Camel model

A
Seminar Report on
Financial Statement Analysis and Valuation
Title of report
Performance of public sector banks under the camel
framework
Submitted in partial fulfillment of award of
MASTER OF BUSINESS ADMINISTRATION
Degree
Prepared By
Vaza Hitesh J.
MBA SEM
(Batch/year)
2016-2018
(Roll No.)
32
Submitted to:
Department of Business Administration,
Maharaja Krishnakumarsinhji Bhavnagar University

Index
SR No. Content Page No.
1 Chapter 1
 Review of Literature 4
 Introduction 5
 History of CAMEL Framework 6
 The industry profile 7
 Chart of Reserve Bank India 11
 Broad Classification of Banks in India 12
 Product and services offered by Banks 13
2 Chapter 2
 Introduction of CAMEL MODEL(part of theory) 16
 Analysis and interpretation (part of Practical) 19
3 Chapter 3
 Conclusion 25
 Bibliography 26

REVIEW OF LITERATURE
Uppal R K (2010) has studied the efficiency of SCBs during the period 1997- 98 to 2007 – 08
and has observed that the performance of PBs and Foreign Banks with respect to profitability,
productivity and liquidity position was much better when compared to PSBs.
Agarwal Pankaj Ketal (2011) have compared the performance of PSBs with their Private sector
counterparts on globally accepted CAMEL model. The study discovered that PSBs have lower
Capital Adequacy than Private Sector Banks, while the Asset Quality of PSBs is superior to
Private Sector Banks which reflected in their Gross NPAs and there is no significant difference
in the Net NPA performance of these Banks. It is further discovered that the management
efficiency and the earnings performance of PSBs is similar to that of PBs, while on liquidity
yardstick, the PBs have outperformed the PSBs.
Manjula Kumara Wanniarachchigeetal (2011) have focused on the study of Commercial
Banks across all the Banking groups, by using DEA technique. The findings revealed that
Foreign Banks outperformed other Banking Groups in terms of cost and revenue efficiencies,
though they could not generally extend their Banking services beyond metro cities.
Shrivastava Urvashietal (2011) have studied the soundness and financial strength of Axis Bank
in terms of capital adequacy and effectiveness by using financial ratios and applying correlation
and t – test. The study reveals that the said Bank has resorted to rising of non-equity capital as a
matter of its growth strategy to meet the capital adequacy requirements. The findings further
reveal that the Bank not only could meet the minimum capital requirement but also made
provision for business growth by adequately mapping credit, operational and market risk to
projected business growth.
Siraj K Ketal (2011) have examined the impact of global financial crisis of 2007-09 on
performance of SCBs by relying upon the relevant data for the period 1999 – 00 to 2010 – 11. It
is observed by the researcher that PSBs were comparatively more stable, while PBs and Foreign
Banks were susceptible to the financial crisis, whereas, SCBs as a whole have shown
vulnerability to global financial crisis.

INTRODUCTION
Today banks have a key role in all countries. And their policies and strategies affect
economic development, employment, prices, national income, etc. The operations of banks are
known as one of the most important economic activity in the world. Any activity which requires
investments and financial resources undoubtedly requires the involvement of banks and financial
institutions. Thus banks have the central role in economy. On the other hand, Managing of a
country's financial system requires a variety of ways that enable financial institutions to
identifying of management problem to be responsible for protecting the citizens and the entire
system because existing problems due to poor management of bank, threaten the entire financial
system of a country. Achieving to the components of a strong and efficient banking system,
achieving goals, efficient use of resources and operating efficiently have been considered for
many years so it requires assessment of bank's performance. Evaluation of bank performance is
very important for Bankers due to the need to protect the banking operations against continuous
risks or due to gambling-incentives related to capital market. In addition, there are numerous
studies on financial interventions and its effect on efficiency of economic growth and also other
studies on bank failures and its relationship with systemic crisis which demonstrate the important
of performance evaluation. Today, the bank performance has become a favorite subject for many
stakeholders such as customers, investors and the general public. There is a wide range of
indicators of financial reports to evaluate financial performance. But the important criteria to
determine the compatibility and health of a financial organization act as some mediators to
measure profitability and liquidity of the organization. Among the various criteria; Basel
Committee on Banking Supervision proposed the CAMEL component to investigate financial
organizations in 1988.
CAMEL model is a simple and appropriate model for managerial and financial assessment
of organizations. It is classified as a modern approach to evaluate the performance. However,
this method has been used more in foreign countries but in our country little efforts has been
done to introduce this model and some banks use it to measure their performance. But it is not
used as a formal method which Central Bank introduces it. So there is still a need for further
investigation in this field. In this study the
CAMEL model was used to measure and compare the financial performance of public and
private commercial banks of Qom city. For this purpose we measure the dimensions of the
CAMEL model such as capital adequacy, asset quality, management quality, earning
performance and liquidity.

