This document analyzes the relative efficiency of 80 banks in India from 2008 to 2010 using data envelopment analysis (DEA). It finds that:
1) Foreign banks have the highest average efficiency score of 0.96, followed by private banks (0.77), and public sector banks (0.74).
2) When analyzed separately by sector, public sector banks have the highest average efficiency (0.96), followed by private banks (0.94), and foreign banks (0.90).
3) Higher costs of deposits and lower returns on investments and loans contribute most to public and private bank inefficiencies relative to foreign banks. Reducing non-performing assets could improve public bank efficiency over
Measuring Technical and Scale Efficiency of Banks in India Using DEAiosrjce
This study uses CRR model and BCC model to estimate the technical and scale efficiency of
commercial banks in India during the periods 2006-2010. The results indicate that deregulation of banking
sector has led to an increase in the efficiency of commercial banks in India. This increase in efficiency of banks
in India is not only because of increase in pure technical efficiency but also due to increase in its scale
efficiency. The results show large spread of technical efficiency between companies during the period. The
estimated results also shows that performance of private sector banks has been better than public sector banks
during the period and source of inefficiency is mainly due to its scale rather than pure technical inefficiency.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
A STUDY OF NON-PERFORMING ASSETS AND ITS IMPACT ON BANKING SECTORJournal For Research
Banks plays an important role in the economic development of a country. Banks are growth-driver and the banking business is exposed to various risk, such as credit risk, liquidity risk, interest risk, market risk, operational risk and management risk. Apart from these risks the very important risk is loan recovery. The sound financial position of a bank depends upon the recovery of loans or its level of Non-performing assets (NPAs). Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overall profitability of banks. The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled.
A Dissertation Report On "Study Of Net Interest Margin {NIM} Of Selected INDIAN Public & Private Sector Banks"
Has Undertaken 10 Years Financial Data Of Selected Banks i.e. 2008-2017 for the Study.
Measuring Technical and Scale Efficiency of Banks in India Using DEAiosrjce
This study uses CRR model and BCC model to estimate the technical and scale efficiency of
commercial banks in India during the periods 2006-2010. The results indicate that deregulation of banking
sector has led to an increase in the efficiency of commercial banks in India. This increase in efficiency of banks
in India is not only because of increase in pure technical efficiency but also due to increase in its scale
efficiency. The results show large spread of technical efficiency between companies during the period. The
estimated results also shows that performance of private sector banks has been better than public sector banks
during the period and source of inefficiency is mainly due to its scale rather than pure technical inefficiency.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
A STUDY OF NON-PERFORMING ASSETS AND ITS IMPACT ON BANKING SECTORJournal For Research
Banks plays an important role in the economic development of a country. Banks are growth-driver and the banking business is exposed to various risk, such as credit risk, liquidity risk, interest risk, market risk, operational risk and management risk. Apart from these risks the very important risk is loan recovery. The sound financial position of a bank depends upon the recovery of loans or its level of Non-performing assets (NPAs). Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overall profitability of banks. The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled.
A Dissertation Report On "Study Of Net Interest Margin {NIM} Of Selected INDIAN Public & Private Sector Banks"
Has Undertaken 10 Years Financial Data Of Selected Banks i.e. 2008-2017 for the Study.
A Comparison of Key Determinants on Profitability of India’s Largest Public a...Rajveer Rawlin
The banking sector in India has come under the scanner following some key changes in monetary policy. With
the Reserve bank of India (RBI) raising interest rates to support the falling Indian currency the Rupee, the cost of
funds of banks has increased significantly. This could manifest itself in rising non-performing assets (NPAs) and
declining profitability. The profitability of banks is impacted by both internal and external factors. This paper is
an attempt to compare the key drivers of profits at India’s largest public and private sector banks. Bank specific
metrics and risk factors were important drivers of profits at both banks. Productivity measures were key drivers
of profits at India’s largest public sector bank SBI but had no effect on profits at India’s largest private sector
bank, HDFC bank. Asset usage efficiency measures were key determinants of profitability at HDFC bank but not
at SBI. The single most important determinant of SBI proved to be business per employee, a productivity
measure while advances and bank size which are traditional bank metrics were key drivers of profits at HDFC
bank. Managers at both banks and their share holders thus can look at these drivers to develop a broad
understanding of profitability at the two banks.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Influence of Solvency Ratio Decision on Rural Bank Dinar Pusaka In The Di...inventionjournals
The solvency ratio is a ratio that can be used to influence lending decisions on the BPR. This research purpose to test and find empirical evidence whether the Debt to Assets Ratio, Times Interest Earned Ratio, and Long-term Debt to Equity Ratio influence on lending decisions. The population useful for customers apply for credit to the BPR Dinar Pusaka in the district Sidoarjo. The sample in this research were selected using purposive sampling method until elected only 30 customers during the three periods, namely the year 2013 to 2015. Data analysis technique used is the logistic regression analysis. The research results show that Times Interest Earned Ratio variable does not affect the lending decisions. Meanwhile, the variable Debt to Assets Ratio and Long-term Debt to Equity Ratio influence on lending decisions
A STUDY ON THE FINANCIAL PERFORMANCE OF FOREIGN COMMERCIAL BANKS IN SRI LANKA...ectijjournal
Banks serve as backbone to the financial sector, which facilitate the proper utilization of financial
resources of a country. The banking sector is increasingly growing and it has witnessed a huge flow of
investment. The banking sector of developing countries is different from the developed countries in term of
performance. The banking sector, especially commercial banks of Sri Lanka plays a vital role in the Sri
Lankan economy. The focus of this study was to investigate the financial performance of foreign
commercial banks in Sri Lanka. Many studies are conducted in different countries to study the financial
performance of banking sector using the various statistical methods. In this study, the CAMEL rating
system is used to study the financial performance of foreign commercial banks in Sri Lanka. The study
selects three foreign banks for the analysis. Data was collected for the time period of 2008-2014.
