to do previously.

154
TABLE 5. 18
PROFIT PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 0.17 0.69 0.59 0.30 1.13 0.33 242.31 91.01 553.85
2. SBBJ 0.06 0.29 0.49 0.39 1.19 0.32 722.22 140.54 1877.78
3. SBOH 0.20 0.51 0.60 0.34 1.69 0.33 196.72 179.56 729.51
4. SBOI 0.08 0.54 0.37 0.29 1.98 0.53 362.50 436.04 2379.17
5. SBOM 0.03 0.33 Q,31o 0.20 0.71 0.66 1133.33 90.99 2255.56
6. SBOP 0.20 0.21 0.76 0.44 2.03 0.35 286.44 166.67 930.51
7. SBOS 0.10 0.61 0.73 0.50 0.85 0.68 626.67 16.97 750.00
8. SBOT 0.10 0.61 0.37 0.26 0.77 0.85 270.00 109.01 673.33
ASS 0.12 0.32 0.53 0.26 1.36 0.39 354.29 157.23 1068.57
9. AB -0.80 -0.87 0.48 0.37 0.48 0.70 -160.17 -0.69 -159.75
10. ANB -0.72 -0.54 0.45 0.42 1.88 0.59 -162.79 317.04 -361 .86
11. BOB 0.19 1.01 0.81 0.21 1.30 0.51 333.93 60.91 598.21
12. BOI -0.67 -1.77 0.59 0.31 1.23 0.57 -187.13 110.23 -283.17
13. BOM -1.66 -0..39 0..31 0..10. 0..98 0..65 -118.91 211.70. -158.95
14. CB 0..22 0..75 0..35 0..21 1.43 0..55 59.0.9 30.7.62 548.48
15. CBOI -1.22 -0.37 0.32 0.09 0.43 0.79 -125.89 35.79 -135.15
16. COB 0..38 1.0.1 1.65 0..18 3.0.6 0.24 338.94 85.0.8 712.39
17. DB -0..26 -1.48 o.64 0..23 -0..42 -4.35 -341.77 -165.45 58.23
18. IB -0..46 -,1.88 -1.83 -0..53 -0..32 -4.60. 295.65 -82.42 -30.43
19. IOB -0.48 -1.35 0..32 0..35 1.0.3 0..61 -166.21 222.92 -313.79
20. OBOC 0.46 0.88 1.46 0..0.9 2.41 0..39 220..44 64.69 427.74
21. P&SB -1.01 -0.82 0.38 0..51 0..13 0..71 -138.0.8 -65.22 -113.25

155
22. PNB 0.09 0.33 0.55 0..34 1.17 0..31 485.71 95.12 10.42.86
23. SB -0.92 -0.83 0.27 0..43 1.03 0..28 -129.35 282.72 -212.32
24. UCO -1.0.2 -0..68 -0.34 -0..47 0..53 0..71 -66.56 -255.88 -152.13
25. UBOI 0.17 0..87 0.68 0.22 1.31 0..61 306.00 93.10 684.00
26. UNBOI -1.61 -0..61 -0.13 -2.53 0..83 1.0.0. -91.91 -735.90. -151.45
27. VB -0..15 -3.30. 0.17 0.24 1.11 0..52 -211.11 564.0.0. -837.78
NB -0..46 -0..98 0.34 0.30 1.03 0.60 -173.38 202.94 -322.30
PSBs -0.25 -1.30 0.43 0.27 1.09 0.50 -270.67 155.47 -536.00

