This project is based on Fundamental analysis. The project is based on Indian banking sector. Top five leading banks in India is chosen for this analysis. In this project, You will see Fundamental analysis Is done through Top to Bottom approach. As per this approach, Economic analysis, Industrial Analysis and company analysis have been used.

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University of Mumbai
A
Project on
“COMPARATIVE STUDY ON THE FUNDAMENTAL ANALYSIS
OF PUBLIC SECTOR BANKS IN INDIA”
(With the Special Reference to Selected Public Sector Banks)
A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce
By
Mr. Dipraj Vitthal Bandal
Exam Seat No.04
Under the Guidance of
PROF. Mr. Hardik Dave
Pillai HOC College of Arts, Commerce and Science,
Pillai HOCL Educational Campus, HOC Colony, Rasayani,
Via. Panvel, Dist. Raigad, Maharashtra- 410 207
March 2021

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University of Mumbai
A
Project on
“COMPARATIVE STUDY ON THE FUNDAMENTAL ANALYSIS
OF PUBLIC SECTOR BANKS IN INDIA”
(With the Special Reference to Selected Public Sector Banks)
A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce
By
Mr. Dipraj Vitthal Bandal
Exam Seat No.04
Under the Guidance of
PROF. Mr. Hardik Dave
Pillai HOC College of Arts, Commerce and Science,
Pillai HOCL Educational Campus, HOC Colony, Rasayani,
Via. Panvel, Dist. Raigad, Maharashtra- 410 207
March 2021
Pillai HOC College of Arts, Science and Commerce

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Pillai HOCL Educational Campus, HOC Colony, Rasayani,
Via. panvel, Dist. Raigad, Maharashtra- 410 207
Certificate
This is to certify that Mr.Dipraj Vitthal Bandal has worked and duly completed her
Project Work for The degree of Bachelor of Commerce (Accounting & Finance) under
the faculty of Commerce in the subject of Accounting and Finance and his project is
entitled, “COMPARATIVE STUDY ON THE FUNDAMENTAL ANALYSIS OF
PUBLIC SECTOR BANKS IN INDIA” under my supervision.
I further certify that the entire work has been done by the Lerner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is his own work and facts reported by his personal findings and investigations.
Prof. Mr. Hardik Dave
(Project Guide)
Date of submission:
Seal of
the
College

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Declaration by Learner
I the undersigned Mr. Dipraj Vitthal Bandal here by, declare that the work embodied
in this project work titled “COMPARATIVE STUDY ON FUNDAMENTAL
ANALYSIS OF PUBLIC SECTOR BANKS IN INDIA” forms my own contribution
to the research work carried out under guidance of Prof. Mr. Hardik Dave is a result of
my own research work and has not been previously submitted to any other University
for any other Degree/Diploma to this or any other University.
Whenever reference has been made to previous work of others, it has been clearly
indicated as such and included in a bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
Dipraj Vitthal Bandal
Certified by
Prof. Mr. Hardik Dave

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To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.
I would like to acknowledge the following as being idealistic channel and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I would like to thank my Principal, Prof. Dr. Lata Menon for providing necessary
facilities required for completion of this project.
I take this opportunity to thank our Coordinator Prof. Mr. Hardik Dave, for her
moral support and guidance.
I would also like to express my sincere gratitude towards my project guide Prof. Mr.
Hardik Dave whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books
and Magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.
Acknowledgement

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INDEX
CHAPTER
NO.
TITLE PAGE
NO.
1. INTRODUCTION 7
1.1 Introduction to Fundamental Analysis 8 - 21
1.2 Overview of Banking Sector in India 22 – 32
1.3 Current trend in Banking Industry 33 - 34
2. RESEARCH AND METHODOLOGY 35 - 43
3. LITERATURE REVIEW 44 - 47
4. DATA ANALYSIS, INTERPRITATION &
PRESENTATION
48
4.1 Economic Analysis 49 – 60
4.2 Industry Analysis 61 – 74
4.3 Company Analysis 75 - 102
5. CONCLUSION & SUGGESTION 103
5.1 Findings 104 – 105
5.2 Suggestions 106
5.3 Conclusion 107 - 108
6. BIBLIOGRAPHY 109
6.1 Reference 110
6.2 Reports 110
6.3 websites 111

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Chapter-1
INTRODUCTION

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INTRODUCTION OF FUNDAMENTAL ANALYSIS
ANALYSIS
The examination and evaluation of the relevant information to select the best
course of action from among various alternatives. The methods used to analyze
securities and make investment decisions fall into two very broad categories:
fundamental analysis and technical analysis. Fundamental analysis involves analyzing
the characteristics of a company in order to estimate its value. Technical analysis takes
a completely different approach, it doesn't care one bit about the "value" of a company
or a commodity. Technicians (sometimes called chartists) are only interested in the
price movement in the market
TECHNICAL ANALYSIS
Technical analysis is a method of evaluating securities by analyzing the
statistics generated by market activity, such as past prices and volume. Technical
analysts do not attempt to measure a security's intrinsic value, but instead use charts and
other tools to identify patterns that can suggest future activity.
FUNDAMENTAL ANALYSIS
Fundamental analysis is a stock valuation methodology that uses financial and
economic analysis to envisage the movement of stock prices. The fundamental data that
is analyzed could include a company's financial reports and non-financial information
such as estimates of its growth, demand for products sold by the company. industry
comparisons, economy-wide changes, changes in government policies etc.
The outcome of fundamental analysis is a value for a range of values of the
stock of the Company called its 'intrinsic value' (often called "price target in
fundamental analysts' parlance). To a fundamental investor, the market price of a stock
tends to revert towards its intrinsic value. If the intrinsic value of a stock is above the
current market price, the investor would purchase the stock because he believes that the
stock price would rise and move towards its intrinsic value. If the intrinsic value of a

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stock is below the market price, the investor would sell the stock because he believes
that the stock price is going to fall and come closer to its intrinsic value.
To find the intrinsic value of a company, the fundamental analyst initially takes
a top down view of the economic environment: the current and future overall health of
the economy as a whole. After the analysis of the macro-economy, the next step is to
analyze the industry environment which the firm is operating in. One should analyze all
the factors that give the firm a competitive advantage in its sector, such as, management
experience, history of performance. growth potential, low cost of production, brand
name etc. In simple term fundamental analysis is the analysis of Economy, Industry and
Company.
Fundamental Analysis involves examining the economic, financial and other
qualitative and quantitative factors related to a security in order to determine its
intrinsic value. If a company`s stock is trading above the intrinsic value or fair value ,
the stock is overvalued. If the company`s stock is trading below the intrinsic value, then
the stock is undervalued. It attempts to study everything that can affect the security`s
value, including macroeconomic factors (like the financial condition and management
of companies). Fundamental Analysis, which is also known as quantitative analysis,
involves delving into a company`s financial statements (such as revenues, loss account
and balance sheet) in order to study various financial indicators (such as revenues,
earnings, liabilities, expenses and assets).Such analysis is usually carried out by
analysts, brokers and savvy investors.
Many analysts and investors focus on a single number--net income (or earnings-
to evaluate performance. When investors attempt to forecast the market value of a firm,
they frequently rely on earnings. Many institutional investors, analysts and regulators
believe earnings are not as relevant as they once were.
Two Approaches of fundamental analysis

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While carrying out fundamental analysis, investors can use either of the following
approaches:
1. Top-down approach: In this approach, an analyst investigates both international
and national economic indicators, such as GDP growth
rates, energy prices, inflation and interest rates. The
search for the best security then trickles down to the
analysis of total sales, price levels and foreign
competition in a sector in order to identify
the best business in the sector.
2. Bottom-up approach: Instead of starting the analysis from the larger scale, the
bottom-up approach immediately dives into the analysis of individual stocks. The
rationale of investors who follow the bottom-up approach is that individual stocks may
perform much better than the overall
industry. The bottom-up approach is
primarily concentrated on various
microeconomic factors such as a
company’s earnings and financial
metrics. Analysts who use such an
approach develop a thorough assessment
of each company to gain a better understanding of its operations.
How Does fundamental analysis works ?
Fundamental analysis is carried out with the aim of predicting the future
performance of a company. It is based on the theory that the market price of a security
tends to move towards its real value or intrinsic value." Thus, the intrinsic value of a
security being higher than the security's market value represents a time to buy. If the
value of the security is lower than its market price, investors should sell it.