According to the findings foreign sector banks are good in the performance of capital adequacy and
earnings while other variables show an average performance.
Evaluation of some private commercial banks in bangladesh from performance pe...ijmvsc
Banks operate on a huge scale at the heart of the modern economy and the banking system has become an
integral part in the progress of economic development in Bangladesh. Besides, the banking sector has
made their innovation and efficiency crucial to the economy as it competes in an e-commerce world. The
role of banking system in this situation cannot be denied at all. This report intends to evaluate the
performance of selected private commercial banks in Bangladesh. In the study, best efforts have been put
on evaluating the performance. The growing pattern of branches, employees, deposits, loans and
advances, classified loan, net income and earnings per share of selected private commercial banks has
been considered to make an analysis on the performance evaluation of the selected private commercial
banks. To evaluate the performance, data have been collected from the secondary sources. Then the
collected data have been analyzed. From the analysis, it has been found that all of the selected banks are
in a position to make a sustainable growth in respect of branches, employees, deposits, loans and
advances, classified loan, net income and earnings per share during the period of 2007-2011 with some
fluctuation. Besides the growth pattern, other forms of calculations have been used for every selected
variable and they are trend equation and square of correlation coefficient. Under trend equation analysis,
the variables named branches, employees, deposits and net incomes hold more positive value than the
other variables considered. As the value of the slope always shows the positive number, it is a clear
indication that Bangladesh has a very good prospect in case of private commercial banks
This research aims to identify and analyze the effect of Capital Adequacy Ratio (CAR), Operation Expense (BOPO), Net Interest Margin (NIM), and Non Performing Loan (NPL) of the Loan to Deposit Ratio (LDR) of conventional bank on the Indonesia Stock Exchange period 2012 – 2017, either simultaneously or partially. Independent variables used in this study is CAR, BOPO, NIM and NPL, while LDR as the dependent variable.The population in this research is conventional bank listed on the Indonesia Stock Exchange. The sampling technique in this research is purposive sampling. The number of samples in accordance with the prescribed criteria are as many as 35 samples. Based on the result of the research found that the variable CAR influences negatively insignificantly toward LDR, BOPO and NIM influences positively insignificantly toward LDR, while the variable NPL influences positively significantly toward CAR. But simultaneously CAR, BOPO, NIM, and NPL jointly affect the LDR.
Mergers and Acquisitions in Indian Banking Sector A Case of Bharat Overseas B...ijtsrd
Mergers and Acquisitions MandAs continue to be a significant force in the restructuring of the financial services industry. The Indian Commercial Banking Sector, which has played a pivotal role in the country’s economic development, is currently passing through an exciting and challenging phase. The present research papers studies the impact of MandA on the financial performance of Bharat Overseas Bank and Indian Overseas Bank. The study uses key financial ratios to find the impact of MandA on financial performance of selected banks. Dr. Soniya Gambhir "Mergers and Acquisitions in Indian Banking Sector (A Case of Bharat Overseas Bank and Indian Overseas Bank)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38415.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/38415/mergers-and-acquisitions-in-indian-banking-sector-a-case-of-bharat-overseas-bank-and-indian-overseas-bank/dr-soniya-gambhir
Impact on NPAs on the performance of UCO Bank: A Studyijtsrd
Indian banking sector has been facing terrible problem due to the deterioration quality of assets which is increasing gradually. The growth of NPA has a direct impact on the overall performance of the bank. The problems of NPAs not only affecting the bank but also affect the entire economy. The present study is analytical in nature and completely based on secondary data analysed by using accounting and statistical tools. The UCO Bank was established before the independence and worked successfully, but now facing various problems due to NPAs. In this above background the present study assess the financial strength, quality of loan assets and NPA management and also discussed the impact of NPAs on the performance of UCO Bank as well as the recovery performance of NPAs. Sanjay Dawn | Dr. Subhas Chandra Sarkar"Impact on NPAs on the performance of UCO Bank: A Study" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-5 , August 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18218.pdf http://www.ijtsrd.com/management/accounting-and-finance/18218/impact-on-npas-on-the-performance-of-uco-bank-a-study/sanjay-dawn
Evaluating Loan Loss Provisioning for Non-Performing Loans and Its Impact on ...Fakir Tajul Islam
Using the aggregate data of 56 commercial banks in the last 9 years
(2009-2017), this study attempts to evaluate the Impacts of LLP maintained for NPLs on profitability, as it may help
to take the level of the LLP, and NPLs in the optimum level of business success.
