104

CHAPTER-5 ANALYSIS OF RESULTS AND DISCUSSION For studying the impact of the Risk Based Supervisory measures on the working of the Banks 6 Parameters have been chosen. They are: I) Asset Quality-Net NPA to Total Advances Ratio II) Net Interest Income to Total Assets Ratio III) Net Profit to Total Assets Ratio IV) Operating Expenses to Total Assets V) Interest Expended to total Assets Ratio VI) Capital Adequacy Ratio

ASSET QUALITY One of the most important indicators for ascertaining the soundness of a Banks working is the quality of Assets. In the CAMELS rating of Banks, Asset quality is the second soundness indicator after the Capital Adequacy. Prior to the Reform period Public Sector Banks

have suffered the most and have reported high non-performing assets of disturbing proportions. In some Banks the ratio was as high as 2530%. The Regulator has given utmost priority to address this issue and streamlined the procedures by issuing the Income Recognition and Asset Classification Norms. The other initiatives to improve the Asset Quality are the strict implementation of the PCA(Prompt Corrective Action) mechanism, CDR (Corporate Debt Restructuring Scheme etc.

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In this study we have compared the performance of the three Sectors of Banks viz., Public Sector Banks, Private Sector Banks and Foreign Banks. The data relating to this parameter has been collected from secondary sources and has been subjected to suitable statistical analysis with the help of SPSS 19.0 version. The data which covers the study period of 13 years viz.,1995 to 2008 has been rearranged.(Annexure 2) The period is divided into two blocks, the first block consisting of 7 years data from 1995 to 2002 and the second from 2003 to 2008 so that it serves as two samples. Now the sample means for all the three Sectors viz., Public, Private and Foreign Banks have been computed for these two periods and designated as Mean I and Mean II. This will enable Researcher to test the Hypotheses as we are in a position to see whether there is any significant difference in these means and also to measure the effect of the Risk Based Supervisory measures taken by the Reserve Bank of India, whether the impact of these measures is uniform among all the Sectors, or are there significant differences in their performance. OVERALL COMPARISON OF THE PERFORMANCE OF ALL THE SCHEDULED COMMERCIAL BANKS H0: There is no significant change in the Ratio of Net NPA to total Advances of Scheduled Commercial Banks over the study period.

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H1: There is a significant change in the Ratio of Net NPA to total Advances of Scheduled Commercial Banks over the study period. An attempt has been made to compare the performance of all the sample Scheduled Commercial Banks with respect to their Performance over the study period in regard to the Ratio of Net NPA to total Advances. Table: 1.1 Paired Samples Statistics
Mean Pair 1 Ist means IInd means 6.2211 2.7048 N 49 49 Std. Deviation 3.9966 2.8851 Std. Error Mean .5709 .4121

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Table 1.2 : Paired Samples Correlations

N Pair 1 Ist means &IInd means 49 Correlation .179 Sig. .217

Table 1.3 :Paired Samples Test

Paired Differences 95%Confide nce Interval of the Std. Std.Err Difference Deviatio or Uppe n Mean Lower r .64141

Mean Pair 1 Ist means IInd means

df

Sig. (2tailed)

3.5163 4.4899

2.226 4.806 5.48 48 .000

Comparison of the two means reveals that there is a significant change among all the Scheduled Commercial Banks. The second

mean at 2.7048 is much lower when compared to the first mean of 6.2211. The correlation is observed to be positive. The t test suggests that the level of variations in the performance of Scheduled Commercial Banks is significant. As per the paired sample statistics, since there is significant change in the working of the Scheduled Commercial Banks, the Null Hypothesis is rejected. SECTORWISE ANALYSIS: PUBLIC SECTOR BANKS After the Group wise analysis, the following tables present the sector wise performance analysis in regard to Public Sector Banks.

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HYPOTHESIS H0: There is no significant change in the Ratio of Net NPA to total Advances of Public Sector Banks over the study period. H1: There is a significant change in the Ratio of Net NPA to total Advances of Public Sector Banks over the study period.