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The steps involved in fundamental analysis are:
1. Macroeconomic analysis, which involves considering currencies, commodities
and indices.
2. Industry sector analysis, which involves the analysis of companies that are a
part of the sector.
3. Situational analysis of a company.
4. Financial analysis of the company.
5. Valuation
The valuation of any security is done through the discounted cash flow (DCF) model,
which takes into consideration:
1. Dividends received by investors
2. Earnings or cash flows of a company
3. Debt, which is calculated by using the debt to equity ratio and the current ratio
( current assets/current liabilities)
WHY ONLY FUNDAMENTAL ANALYSIS
 Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends.
very long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right
industry groups or companies.
 Value Spotting
Sound fundamental analysis will help identify companies that represent a good
value. Some of the most legendary investors think long-term and value. Graham and
Dodd, Warren Buffett and John Neff are seen as the champions of value investing.
Fundamental analysis can help uncover companies with valuable assets, a strong
balance sheet, stable earnings, and staying power

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 Business insights
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such pains taking
research and analysis, an investor will be familiar with the key revenue and profit
drivers behind a company. Earnings and earnings expectations can be potent drivers of
equity prices. Even some technicians will agree to that.
A good understanding can help investors avoid companies that are prone to
shortfalls and identify those that continue to deliver. In addition to understanding the
business, fundamental analysis allows investors to develop an understanding of the key
value drivers and companies within an industry. A stock's price is heavily influenced by
its industry group. By studying these groups, investors can better position themselves to
identify opportunities that are high-risk (tech), low-risk (utilities). growth oriented
(computer), value driven (oil), non-cyclical (consumer staples), cyclical
(transportation) or income-oriented (high yield).
 Knowing Who's Who
Stocks move as a group. By understanding a company's business, investors can
better position themselves to categorize stocks within their relevant industry group.
Business can change rapidly and with it the revenue mix of a company. This has
happened with many of the pure internet retailers, which were not really internet
companies, but plain retailers, Knowing a company's business and being able to place it
in a group can make a huge difference in relative valuations. The charts of the technical
analyst may give all kinds of profit alerts, signals and alarms, but there's little in the
charts that tell us why a group of people make the choices that create the price patterns.
USERS OF FUNDAMENTAL ANALYSIS
 Investors

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 Brokers
 Financial institutions
 Competitors
COMPONENTS OF FUNDAMENTAL ANALYSIS
A. ECONOMIC ANALYSIS
B. INDUSTRY ANALYSIS
C. COMPANY ANALYSIS
A-ECONOMIC ANALYSIS
The economic analysis aims at determining if the economic climate is
conclusive and is capable of encouraging the growth of business sector, especially the
capital market. When the economy expands, most industry groups and companies are
expected to benefit and grow. When the economy declines, most sectors and companies
usually face survival problems. Hence, to predict share prices, an investor has to spend
time exploring the forces operating in overall economy. Exploring the global economy
is essential in an international investment setting. The selection of country for
investment has to focus itself to examination of a national economic scenario. It is
important to predict the direction of the national economy because economic activity
affects corporate profits, not necessarily through tax policies but also through foreign
policies and administrative procedures.
ECONOMIC ANALYSIS TOOLS
The most used tools for performing economic analysis are:
1. Gross Domestic product
GDP is one measure of economic activity. This is the total amount of goods and
services produced in a country in a year. It is calculated by adding the market values of
all the final goods and services produced in a year.

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 It is a gross measurement because it includes the total amount of goods and
services produced, of which some merely replace goods that have depreciated
or have worn out.
 It is domestic production because it includes only goods and services produced
within the country
2. Inflation
Inflation can be defined as a trend of rising prices caused by demand exceeding
supply. Over time, even a small annual increase in prices of say 1 % will tend to
influence the purchasing power of the nation. In others word, if prices rise steadily,
after a number of years, consumers will be able to buy only fewer goods and services
assuming income level does not change with inflation.
3. Interest rate
Interest rate is the price of credit. It is the percentage fee received or paid by
individual or organization when they lend and borrow money. In general, increases in
interest rate, whether caused by inflation, government policy, rising risk premium, or
other factors, will lead to reduced borrowing and economic slowdown.
4. International influences
Rapid growth in overseas market can create surges in demand for exports,
leading to growth in export sensitive industries and overall GDP. In contrast, the
erection of trade barriers, quotas, currency restrictions can hinder the free flow of
currency, goods and services, and harm the export sector of an economy.
5. Fiscal policy
The fiscal policy of the government involves the collection and spending of
revenue. In particular, fiscal policy refers to the efforts by the government to stimulate
the economic directly, through spending.
6. Monsoon
Agriculture forms a very important sector of the Indian economy. Rise in the
agricultural income will cause increase in the demand for industrial products and

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services and the performance of agriculture is depends up on monsoon. So the
progress and adequacy of monsoon becomes a matter of great concern for an
investor in the Indian contest.
7. Political stability
A stable political environment is necessary for steady and balanced growth.
Stable long term political policies are good for the performance of economy
8. Exchange rates
The performance and profitability of industries and companies that are major
importers or exporters are considerably affected by the exchange rates of rupee against
major currencies. A depreciation of rupee improve the competitive position of Indian
products in the foreign market, thereby stimulating exports. But it would also make
imports more expensive. A company depending heavily on imports may find
devaluation of rupee affecting its profitability adversely.
9. Monetary policy and Liquidity
10. International influences
11. Fiscal policy
12. Budget
13. Balance of payment
14. Domestic legislation
15. Unemployment
16. Infrastructural growth etc.
B-INDUSTRY ANALYSIS
An industry analysis helps in form business managers about the viability of their
current strategy and on where to focus a business among its competitors in an industry.
The analysis examines factors such as competition and the external business
environment, substitute products, management preferences, buyers and suppliers.
Industry analysis involves reviewing the economic, political and market factors that

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influence the way the industry develops. Major factors can include the power wielded
by suppliers and buyers, the condition of competitors. And the likelihood of new
market entrants
1. INDUSTRY LIFE CYCLE
The profitability of industry is depends up on the stage of lifecycle of industry,
Each development stage is unique and exhibits different characteristics.
Followings are the different stages of lifecycle of industry:
a. Pioneering stage
It is the stage of startup of an industry. In this stage very few beginners
set up the companies. The risk at this stage is very high due to gestation period
effect.
b. Rapid growth stage
At this stage of industry lifecycle demand for the product in the industry
increases at a fast pace and every day new participants enter in the industry
c. Maturity and saturation
At this stage demand almost stabilizes at a particular level. Product
differentiation takes place and companies start competing on the product
features. This phase is also of consolidation and companies consolidate their
position by focusing on a particular segment.
d. Decline/diversification
At this stage poor performers start winding up their business and this
phase witnesses the survival of only the fittest. Very strong companies
survive during this stage. A few companies take up the path of
diversification to overcome this phase, If company diversifies then they
again enter into a new industry life cycle.
2. INDUSTRY CHARACTERISTICS
a) Demand supply gap

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Excess supply reduces the profitability of industry through a decline in unit
price realization. On the contrary insufficient supply tends to improve the profitability
through higher unit price realization. Therefore the gap between demand and supply in
an industry is a fairly good indicator of its short term or medium term prospects.
b) Competitive condition in the industry
The level of competition among various companies in an industry is determined
by certain competitive forces like barriers to entry, the threat of substitution, bargaining
power of buyers, bargaining power of suppliers, and rivalry among competitors.
c) Permanence
In this age of rapid technological change, the degree of permanence of an
industry is an important consideration in industry analysis permanence is a
phenomenon related to the product and technology used by the industry. if an analyst
feels that the need for a particular industry will vanish in short period, or that rapid
technological changes would render the products obsolete within a short time, it would
be foolish to invest in such an industry.
d) Labour conditions
If labours in a particular industry is rebellious and is inclined to resort to strikes
frequently, the prospects of that industry cannot become bright.
e) Attitude of government
Government may encourage the growth of certain industries and assist such
industries through favorable legislation
f) Supply of raw materials
Availability of raw material is an important factor determining profitability of
industry. Some industries may not have problems to obtain row materials.
g) Cost structure
Cost structure is the proportion of fixed cost to variable cost. The higher the
fixed cost component, higher is the sales volume necessary to achieve breakeven point.

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Conversely lower the fixed cost proportion to variable cost, lower would be the
breakeven point.
C-COMPANY ANALYSIS
Every industry has more than one company therefore this phase scans the
companies of those industries which have been selected in the Industry analysis. The
purpose of this phase is to identify the best company in the industry selected.
This is done with the help of the following factors:
 Analysis of qualitative factors
 Financial performance analysis
1) Competitive position
The level of competition and companies positions are the important factors which
determine the profitability of particular company
2) Management quality
Investors prefer to have highly skilled management in company.
3) Technology
Technological up gradation of companies directly influence profitability of companies
and it will increase the market price of shares also.
4) Brand image
5) Raw materials
6) Labour condition
7) Capacity Utilization
Ratio analysis

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A tool used by individuals to conduct a quantitative analysis of information in a
company's financial statements, Ratios are calculated from current year numbers and
are then compared to previous years, other companies, the industry, or even the
economy to judge the performance of the company. Ratio analysis is predominately
used by proponents of fundamental analysis. There are many ratios that can be
calculated from the financial statements pertaining to a company's performance,
activity, financing and liquidity. Some common ratios include the price-earnings ratio,
debt-equity ratio, earnings per share, asset turnover and working capital.
1. ROA
Return on assets, which, offering a different take on management's effectiveness
reveals how much profit a company earns for every dollar of its assets. Assets include
things like cash in the bank accounts receivable, property, equipment, inventory and
furniture. ROA is calculated like this.
ROA =
NET INCOME
TOTAL ASSET
2. ROI
Return on Investment is one of several commonly used approaches for evaluating
the financial consequences of business Investments, decisions, or actions, ROI analysis
compares the magnitude and timing of investment gains directly with the magnitude
and timing of investment costs. A high ROI means that investment gains compare
favorably to investment costs
ROI =
RETURNS
COST OF INVESTMENT
3. ROE

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Of all the fundamental ratios that investors look at, one of the most important is
Return on Equity. It's a basic test of how effectively a company's management uses
investors' money - ROE shows whether management is growing the company's value at
an acceptable rate. ROE is calculated as
ROE =
NET INCOME
SHAREHOLDER`S EQUITY
4. EPS
The portion of a company's profit allocated to each outstanding share of common
stock, Earnings per share serve as an indicator of a company's profitability
EPS =
NET INCOME OF COMPANY
AVERAGE OUTSTANDING SHARES OFCOMPANY
.
5. DPS
The sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends
but not including special dividends) divided by the number of outstanding ordinary
shares issued.
DPS =
TOTAL DIVIDEND
NO.OF SHARES
6. DIVIDEND YEILD
Financial ratio that shows how much a company pays out in dividends each year
relative to its share price. In the absence of any capital gains, the dividend yield is the
return on investment for a stock. Dividend yield is calculated as follows:
DIVIDEND YIELD =
ANNUAL DIVIDEND PER SHARE(DPS)
PRICE PER SHARE