A Comparison of Key Determinants on Profitability of India’s Largest Public a...Rajveer Rawlin
The banking sector in India has come under the scanner following some key changes in monetary policy. With
the Reserve bank of India (RBI) raising interest rates to support the falling Indian currency the Rupee, the cost of
funds of banks has increased significantly. This could manifest itself in rising non-performing assets (NPAs) and
declining profitability. The profitability of banks is impacted by both internal and external factors. This paper is
an attempt to compare the key drivers of profits at India’s largest public and private sector banks. Bank specific
metrics and risk factors were important drivers of profits at both banks. Productivity measures were key drivers
of profits at India’s largest public sector bank SBI but had no effect on profits at India’s largest private sector
bank, HDFC bank. Asset usage efficiency measures were key determinants of profitability at HDFC bank but not
at SBI. The single most important determinant of SBI proved to be business per employee, a productivity
measure while advances and bank size which are traditional bank metrics were key drivers of profits at HDFC
bank. Managers at both banks and their share holders thus can look at these drivers to develop a broad
understanding of profitability at the two banks.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Influence of Solvency Ratio Decision on Rural Bank Dinar Pusaka In The Di...inventionjournals
The solvency ratio is a ratio that can be used to influence lending decisions on the BPR. This research purpose to test and find empirical evidence whether the Debt to Assets Ratio, Times Interest Earned Ratio, and Long-term Debt to Equity Ratio influence on lending decisions. The population useful for customers apply for credit to the BPR Dinar Pusaka in the district Sidoarjo. The sample in this research were selected using purposive sampling method until elected only 30 customers during the three periods, namely the year 2013 to 2015. Data analysis technique used is the logistic regression analysis. The research results show that Times Interest Earned Ratio variable does not affect the lending decisions. Meanwhile, the variable Debt to Assets Ratio and Long-term Debt to Equity Ratio influence on lending decisions
A STUDY ON THE FINANCIAL PERFORMANCE OF FOREIGN COMMERCIAL BANKS IN SRI LANKA...ectijjournal
Banks serve as backbone to the financial sector, which facilitate the proper utilization of financial
resources of a country. The banking sector is increasingly growing and it has witnessed a huge flow of
investment. The banking sector of developing countries is different from the developed countries in term of
performance. The banking sector, especially commercial banks of Sri Lanka plays a vital role in the Sri
Lankan economy. The focus of this study was to investigate the financial performance of foreign
commercial banks in Sri Lanka. Many studies are conducted in different countries to study the financial
performance of banking sector using the various statistical methods. In this study, the CAMEL rating
system is used to study the financial performance of foreign commercial banks in Sri Lanka. The study
selects three foreign banks for the analysis. Data was collected for the time period of 2008-2014.
According to the findings foreign sector banks are good in the performance of capital adequacy and
earnings while other variables show an average performance.
Evaluation of some private commercial banks in bangladesh from performance pe...ijmvsc
Banks operate on a huge scale at the heart of the modern economy and the banking system has become an
integral part in the progress of economic development in Bangladesh. Besides, the banking sector has
made their innovation and efficiency crucial to the economy as it competes in an e-commerce world. The
role of banking system in this situation cannot be denied at all. This report intends to evaluate the
performance of selected private commercial banks in Bangladesh. In the study, best efforts have been put
on evaluating the performance. The growing pattern of branches, employees, deposits, loans and
advances, classified loan, net income and earnings per share of selected private commercial banks has
been considered to make an analysis on the performance evaluation of the selected private commercial
banks. To evaluate the performance, data have been collected from the secondary sources. Then the
collected data have been analyzed. From the analysis, it has been found that all of the selected banks are
in a position to make a sustainable growth in respect of branches, employees, deposits, loans and
advances, classified loan, net income and earnings per share during the period of 2007-2011 with some
fluctuation. Besides the growth pattern, other forms of calculations have been used for every selected
variable and they are trend equation and square of correlation coefficient. Under trend equation analysis,
the variables named branches, employees, deposits and net incomes hold more positive value than the
other variables considered. As the value of the slope always shows the positive number, it is a clear
indication that Bangladesh has a very good prospect in case of private commercial banks
This research aims to identify and analyze the effect of Capital Adequacy Ratio (CAR), Operation Expense (BOPO), Net Interest Margin (NIM), and Non Performing Loan (NPL) of the Loan to Deposit Ratio (LDR) of conventional bank on the Indonesia Stock Exchange period 2012 – 2017, either simultaneously or partially. Independent variables used in this study is CAR, BOPO, NIM and NPL, while LDR as the dependent variable.The population in this research is conventional bank listed on the Indonesia Stock Exchange. The sampling technique in this research is purposive sampling. The number of samples in accordance with the prescribed criteria are as many as 35 samples. Based on the result of the research found that the variable CAR influences negatively insignificantly toward LDR, BOPO and NIM influences positively insignificantly toward LDR, while the variable NPL influences positively significantly toward CAR. But simultaneously CAR, BOPO, NIM, and NPL jointly affect the LDR.
Mergers and Acquisitions in Indian Banking Sector A Case of Bharat Overseas B...ijtsrd
Mergers and Acquisitions MandAs continue to be a significant force in the restructuring of the financial services industry. The Indian Commercial Banking Sector, which has played a pivotal role in the country’s economic development, is currently passing through an exciting and challenging phase. The present research papers studies the impact of MandA on the financial performance of Bharat Overseas Bank and Indian Overseas Bank. The study uses key financial ratios to find the impact of MandA on financial performance of selected banks. Dr. Soniya Gambhir "Mergers and Acquisitions in Indian Banking Sector (A Case of Bharat Overseas Bank and Indian Overseas Bank)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38415.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/38415/mergers-and-acquisitions-in-indian-banking-sector-a-case-of-bharat-overseas-bank-and-indian-overseas-bank/dr-soniya-gambhir
Impact on NPAs on the performance of UCO Bank: A Studyijtsrd
Indian banking sector has been facing terrible problem due to the deterioration quality of assets which is increasing gradually. The growth of NPA has a direct impact on the overall performance of the bank. The problems of NPAs not only affecting the bank but also affect the entire economy. The present study is analytical in nature and completely based on secondary data analysed by using accounting and statistical tools. The UCO Bank was established before the independence and worked successfully, but now facing various problems due to NPAs. In this above background the present study assess the financial strength, quality of loan assets and NPA management and also discussed the impact of NPAs on the performance of UCO Bank as well as the recovery performance of NPAs. Sanjay Dawn | Dr. Subhas Chandra Sarkar"Impact on NPAs on the performance of UCO Bank: A Study" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-5 , August 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18218.pdf http://www.ijtsrd.com/management/accounting-and-finance/18218/impact-on-npas-on-the-performance-of-uco-bank-a-study/sanjay-dawn
Evaluating Loan Loss Provisioning for Non-Performing Loans and Its Impact on ...Fakir Tajul Islam
Using the aggregate data of 56 commercial banks in the last 9 years
(2009-2017), this study attempts to evaluate the Impacts of LLP maintained for NPLs on profitability, as it may help
to take the level of the LLP, and NPLs in the optimum level of business success.