Table: 2.1 Paired Samples Test

Std. Deviation 3.5314 3.3787 Std.Error Mean .7062 .6757

Mean Pair 1 Ist means IInd means 8.3795 2.5838

N 25 25

Table: 2.2 : Paired Samples Correlations

N Pair 1 Ist means & IInd means 25 Correlation .074 Sig. .725

Table: 2.3 : Paired Samples Statistic

Paired Differences Mean Std. Devia tion Std. Error Mean 95% Confidence Interval of the Difference Lower Upper Pair 1 Ist 5.795 means IInd means 4.70 .9407 3.854 7.7371 6.161 24 .000 t df Sig. (2tailed )

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The first mean is computed for the period 1995-96 to 2001-2002 and the second mean is computed is computed for the period 2002-2003 to 2007-2008. The second mean at 2.5838 is significantly lower than the first mean at 8.3795, which indicates that there is significant difference between the two means. They show substantial

improvement in the working of the Public Sector Banks. As per Karl Persons Correlation test there is correlation between the means belonging to the same Sector. insignificant correlation. The results indicate very

As per the t test at 0.05 level of

significance, it is observed that there is significant difference between means with respect to Public Sector Banks. As per the Paired Samples Statistics the Public Sector Banks have shown significant change in the Ratio of Net NPA to total Advances. Hence the null hypothesis is rejected. Private Sector Banks HYPOTHESES H0: There is no significant change in the Ratio of Net NPA to total Advances of Private Sector Banks over the study period. H1: There is a significant change in the Ratio of Net NPA to total Advances of Private Sector Banks over the study period.

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Table: 3.1 Paired Samples Statistics

Std. Std. Mean Pair 1 Ist means IInd means 4.0368 2.7538 N Deviation 15 1.9093 15 1.1583 Error Mean .4929 .2990

Table: 3.2 Paired Samples Correlation

N Pair 1 Ist means & IInd means 15

Correlation .670

Sig. .006

Table: 3.3 Paired Samples Test

Paired Differences 95% Confidence Interval of the Difference Lower .49479 Upper t df Sig. (2taile d)

Mean Pair 1 Ist means - IInd means 1.2829

Std. Deviati on 1.4232

Std. Error Mean .36748

2.071 3.49

14 .004

The first mean is computed for the period 1995-96 to 2001-2002 and the second mean for the period 2002-2003 to 2007-2008. The SECOND mean at 2.7538 is significantly lower than the first mean at 4.036, which indicates that there is significant difference between the means. This shows substantial improvement in their working. As per the Paired Sample Statistics, there is significant difference in the working of these Banks hence the null hypothesis is rejected.

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FOREIGN BANKS Table: 4.1 Paired Samples Statistics

Std. Mean Pair 1 Ist means IInd means 2.9590 9 3.6367 1.2122 3.8663 N 9 Deviation 4.7225 Std. Error Mean 1.5741

Table: 4.2 Paired Samples Correlations

N Pair 1 Ist means & IInd means 9

Correlation .516

Sig. .155

Table 4.3 Paired Samples Test

Paired Differences 95% Confidence Std. Deviatio Mean Pair 1 Ist means - IInd means .9072 n 4.2185 Std. Error Mean Interval of the Difference Lower Upper 4.1499 t .645 df 8 Sig. (2tailed) .537

1.4061 -2.3353

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As can be seen from the above Table the second mean at 2.95904 is marginally lower than the first mean at 3.8663. As per Karl Persons Correlation test, the results indicate positive correlation. As per the t test since the significance value is more than 0.05, it is concluded that there is no significant difference between the averages of the first mean and the averages of the second mean with respect to Foreign Banks. Since as per the paired sample statistics, Foreign Banks have not shown significant change in the ratio of NPAs to Total Advances, the Null Hypothesis is accepted.