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END RESULT OF FUNDAMENTAL ANALYSIS
 At what time investment is to be made
 In which company investment is to be made

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OVERVIEW OF
BANKING INDUSRTY

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HISTORY OF BANKING IN INDIA
The banking sector is the most important sector as it helps to develop the vital
sectors of the economy. The RBI set up in 1935 is the chief bank which was founded to
control the monetary policy in India. It took the responsibility of regulating the Indian
banking sector from 1935. After India's independence RBI was nationalized and given
broader powers. This was an important landmark in the Indian Banking system. The
RBI in general regulated and supervised the major financial system in India. Before the
nationalization of the bank except for State bank of India all the banks were privately
controlled. By then the Indian Banking sector had grown in strength and large number
of people were employed. In 1969, 14 commercial banks have been nationalized
followed by 6 more banks in the year 1980. With the second phase of nationalization
the Indian government controlled approximately 91% of the banking sector. The total
number of banks however came down to 19 with the merger of New Bank of India with
Punjab National Bank.
As the banking sector expanded and became increasingly complex due to
innovation and technological up gradations. The banks with time had to change the way
they functioned by offering new services to the customers. The rapid technological
advancement has reduced the transaction costs. Despite the progress that the banks
have made post the 1991 liberalization there has been a decline in productivity and the
profits of the banks have reduced. Therefore the government of India set up the
Narasimham Committee to look into the problems and recommend measures to

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improve the health of the financial system.
Currently the banking industry has entered into a new era with the era of
technological advancements and other challenges. Branches and ATM`s will need to
grow to serve the bankable population. Banks will also have to adopt new technologies
like CRM which will automate certain systems. In additions to this they also need to
understand and adopt new technologies like cloud computing.
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 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.
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.

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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. Reserve Bank of India was
vested with extensive powers for the supervision of banking in India as the Central
Banking Authority. During those days, 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:

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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 liberalisation 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. 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.

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Banking Structure in India
FACTORS AFFECTING SHARE PRICES OF BANKING SECTOR
There are several numbers of factors which affect the share prices. They can be
broadly classified into two:
 INTERNAL FACTORS
 EXTERNAL FACTORS
INTERNAL FACTORS:
As the name suggests, Internal Factors are those which affect the share prices
internally, i.e. they are internal to the company or more specifically bank. Some of the
major internal factors that affect the share prices of a bank are as follows:
Earnings of the company:
How much Profit a company earns acts as a significant factor in price
movements, Investors invest money in the companies who earn well and in turn give
good return on investment. Thus, a wealthy and a profitable company have good
investors and thus have positive price movements. Price Earnings Ratio also gives us
idea about the same,

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Market capitalization:
A company or bank with high Market Capitalization turns out to be more
popular among investors. For example, HDFC BANK, ICICI BANK and SBI are more
popular among investors than other banks because they have huge market share and
market capitalization. As market capitalization increases, the share price tends to
increase and as market capitalization decreases, the share price tends to decrease,
Price earnings ratio:
Price/Earnings ratio or the P/E ratio gives us a fair idea of how a company's
share price compares to its earnings. If the price of the share is too much lower than the
earning of the company, the stock is undervalued and it has the potential to rise in the
near future. On the other hand, if the price is way too much higher than the actual
earning of the company and then the stock is said to overvalued and the price can fall at
any point.
Internal affairs of the company:
Any happening inside the company or any internal news does affect its share
price. For example any key person moving out of the company, acquisition or takeover
or merger news, share split, employee strike and any other thing internal to the affairs of
the bank affects the share price. A positive note from the internal affairs takes the price
to new highs and a negative does vice versa.
Interest rates:
Interest rates play a major role in determining stock market trends, Interest rates
are determined by the demand for capital - pushes them up and normally indicates that
the economy is thriving and that shares probably expensive. Low interest indicate low
demand for capital, thus liquidity builds up on the economy, driving share price down.
Other interest rates like that of on Deposits and Borrowings also have impact on share
prices.
Other factors:

29. 29 | Page
Other factors like Growth of the company, figures of deposits, advances,
balance sheet, Profit and Loss Account, etc. Also affect the share prices drastically.
EXTERNAL FACTORS:
After studying the internal factors, let's take a look at some External Factors
which affect the Share Prices
Sentiments:
Investor sentiment is almost impossible to predict and can be infuriating if, for
example, you have bought shares in a company that you think is a good "buy" but the
price remains flat. Investor sentiment is influenced by a wide variety of factors.
Investor sentiment can lead to irrational buying or selling of shares and result in bull
and bear markets In the technology boom of the late 1990s, for example, investors paid
extremely high prices for shares and ignored traditional valuation measures. Such as PE
ratios. This carried on until 2000 when investors belatedly realized these shares has
risen too far and resulted in a three year bear market in shares, Thus, Sentiments of
investors affect the share prices a lot and this is something unpredictable and
immeasurable factor, but still the most important one.
Company news and other news:
The way investors interpret news coming out of companies is also a major influence on
share prices. For example, a company puts out a warning that business conditions are
tough, shares will often drop in value. Companies put out a great deal of news and most
of the major announcements are covered by the financial press. Also any other news or
speculation about factors like change in Repo Rate, Cash Reserve Ratio Reverse Repo
Rate, any change or likely change in the policies of government or RBI or SEBI, any
new guidelines issued by the concerned authority, etc. affect the price of the share. A
positive news in any of these respects leads to a rise in price and a negative takes it to
the other side. Thus, news in any respect is undoubtedly a huge factor when it comes to
stock price.
Demand and supply:

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This fundamental rule of economics holds good for the equity market as well.
The price is directly affected by the trend of stock market trading. When more people
are buying a certain stock, the price of that stock increases and when more people are
selling the stock, the price of that particular stock falls. Now it is difficult to predict the
trend. Thus, we should be very careful while dealing in stocks as buying or selling
pressure may lead to steep rise or fall in price of the shares.
Analysts' reports:
Analysts" reports are produced primarily by investment banks for professional
investors, although some stockbrokers will make their research available to private
investors. We may find summaries of some reports published on financial news
websites or in newspapers and magazines.. We should remember that the
recommendation an analyst puts on a company will affect its share price very quickly
and can become irrelevant within hours. The reports usually contain a great deal of
useful information on the company and how its business is developing. They also often
look at how the company rates against its competitors.
The economy:
The health of the global economy has a fundamental influence on share prices
because it is ultimately responsible for driving company profits. Broadly speaking, if
the economy is growing, company profits improve and shares will become more highly
valued. If the economy is weakening, company profits will fall and share prices will go
down.
When looking at economic data, we need to think not only how the wider
economy will be affected but whether certain areas will be more affected than others. A
rise in interest rates is, for example often bad news for house builders as people feel less
confident about taking on debt. Retailers are often badly affected too as people spend
less. Pharmaceutical companies are, however, usually unaffected as people's demand
for drugs is not influenced by the state of the economy. Companies whose profits are
closely tied to the health of the economy are known as "cyclical" stocks. Those
businesses that aren't too affected by the economy are called "defensive" stocks. If
economic conditions deteriorate you will often see investors shift from cyclical stocks
to defensives. Thus, the economic health of an Economy affects the Share Prices.

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Technical influences:
Share prices can rise and fall for a variety of technical reasons that may have
nothing to do with the actual outlook for an individual company or the outlook for the
market. It is for example, a common occurrence for share prices to drop back after a
strong rally. This happens because investors take profits on some of the shares that have
risen in value, protecting their gains just in case the shares start to slip back. Investors
often refer to this as market consolidation. Share prices can also be affected by
investors who use technical analysis to drive their investment techniques.
Change in rates by RBI:
Looking at the changing scenario, RBI keeps on changing rates like Repo Rate,
Reverse Repo Rate and Cash Reserve Ratio. These rates have a direct relation with the
Bank's performance and in turn the share prices are linked with Bank's Performance.
Thus, a change in these rates or even a speculation of change in these rates affects share
prices.
Global changes:
Any change in the global economy or in other words global changes also affects
Indian economy. Thus, the performance of an economy and its banks is affected by
these global changes. For example: The recession was first observed in the USA and
later on it caught its lead in other countries too. When it entered India, the share market
crashed literally. So, a careful and logical investor always keeps this in mind that what
global changes affect the market and thus leads to rise or fall in share prices.
Change in Government Policies:
Keeping in mind the progress and well wishes about the country, the
government takes desired steps and keeps on reviewing its policies, rules and
regulations and procedures. A change in FDI and FII inflow restrictions, entry exit
barriers for foreign banks in India, EXIM regulations, change in Basel Norms, etc. form
part of important government policies. Thus, a change in these policies affects the
market scenario. For example: if government allows entry of foreign Banks in India,

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then the competition would rise and it might happen that those foreign Banks may
outperform and leave our own banks far behind. Then in this case, the investors would
be interested in investing in those foreign Banks and a government would never like
that the funds are invested in some foreign banks rather than our own banks. Thus,
some restriction would follow and this will definitely affect the share prices.