A COMPARATIVE STUDY ON FINANCIAL PERFORMANCE OF PUBLIC SECTOR BANKS IN INDIA:...kishoremeghani
Banking sector is one of the fastest growing sectors in India. Today’s banking sector becoming more complex. The objective of this study is to analyze the Financial Position and Performance of the Bank of Baroda and Punjab National Bank in India based on their financial characteristics. This study attempts to measure the relative performance of Indian banks. For this study, we have used public sector banks. We know that in the service sector, it is difficult to quantify the output because it is intangible. We have chosen the CAMEL model and t-test which measures the performance of bank from each of the important parameter like capital adequacy, asset quality, management efficiency, earning quality, liquidity and Sensitivity.
The profitability of commercial banks is influenced by a number of internal and external factors. This paper attempts to identify the internal factors which significantly influence the profitability of commercial banks in Bangladesh. In this study, profitability is measured by ROA and ROE which may be significantly influenced by the internal factors such as IRS, NIM, CAR, CR, DG, LD, CTI and SIZE of the bank. Data are collected from published annual reports during 2014--2018 of 23 commercial banks. Using simple regression model, it is found that CR has significant effect on the profitability and CAR has significant influence on ROA only. In addition to this, DG has significant effects on PCBs’ profitability (ROE only) where as IRS and CTI have significant influence on profitability (ROA only) of ICBs. Further, none of these variables have significant effects on the profitability of SCBs but CAR and CR are correlated with profitability (ROA only) and the causes may be the nature of services provided by SCBs to its clients. The internal policy makers should manage the influential internal factors of the banks in order to increase their profitability so that they can meet stakeholders’ expectations.
Comparative study of non interest income of the Indian Banking SectorGaurav Sharma
There are two broad sources of bank revenues:
1. Interest income
2. Non-interest income.
Interest income is generated from what is known as “the spread.” The spread is the difference between the interest a bank earns on loans extended to customers, corporate etc and the interest paid to depositors for the use of their money. It is also earned from any securities that the banks own, such as treasury bills or bonds.
Non-interest income is earned by providing a variety of services, such as trading of securities, assisting companies to issue new equity financing, securities commissions and wealth management, sale of land, building, profit and loss on revaluation of assets etc.
As compared to the developed world, the Indian banking sector, apart from the relying on traditional sources of revenue like loan making are also focusing on the activities that generate fee income, service charges, trading revenue, and other types of noninterest income. While noninterest income plays an important role in banking revenues in the developed world, its contribution to the total income of the Indian banking was 25% as on 31st March 2008.
IMPACT ON INDIAN BANKS’ PROFITABILITY INDICATORS – AN EMPIRICAL STUDYIAEME Publication
The Indian banking system consists of 26 public sector banks, 20 private sector banks, 43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks, in addition to cooperative credit institutions. The Indian banking sector’s assets reached US$ 1.8 trillion in FY14 from US$ 1.3 trillion in FY10, with 70 per cent of it being accounted by the public sector. Indian banks are increasingly focusing on adopting integrated approach to risk management. Banks have already embraced the international banking supervision accord of Basel II. According to RBI, majority of the banks already meet capital requirements of Basel III, which has a deadline of March 31, 2019. Most of the banks have put in place the framework for asset-liability match, credit and derivatives risk management.
Financial Performance Analysis of Selected Private Sector Banks in IndiaDr. Amarjeet Singh
The performance of the banking system has been
widely recognized as an important element for economic
growth and for enhancing the economic and financial system
buoyancy in facing financial crisis. In fact, such a vital role in
the economy has made banks to be considered as one of the
most strained kinds of businesses in the globe as they are
subject to close scrutiny since banks will otherwise be
counterproductive and severely damage the economy of a
country. Efficient and profitable banks maximize
shareholders’ value and encourage the shareholders to make
additional investments. As a result of which, more
employment opportunities will be created and more goods
and service will be produced and ultimately bring about
economic growth in which private and public sector banking
institutions play equal role. The present study analyses the
financial performance of selected private banks in India with
the help of correlation analysis by considering return on total
assets as the independent variable.
Determinants of Banks’ Financial Performance: A Comparative Study between Nat...inventionjournals
Financial performance is one of the most critical factors having impact on the decision making of the resource providers. And thus to ensure the existence in the ever growing competitive business environment, every institution should be more concerned about the factors affecting their financial performance. This paper specially focuses on identifying the factors having impact on the financial performance of the commercial banks operating in Bangladesh. An effort has also been exerted to determine whether the extent of influence of various factors on financial performance varies with respect to local private and nationalized commercial banks. For this purpose 10 local private commercial banks (PCB) and all nationalized commercial banks (NCB) have been taken covering the period from 2008-2014. Here, data has been collected from the annual reports of the banks under consideration. To draw conclusion a multiple regression has been run by considering financial performance (profitability) as dependent variable and operating efficiency, asset utilization , liquidity, credit risk, capital adequacy and size of the company as independent variables. The study finds that asset utilization and operating efficiency have significant positive impact on banks' financial performance (profitability) whereas credit risk has significant negative impact. However, for PCBs asset utilization is the most critical factor to performance. On the other hand, result shows that in case of NCB 1 taka increase in credit risk is responsible for negative return of 0.968 taka. It is found that financial performance has no significant relationship with size and liquidity of the banks
An Impact of Capital Adequacy Ratio on the Profitability of Private Sector Ba...Dr. Amarjeet Singh
Profitability being one of the cardinal principles of bank lending acts as a game changer for the survival and success of private sector banks in India. In order to stay profitable, banks have to capitalise on every penny advanced to yield the expected returns. However, considering the constraints laid down by the Reserve Bank of India, banks have to maintain a minimum capital adequacy ratio, as per the current BASEL III regulations active in India. With the mergers of public sector banks, the challenge has got just tougher for the private sector banks in India. Expansion and Diversification are the key strategies adopted by the key players from the private banking sector, however, with the minimum capital adequacy ratio observed by them, it is necessary to understand its actual impact on the bank’s profitability. This research paper aims to throw light upon the linkage that capital adequacy has with the bank’s profitability. It attempts to establish a relation between the Capital Adequacy Ratio with the Net profits of the bank. For the purpose of this study, data from the past 5 years of the leading private sector banks has been collected, namely, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, AXIS Bank and YES Bank. The collected data has been analysed using Pearson’s Correlation to establish a relation between the CAR Ratio & the bank’s profitability. Hypothesis testing has been further done to study the quantum of proportionate change in the profitability with a change in the CAR Ratio for private sector banks using applicable research tools. The said research tools are applied to achieve the desired results while maintaining the required quantum of accuracy. It also aims to understand the proportionate impact of changes in CAR to the bank’s profitability, which can act as a suggested measure for banks to develop a reliable framework for efficient capital management and increase overall efficiency. The results derived from the data collected and analyzed aim to provide scope for further study on the subject matter.