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Table: 5
Group Statistics bank type N Ist means IInd means overall means public private public private public private 25 15 25 15 25 15 Mean 8.3795 4.0368 2.5838 2.7538 5.2300 3.3434 Std. Deviation 3.5314 1.9093 3.3787 1.1583 2.4037 1.3827 Std. Error Mean .7063 .4929 .6757 .2991 .4807 .3570

bank type N Ist means private foreign IInd means overall means private foreign private foreign 15 9 15 9 15 9 Mean 4.0368 3.8663 2.7538 2.9590 3.3432 3.3635

Std. Deviation 1.9093 4.7225 1.1583 3.6367 1.3827 3.6122

Std. Error Mean .4929 1.5743 .2990 1.2122 .3570 1.2040

bank type N Ist means IInd means overall means public foreign public foreign public foreign 25 9 25 9 25 9 Mean 8.3795 3.8663 2.5838 2.9590 5.2300 3.3635

Std. Deviation 3.5314 4.7225 3.3787 3.6367 2.4037 3.6122

Std. Error Mean .7062 1.5741 .6757 1.212 .4807 1.204

A comparison of Public Sector and Private Sector Banks has been made. The results have shown that during the first phase Public Sector Banks were far behind Private Sector Banks, with their 1st mean of 8.3795 as against the Private Sector Banks mean of 4.036. The scenario has drastically changed during the second Phase. The

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performance of Private Sector Banks at 2.7538 though marginally higher as compared to the Public Sector Banks ratio of 2.5838 is considered a substantial reduction when compared to the previous period. A similar comparison of Public Sector and Foreign Banks has also been made. The results have shown that during the first phase foreign Banks were ahead of Public Sector Banks, with their 1st mean of 3.8663 as against the Public Sector Banks mean of 8.3795. During the second Phase the performance of Public Sector Banks has drastically improved from 8.3795 to 2.5838.Foreign Banks have also achieved a reduction from 3.8663 to 2.9590. However the progress achieved by them is far lower when compared to the Banks. The performance of Private Sector Banks vis--vis Foreign Banks reveals that during the 1st phase private banks with a mean of 4.036 were slightly behind Foreign Banks whose 1st mean is3.8863. During the second phase, the position of the Private Sector Banks is better with a lower ratio of 2.7538 as against the ratio of Foreign Banks which is 2.9590. Public Sector

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Table:6

ANOVA Sum of Squares 237.939 528.767 766.707 8.469 136.958 145.427 43.229 269.823 313.052 df 2 46 48 2 46 48 2 46 48 21.614 5.866 3.685 .033 4.235 2.977 1.422 .252 Mean Square 118.970 11.495 F 10.350 Sig. .000

Ist means

Between Groups Within Groups Total

IInd mean

Between Groups Within Groups Total

overall means

Between Groups Within Groups Total

Inference: From the above table it is conclude that i) There is significant difference between the three groups with respect to first means ii) There is no significant difference in the case of second mean, and

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TABLE: 7 Post Hoc Tests

Dependent (I)bank Variable type

(J bank type Mean Differenc e (I-J) private foreign public foreign public pri pri foreign public foreign public pri pri foreign public foreign public pri 4.3426 4.5131 -4.3426 .17050 -4.5131 -.17050 -.8241 -.8439 .8241 -.0197 .84391 .01977 1.8862 1.8664 -1.8862 -.0198 -1.8664 .01980

95% Confidence Interval Std. Error 1.1073 1.3179 1.1073 1.4295 1.3179 1.4295 .5635 .6707 .5635 .7275 .6707 .7275 .7909 .9414 .7909 1.0211 .94147 1.0211 Sig. .000 .001 .000 .906 .001 .906 .150 .215 .150 .978 .215 .978 .021 .053 .021 .985 .053 .985 Lower Bound 2.1137 1.8602 -6.5715 -2.7069 -7.1661 -3.0479 -1.9584 -2.1940 -.31022 -1.4842 -.50624 -1.4446 .29410 -.02859 -3.4784 -2.0753 -3.7615 -2.0357 Upper Bound 6.5715 7.1661 -2.1137 3.0479 -1.8602 2.7069 .3102 .5062 1.9584 1.4446 2.1940 1.4842 3.4784 3.7615 -.2941 2.0357 .02859 2.0753

Ist means

pub pri foreign

IInd medians

public pri foreign

overall means

publi pri foreig

*. The mean difference is significant at the 0.05 level.