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CURRENT TREND IN BANKING INDUSTRY
 The Indian banking system consists of 12 public sector banks, 22 private sector
banks, 44 foreign banks, 56 regional rural banks, 1,485 urban cooperative banks
and 96,000 rural cooperative banks in addition to cooperative credit institutions.
As of August 2020, total number of ATMs in India increased to 209,110 and is
expected to reach 407,000 by 2021.
 According to Reserve Bank of India (RBI), India’s foreign exchange reserve
reached US$ 560.53 billion as on October 23, 2020. According to the Reserve
Bank of India (RBI), bank credit and deposits stood at Rs. 103.43 lakh crore
(US$ 1.39 trillion) and Rs. 143.02 lakh crore (US$ 1.92 trillion), respectively, in
the fortnight ending October 9, 2020.
 Credit to non-food industries stood at Rs. 102.80 lakh crore (US$ 1.38 trillion)
as of October 9, 2020.
 Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in
FY20.
 Total assets across the banking sector (including public, private sector and
foreign banks) increased to US$ 2.52 trillion in FY20.
 Indian banks are increasingly focusing on adopting integrated approach to risk
management. The NPAs (Non-Performing Assets) of commercial banks has
recorded a recovery of Rs. 400,000 crore (US$ 57.23 billion) in FY19, which is
highest in the last four years.
 As per Union Budget 2019-20, investment-driven growth required access to
low cost capital, and this would require investment of Rs. 20 lakh crore (US$
286.16 billion) every year.
 RBI has decided to set up Public Credit Registry (PCR), an extensive database
of credit information, accessible to all stakeholders. The Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2017 Bill has been passed and is
expected to strengthen the banking sector. Total equity funding of microfinance
sector grew 42% y-o-y to Rs. 14,206 crore (US$ 2.03 billion) in 2018-19.

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 Bank accounts opened under the Government’s flagship financial inclusion
drive Pradhan Mantri Jan Dhan Yojana (PMJDY) reached 40.05 crore and
deposits in Jan Dhan bank accounts stood at more than Rs. 1.30 lakh crore (US$
18.44 billion).
 Rising income is expected to enhance the need for banking services in rural
areas, and therefore, drive the growth of the sector.
 The digital payments revolution will trigger massive changes in the way credit
is disbursed in India. Debit cards have radically replaced credit cards as the
preferred payment mode in India after demonetization. Payments on Unified
Payments Interface (UPI) hit an all-time high of 1.49 billion in terms of volume
with transactions worth nearly Rs. 2.90 lakh crore (US$ 41.22 billion) in July
2020.

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Chapter-2
RESEARCH
METHODOLOGY

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RESEARCH METHODOLOGY
Research methodology is a systematic way to solve a problem. It is science of
studying how research is to be carried out. Essentially, the procedures by which
researcher go about their work of describing explaining and predicting phenomenon are
called research methodology research methodology consists of different steps that are
generally adopted by researcher to study the research problem along with logic behind
from.
RESEARCH DESIGN
The present study is descriptive and analytical in nature.
STATEMENT OF THE PROBLEM
The study of fundamental Analysis of banking industry is to assess the
performance of the banking industry in India and select the most performing banking
companies through the analysis of macro and micro variables that affects the
performance of particular company.
OBJECTIVES OF THE STUDY
 To analyze economy by using some economic indicators like GDP, and
inflation rate, etc. to find out the best time for investment and selection of
industry performing companies, well in economy.
 To analyze industry for assessing the strength and find out best performing
companies.
 To carry out analysis companies to select particular company performing well
for investment.
 To provide investment decisions.

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SCOPE OF THE STUDY
1. The study gives overview of banking industry to investors while investing.
2. This study consists of economic, Industry and Company framework for analysis
with the following aspects:
 Economic analysis consists of various variables such as GDP, BOP,
Inflation, FII, etc.
 Industry analysis consists of Demand, potential market, growth and
development, etc.
 Company analysis consists of financial statement analysis, companies
prospects, growth, and Management board of company.
HYPOTHESIS
H0: There is no significant relation between the selected variables of selected banks.
H1: There is a significant relation between the selected variables of selected banks.
LIMITATIONS OF THE STUDY
 For study only following limited variables has studied such as GDP, CAD,
Foreign exchange reserve, foreign investment inflow, inflation, agricultural
production, industrial production index, lending rate, employment, & sectorial
contribution to GDP.
 Industrial analysis is limited to quantitative factors and excluded qualitative
factors like political factors, product line, innovations etc.
 Fundamental analysis is a time consuming analysis, efficiency of the analysis is
totally depends up on the availability of time. The analysis here conducted with
limited period of time.
 Qualitative factors had limited priority in company analysis.
 Valuation techniques and tools for banks are different from other form of
companies. So the suggested fundamental ratios to analyze companies should

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not be suitable for banks.
 Reliability of analysis is depends up on the reliability of the data sources.
 Future changes are largely unpredictable, so the past record is a poor guide to
future performance.
 The analysis is based on my own interpretation and up to my best of knowledge
but every analyst have his or her own interpretation and suggestions.
 Error due to misinterpretation.
SELECTION OF THE PROBLEM
The study of fundamental analysis of banking industry is to assess the
performance of banking industry and select the most performing banking companies
through the analysis of macro and micro variables that affects the performance of
particular company.
SAMPLE SIZE
The present study is descriptive and analytical in nature. The sample consists of
Three largest Public sector Banking companies in india by market capitalization chosen
from the BSE Sensex. The banking companies which are a part of the BSE sensex are
State Bank of India, Punjab National Bank, Bank of Baroda.
DATA COLLECTION
Secondary data has been collected from various sources to analyze the
fundamentals. Following are the Sources:
 RBI
 Annual reports
 CMIE Data base
 Bloomberg data base
 NSE

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 World bank
 Money control
 Other websites
TOOLS FOR ANALYSIS
Unlike any other manufacturing or service company, a bank's accounts are
presented in a different manner (as per banking regulations). The analysis of a bank
account differs significantly from any other company. The key operating and financial
ratios, which one would normally evaluate before investing in company, may not hold
true for a bank.
The followings are the most popular tools for the fundamental analysis of Banks or to
evaluate performance of Banks:
 NET INTEREST MARGIN(NIM)
For banks, interest expenses are their main costs (similar to manufacturing cost
for companies) and interest income is their main revenue source. The difference
between interest income and expense is known as net interest income. It is the
income, which the bank earns from its core business of lending. Net interest margin
is the net interest income earned by the bank on its average earning assets. These
assets comprises of advances, investments, balance with the RBI and money at call.
NIM =
INTEREST INCOME − INTEREST EXPENSE
EARNING ASSETS
 CREDIT TO DEPOSIT(CD) RATIO
The ratio is indicative of the percentage of funds lent by the bank out of the total
amount Raised through deposits. Higher ratio reflects ability of the bank to make
optimal use of the available resources. The point to note here is that loans given by
bank would also include its investments in debentures, bonds and commercial
papers of the companies (these are generally included as a part of investments in the

40. 40 | Page
balance sheet).
CD RATIO =
CREDIT
ADVANCES
 OPERATING PROFIT MARGIN(OPM)
Banks operating profit is calculated after deducting administrative expenses,
which mainly include salary cost and network expansion cost. Operating margins
are profits earned by the bank on its total interest income. For some private sector
banks the ratio is negative on account of their large IT and network expansion
spending.
OPM=
NET INTEREST INCOME − OPERATING EXPENSES
TOTAL INTEREST INCOME
× 100
 NON-PERFORMING ASSETS(NPA) RATIO
The net non-performing assets to loans (advances) ratio is used as a measure of the
overall quality of the bank's loan book. Net NPAs are calculated by reducing
cumulative balance of provisions outstanding at a period end from gross NPAS.
Higher ratio reflects rising bad quality of loans.
NPA RATIO =
NET NPA
LOANS GIVEN
 COST TO INCOME RATIO
Controlling overheads are critical for enhancing the bank's return on equity.
Branch Rationalization and technology upgrade account for a major part of
operating expenses for new generation banks. Even though these expenses result in
higher cost to income ratio, in long term they help the bank in improving its return
on equity. The ratio is calculated as a proportion of operating profit including non-

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interest income (fee based income).
COST TO INCOME =
OPERATING EXPENSE
TOTAL INCOME
 EARNING PER SHARE(EPS)
The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's
profitability.
EPS=
NET INCOME
NO.OF SHARES
 DIVIDEND PER SHARE(DPS)
The sum of declared dividends for every ordinary share issued. Dividend per
share (DPS) is the total dividends paid out over an entire year (including interim
dividends but not including special dividends) divided by the number of
outstanding ordinary shares issued. Having a growing dividend per share can be a
sign that the company's growth can be sustained.
DPS=
TOTAL DIVIDEND
NO.OF SHARES
 DIVIDEND PAYOUT RATIO(DPR)
A reduction in dividends paid is looked poorly upon by investors, and the stock
price usually depreciates as investors seek other dividend paying stocks. A stable
dividend payout ratio indicates a solid dividend policy by the company's board of
directors.
DPR=
DPS
EPS

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 PRICE EARNING(PE) RATIO
A valuation ratio of a company's current share price compared to its per-share
earnings. A high P/E ratio suggests that investors are expecting higher earnings
growth in the future compared to companies with a lower P/E ratio. The P/E ratio is
sometimes referred to as the "multiple", because it shows how much investors are
willing to pay per units of earnings.
PE=
MARKET VALUE PER SHARE
EPS
INTRINSIC VALUE
By intrinsic value we mean value of share which is supported by asset quality,
Performance earning capacity, risk, future prospects, and happening in the economy. It
is believed that in the long run a share is likely to command a market price around its
intrinsic value. Therefore knowledge about this can help in investment decision Steps
for calculating intrinsic value
1. Estimation of expected EPS of the company
2. Estimation of price earning multiplier (P/E)
PE multiplier can be estimated by taking into consideration several factors like
(a) Past performance of the company.
(b) Expectation about future,
(c) Goodwill of company etc.
Here in this analysis P/E multiplier is calculated on the basis of past
performance of company, i.e. average of past five years P/E ratio. And estimated EPS
also calculated on the basis of past five year EPS i.e. average of past five years EPS.
Thus

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INTRINSIC VALUE = EXPECTED EPS × PRICE EARNING MULTIPLIER
Decision making with the help of intrinsic value
Buy - if intrinsic value is greater than current market price .
Sell - if intrinsic value less than current market price.
TECHNIQUES
The techniques used in the analysis of the Banking Company are excel sheets,
graphs and tables of Financial Statement, etc.