Analysis of Internal, Market & Economic Based Financial Performance Measureme...IOSRJBM
The aim of this study is to investigate the financial performance of 10 commercial banks listed on Dhaka Stock Exchange. In this paper, financial performance has been measured by using three indicators. Internal–based performance measured by Return on Assets, Market-based performance measured by Tobin’s Q model (Price / Book value of Equity) and Economic–based performance measured by Economic Value adds. The correlation and multiple regression of annual time series data is used to find the impact of bank size, credit risk, operational efficiency and asset management on financial performance measured by the three indicators, The study rejected the null hypothesis and it is found that there exist statistically significant impact of bank size, credit risk, operational efficiency and asset management with ROA and Economic Value Added. On the other hand Tobin’s Q has insignificant impact on financial performance of commercial banks
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Sustainability: Balancing the Environment, Equity & Economy
Ccs publication article
1. Relative Efficiency of Banks in India - Evaluation and Policies for Improvement
Prabhakar A. K., prabhakar.ak10@iimb.ernet.in Feroze Sheriff S, feroze.sheriff10@iimb.ernet.in
V Nagadevara, nagadev@iimb.ernet.in
Indian Institute of Management Bangalore, India
3. Introduction
The Indian financial sector reform of 1991 has greatly changed the face of Indian Banking system. In addition to the
nationalized banks, several private Banks were newly founded or created by previously extant financial institutions.
India has also seen the entry of over two dozen foreign banks since the beginning of financial reforms. In the face of
increased competition, the banks have to operate more efficiently in order to sustain and perform better. In the
context of increased competition and the importance of banks in financial markets, it becomes very much essential
to evaluate whether these banks operate efficiently. Primarily, there are two chief reasons to measure the efficiency
of banking institutions. Firstly, this assists to identify the most efficient banks and benchmarks the relative
efficiency of individual banks against these most efficient banks. Secondly, it helps to evaluate the impact of various
policy measures on the performance of banks.
There are numerous inputs and output parameters which indicate the financial performance of a bank. A simple
mathematical formula of output to input ratio cannot determine the efficiency of operations of banks. Therefore, a
mathematical model – Data Envelopment Analysis (DEA) is used to statistically measure the relative efficiency of
banks operations. DEA is an application of linear programming which is used to measure the relative efficiency of
operating units with the same goals and objectives. DEA is a deterministic methodology for examining the relative
efficiency, based on the data of selected inputs and outputs of a number of entities called decision–making units.
The main advantage of DEA is that, unlike regression analysis, it does not require an assumption of a functional
form relating inputs to outputs. Instead, it constructs the best production function solely on the basis of observed
data; hence statistical tests for significance of the parameters are not necessary. In our project, we have used
financial ratios of banks as inputs and outputs, when finding out the relative efficiencies of banks. The rationale is
that, these financial ratios which incorporate the financial measures represent the operational performance of banks.
Literature Review
There have been several studies that analyzed bank efficiency in India. In Indian context the whole literature which
tries to measure/capture the performance of banks can be divided into two parts based on their methodologies viz.,
traditional measures and frontier approaches. Frontier approaches are studies conducted with DEA techniques.
The major works under traditional measures are: Divitia and Venkatachalam (1978), Angadi (1983), Karkal (1983),
Subramanyam (1985), Subramanyam and Swamy (1994 a,b), Das and Sarkar (1994), Hansda (1995) and Das
(1999). The major findings of the above studies are; the banking functions are more or less uniform, production
differences between firms are not only because of technological improvement but also comes from competence,
there are wide disparities in their measure of performance of bank groups and rural branches are more profit making
than urban1.
Studies under Sarkar et al. (1998) compared banks of public, private and foreign sectors in India to study the effect
of ownership type on different bank performance measures. Another study to compare operational efficiencies of
different banks over a period of time was conducted by Rammohan (2002, 2003).
Bhattacharya et al (1997) measured the productive efficiency of Indian commercial banks in the late 1980’s to early
1990’s. This study showcases the impact of policy measures undertaken during liberalization in 1980’s on the
performance of various banks. This DEA approach revealed that the Indian public sector banks were the best
performing banks, as the entire banking sector was overwhelmingly dominated by the Indian public sector banks,
while some of the new private sector banks were just emerging in the India.
Sathye (2001) used DEA to study the relative efficiency of Indian banks in the late 1990’s with that of banks
operating in other countries. He found that the public sector banks have a higher mean efficiency score as compared
to the private sector banks in India, but found mixed results when comparing public sector banks and foreign
commercial banks in India. Kumbhakar and Sarkar (2003) found that while private sector banks in India have
improved their performance when compared with public sector banks in India after the deregulation measures.