Post Hoc test revealed that the difference is significant in the First mean between the Public Sector and Private Sector and Public Sector and Foreign Banks, while there is no significant difference between Private Sector and Foreign Banks. In the case of the Second Mean there is no significant difference between the three Sectors.

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TABLE: 8 RANKING OF BANKS: NET NPA TO TOTAL ADVANCES

SECTOR FOR PVT PUB FOR FOR PUB PUB PUB FOR PUB PUB PUB FOR PUB PVT PVT PUB FOR PUB PUB PUB PUB PUB PUB PVT BANK DEUTSCHE HDFC AB HSBC ABN-AMRO ORIENTAL BANK S BP SBH SCB C BANK VIJAYA PN B CITI. SB INDORE J&K K VB SB BIKANER DBS SBT SB MYSORE SYNDICATE IOB CANARA IB FED.BANK SCORE .04 .35 .59 .64 .65 .78 .86 .88 1.00 1.00 1.02 1.11 1.13 1.21 1.27 1.56 1.69 1.74 1.74 1.78 1.84 1.86 1.88 1.93 1.95 RANK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SECTOR PVT PUB PUB PUB PVT PUB PUB PUB PVT PUB PVT PVT PVT PUB PVT PVT PVT FOR PVT PVT PUB FOR FOR PUB BANK ICICI BOB ALL. BANK BOM B.RAJASTHAN BANK OF INDIA SBI UBI INDUSIND UCO BANK SOUTH INDIAN KARNATAKA TMC LTD CBI CITY UNION LVB. CATHOLIC SBM. DHAN.BK DCB. DENA BANK B.BAHRAIN ABU DHABI UBI SCORE 2.06 2.19 2.24 2.26 2.32 2.60 2.63 2.71 2.75 2.86 2.92 3.00 3.36 3.51 3.65 3.75 3.79 4.14 4.29 4.30 5.40 6.24 11.07 18.03 RANK 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

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In an attempt to assess the performance of the Banks in the three Sectors, ranks have been assigned to individual Banks, and from the above table, the following inferences are drawn: Deutsche Bank AG in Foreign sector stands out the best with first rank among all the 49 sample Banks. Sector wise the Banks in the 1st position are as under: Public Sector: Andhra Bank Private Sector: HDFC Bank Foreign Bank: Deutsche Bank AG II-Parameter NET INTEREST MARGIN TO TOTAL ASSETS The way to effectively measure the profitability of a Bank is to compare the ratio of Net Interest margin to Total Assets. If the ratio is increasing over a period of time, it is indicative that the Bank is functioning efficiently. Net interest margin is arrived at after providing for all interest expenses out of its total interest income. Annexure 3 contains the data relating to this Parameter.

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OVERALL COMPARISON OF THE PERFORMANCE OF ALL THE SCHEDULED COMMERCIAL BANKS

H0: There is no significant change in the Net interest Margin to total assets ratio of Scheduled Commercial Banks over the study period. H1: There is a significant change in the Net interest Margin to total assets ratio of Scheduled Commercial Banks over the study period.
TABLE:-9.1 Paired Samples Statistics

Pair 1

I means II nd means

Mean 2.8543 2.7978

N 49 49

Std. Error Std. Deviation Mean .5993 .08562 .5279 .07542

Table: 9.2 Paired Samples Correlations N Pair 1 I means & II nd means 49 Correlation .949 Sig. .000

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Table: 9.3

Paired Samples Test 95% Confidence

Paired Differences Sig. (2tailed t df 48 ) .047 Std. Devia Mean Pai I r1 means - II nd means tion .0564 .1938 Std. Error Mean .0276 Interval of the Difference Lower .00078 Upper .11214 2.039

An attempt has been made to compare the performance of all the sample Scheduled Commercial Banks with respect to their

performance over the study period in regard to the Ratio of Net Interest Margin to total assets as per the above Table. Paired Samples Correlations statement reveals that there is positive correlation, and the t tests suggests that level of variations in the performance is significant. Hence the null Hypotheses is rejected.