156
TABLE 5. 19
RETURN ON ASSETS OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 0.34 0.58 0.74 0.38 0.68 0.24 0.40 -0.06 0.34
2. SBBJ 0.21 0.38 0.78 0.35 0.98 0.20 0.58 0.20 0.78
3. SBOH 0.44 0.32 0.73 0.24 1.00 0.17 0.29 0.27 0.56
4. SBOI 0.23 0.33 0.56 0.17 1.27 0.39 0.33 0.71 1.04
5. SBOM 0.09 0.45 0.69 0.27 0.64 0.58 0.60 -0.05 0.55
6. SBOP 0.44 0.13 0.99 0.40 1.32 0.15 0.55 0,33 088
7. SBOS 0.25 0.41 0.96 0.56 0.63 0.65 0.72 -0.33 0.38
8. SBOT 0.36 0.55 0.53 0.20 0.77 0.16 0.16 0.24 0.40
ASS 0.29 0.17 0.75 0.27 0.97 0.25 0.46 0.22 0.68
9. AB -1.82 -0.88 0.68 0.28 0.36 0.57 2.50 -0.31 2.18
10. ANB -2.06 -0.59 065 0.31 1.06 0.49 2.71 0.41 3.13
11. BOB 0.26 0.96 0.78 0.17 0.74 0.40 0.52 -0.04 0.48
12. BOI -1.71 -1.22 0..86 0.12 0.75 0.46 2.57 -0.11 2.46
13. BOM -3.24 -0.73 0.47 0.12 0.60 0.55 3.71 0.13 3.84
14. CB 0.45 0.68 0.42 0.07 0.90 0.47 -0.02 0.48 0.45
15. CBOI -2.15 -0.79 0.50 0.17 032 0.69 2.65 -0.18 2.47
16. COB 0.56 0.78 1.36 0.09 1.41 0.11 0.81 0.04 0.85
17. DB -0.81 -1.35 0.76 0.08 -0.29 -3.74 1.58 -1.05 0.53

157
18. IB -0.84 -1.86 -2.32 -0.44 -0.13 -6.21 -1.48 2.19 0.71
19. IOB -3.05 -1.11 0.42 0.42 0.68 0.46 3.48 0.26 3.73
20. OBOC 0.73 0.67 1.34 0.11 1.03 0.29 0.60 -0.31 0.29
21. P&SB -2.83 -0.86 0.49 0.46 0.10 0.70 3.32 -0.39 2.93
22. PNB 0.25 0.27 0.62 0.88 0.83 0.16 0.37 0.21 0.58
23. SB -3.14 -0.95 0.47 0.30 0.87 0.13 3.61 0.40 4.01
24. UCO -2.78 -0.70 -0.61 -0.60 0.41 0.62 2.17 1.02 3.19
25. UBOI 0.35 0.69 1.77 0.84 0.73 0.47 1.42 -1.04 0.38
26. UNBOI -4.31 -0.63 -0.24 -2.27 0.62 0.95 4.07 0.86 4.93
27. VB -0.65 -2.46 0.24 0.06 0.78 0.34 089 0.54 1.43
NB -1.13 -0.94 0.44 0.28 0.67 0.49 1.57 0.23 1.80
PSBs -0.60 -1.22 0.55 0.30 0.70 0.39 1.15 0.15 1.30

158
TABLE 5. 20
RETURN ON EQUITY OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 104.95 0.44 268.57 0.30 452.53 0.32 163.61 183.97 347.58
2. SBBJ 41.27 0.24 158.37 0.26 315.33 0.31 117.10 156.96 274.06
3. SBOH 166.67 0.49 511.76 0.36 1327.45 0.33 345.10 815.69 1160.78
4. SBOI 59.26 0.60 140.74 0.29 720.37 0.53 81.48 579.63 661.11
5. SBOM 25.00 0 0.33 115.74 0.21 192.59 0.65 90.74 76.85 167.59
6. SBOP 105.,j3 0.21 404.00 0.42 954.67 0.34 298.67 550.67 849.33
7. SBOS 83.33 0.59 18.47 0.50 20.06 0.68 -64.86 1.59 -63.27
8. SBOT 63.33 0.57 108.76 0.19 259.33 0.29 45.43 150.57 196.00
ASS 82.60 0.36 86.82 0.24 198.89 0.39 4.22 112.07 116.29
9. AB -71.16 -0.90 44.26 0.36 32.14 0.49 115.42 -12.12 103.30
10. ANB -76.84 -0.94 14.88 0.68 57.51 0.67 91.73 42.63 134.35
11. BOB 11.70 0.93 136.30 0.18 180.73 0.47 124.60 44.42 169.02
12. BOI -55.55 -0.94 69.98 0.66 105.79 0.64 125.53 35.81 161.34
13. BOM -67.09 -0.80 9.82 0.52 41.49 0.65 76.91 31.67 1 08.58
14. CB 22.48 0.50 34.58 0.13 142.02 0.71 12.10 107.43 119.53
15. CBOI -102.88 -1.05 8.72 0.10 14.76 0.84 111.60 6.04 117.64
16. COB 31.75 0.96 140.57 0.13 241.54 0.18 108.82 100.97 209.79
17. DB -25.30 -1.42 46.38 0.21 -22.71 -4.18 71.67 -69.08 2.59