Rammohan and Ray (2004) compared the revenue maximizing efficiency of banks in India in 1990’s. Deposits and
operating costs were taken as inputs while loans, investments and other income were taken as outputs. The research
1
The traditional approaches used in the above studies are ratio analysis, regression analysis, Index number approach, taxonomic method, multivariate analysis,
translog function etc., and the frontier approaches mainly characterized into two groups i.e., parametric and non-parametric approaches.
4. found that public sector banks were significantly better than private sector banks on revenue maximization
efficiency. However it was found that the difference in efficiency between public sector banks and foreign banks
was not significant.
Das et al (2004) studied the efficiency of Indian banks using DEA. Four input measures: deposits and other
borrowings, number of employees, fixed assets and equity, and three output measures: investments, performing loan
assets and other non-interest fee based incomes were used in the analysis. He found that Indian banks did not exhibit
much of a difference in terms of input or output oriented technical and cost efficiency. However, in terms of revenue
and profit efficiencies prominent differences were seen. He also found that size of the bank, ownership of the bank,
and listing on the stock exchange had a positive impact on the average profit and revenue efficiency scores.
Sanjeev (2006) studied the efficiency of private banks, public banks, and foreign banks in India during 1997-2001
using DEA. He also extended his study to uncover the possibility of any relationship between the efficiency and
NPA of the banks and found that efficiency has increased post-reforms and that NPA and efficiency are negatively
related.
Objectives
The objective of the paper is:
1. To determine the relative efficiency of 80 banks from groups of Nationalized, Foreign and Indian Private banks
that operate in India by comparing the efficiencies:
A. Across 80 banks.
B. Within groups of Nationalized, Foreign and Indian Private Banks.
2. Identify the factors that contribute most to the inefficiency of the banks and suggest improvements to increase
their efficiencies.
Methodology
The data is obtained from yearly publication issues of Statistical Tables Relating to Banks in India by Reserve Bank
of India, the central bank of the country. This publication provides various details such as liabilities and assets,
deposits, advances, investment and expenses of commercial banks in India. It also provides consolidated report of
selected ratios of scheduled commercial banks that contains various key financial ratios of all commercial banks
operating in India. The 2008, 2009 and 2010 data are used for the purpose of our analysis to measure efficiency of
banks in this paper using DEA. The critical inputs and outputs used for the analysis are given below:
Inputs Outputs
Ratio of deposits to total liabilities (Credit + Investment)-Deposit ratio
Ratio of net interest income to total assets (Net Interest
Cost of deposits Margin)
Ratio of intermediation cost to total assets Return on equity
Ratio of wage bills to total expense Ratio of non-interest income to total assets
Ratio of burden to interest income Ratio of net NPA to net advances
Return on advances adjusted to cost of funds
Return on investments adjusted to cost of funds
The analysis was carried out in the following steps
1. The banks were grouped under Public sector banks, Private sector banks and Foreign banks.
2. In the first run, using only 2010 year data all the 79 banks2 were analyzed to identify how banks perform
when compared with all the other banks that operate in India.
3. In the next run, again using only the 2010 year data each of the sectors were analyzed separately to identify
how the banks perform only relative to banks in its sector.
2
The data for Internasional Indonesia is not available for year 2010 and hence excluded from the analysis using 2010 data
5. 4. The above steps (step 2 and step 3) are carried out using 2008 and 2009 year data to understand how banks
have performed over the last 3 years in comparison to banks across sectors and to banks only in its sector.
Results and Discussion
Public sector banks (full run)
The efficiency of public sector banks varies from 0.55 to 1 with mean efficiency score of 0.74. Indian Overseas
Bank has the least efficiency of 0.55 and 4 banks namely State Bank of Travancore, Andhra Bank, Corporation
Bank and Punjab National Bank have the highest efficiency of 1. Many banks have an efficiency index in the range
of 0.60 to 0.80 indicating relative inefficiency of these banks. Although banks have varying efficiency index in this
sector, the mean efficiency as a measure indicates relative inefficiency to both private sector and foreign banks. We
also see that the inefficiency of this sector is only marginal when compared to private sector but more pronounced
when compared with foreign banks.
Private sector banks (full run)
The efficiency of private sector banks varies from 0.47 to 1 with a mean efficiency index of 0.77. Bank of Rajasthan
has the least efficiency of 0.47 and 4 banks namely Nainital Bank, ICICI Bank, IndusInd Bank and Kotak Mahindra
bank have the highest efficiency of 1. Banks such as HDFC Bank and Axis bank have efficiency index close to 1
indicating they are almost as efficient as the best banks. Like public sector banks, banks here with varying efficiency
index indicate relative inefficiency compared with foreign banks.
Foreign banks (full run)
The efficiency of foreign sector banks varies from 0.61 to 1 with a mean efficiency of 0.96. Bank of Bahrain &
Kuwait have the lowest efficiency of 0.61 and many banks such as Bank of America, BNP Paribas, etc. have the
highest efficiency of 1. Many other banks such as HSBC, Oman International have efficiency close to 1 indicating
satisfactory efficiency. The mean index suggest that most of the banks in this category are highly relatively efficient
barring a few.
Public sector banks (sector run)
For the public sector banks we find that the efficiency index varies from 0.92 to 1 with mean efficiency score of
0.96. Most of the banks turn out to be efficient with scores close to 1. The relatively least efficient bank in this
category is the Vijaya Bank with an efficiency index of 0.92. The individual scores and mean scores suggest that all
the public sector banks have more or less similar efficiency. The public sector banks do not seem to have stark
difference in their strategy and performance.
Private sector banks (sector run)
For the private sector banks we find that the efficiency index varies from 0.74 to 1 with a mean efficiency score of
0.94. The spread of index is higher here (0.26) compared to public sector banks (0.08). Many banks are highly
efficient and some are close to high efficiency with index close to 1. However, there are few banks such as Bank of
Rajasthan, Dhanlaxmi Bank, Catholic Syrian Bank and Catholic Syrian Bank that show relative inefficiency with
index scores in the range of around 0.75. Unlike public sector banks, private sector banks show higher differences in
their performance among them.