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PUBLIC SECTOR BANKS HO: There is no significant change in the Net interest Margin total assets ratio of Public Sector Banks over the study period. H1: There is a significant change in the Net interest

Margin total assets ratio of Public Sector Banks over the study period. Table: 10.1 Paired Samples Statistics

Pair 1

I means IInd means

Mean 2.959 2.799

N 25 25

Std. Deviation .24124 .21311

Std. Error Mean .04824 .04262

Table 10.2: Paired Correlation test

N Pair 1 I means & II nd means 25 Correlation .912 Sig. .000

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Table 10.3 Paired Samples Test

Paired Differences 95% Confidence Std. Deviati Mean Pair 1 I means - II nd means .1602 on .0993 Std. Error Mean Interval of the Difference Lower Upper t df 24 .2013 8.063 Sig. (2tailed ) .000

.0198 .1192

Mean comparison reveals that the second mean at 2.7990 is lower than the 1st mean at .2.9593. Karl Persons Correlation test results indicate highly positive correlation. As per thet test since the significance value is less than 0.05, it is concluded that there is a significant difference between the means with respect to Public Sector Banks. As per the Paired Samples Statistics the Public Sector Banks have shown significant change in the Net Interest Margin to total assets ratio. Hence the null hypothesis is rejected. PRIVATE SECTOR BANKS HO: There is no significant change in the Net interest Margin total assets ratio of Private Sector Banks over the study period. H1: There is a significant change in the Net interest Margin total assets ratio of Private Sector Banks over the study period.

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Table: 11.1
Paired Samples Statistics Std. Error Mean Pair 1 I means IInd means 2.6411 2.6291 N 15 15 Std. Deviation .6223 .6051 Mean .1606 .1562

Table 11.2 : Paired Samples Correlations:

N Pair 1 I means & II nd means 15 Correlation .991 Sig. .000

Table 11.3 : Paired Samples Test

Paired Differences 95% Confidence Interval of the Difference Lower Upper t df -.0340 .0582

Mean Pair 1 I means IInd means .0120

Std. Std. Deviatio Error n Mean .0833 .0215

Sig. (2tailed)

.561 14 .584

As per the above table the second mean at 2.6291 is lower than the 1 st mean at .2.6411, which indicates that there is no significant difference between the means. As per Karl Persons Correlation test, the results indicate highly positive correlation. As per thet test, since the significance value is more than 0.05, it is concluded that there is no significant difference in the means with respect to Private Sector Banks.

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As per the Paired Samples Statistics the Private Sector Banks have shown no significant change in the Net Interest Margin to total assets ratio. Hence the null hypothesis is accepted. FOREIGN BANKS HO: There is no significant improvement in the Net interest Margin total assets ratio of Foreign Banks over the study period. H1: There is a significant improvement in the Net interest Margin total assets ratio of Foreign Banks over the study period. Table: 12.1
Paired Samples Statistics Std. Error Mean .3619 .2896

Mean Pair 1 I means II nd means 2.9179 3.0757

N 9 9

Std. Deviation 1.0857 .8689

Table 12.2 : Paired Samples Correlations

N Pair 1 I means & II 9 nd means Correlation .975 Sig. .000

Table 12.3 : Paired Samples Test

Paired Differences 95% Confidence Interval of the Difference Lower Upper t df -.3943 .0786 -1.539 8 Sig. (2taile d) .162

Mean Pair 1 I means IInd means -.1578

Std. Deviati on .3076

Std. Error Mean .1025

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As per the above table the second mean at 3.0757 is slightly higher than the first mean at .2.9279, which indicates that there is no significant difference between the means. As per Karl Persons Correlation test, the results indicate highly positive correlation. As per the t test, since the significance value is more than 0.05, we conclude that there is no significant difference with respect to Foreign Banks. As per the Paired Samples Statistics the Foreign Banks have shown no significant change the Net Interest Margin to total assets ratio. Hence the null hypothesis is accepted .