159
18. IB -28.95 -1.90 -34.37 -0.69 -1.9 -4.00 -5.42 32.39 26.97
19. IOB -78.47 -1.40 27.25 0.35 .J)78 0.60 105.72 29.83 135.55
20. OBOC 37.00 0.52 107.08 0.12 169.43 0.39 70.08 62.35 132.43
21. P&SB -47.87 -0.97. 11.69 0.88 5.49 0.71 59.56 -6.21 53.36
22. PNB 21.48 0.09 '. 159.8'1 0.53 293.71 0.32 138.32 133.91 272.23
23. SB -155.08 -1.49 17.61 1.16 58.62 0.21 172.70 41.00 213.70
24. UCO -48.99 -0.85 -5.97 -0.64 14.43 1.22 43.0 20.40 -63..42
25. UBOI 18.04 0.67 61.74 0.22 86.32 0.44 43.69 24.59 68.28
26. UNBOI -67.35 -0.68 -1.75. -2.43 8.15 0.98 65.60 9.90 75.51
27. VB -20.83 -2.36 4.32 0.23 54.60 0.82 25.14 50.28 75.42
NB -44.03 -1.00 13.89 0.21 36.49 0.60 57.93 22.59 80.52
PSBs -36.00 -1.13 25.34 0.19 57.23 0.50 61.34 31.89 93.23

160
TABLE 5. 21
NET INTEREST MARGIN AS % TO WF OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 2.94 0.11 3.05 0.12 2.64 0.01 0.12 -0.41 -0.30
2. SBBJ 2.88 0.08 3.41 0.07 3.16 0.04 0.52 -0.25 0.28
3. SBOH 3.18 0.09 3.61 0.02 3.04 0.08 0.3 -0.57 -0.14
4. SBOI 3.43 0.14 4.02 0.06 2.99 0.07 0.60 -1.03 -0.43
5. SBOM 3.12 0.06 3.91 0.08 3.26 0.06 0.79 -0.65 0.14
6. SBOP 3.56 0.03 3.64 0.03 3.73 0.14 0.07 0.09 0.16
7. SBOS 3.57 0.12 3.58 0.02 2.95 0.01 0.01 -0.63 -0.62
8. SBOT 2.65 0.09 2.77 0.19 2.68 0.04 0.12 -0.09 0.03
ASS 3.17 0.06 3.50 0.06 3.16 0.03 0.33 -0.34 -0.01
9. AB 1.73 0.24 2.90 0.05 3.10 0.05 1.17 0.20 1.37
10. ANB 1.85 0.33 3.09 0.08 2.75 0.11 1.24 -0.34 0.90
11. BOB 3.12 0.14 3.04 0.05 2.82 0.08 -0.07 -0.22 -0.30
12. BOI 2.16 0.18 2.79 0.07 2:69 0.03 0.63 -0.10 0.53
13. BOM 1.94 0.34 3.48 0.06 2.79 0.04 1.55 -0.69 0.85
14. CB 3.21 0.17 2.95 0.14 2.69 0.06 -0.26 -0.26 -0.52
15. CBOI 1.93 0.26 3.08 0.03 3.10 0.07 1.15 0.02 1.17
16. COB 2.86 0.03 3.27 0.22 2.87 0.07 0.41 -0.40 0.01
17. DB 2.68 0.18 3.43 0.13 2.56 0.09 0.75 -0.87 -0.12