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Chapter-3
LITERATURE REVIEW

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LITERATURE REVIEW
The literature review is a study involving a collection of literatures in the
selected area of research in which the researcher has limited experience, and critical
examination and comparison of them to have a better understanding. It also helps the
researchers to update the past data, data sources and results and identify the gaps, if any
in the researches. Thus, the reviews in the present study consist of the ones discussed
below and they reveal that there are very scant studies in India emphasizing on the
fundamental analysis.
As per the project articles were reviewed and summaries of the same are listed
below:
Hemraj Verma and Prakash Tiwari (2010) in their study, headed “A Fundamental
analysis of public sector banks in India” detailed the growth of the Indian banking
industry and current performance of the bank with the help of various ratios.
Pratima Jain, Peeyush Bangur, and Kapil Sharma(2011) interpreted CANSLIM as
a growth stock investment strategy which involves implementation of both technical
analysis and fundamental analysis. It is also an approach which helps the investor to
select the best stocks among others to book profits. There are so many stocks in the
market in which one can invest one’s money; the decision to invest and select a
particular stock is a crucial task. CANSLIM is the approach which helps the investor to
select the best stocks among others to book profits. But this is only a type of
fundamental analysis and may not work all the time. The main reason being that, It is
based on the company’s past track records. By keeping other things same, viz., the
investor’s financial condition, the investment goal of the investor and time horizon, the
investor can choose fundamental analysis
(Jeevitha & Shravani, 2018) has conducted fundamental analysis for three public
sector banks. The study was conducted with the objective to help in Investment
decision making. The author has conducted three tier analysis i.e. economic, industry
and company analysis for the selected public sector banks. The author has used various

46. 46 | Page
ratios for identifying the financial position of these banks. The author has stated that no
investment decisions should be taken without processing of all relevant and available
information.
R.K, UPPAL (2011) examined the efficiency of all the bank groups in the post-
banking sector reforms era for the time period between 1999 and 2006. The main
implication of this study is that although public sector banks have improved their
financial position, they still need to make many changes. On the basis of some
important parameters of efficiency, the paper concludes that among the Indian banks,
efficiency of new private sector banks is quite high, but foreign banks have an edge
over new private sector banks.
Malaya Ranjan Mohapatra, Avizeet Lenka, Subrat Kumar Pradhan (2015)
analysed the operational efficiency of commercial banks in India and challenges faced
by public sector banks. The parameters considered for study are labour productivity,
branch expansion and profitability ratios. The study concluded that internal
management and employee efficiency of foreign banks are far better than other sectors
of commercial banks. Public sector banks are lagging behind in various financial
parameters.
(Sangeetha & Jain, 2013) Opinioned that banking companies in the service sector
exhibit the problem of distinct results in terms of efficiency. This problem is a cause of
concern for many big organizations in the service sector like hotels, courier companies,
hospitals, banks and so on. In particular, the last decade has observed continuous
amendment in regulation, technology and competition in the global financial services
industry, and Indian banks are no exception.
Dr. M. Parveen and Ms. S. Sameera (ICAM 2016), “Problems and Challenges on
Indian Banking Sector in Pre and Post Globalisation Period”- Fundamental analysis

47. 47 | Page
argued that no investment decision should take without processing and analyzing all
relevant information. The analysis is based on industry as well as bank. For analysis of
three banks are selected. Intrinsic value of all banks except, bank of Baroda is under
prized and P/E ratio of all banks except Bank of Baroda showing increasing trend. It
indicates that investment in Bank of Baroda is not viable and other two banks are good
for investors, among these two banks SBI showing highest P/E ratio and intrinsic value
and it would be profitable for investors to invest in SBI.
Mayuri, J. Farmer's (2009) - An accounting evaluation of performance of Indian
public sector banks, study was primarily based on the secondary data relating to the
financial performance of 27 nationalized banks of India during 1989 to 1998. A
regression analysis has been attempted to identify the quantifiable variables and to
judge how far the changes in profitability are influenced by each of these variables. A
detailed study has also been undertaken by selecting a very profitable bank and a highly
loss making bank to identify the variables affecting the profitability of each of them.
The application of the concept of Break Even Analysis has been attempted to
differentiate between a profit earning bank and a losing bank and to help in suggestions
how margin of safety can be improved.
Mitra Roma, Ravi Shankar (2008), A stable and efficient banking sector is an
essential precondition to increase the economic level of a country. This paper tries to
model and evaluate the efficiency of 50 Indian banks. The Inefficiency can be analyzed
and quantified for every evaluated unit. The aim of this paper is to estimate and
compare efficiency of the banking sector in India. The analysis is supposed to verify or
reject the hypothesis whether the banking sector fulfils its intermediation function
sufficiently to compete with the global players. The results are insightful to the
financial policy planner as it identifies priority areas for different banks, which can
improve the performance. This paper evaluates the performance of Banking Sectors in
India.

48. 48 | Page
Chapter-3
DATA ANALYSIS,
INTERPRETATION AND
PRESENTATION

49. 49 | Page
ECONOMIC ANALYSIS

50. 50 | Page
ECONOMIC ANALYSIS
The independence-era Indian economy (from 1947 to 1991) was based on a
mixed economy combining features of capitalism and socialism, And failed to take
advantage of the post-war expansion of trade. In 1991, India adopted liberal and free-
market principles and liberalised its economy to international trade under the guidance
of Former Finance minister Manmohan Singh under the Prime Ministry of P.V.
Narasimha Rao, prime minister from 1991 to 1996, who had eliminated Licence Raj,
a pre- and post-British era mechanism of strict government controls on setting up new
industry. After more fundamental reforms since 1991 and their renewal in the 2000s,
India has progressed towards a free market economy.
Source:www.pibindia.gov.in
The economy of India is the fifth largest in the world by nominal GDP and the
third-largest by purchasing power parity (PPP). The country is one of the G-20 major
economies and a member of BRICS. on a per capita income basis, India ranked 142nd
by GDP (nominal) and 124th by GDP (PPP) in 2020.The economy slowed to around
9.60% for the 2019-20 fiscal year compared with rise of 4.7% in the previous fiscal
year. On April 01, 2020 the Indian rupee hit an all time low of 77.60 against the US
dollar. In order to control the fall in rupee, the government introduced capital controls
on outward investment by both corporate and individuals. GDP growth rose marginally
to 0.4% during the 3rd quarter through December 2020, from about fall of 7.3% in the
previous quarter. The Q1 result was the worst contraction by -23.4% in the history of
Indian economy due to the severe Corona Pandemic. The government has forecast

51. 51 | Page
contraction of a growth rate of 7.7% for the year 2020-21, India suffered a very high
fiscal deficit of 9.5% of GDP in the year 2020-21. The Indian Government aims to cut
the fiscal deficit to 6.7% of GDP in 2021-22.
GROSS DOMESTIC PRODUCT (GDP)
Gross domestic product (GDP) is the market value of all officially recognized
final goods and services produced within a country in a given period of time.
Source:www.pibindia.gov.in
India is the fifth-largest in the world by nominal GDP. India's GDP grew by
7.0% in 2017-18. GDP growth rose marginally to 4.8% during the quarter through
March 2013, from about 0.4% in the previous quarter. Growth rose marginally to 0.4%
during the 3rd quarter through December 2020, from about fall of 7.3% in the previous
quarter. The Q1 result was the worst contraction by -23.4% in the history of Indian
economy due to the severe Corona Pandemic. The government has forecast contraction
of a growth rate of 7.7% for the year 2020-21, India suffered a very high fiscal deficit of
9.5% of GDP in the year 2020-21. The Indian Government aims to cut the fiscal deficit
to 6.7% of GDP in 2021-22. The government has forecast a growth rate of 6.1%-6.7%
for the year 2013-14, The GDP value of India represents 2.97 percent of the world
economy; GDP in India is reported by the World Bank Group. The gross domestic
product (GDP) measures of national income and output for a given country's
economy.GDP of India at Factor cost is Rs 55054.37 Billion in the year 2012-13. It

52. 52 | Page
indicates future growth of GDP which is shown by the following Diagram.
SECTORAL ANALYSIS
The share of various sectors (including manufacturing and services sector) in
Gross Value Added (GVA) during last three years is given in the table below.
Share of sectors in GVA at current prices (per cent)
Sector 2015-16 (2nd RE) 2016-17 (1st RE) 2017-18 (PE)
Agriculture, forestry &
fishing
17.7 17.9 17.1
Industry 29.8 29.3 29.1
(Of which)
Manufacturing
16.8 16.8 16.7
Services 52.5 52.8 53.9
Source: Central Statistics Office;
Notes: 2nd RE: Second Revised Estimates, 1st RE: First Revised Estimates, PE:
Provisional Estimates.
Source: https://pib.gov.in
In first half (April-September) of 2018-19, share of manufacturing sector in GVA was
16.9 per cent, higher as compared to 16.5 per cent in the first half of 2017-18.
Promoting the growth of manufacturing sector and hence increasing its
contribution to the economy remains one among the utmost priorities of the
Government. The Government has put in place a policy framework to create conducive
business environment and improved infrastructure network. The Make in India
initiative launched by the Government focuses on infrastructure development,
simplified processes, job creation, skill development and fostering innovation in the
select manufacturing sectors. Startup India initiative was launched to build a strong eco

53. 53 | Page
-system for nurturing innovation and startups and to drive economic growth and
generate employment opportunities. The Government has also taken up a series of
measures to improve ease of doing business, which has borne results with the position
of India improving from 142nd rank in 2014 to 77th rank in 2018. Further, the Foreign
Direct Investment policy has been simplified and liberalized progressively and now
most sectors are on automatic route. Pradhan Mantri Mudra Yojana was launched to
extend collateral free loans by banks, non-banking financial companies and micro
finance institutions to small/micro business enterprises in the non-agricultural sector to
individuals to enable them to setup or expand their business activities and to generate
self-employment.
CURRENT ACCOUNT DEFICIT
CAD is the shortfall between the money flowing in on exports, and the money
flowing out on imports. Current Account Deficit (or Surplus) measures the gap
between the money received into and sent out of the country on the trade of goods and
services and also the transfer of money from domestically-owned factors of production
abroad. A nation’s Current Account maintains a record of the country’s transactions
with other nations, in terms of trade of goods and services, net earnings on overseas
investments and net transfer of payments over a period of time, such as remittances.
This account goes into a deficit when money sent outward exceeds that coming inward.
Current Account Deficit is slightly different from Balance of Trade, which
measures only the gap in earnings and expenditure on exports and imports of goods and
services. Whereas, the current account also factors in the payments from domestic
capital deployed overseas. For example, rental income from an Indian owning a house
in the UK would be computed in Current Account, but not in Balance of Trade.