Foreign banks (sector run)
For the foreign banks we find that the efficiency index varies from 0.46 to 1 with a mean efficiency of 0.90. More
banks turn out to be inefficient now expectedly as the current pool consists of better performing banks compared to
the full run.
Looking at the data closely, we observe that the average ratio of deposits to total liabilities for public sector banks
are high compared to that of both private sector and foreign banks. The ratio of deposits to total liabilities for public
sector, private sector and foreign banks are 85.97, 80.84 and 45.95 respectively. This coupled with the average cost
of deposits which are 5.79, 6.07 and 3.56 respectively in the above order of sectors are a source of inefficiency for
public sector and private sector banks. The foreign banks attribute much lesser cost to their funds which translates
into higher efficiency. Although the foreign banks have higher intermediation costs, wage bills and burden they are
able to generate higher output with the given inputs.
6. Despite having high ratio of deposits to total liabilities for public sector banks their (credit+investment)-deposit ratio
is lower compared to foreign banks. The average (credit+investment)-deposit ratio for these banks are 102.89,
108.27, 347.71 respectively. The data clearly suggests that foreign banks with least deposits make most of credit and
investments. The private sector banks are also better off compared to public sector banks as they also make higher
credit and investments comparatively with smaller deposits.
Interest income is earned from interest bearing assets such as loans, investments in bonds and treasury securities,
balances with banks & money at call. The average net interest margin which is the ratio of net interest income to
total assets for public, private and foreign banks is 2.36, 2.73 and 3.38 respectively. It shows that foreign banks earn
higher net interest margin per rupee of their assets implying that their assets are being put to better use.
Another source of income for banks is the non-interest income which is composed of service charges, advisory
services charges, brokerage services charges, trading revenue and other gains/losses. The foreign banks are better off
in generating non-interest income as well. The average ratios of non-interest income to total assets are 1.06, 1.38 and
3.47 respectively in the same order of sectors as above. Thus, every rupee of asset earns higher interest and non-
interest income for foreign banks followed by private banks and then by public sector banks.
Non-performing assets (NPA) are those that have stopped paying interest for 90 days or more and are past due.
Every bank ideally should have as minimum NPA as possible to boost profitability. The average ratios of NPA to
net advances for the sectors are 0.97, 1 and 1.85 respectively. The foreign banks have more NPA but their earning
assets seem to have high quality that can generate enough income to more than compensate for the losses due to
NPA. This is reflected in the ratio of interest and non-interest income to total assets.
7. As advances and investments form major chunk of assets for a typical bank, the returns on these assets are an
important measure of profitability. The average return on advances adjusted to cost of funds are 3.87 for public
banks, 4.87 for private banks and 5.3 for foreign banks excluding UBS. UBS was excluded because it has high
negative return which would potentially distort the average value. As these are mainly interest bearing assets, the
above values strengthen the previous conclusions that foreign banks earn the highest interest income. These banks
are able to raise more money than other banks for every rupee of money paid for the funds. The average return on
investments adjusted to cost of funds for these banks are 1.27, 0.46 and 2.24 respectively. The foreign banks earn
the highest return but we see that private banks earn less return than the public banks on average. However, the net
interest margin is more for private banks which could be because typically advances form a major portion of assets
that earns more than investments do.
Return on equity is high for public banks compared to both private and foreign banks. The average ROE for the
public, private and foreign banks are 18.7, 10.8 and 3.9 respectively. It is observed that the tier-I capital for public
sector are lower than that of private banks helping them to achieve higher ROE. This could be because the public
sector banks where the government has a stake close to 51% can’t raise further equity as that will lead to further
dilution of government stake. Thus, ROE is not an appropriate metric to be looked at in isolation.
Using 2008, 2009 and 2010 data for the analysis 3, we find that the mean efficiency index for public sector banks is
0.81, 0.72 and 0.64 in 2008, 2009 and 2010 respectively. The reduction in efficiency index in 2009 seems to be due
to marginal increase in cost of deposits and sharp decrease in return on investments adjusted to cost of funds from
1.35 in 2008 to 0.84 in 2009. Although the public sector banks have marginally improved in terms of the input
parameters in 2010, the ratio of NPA to net advances has increased significantly in 2010 from 0.75 in 2008 to 0. 97
in 2010 which seems to have led to reduction in mean efficiency index.
3
The data for banks American Express Banking Corp., Bank Internasional Indonesia, Credit Agricole Bank, FirstRand Bank, JSC VTB Bank, Royal Bank of
Scotland and UBS AG are excluded for the analysis as they don’t have data for all 3 years 2008, 2009 and 2010
8. The efficiency index for private sector banks follows a similar pattern to that of public sector banks. Unlike public
sector banks the decrease in index for private sector banks is only marginal in 2009. The index scores are 0.76, 0.74
and 0.69 in 2008, 2009 and 2010 respectively. We find that the ratio of burden to interest income has increased from
7.65 in 2008 to 9.24 in 2010. The ratio of NPA to net advances has increased from 0.79 in 2008 to 1.00 in 2010 and
the return on investments adjusted to cost of funds has decreased sharply from 0.89 in 2008 to 0.46 in 2010.
The efficiency index for foreign banks are 0.94, 0.90, and 0.90 in 2008, 2009 and 2010 respectively. Although, the
mean efficiency has slightly dropped from 2008 score, they still seem to be operating at a satisfactory efficiency
level compared to public and private sector banks.
In the sector wise run, for the public sector banks, we find that there is not much variation in either efficiency index
of individual banks or the mean score. The mean efficiency scores are 0.97, 0.96, and 0.96 in 2008, 2009 and 2010
respectively. The sector seems to be functioning efficiently when compared among its peers although its
performance has deteriorated across all the sectors.