HISTORY OF CAMEL FRAMEWORK:-
CAMELS Rating Framework
CAMEL model of rating was first developed in the 1970s by the three federal
banking supervisors of the U.S (the Federal Reserve, the FDIC and the OCC) as part of the
regulators “Uniform Financial Institutions Rating System”, to provide a convenient summary of
bank condition at the time of its on-site examination. The banks were judged on five different
components under the acronym C-A-M-E-L: Capital adequacy, Asset quality, Management,
Earnings and Liquidity. The banks received a score of “1” through “5” for each component of
CAMEL and a final CAMEL rating representing the composite total of the component CAMEL
scores as a measure of the bank‘s overall condition. The system of CAMEL was revised in 1996,
when agencies added an additional parameter “S” for assessing “sensitivity to market risk”, thus
making it “CAMELS” that is in vogue today.
This system has applied by National Credit Union Administration (NCUA) in
October 1987. Also Federal Reserve Bank of America assesses its banks on a scale of one to five
by using the CAMEL model components which is monitoring various aspects of bank's health.
The rank 1 is the highest rank (strongest performance) and rank 5 is the lowest rank (weakest
performance). Reliability, profitability and liquidity are the most important criteria for assessing
the competency performance of a bank. Therefore, since 1988 the Basel Committee on Banking
Supervision has stated that the CAMEL model is necessary to evaluate financial institution. In
1997 another component was added to the CAMEL model which was called market risk (S).
However, Most of developing countries use CAMEL instead of CAMELS to evaluate the
performance of financial organizations. It means they don't consider the market risk. Given that
our country is a developing country so in this Study we used the CAMEL model.
CAMELS’ framework is a common approach to evaluate the financial health of the
organization. This system was created by U.S. bank supervising organizations. Also the Asian
Development Bank, African Development Bank, Central bank of America (the Federal Reserve
Bank) and the World Bank use these parameters to evaluate the performance of financial
organizations. In addition, the International Monetary Fund use compressed index of financial
institutions to evaluate the accuracy of the financial systems of the members. Testing CAMELS
system needs information from various sources such as balance sheet financing, financing
sources, data macroeconomic, budget and cash flow forecasting, staffing and operation. In this
model, the overall condition of the banks and their strengths and weaknesses are assessed.

THE INDUSTRY PROFILE
INTRODUCTION
The banking section will navigate through all the aspects of the Banking System in India. It will
discuss upon the matters with the birth of the banking concept in the country to new players
adding their names in the industry in coming few years. The banker of all banks, Reserve Bank
of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI,
ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to
each bank. However, in the introduction part of the entire banking cosmos, the past has been well
explained under three different heads namely:
1) History of Banking in India
2) Nationalization of Banks in India
3) Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in India.
Government took major step in the 1969 to put the banking sector into systems and it
nationalized 14 private banks in the mentioned year. This has been elaborated in Nationalization
of Banks in India. The last but not the least explains about the scheduled and unscheduled banks
in India, Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial
banks.
History of Banking in India
Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of
the country. This is one of the main reasons of India's growth process. The government's regular
policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major
private banks of India. Not long ago, an account holder had to wait for hours at the bank counters
for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days
when the most efficient bank transferred money from one branch to other in two days. Now it is
simple as instant messaging or dials a pizza. Money has become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:

 Early phase from 1786 to 1969 of Indian Banks
 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
 New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:
 Early phase from 1786 to 1969 of Indian Banks
 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
 New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly European shareholders. In 1865 Allahabad Bank was
established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894
with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of
India came in 1935.During the first phase the growth was very slow and banks also experienced
periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of India came
up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act
1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central Banking Authority.
During those day’s public had lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.

Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially
in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July,
1969, major process of nationalization was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were
nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate
Banking Institutions in the Country:
1949: Enactment of Banking Regulation Act.
1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the
sunshine of Government ownership gave the public implicit faith and immense confidence about
the sustainability of these institutions.

Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money. The
financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Countries suffered. This is
all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not
yet fully convertible, and banks and their customers have limited foreign exchange exposure.
Scheduled Commercial Banks in India
The commercial banking structure in India consists of:
 Scheduled Commercial Banks in India
 Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the Second
Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in
this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act. As on 30th
June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches.
The scheduled commercial banks in India comprise of State bank of India and its associates (8),
nationalized banks (19), foreign banks (45), private sector banks (32), co-operative banks and
regional rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the State Bank of
India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary
Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40
of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank
of India Act, 1934 (2 of 1934), but does not include a co-operative bank". "Non-scheduled bank
in India" means a banking company as defined in clause (c) of section 5 of the Banking
Regulation Act, 1949 (10 of 1949), which is not a scheduled bank".

Organizational Structure of Banks in India:
In India banks are classified in various categories according to differ rent criteria. The following
charts indicate the banking structure
Reserve Bank of India
Commercial Banks Co-operative Banks Development Banks
Nationalized Private
Short-term credit Long-term credit
Agricultural Credit Urban Credit EXIM IndustrialAgricultural

Broad Classification of Banks in India:
1) The RBI: The RBI is the supreme monetary and banking authority in the country and has
the responsibility to control the banking system in the country. It keeps the reserves of all
scheduled banks and hence is known as the “Reserve Bank”.
2) Public Sector Banks:
 State Bank of India and its Associates (8)
 Nationalized Banks (19)
 Regional Rural Banks Sponsored by Public Sector Banks (196)
3) Private Sector Banks:
 Old Generation Private Banks (22)
 Foreign New Generation Private Banks (8)
 Banks in India (40)
4) Co-operative Sector Banks:
 State Co-operative Banks
 Central Co-operative Banks
 Primary Agricultural Credit Societies
 Land Development Banks
 State Land Development Banks
5) Development Banks: Development Banks mostly provide long term finance for setting
up industries. They also provide short-term finance (for export and import activities).
 Industrial Finance Co-operation of India (IFCI)
 Industrial Development of India (IDBI)
 Industrial Investment Bank of India (IIBI)
 Small Industries Development Bank of India (SIDBI)
 National Bank for Agriculture and Rural Development (NABARD)
 Export-Import Bank of India.

PRODUCTS AND SERVICES OFFERED BY BANKS
Products
1) Investment Banking
2) Consumer Banking
3) Commercial Banking
4) Retail Banking
5) Private Banking
6) Asset Management
7) Pensions
8) Mortgages
9) Credit Cards
Broad Classification of Products in a bank:
The different products in a bank can be broadly classified into:
 Retail Banking.
 Trade Finance.
 Treasury Operations.
Retail Banking and Trade finance operations are conducted at the branch level while the
wholesale banking operations, which cover treasury operations, are at the hand office or a
designated branch.
Retail Banking:
 Deposits
 Loans, Cash Credit and Overdraft
 Negotiating for Loans and advances
 Remittances
 Book-Keeping (maintaining all accounting records)
 Receiving all kinds of bonds valuable for safe keep