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India's current account deficit averaged 2.2 per cent of gross domestic product
(GDP) in the last 10 years. However, reversing this trend, current account balance
turned into surplus (0.1 per cent of GDP) in fourth quarter 2019-20 on the back of,
among others, a lower trade deficit and a sharp rise in net invisible receipts. This
quarterly surplus was registered after a gap of 13 years after fourth quarter of fiscal
2006-07. This has been followed by successive current account surpluses in first and
second quarters of the current fiscal.
In the first half of 2020-21, steep contraction in merchandise imports and lower
outgo for travel services led to a sharper fall in current payments (by 30.8 per cent) than
current recei India, being a developing and emerging market economy, typically runs a
deficit on the current account to supplement domestic savings with foreign savings to
fund higher investment, it said. The current account deficit is usually financed by a
capital account surplus. However, since the last quarter of 2019-20, India has been
experiencing a current account surplus along with robust capital inflows leading to a
balance of payment (BoP) surplus.
Meanwhile, the pre-Budget document also called for scaling up of business
sector contribution to research and development (R&D) by more than 50 per cent.
FOREIGN EXCHANGE RESERVE
Forex Reserves are Assets held by central banks and monetary authorities,
usually in different reserve currencies, mostly the United States dollar, and to a lesser

55. 55 | Page
extent the Euro. The term in popular usage commonly also adds gold reserves, special
drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions.
Foreign Exchange reserves are called Reserve Assets in the Balance of Payments.
India has large foreign-exchange reserves; holdings of cash, bank deposits,
bonds, and other financial assets denominated in currencies other than India's national
currency, the Indian rupee. The reserves are managed by the Reserve Bank of India for
the Indian government and the main component is foreign currency assets.
Foreign-exchange reserves act as the first line of defense for India in case of
economic slowdown, but acquisition of reserves has its own costs.[1] Foreign exchange
reserves facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.
India's total foreign exchange (Forex) reserves stand at around US$590.185
Billion on 29 January 2021, the highest ever, with the Foreign Exchange Assets (FCA)
component at around US$547.218 Billion, Gold Reserves at around US$36.294
Billion, SDRs (Special Drawing Rights with the IMF) of around US$1.508 Billion and
around US$5.165 Billion Reserve Position in the IMF, as per Reserve Bank of India's
(RBI) weekly statistical supplement published on 29 January 2021. The Economic
survey of India 2014-15 said India could target foreign exchange reserves of US$750
Billion-US$1 Trillion.
Source: RBI
In June 2020 India for the first time crossed the 500 Billion USD mark. The
total forex reserves touched an all time high of 590 billion US$ on 29 January 2021.

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FOREIGN INVESTMENT INFLOW
Foreign direct investment (FDI) is an important source of non-debt finance and hence a
factor in the economic development of a country. Apart from supplementing domestic
investment, it brings with it internationally available technologies, managerial skills
and practices, and new employment opportunities.
Source: https://bloomberg.com
According to the World Investment Report, 2020 of the United Nations
Conference on Trade and Development (UNCTAD), India jumped from 12th spot in
2018 to 9th spot in 2019 on the list of global top 20 recipients of FDI. In other words,
India was among the top 10 recipients of FDI. FDI inflows into India increased from
US$ 60 billion in 2018 to US$ 62 billion in 2019.
Similarly, as per the quarterly Fact Sheet on FDI released on November 27,
2020 by the Department for Promotion of Industry and Internal Trade (DPIIT),
Government of India, FDI into India totalled US$ 30 billion during the first half (April
to September) of the current fiscal year (2020-21) as compared to US$ 26 billion for the
same period last year (2019-20), recording an increase of 15 percent.

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INFLATION
The inflation rate in India was recorded at 4.06 percent in January of 2021.
Inflation Rate in India is reported by the Ministry of Commerce and Industry of India.
India Inflation Rate averaged 7.72 Percent from 1969 until 2021, reaching an all time
high of 34.68 Percent in September of 1974 and a record low of -11.31 Percent in May
of 1976. Inflation in India fell to 4.06 percent in January of 2021 from 4.59 percent in
December. It is the lowest reading since September of 2019 and below market forecasts
of 4.45 percent. In India, the wholesale price index (WPI) is the main measure of
inflation.
AGRICULTURAL PRODUCTION
India is the largest producer of spices, pulses, milk, tea, cashew, and jute. The
second-largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton, and
oilseeds. India has the tenth-largest arable land resources in the world. It is also the
largest producer, consumer, and exporter of spices and spice products.
Source: https://www.pibindia.gov.in
Agriculture sector to grow at 3% in 2020-21 despite Covid-19 lockdown.
According to the Economic Survey 2019-20, the annual growth rate in real terms in
agriculture and its allied sectors was 2.88 per cent from 2014-15 to 2018-19 whereas

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the estimated growth rate in 2019-20 was 2.9 per cent. India has set a food grain
production target of 298.3 million tonnes for 2020-21 fiscal year against 291.95 million
tonnes in 2019-20 and 285.20 million tonnes in 2018-19.
INDUSTRIAL PRODUCTION
The Index of Industrial Production (IIP) is an index which shows the growth
rates in different industry groups of the economy. It is a key economic indicator of
manufacturing sector of the economy.
The weightage of Manufacturing, Mining and Electricity production in overall
Index of Industrial Production (IIP) is 77.63 per cent, 14.37 per cent and 7.99 per cent
respectively. The overall Index of Industrial Production for the month of December
2020 stands at 135.9 as compared to 126.1 for November 2020 and 129.2 for October
2020. The Indices of Industrial Production for the Mining, Manufacturing and
Electricity Sectors for the month of December 2020 stand at 115.1, 137.5 and 158.0
respectively. The Quick Estimates by government for December 2020 have been
compiled at a weighted response rate of 89 percent, the first revision for November
2020 at a weighted response rate of 92 percent and the final revision for September,
2020 at a weighted response rate of 95 percent.

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Source:RBI
LENDING RATE
In India, Lending rates decision are taken by Reserve Bank of India`s central
board of directors. Fall in lending rates positively affects the economic activities of that
particular country, because fall in interest rates will lead to decrease in cost of capital
and increase in volume of the investment of that country.
Following is the table showing average lending interest rates of banks over 8
years. By analyzing the table it is clear that falling interest rates year by year from year
2012-2013 to 2017-18 but increased in year 2018-19 to the certain extent and continue
to fall by 2019-20.
EMOLOYMENT

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The Republic of India is one of the world’s largest countries, with a yearly average
population growth of one percent. India has more labour productive capacity. Today`s
labour productivity growth rate of india is 9.9% even unemployment rate is 5.4%.
Mining and quarrying are the most labour productive sector. The Worker Population
Ratio in India stood at 46.8 percent in the 2019-20 in fiscal year, the Periodic Labour
Force Survey (PLFS) of the National Sample Survey Office (NSSO)
Following is the diagram showing the unemployment rate in india;

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INDUSTRY ANALYSIS

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INDUSTRY ANALYSIS:
SWOT ANALYSIS FOR THE INDUSTRY
1. STRENGTH
 Indian banks have compared favourably on growth, asset quality and
profitability with other regional banks over the last few years. The banking
index has growth at a compounded annual rate of over 51% since April 2001 as
compared to a 27% growth in the market index for the same period.
 Policy makers have made some notable changes in policy and regulation to help
strengthen the sector. These changes include strengthening prudential norms,
enhancing the payments system and integrating regulations between
commercial and co-operative banks.
 Bank lending has been a significant driver of GDP growth and employment.
 Extensive reach: The vast networking & growing number of branches & ATMs,
Indian banking system has reached even to the remote corners of the country.
The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India.
 In terms of quality of assets and capital adequacy. Indian banks are considered
to have clean, strong and transparent balance sheets relative to other banks in
comparable economies in its region.
 India has 88 scheduled commercial banks (SCBS)-27 public sector banks (that
is with the Government of India holding a stake) after merger a NEW BANK of
India in Punjab National Bank in 1933, 29 private banks (these do not have
government stake; they may be publically listed and traded on stock exchanges)
and 31 foreign banks. They have a combined network of over 53,000 branches
and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the

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public sector banks hold over 75% of total assets of the banking industry, with
the private and foreign banks holding 18.2% and 6.5% respectively.
 Foreign banks will have the opportunity to own up to 74% of India private
sector banks and 20% of government bonds.
2. WEAKNESS
 PSBs need to fundamentally strengthen institutions skill levels especially in sale
and marketing. service operations, risk management and overall organizational
performance ethic & strengthen human capital
 Old private sector banks also have the need to fundamentally strengthen skill
levels.
 The cost of intermediation remains high and bank penetration is limited to only
a few customer segment and demographics.
 Structural weakness such a fragmented industry structure, restrictions on capital
availability and deployment, lack of institutional support infrastructure,
restrictive labour laws, weak corporate governance and ineffective regulations
beyond Scheduled Commercial Banks (SCBS),unless industry utilities and
service bureaus.
 Refusal to dilute stake in PSU banks: The government has refused to dilute its
stake in PSU banks below 51% thus choking the headroom available to these
banks for raining equity capital
 Impediments in sectoral reforms: Opposition form left and resultant cautious
approach from the North Block in terms of approving merger of PSU banks may
hamper their growth prospects in the medium term.