For the private sector banks we find that for some of the banks like Dhanalaxmi bank and Lakshmi Vilas bank the
efficiency index has dropped while for some it has improved. The mean efficiency indexes for these banks are 0.99,
0.98 and 0.94 in 2008, 2009 and 2010 respectively. From the data we see that for Dhanlaxmi bank most of the inputs
have become more expensive and at the same time outputs have reduced. For Lakshmi Vilas Bank we see a similar
pattern but ratio of NPA to net advances have increased very sharply from 1.55 in 2008 to 4.11 in 2010.
For the foreign banks we find that the efficiency index has actually increased in 2010 although only marginally. The
index scores are 0.94, 0.93 and 0.96 in 2008, 2009 and 2010 respectively. The banks have been able to reduce their
cost of deposits and burden as a proportion of interest income and have also managed to increase their credit and
investments to the deposit base.
The analysis was further extended to identify reasons for some banks showing sharp decrease in efficiency index
over the years while some showing opposite trend for each of the sectors.
9. Public sector banks (time series analysis)
By looking at the data from 2008 to 2010 we see that State Bank of India , State Bank of Mysore , Allahabad Bank ,
Bank of India , Indian Overseas Bank , Syndicate Bank , Union Bank of India and Vijaya Bank have shown sharp
declining trend. We find increases in ratio of burden to interest income, ratio of net NPA to net advances and
decrease in ratio of non-interest income to total assets have contributed to sharp decline in efficiency index. Below
chart shows how the average values of above ratios for these banks have changed from 2008 to 2010.
While the above banks showed declining trend some others banks namely Andhra Bank, Bank of Baroda,
Corporation Bank and Punjab National Bank showed increasing trend in efficiency index scores. For these banks,
we find decreases in cost of deposits, ratio of intermediation cost to total assets and increase in return on investments
adjusted to cost of funds have contributed to improvement in efficiency index. Below chart shows how the average
values of above ratios for these banks have changed from 2008 to 2010.
Private sector banks (time series analysis)
By looking at the data from 2008 to 2010 we see that Bank of Rajasthan, Dhanlaxmi Bank, Jammu & Kashmir Bank
and Nainital Bank have shown sharp declining trend. We find increases in ratio of intermediation cost to total assets,
ratio of wage bills to total expense and decrease in return on investments adjusted to cost of funds have contributed
to sharp decline in efficiency index. Below chart shows how the average values of above ratios for these banks have
changed from 2008 to 2010.
While the above banks showed declining trend some other banks namely Federal Bank, ING Vysya Bank, Lakshmi
Vilas Bank and Kotak Mahindra Bank showed increasing trend in efficiency index scores. For these banks, we find
decrease in cost of deposits and increases in net interest margin and return on advances adjusted to cost of funds
have contributed to improvement in efficiency index. Below chart shows how the average values of above ratios for
these banks have changed from 2008 to 2010.
Foreign banks (time series analysis)
By looking at the data from 2008 to 2010 we see that Abu Dhabi Commercial Bank, Bank of Bahrain & Kuwait and
J.P.Morgan Chase Bank have shown sharp declining trend. We find increases in ratio of wage bills to total expense,
10. ratio of net NPA to net advances and decreases in ratio of non-interest income to total assets and return on
investments adjusted to cost of funds to be the primary factors for sharp decline in efficiency index. Below chart
shows how the average values of above ratios for these banks have changed from 2008 to 2010.
While the above banks showed declining trend some other banks namely Chinatrust Commercial Bank, DBS Bank,
Deutsche Bank and Societe Generale showed increasing trend in efficiency index similar to public and private sector
banks. For these banks, we find sharp decrease in cost of deposits and increases in net interest margin and return on
investments adjusted to cost of funds have been the predominant factors for improvement in efficiency index. Below
chart shows how the average values of above ratios for these banks have changed from 2008 to 2010.
The above analysis shows that different critical parameters were responsible for the above trends for various sectors.
Overall, we find that increase in ratio of net NPA to net advances and decrease in return on investments adjusted to
cost of funds have been the primary contributors for decreases in efficiency index across sectors. On the other hand,
we also see that the decrease in cost of deposits and increase in return on investments/advances adjusted to cost of
funds have been the primary contributors for increase in efficiency index across sectors.
Overall, the foreign sector banks are the best performing banks. It is followed by private sector banks and the public
sector banks in that order. The following are suggested for the improvement of performance of inefficient banks to
match with the best performing banks based on the analysis:
1. The public sector and private banks must reduce the dependence on deposits as a major source of funding
and look at alternative sources whereby the overall cost of funds can be reduced. The higher dependence
also translates to higher cost of deposits as banks compete with each other to get higher deposits by
offering a competitive rate of return to depositers.
2. Increase good quality credit and investments on the deposit base to increase interest income for every rupee
of deposit. Extending credit to good credit worthy customers would help in increasing interest income
while at the same time reducing NPA.
3. Provide better advisory and customer friendly brokerage services to increase non-interest income.
4. Make good quality advances and investments to earn a higher return. Investing in good diversified
portfolio would help in increasing the returns while minimizing the risk.
References
[1] Prasad V. Joshi & Dr. Mrs. J V Bhalerao. (2011). Efficiency evaluation of banking sector in India based on Data
Envelopment Analysis. Indian Journal of Commerce & Management Studies. Vol–II, Issue -3, March, 32-34.
[2] T.T. Ram Mohan & Subhash C. Ray. (2004). Comparing Performance of Public and Private Sector Banks: A
Revenue Maximization Efficiency Approach. Economic and Political Weekly. Vol. 39, March, pp. 1271-
1272+1274-1276.
11. [3] Abhiman Das & Saibal Ghosh (2006). Financial deregulation and efficiency: An empirical analysis of Indian
banks during the post reform period. Review of Financial Economics. Vol. 15, Issue 3. pp 197-199.
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