Trade Finance:
 Issuing and confirming of letter of credit.
 Drawing, accepting, discounting, buying, selling, collecting of bills of exchange,
promissory notes, drafts, bill of lading and other securities.
Treasury Operations:
 Buying and selling of bullion. Foreign exchange
 Acquiring, holding, underwriting and dealing in shares, debentures, etc.
 Purchasing and selling of bonds and securities on behalf of constituents.
The banks can also act as an agent of the Government or local authority. They insure, guarantee,
underwrite, and participate in managing and carrying out issue of shares, debentures, etc.
Apart from the above-mentioned functions of the bank, the bank provides a whole lot of other
services like investment counseling for individuals, short-term funds management and portfolio
management for individuals and companies. It undertakes the inward and outward remittances
with reference to foreign exchange and collection of varied types for the Government.
Following Services Can Be Availed On The Internet:
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 Bill Payment
 Funds Transfer
 Special Promotions & Offers
 Ticket Booking
 Online loans and credit cards
 Online Shopping
 Online Tax payment
 Prepaid mobile recharge
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CAPITAL ADEQUACY:
It is important for a bank to maintain depositors ‘confidence and preventing the bank from going
bankrupt. It reflects the overall financial condition of banks and also the ability of management
to meet the need of additional capital. The following ratios measure capital adequacy:
Capital Adequacy Ratio: The capital adequacy ratio is developed to ensure that banks can
absorb a reasonable level of losses occurred due to operational losses and determine the capacity
of the bank in meeting the losses. As per the latest RBI norms, the banks should have a CAR of 9
per cent.
Debt-Equity Ratio: This ratio indicates the degree of leverage of a bank. It indicates how much
of the bank business is financed through debt and how much through equity.
Advance to Assets Ratio: This is the ratio indicates a bank‘s aggressiveness in lending which
ultimately results in better profitability.
Government Securities to Total Investments: It is an important indicator showing the risk-
taking ability of the bank. It is a bank‘s strategy to have high profits, high risk or low profits, low
risk.
ASSET QUALITY:
The quality of assets is an important parameter to gauge the strength of bank. The prime motto
behind measuring the assets quality is to ascertain the component of nonperforming assets as a
percentage of the total assets. The ratios necessary to assess the assets quality are:
Net NPAs to Total Assets: This ratio discloses the efficiency of bank in assessing the credit risk
and, to an extent, recovering the debts.
Net NPAs to Net Advances: It is the most standard measure of assets quality measuring the net
non-performing assets as a percentage to net advances.
Total Investments to Total Assets: It indicates the extent of employment of assets in
investment as against advances.
Percentage Change in NPAs: This measure tracks the movement in Net NPAs over previous
year. The higher the reduction in the Net NPA level, the better it for the bank

MANAGEMENT SOUNDNESS:
Management efficiency is another important element of the CAMEL Model. The ratio in this
segment involves subjective analysis to measure the efficiency and effectiveness of management.
The ratios used to evaluate management efficiency are described as:
Total Advances to Total Deposits: This ratio measures the efficiency and ability of the bank‘s
management in converting the deposits available with the bank excluding other funds like equity
capital, etc. into high earning advance.
Profit per Employee: This shows the surplus earned per employee. It is known by dividing the
profit after tax earned by the bank by the total number of employees.
Business per Employee: Business per employee shows the productivity of human force of bank.
It is used as a tool to measure the efficiency of employees of a bank in generating business for
the bank.
Return on Net worth: It is a measure of the profitability of a bank. Here, PAT is expressed as a
percentage of Average Net Worth.
EARNINGS & PROFITABILITY:
The quality of earnings is a very important criterion that determines the ability of a bank to earn
consistently. It basically determines the profitability of bank and explains its sustainability and
growth in earnings in future. The following ratios explain the quality of income generation.
Operating Profit to Average Working Funds: This ratio indicates how much a bank can earn
profit from its operations for every rupee spent in the form of working fund.
Percentage Growth in Net Profit: It is the percentage change in net profit over the previous
year.
Net Profit to Average Assets: This ratio measures return on assets employed or the efficiency in
utilization of assets.