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3. OPPORTUNITY
 The market is seeing discontinuous growth driven by new products and services
that include opportunities in credit cards, consumer finance and wealth
management on the retail side, and in fee-base income and investment banking
on the whole sale banking side. These require new skills in sales & marketing,
credit and operations.
 Banks will no longer enjoy windfall treasury gains that the decade-long secular
decline in interest rates provided. This will expose the weaker banks.
 With increased interest in India, competition from foreign banks wills only
intensity.
 Given the demographic shifts, resulting from changes in age profile and
household income, consumers will increasingly demand enhanced institutional
capabilities and Service levels from banks.
 New private banks could reach the next level of their growth in the Indian
banking sector by continuing to innovate and develop differentiated business
models to profitability.
 Serve segments like the rural/low income and affluent/HNI segment; actively
adopting acquisitions as a means to grow and reaching the next level of
performance in their service platforms. Attracting, developing and reaching and
retaining more leadership capacity.
 Foreign banks committed to making a play in India will need to adopt
alternative approaches to win the "race for the customer" and build a value-
creating customer franchise in advance of regulations potentially opening up
post 2009. At the same time, they should stay in the game for potential
acquisition opportunities as and when they appear in the near term. Maintaining
a fundamentally long-term value creation mindset.
 Reach in rural India for the private sector and foreign banks.

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 With the growth in the Indian economy expected to be strong for quite some
time especially in its services sector the demand for banking services, especially
retail banking, mortgages and investment services are expected to be strong.
 The Reserve Bank of India (RBI) has approached a proposal from the
government to amend the Banking Regulation Act to permit banks to trade in
commodities and commodity derivatives.
 Liberalization of ECB norms: The government also liberalized the ECB norms
to permit financial sector entities engaged in infrastructure funding to raise
ECBS. This enables banks and financial institutions, which were earlier not
permitted to raise such funds, explore this route for raising cheaper funds in the
overseas markets.
 Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI
has allowed them to raise perpetual bonds and other hybrid capital securities to
shore up, their capital. If the new instruments find takers, it would help PSU
banks. left with little headroom for raising equity. Significantly, FII and NRI
investment limits in these securities have been fixed at 49%, compared to 20%
foreign equity holdings allowed in PSU banks.
4. THREATS
 Threat of stability of the system failure of some weak banks often threatened the
stability of the system.
 Rise in inflation figures which would lead to increase in interest in interest rates.
 Increase in the number of foreign players would pas well as those a threat to the
PSB as well as the private players.
PORTER`S FIVE FORCE ANALYSIS

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RIVARLY AMAONG COMPETING FIRMS
Rivalry among competitors is very fierce in Indian Banking Industry. The
services banks offer is more of homogeneous which makes the Company to offer the
same service at a lower rate and eat their competitor market's share. Market Players use
all sorts of aggressive selling strategies and activities from intensive advertisement
campaigns to promotional stuff. Even consumer switch from one bank to another, if
there is a wide spread in the interest. Hence the intensity of rivalry is very high. The no

67. 67 | Page
of factors has contributed to increase rivalry those are-
1. A large no. of banks
There is so many banks and non financial institution fighting for same pie. which has
intensified competition?
2. High market growth rate
India is seen as one of the biggest market place and growth rate in Indian banking
industry is also very high. This has ignited the competition.
3. Homogeneous product and services
The services banks offer is more of homogeneous which makes the company to offer
the same service at a lower rate and eat their competitor market's share.
4. Low switching cost
Costumers switching cost is very low, they can easily switch from one bank to another
bank and very little loyalty exist .
5. Undifferenciated services
Almost every bank provides similar services. Every bank tries to copy each other
services and technology which increase level of competition.
6. High fixed cost
Fixed cost is very high
7. High exit barriers
High exit barriers humiliate banks to earn profit and retain customers by providing
world class services.
8. Low government regulations
There are low regulations exist to start a new business due LPG policy adopted by
India.

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BARGAINING POWER OF SUPPLIERS
Banking industry is governed by Reserve Bank of India. Reserve Bank of India
is the authority to take monetary action which leads to direct impact on circulation of
money in the Economy. The rules and regulation lay down by RBI.
Suppliers of banks are depositors these are those people who have excess
money and prefer regular income and safety. In banking industry suppliers have low
bargaining power.
1. Nature of suppliers
Suppliers of banks are those people who prefer low risk and those who need regular
income and safety as well. Banks best place for them to deposits theirs surplus money.
2. Few alternatives
Very few alternatives are available so the bargaining power is less.
3. RBI rules and regulations
Banks are subject to RBI rules and regulations bank has to behave in a way that RBI
wants. So RBI takes all decisions related to interest rates. This reduces bargaining
power of suppliers.
4. Suppliers not concentrated
Banking industry suppliers sure not concentrated. There are numerous with negligible
portion of offer so this reduces their bargaining power.
BARGAINING POWER OF CONSUMERS
In today world, Customer is the King. Banks offers different services According
to clients need and requirement. They offer loans at Prime Lending Rate (PLR) to their
trust worthy clients and higher rate to others clients.
Customers of banks are those who take loans and uses services of banks.
Customers have high bargaining power. These are:

69. 69 | Page
1. Large no of alternatives
Customers have large no of alternatives, there are so many banks, which fight for same
pie. There are many non financial institutions like ICICI, HDFC and IFCI, etc. which
has also jump into these business there are foreign banks private banks, co-operative
banks and development banks together with specialized financial companies that
provides finance to customers .these all increase preference for customers.
2. Low switching cost
Cost of switching from one bank to another is low. Banks are also providing zero
balance account and another types of facilities. They are free to select any banks
service. Switching cost are becoming lower with internet banking gaining momentum
and a result customers loyalties are harder to retain.
3. Undifferenciated service
Bank provide merely similar service there are no much diffracted in service provides by
different banks so, bargaining power of customers increase. They can not be charged
for differentiation.
4. Full information about the market
Customers have full information about the market due to globalization and
digitalization Consumers have become advance and sophisticated they are aware with
each market condition so banks have to be more Competitive and customer friendly to
serve them.
For good creditworthy borrowers bargaining power is high due to the
availability of large number of banks.
POTENTIAL ENTRY OF NEW COMPETITORS

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Reserve Bank of India has laid out a stagnant rules and regulation for new
entrant in Banking Industry. We experience merger and acquisition in the banking
industry in current situation. Hence, the industry is less suitable for new competitor.
Barriers to an entry in banking industry no longer exist. So lots of private and
foreign banks are entering in the market. Competitors can come from an industry to dis-
intermediate bank product differentiation is very difficult for banks and exit is difficult.
So every bank strives to survive in highly competitive market so we see intense
competitive can mergers and acquisitions. Government policies are supportive to start
new bank. There is less statutory requirement needed to start a new venture? Every
bank to tries to achieve economics of scale through use of technology and selecting and
training manpower.
There are public sector banks, private sector and foreign banks along with non
banking finance companies competing in similar business segments.
POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS
Every day there is one or the other new product in financial sector. Banks are
not limited to tradition banking which just offers deposit and lending. In addition, today
banks offers loans for all products, derivatives, FOREX, Insurance, Mutual Fund,
Demit account to name a few. The wide range of choices and needs give a sufficient
room for new product development and product enhancement.
Substitute products or services are those, which are different but satisfy the same set
of customers. In private banking industry following are the substitutes:
 NBFC: Non-banking financial Institutions play an important role in giving
financial assistance. Mobilization of financial resources outside the traditional
banking system has witnessed a tremendous growth in recent years in the India.
NBFC is a close substitute of banking in respect of raising funds. Borrower can
easily raise funds from NBFC because it requires less formal procedure for
getting funds compare to private banks.