161
18. IB 1.76 0.02 0.73 0.24 1.98 0.15 -1.03 1.24 0.22
19. IOB 1.15 0.51 2.33 0.02 2.87 0.04 1.18 0.54 1.72
20. OBOC 3.31 0.15 3.46 0.12 3.16 0.11 0.15 -0.30 -0.15
21. P&SB 1.61 0.59 2.54 0.05 2:49 0.07 0.93 -0.05 0.88
22. PNB 2.80 0.03 3.43 0.05 3.33 0.08 0.63 -0.10 0.52
23. SB 2.25 0.26 3.26 0.14 3.62 0.06 1.01' 0.36 1.37
24. UCO 1.26 0.68 2.01 0.06 2.43 0.04 0.75 0.42 1.17
25. UBOI 2.93 0.13 3.08 0.12 3.02 0.03 0.15 -0.06 0.10
26. UNBOI 0.69 0.32 2.10 0.30 2.67 0.11 1.42 0.56 1.98
27. VB 2.46 0.13 2.84 0.03 3.20 0.06 0.39 0.36 0.75
NB 2.31 0.16 2.91 0.04 2.88 0.04 0.60 -0.03 0.57
PSBs 2.56 0.12 2.96 0.06 2.83 0.03 0.40 -0.13 0.27

162
TABLE 5.22
NON-INTEREST INCOME AS % TO TOTAL INCOME OF PSBS-PERIOD-WISE ANALYSIS
Percentage Change
1992-95 1996-99 20002003
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1. SBI 14.54 0.10 14.92 0.01 13.60 0.13 0.38 -1.32 -0.94
2. SBBJ 15.33 0.11 15.14 0.05 17.71 0.09 -0.18 2.57 2.39
3. SBOH 14.91 0.09 13.61 0.03 16.27 0.12 -1.31 2.66 1.36
4. SBOI 14.33 0.13 14.19 0.12 21.91 0.13 -0.14 7.72 7.58
5. SBOM 14.77 0.14 13.67 0.07 19.07 0.17 -1.10 5.40 4.30
6. SBOP 7.43 0.13 10.05 0.12 14.20 0.19 2.61 4.15 6.77
7. SSOS 14.83 0.03 14.32 0.09 16.34 0.20 -0.50 2.02 2.02
8. SBOT 13.57 0.15 12.74 0.05 14.15 0.11 -0.82 1.41 1.41
ASS 13.36 0.09 13.22 0.05 16.72' 0.13 -0.14 3.50 3.36
9. AB 10.13 0.15 12.52 0.08 13.92 0.24 2.39 1.40 3.79
10. ANB 12.04 0.25 11.55 0.05 14.82 0.41 -0.49 3.27 2.78
11. BOB 12.65 0.32 11.03 0.04 14.12 0.22 -1.62 3.09 1.47
12. BOI 11.25 0.10 12.07 0.07 17.36 0.23 0.82 5.29 6.11
13. BOM 8.83 0.07 8.61 0.01 13.20 0.12 0.22 4.60 4.37
14. CB 12.63 0.09 12.65 0.08 16.96 0.15 0.02 4.31 4.33
15. CBOI 9.93 0.16 10.37 0.06 10.39 0.09 0.44 0.03 0.46
16. COB 15.21 0.17 12.45 0.05 16.85 0.19 -2.76 4.39 1.63
17. DB 10.53 0.15 10.75 0.19 15.76 0.31 0.22 5.01 5.24

163
18. IB 10.80 0.19 11.74 0.06 15.98 0.17 0.95 4.24 5.19
19. IOB 16.20 0.27 9.54 0.03 12.36 0.19 -6.66 2.82 -3.84
20. OBOC 8.70 0.13 8.29 0.06 12.14 0.24 -0.41 3.85 3.45
21. P&SB 10.22 0.09 11.11 0.08 15.48 0.24 0.89 4.37 5.25
22. PNB 10.81 0.29 12.0; 0.13 12.95 0.10 1.20 0.94 2.14
23. SB 9.45 0.09 10.67 0.14 10.86 0.31 1.22 0.19 1.41
24. UCO 10.74 0.25 10.20 0.14 16.04 0.24 -0.55 5.85 5.30
25. UBOI 9.53 0.04 8.00 0.05 11.61 0.36 -1.53 3.61 2.08
26. UNBOI 8.36 0.26 8.62 0.14 13.63 0.37 0.26 5.01 5.27
27. VB 14.15 0.07 8.98 0.11 12.80 0.29 -5.17 3.83 -1.35
NB 11.32 0.11 10.90 0.06 14.11 0.20 -0.42 3.21 2.79
PSBs 12.44 0.10 12.24 0.04 14.20 0.16 -0.20 1.96 1.76

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