LIQUIDITY:
Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge the
liquidity risk; at the same time ensuring good percentage of funds are invested in high return
generating securities, so that it is in a position to generate profit with provision liquidity to the
depositors. The following ratios are used to measure the liquidity:
Liquid Assets to Demand Deposits: This ratio measures the ability of bank to meet the demand
from depositors in a particular year. To offer higher liquidity for them, bank has to invest these
funds in highly liquid form.
Liquid Assets to Total Deposits: This ratio measures the liquidity available to the total deposits
of the bank.
Liquid Assets to Total Assets: It measures the overall liquidity position of the bank. The liquid
asset includes cash in hand, balance with institutions and money at call and short notice. The
total assets include the revaluation of all the assets.
G-Sec to Total Assets: It measures the risk involved in the assets. This ratio measures the
Government securities as proportionate to total assets.
Approved Securities to Total Assets: This is arrived by dividing the total amount invested in
Approved securities by Total Assets

Now each parameter will be taken separately & discussed in detail
(A)CAPITAL ADEQUACY:
Capital Adequacy Ratio = Tier one capital + Tier two capital
Risk weighted assets
In accordance with Basel III norms, Indian banks will have to maintain their capital adequacy
ratio at nine percent as against the minimum recommended requirement of eight per cent. A
measure of a bank's capital, it is expressed as a percentage of a bank's risk weighted credit
exposures. This ratio is used to protect depositors and promote the stability and efficiency of
financial systems around the world. Two types of capital are measured: tier one capital, which
can absorb losses without a bank being required to cease trading, and tier two capital, which can
absorb losses in the event of a winding-up and so provides a lesser degree of protection to
depositors. Also known as "Capital to Risk Weighted Assets Ratio (CRAR)
Particular 2015 2016 2017
Oriental Bank of
Commerce
11.64 11.76 11.41
Punjab national
bank
12 11 13
Syndicate Bank 12 11 11
10
10.5
11
11.5
12
12.5
13
2015 2016 2017
Oriental Bank of
Commerce
Punjab National
Bank
Syndicate Bank
Interpretation:
Reserve Bank of India prescribes Banks to
maintain a minimum Capital to risk weighted
Assets Ratio (CRAR) of 8 percent with regard to
credit risk, market risk and operational risk on an
ongoing basis, as against 8 percent prescribed in
BaselDocuments. This ratio is propounded to
ensure that banks can adopt a reasonable level of
losses arising from operations and to ascertain
bank‘s loss bearing capacity. Higher the ratio
means banks are stronger and the investors are
more protected. Latest RBI guideline for banks in
India is to maintain a CRAR of 8%. Therefore
ranking for CRAR is I and II – Punjab National
Bank or Syndicate Bank respectively III –
Oriental Bank of Commerce. The overall
percentages for these banks are Oriental Bank of
Commerce – 11.64, Punjab National bank and
syndicate Bank – 12, 12 respectively.

ASSET QUALITY
Another relevant problem could have an impact on bank credit worthiness is doubtful
loans. Loans are the most important part in a bank balance sheet (above all in commercial,
commercial, and cooperative and saving banks). Deteriorated loans have been a relevant problem
in the financial crisis: bans have accumulated too many bad loans to become unable to repay its
debts, because total assets had lost value.
Assets quality ratio = Loan Impairment charge / Total assets
Analysis the entity of the annual expenses for impaired loans respect the total amount of assets
Oriental Bank of
Commerce
3 7 9
Punjab national
bank
4 9 8
Syndicate Bank 4 4 5
0
1
2
3
4
5
6
7
8
9
2015 2016 2017
Oriental Bank of
Commerce
Punjab National
Bank
Syndicate Bank
INTERPRETATION:
This ratio indicates the efficiency of
bank in ascertaining the risk arising
from credit and recovering the debts.
Under this ratio, the net NPAs are
expressed as percentage of total
assets. Lower the ratio reflects the
better is the quality of advances and
vice versa. In this the rating shall be as
I – Oriental Bank of Commerce, II –
Punjab national Bank, III – Syndicate
Bank.

MANAGEMENT SOUNDNESS:
(Total Advances to Total Deposits)
Management efficiency is another important element of the CAMEL Model. The ratio in this
segment involves subjective analysis to measure the efficiency and effectiveness of management.
The ratios used to evaluate management efficiency are described as:
Total Advances to Total Deposits:
This ratio measures the efficiency and ability of the bank‘s management in converting the
deposits available with the bank excluding other funds like equity capital, etc. into high earning
advances.
It is a measure of the profitability of a bank. Here, PAT is expressed as a percentage of Average
Net Worth.
Oriental Bank of
Commerce
0.957 0.713 0.719
Punjab national
bank
0.746 0.746 0.675
Syndicate Bank 0.794 0.769 0.766
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2015 2016 2017
Oriental Bank of
Commerce
Punjab National
Bank
Syndicate Bank
Interpretation:
This ratio assesses the efficiency of the bank‘s
management in applying the deposits (including
receivables) available excluding other funds like
equity capital, etc. into advances with high
yields. Savings deposits, demand deposits, term
deposits and deposits of other banks are included
in total deposits. Ranking shall be as I –
Syndicate Bank, II – Oriental Bank of
Commerce, III – Punjab National Bank