71. 71 | Page
 Post Office Products: Post office is also providing some service like fixed
deposit facility. Saving account, recurring account etc. The interest rate of
saving account is higher than private banks. It is fully secured by the
government so people who do not want to take risk for them post office saving
is good substitute.
 Government Bond: Govt. Bond also attracts savings from the general public. It
is less risky and more secured as compare to savings in private banks.
 Mutual Funds: Mutual funds are also now proving as good substitutes for
banks. They assure for providing high return with less time in comparison of
banks. The administrative expenses are also very low as compared to banks.
Investment in Mutual funds is more flexible than investment in banks.
 Stock Market: People who are ready to bear risk and wants a high return on
their investment, stock market is a good substitute for them. Day by day
investors are moving towards stock market as interest rate in banks are
decreasing. So now stock market has proved as a big competitor for baking
sector.
 Debentures: Debentures is also proved as a good substitute of bank's fixed
deposit as return on debenture is fixed and high. There are different types of
debentures, which attract various classes of investors.
 Other Investment Alternatives: Now common people's attraction is shifting
from banks to other various alternatives such as gold, precious metals, land,
small savings etc. As we can see the growing trend in these alternatives in
comparison of decreasing interest rates in banks.
PEST ANALYSIS

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Political/ Legal
Influences which have an impact on banking services and consumer confidence include
the following:
 State provision of pensions
 Government encouragement of savings and investment (for e.g. via tax
benefits)
 Regulatory control and protection (to prevent the collapse of financial
institutions and protect investors money)
Economic
Economic factors are key variables which have an impact on the activity in the
banking services sector. The level of consumer activity is governed by income levels
and personal wealth. As income levels grow, more discretionary income is available to
spend on banking services. Consumer confidence in the economy and in job security
also has a major impact; if lean times are foreseen ahead, savings will take priority over

73. 73 | Page
loans and other forms of expenditure. Consumers may also seek easy access savings
and be willing to tie up their money for longer periods with potentially more attractive
investments.
The main economic factors that should be monitored with regard marketing are as
follows:
 Personal and household disposable income
 Discretionary income levels
 Employment levels
 The rate of inflation
 Income tax levels and taxation structures
 Savings and investment levels and trends
 Stock market performance
 Consumer spending & Consumer credit
Socio-cultural
Many demographic factors have an important bearing on banking services Markets:
 Changing attitude towards consumer credit and debt
 Changing employment patterns
 Numbers of working women
 The ageing population
 Marriage/divorce/birth rates
 Consumption trends
Technological
Technology has a major impact on many industries including financial services
and banking in particular. ATM services which not only provide cash but also allow for
bill payments, deposits and instant statements are widely used. From the customers'
viewpoint, technology has played a major role in the development of the process
whereby the service is delivered. Automated queuing systems have made visits to the

74. 74 | Page
bank easier and more convenient. Telephone Banking and insurance services are now
being used in place of the traditional branch-based service process. Technology has
also played a major role within organizations, bringing about far greater efficiency
through computerized records and transaction systems and also in business
development, through the setting up of detailed customer databases for effective
segmentation and targeting.
The main technological developments fall within these categories:
 Process developments
 Information storage and handling
 Database system.

75. 75 | Page
COMPANY ANALYSIS

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STATE BANK OF INDIA (SBI)
State Bank of India (SBI) is an Indian multinational Government owned
(56.92%), public sector banking and financial services statutory body headquartered in
Mumbai, Maharashtra founded in July 1956. SBI is the 43rd largest bank in the world
and ranked 221st in the Fortune Global 500 list of the world's biggest corporations of
2020, being the only Indian bank on the list. As of December 2020, it had assets of
US$590 billion and 24,000 branches, including 191 foreign offices in 36 countries,
making it the largest banking and financial services company in India by assets. SBI
had 14,816 branches of which 9.851 (66%) were in Rural and Semi-urban areas its
revenue was INR ₹368,010 Crores (USS 52 billion), out of which domestic operations
contributed to 95.35% of revenue in financial year 2019-2020. SBI had five associate
banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore,
State Bank Partial, State Bank of Travancore but all merged into SBI. Apart from five
associate banks it has seven Non-Banking Financial services. SBI also has the
following non-banking subsidiaries SBI Capital Markets Ltd., SBI Funds Management
Pvt. Ltd., SBI Factors & Commercial Services Pvt. Ltd., SBI Cards & Payments
Services Pvt. Ltd. (SBICPSL), SBI DFHI Ltd, SBI Life Insurance Company Limited,
SBI General Insurance.
COMPETITIVE POSITION
SBI is India's oldest and largest public sector Bank. SBI is the 43rd largest bank in the
world and ranked 221st in the Fortune Global 500 list of the world's biggest
corporations of 2020, being the only Indian bank on the list. A nationalised bank, it is
the largest in India with a 23% market share by assets and a 25% share of the total loan

77. 77 | Page
and deposits market. It has market capitalization of Rs.342,526.16 Crore, Net interest
income of Rs.119,657.10Cr. And net profit of Rs. 14,104.98Cr. Some of the major
competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis Bank,
Bank of India, Punjab National Bank, Canara Bank and Bank of Baroda. However in
terms of average market share, SBI is by far the largest player in the market. SBI has
increase its customer base to 49.87 crore in year2019-2020.
BOARD OF DIRECTORS
Chairman Shri. Dinesh Kumar Khara
Managing Directors Shri. Challa Sreenivasulu Setty
Shri. Ashwani Bhatia
Shri. Swaminathan J.
Shri. Ashwini Kumar Tiwari
Directors Shri. B. Venugopal
Dr. Ganesh Natarajan
Shri. Ketan S. Vikamsey
Shri. Mrugank M Paranjape
Dr. Pushpendra Rai
Shri. Sanjeev Maheshwari
Shri. Debasish Panda
Shri. Chandan Sinha
PRODUCT AND SERVICES:
 Debit cards: Debit Card spends of State Bank Group crossed 15,000 crores for
FY 2019-20 which constitutes over 20% of total Debit Card spends in the
industry. Prepaid Cards Bank's range of products include popular Rupee
Prepaid Cards like Gift Card, General Purpose Prepaid Card like eZ-Pay Card
and Foreign Travel Card catering to various payment needs of the customers.

78. 78 | Page
 Foreign Travel Card: Foreign travel card providing safety, security and
convenience to overseas travelers, which is now available in eight major
currencies US Dollar (USD), Great Britain Pound (GBP). Euro, Canadian
Dollar CAD). Australian Dollar (AUD). Japanese Yan (JPY), Saudi Riyal
(SAR) and Singapore Dollar (SGD).
 eZ-Pay Cards: eZ-Pay Cards are aligned with most of the social schemes of
State and Central Governments.
 Gift Cards: Gift Cards remain the preferred option to customers to gift the
freedom of choice' to their loved ones.
 Green Remit Card (GRC): A cardholder can swipe the card at Green Channel
Counter or in Cash Deposit Machines and remit money to the beneficiary whose
account number is mapped to the card. Once the transaction is complete, both
the remitter and beneficiary get confirmation through SMS on their mobile
phone.
 Mobile banking
 Internet banking
AREAS COVERED
SBI provides a range of banking products through its network of branches in India and
overseas with headquarters in Mumbai, Maharashtra. It has 14 regional hubs and 57
Zonal Offices that are located at important cities throughout India. And had 14,816
branches in India of which 9.851 (66%) were in rural and Semi -urban areas In the
financial year 2019-20. The bank has 191overseas offices spread over 36 countries.

79. 79 | Page
MARKET CAPITALIZATION
SBI is India's Number one bank on the basis of market capitalization, Amounted to
Rs.342,526.16 Crore in 2020. It has 23% market share by assets.
59%
17%
12%
4%
3%
6%
Promotor (Govt.) Banks & Insurance company FII/GDR/NRI Mutual funf & UTI
Private corporate bodies Other
SHAREHOLDING PATTERN

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COMPARATIVE BALANCESHEET OF SBI 2018-2020
Source: https://www.moneycontrol.com

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LABOUR CONDITION
SBI is one of the largest employer in the country having 2,49,448 employees as on
march 2020, which shows there is no scarcity of employees in SBI.
Labour Condition
Year 2016 2017 2018 2019 2020
Total Income (in Cr.) 85,040 97,321 1,19,454 1,25,124
97,321 119,454 125,124 143,306
No. of Employees 203864 209,567 264,041 257,252 249,448
Earning per Employee 0.4171 0.4644 0.4675 0.4812 0.5744
The table above stated shows the productive quality and availability of labours
over past 5 years. It is clear about there is no scarcity of labour and the employed
Labours are highly productive. The number of employees increased by 22.6% from
2016 to 2020 i.e. 46,000 additional labours are recruited during the period of time. And
Sales per employee increased from 41 crore in 2016 to 57 crore in 2013, i.e. an increase
of 6 Crore over the period.
RATIO ANALYSIS
NET INTEREST MARGIN
Higher the ratio indicates efficiency of firm in investment decision. Here in the table
shows NIM rose from 2.27% in 2018 to 2.59% in 2020.

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CREDIT TO DEPOSIT RATIO
Higher the ratio reflect the ability of bank to make optimal use of available resources.
By analyzing above table it is clear that CD Ratio decreased from 84.57% in 2016
to71.73% in 2020.
OPERATING PROFIT MARGIN
A higher operating margin indicates that the company is earning enough money from
business operations to pay for all of the associated costs involved in maintaining that
business. Table showing an increased trend of OPM of SBI from 6.75% in 2018 to
8.90% in 2020.
NON PERFORMING ASSETS (NPAs) RATIO

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NPA ratio had increased till 2018 i.e 5.73 but it has decreased to 3.01 in 2019. In 2020,
NPA ratio is 2.23, this show efficiency in working of loan recovery of SBI.
COST TO INCOME RATIO
Cost to income ratio is constantly increasing from 21.78% in 2016 to 24.85% in 2020.
MARKET TEST RATIO
EARNING PER SHARE (EPS)
Earning per share of SBI went negative -7.67 in 2018 but recovered by 0.97 in 2019 and
continue to 16.23 in 2020.
DIVIDEND PER SHARE (DPS)

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SBI retains profit for its own operations and so didn`t declare dividend for years and
year. In 2017 and 2016, DPS was 2.64 and 2.60 respectively.
DIVIDEND PAYOUT RATIO
Bank had maintained dividend payout around 20% till 2017 and retained Profit for its
operational purpose from 2018.
PRICE TO EARNING (PE) RATIO
Higher PE indicates the investors expecting high earning growth in future and it shows
how much investors are willing pay for the EPS. In 2018, there was negative PE of -
34.24. In 2020, it has increased to 19.23.