EARNINGS & PROFITABILITY:
The quality of earnings is a very important criterion that determines the ability of a bank to earn
consistently. It basically determines the profitability of bank and explains its sustainability and
growth in earnings in future. The following ratios explain the quality of income generation.
Net Profit to Average Assets:
This ratio measures return on assets employed or the efficiency in utilization of assets.
Oriental Bank of
Commerce
0.002 3.036 0.002
Punjab national
bank
0.002 0.002 6.654
0
1
2
3
4
5
6
7
2015 2016 2017
Oriental Bank of
Commerce
Punjab National
Bank
Syndicate Bank
Interpretation:
This ratio reflects the return on assets
employed. It is calculated by dividing the
net Profits with Average assets of the
bank. Higher the ratio reflects better
earning potential and vice versa. In this
rating shall be as I – Punjab National
bank, II –Syndicate Bank, III – Oriental
Bank of Commerce.

LIQUIDITY
Liquid Assets to Demand Deposits
LIQUIDITY:
Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge
the liquidity risk; at the same time ensuring good percentage of funds are invested in
high return generating securities, so that it is in a position to generate profit with
provision liquidity to the depositors. The following ratios are used to measure the
liquidity:
Liquid Assets to Demand Deposits: This ratio measures the ability of bank to meet
the demand from depositors in a particular year. To offer higher liquidity for them, bank
has to invest these funds in highly liquid form.
Oriental Bank of
Commerce
0.345 0.784 0.351
Punjab national
bank
0.784 0.225 0.454
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2015 2016 2017
Oriental Bank of
Commerce
Punjab National
Bank
Syndicate Bank
Interpretation:
This ratio reflects the ability of bank to honor
the demand from depositors during a particular
year. In order to provide higher liquidity for
depositors, bank has to invest these funds in
highly liquid form.

CONCLUSION:
Capital adequacy
 It is useful to track capital-adequacy ratios that take into account the most important
 This ratio is used to protect depositors and promote the stability.
Asset Quality
 Sound management is one of the most important factors behind financial institutions
‘performance.
 This ratio discloses the efficiency of bank in assessing the credit risk and, to an extent,
recovering the debts.
 It indicates the extent of deployment of assets in investment as against advances
Management Soundness
 It is strong earnings and profitability profile of banks reflects the ability to support
present and future operations.
 It is a measure of the profitability of a bank. Here, PAT is expressed as a percentage of
Average Net Worth
Adequate Liquidity
 It is converting its assets quickly at a reasonable cost
 Generally in terms of overall assets and liability is mismatch rise to liquidity risk.

BIBLIOGRAPHY
Websites Visited
 https://www.youtube.com/watch?v=Kn1tWwBuzZo
 http://www.moneycontrol.com/financials/oriental%20bank/ratiosVI/OBC
 http://www.moneycontrol.com/financials/orientalbankcommerce/balance-
sheetVI/OBC#OBC
 http://www.moneycontrol.com/financials/oriental%20bank/consolidated-
ratiosVI/OBC
 http://www.moneycontrol.com/financials/punjabnationalbank/balance-
sheetVI/PNB05#PNB05
 http://www.moneycontrol.com/financials/punjabnationalbank/ratiosVI/PNB05
 http://www.moneycontrol.com/financials/syndicatebank/balance-sheetVI/SB9#SB9
 http://www.moneycontrol.com/financials/syndicatebank/profit-lossVI/SB9#SB9
Books referred
Performance Evaluation of Commercial Banks through Camel Approach - a Comparative
Study of Selected Public, Private and Foreign Banks working in India by kaushal Bhatt

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