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Table: 13 COMPARISON IN THE PERFORMANCE OF BANKS GROUPWISE

Bank Type N I means IInd means overall means private bank foreign private bank foreign private bank foreign 15 9 15 9 15 9 Mean 2.6411 2.9179 2.6291 3.0757 2.6899 3.2829

Std. Deviation .6223 1.0857 .6051 .8689 .51288 .85173

Std. Error Mean .1606 .3618 .15624 .2896 .1324 .2839

Bank Type I means public private bank IInd means overall public private bank public private bank N 25 15 25 15 25 15 Mean 2.9593 2.6411 2.7990 2.6291 2.8857 2.6899

Std. Deviation .2412 .6223 .2131 .6051 .2809 .5128

Std. Error Mean .0482 .1606 .0426 .1562 .0561 .1324

Bank variable N I means IInd means overall means public foreign public foreign public foreign 25 9 25 9 25 9 Mean 2.9593 2.9179 2.7990 3.0757 2.8857 3.2829

Std. Deviation .24124 1.0857 .2131 .8689 .2809 .8517

Std. Error Mean .0482 .3619 .0426 .2896 .05619 .2839

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A comparison of the performance of Public Sector and Private Sector Banks has been made. The results have shown that during the first phase Private Banks were lagging behind Public Sector Banks, with their 1st mean of 2.6411 as against the Public Sector Banks mean of 2.9593. Even during the second Phase the performance of Private

Sector Banks with their mean of 2.6291are behind Public Sector Banks with a second mean of 2.7990. A similar comparison of Public Sector and Foreign Banks has also been made. The results have shown that during the first phase foreign Banks were slightly behind Public Sector Banks, with their 1st mean of 2.9179 as against the Public Sector Banks mean of 2.9593. However, during the second Phase the performance of Foreign Banks has improved from to 3.0757as against that of 2.7990 of the Public Sector Banks. The performance of Private Sector Banks vis--vis Foreign Banks reveals that during the 1st phase private banks with a mean of 2.6411 were behind Foreign Banks whose 1st mean is 2.9179. The position of the second means is Private Sector 2.6291 and Foreign Banks 3.0757. This shows that the Private Sector Banks were behind Foreign Banks during both the study periods.

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Table: 14
ANOVA Sum of Squares I means Between Groups Within Groups IInd means overall means Total Between Groups Within Groups Total Between Groups Within Groups Total .993 16.250 17.244 1.122 12.258 13.380 1.986 11.381 13.367 df 2 46 48 2 46 48 2 46 48 Mean Square .497 .353 .561 .266 .993 .247 2.106 .133 F 1.406 Sig. .255

4.014

.025

From the Anova table, it is conclude that: i) There is no significant difference between the three Sectors in respect of the first means and the second means ii) In the case of the overall means, the difference is significant.

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Table: 15
Post Hoc Test

Dep. Variable

(I) bank type

(J) bank type

Mean Differenc e (I-J) .3181 .0414 -.3181 -.2767 -.0414 .2767 .1699 -.2766 -.1699 -.446* .2766 .4466* .1958 -.3971* -.1958 -.5928* .3971* .5929*

95% Confidence Interval Std. Error .1941 .2310 .1941 .2506 .2316 .2506 .1685 .2006 .1685 .2176 .2006 .2176 .1624 .1935 .1624 .2097 .1933 .2097 Sig. .108 .859 .108 .275 .859 .275 .319 .175 .319 .046 .175 .046 .234 .046 .234 .007 .046 .007 Lower Upper Bound Bound -.0726 -.4236 -.7088 -.7811 -.5064 -.2277 -.1694 -.6805 -.5093 -.8847 -.1272 .0085 -.1311 -.7863 -.5221 .7088 .5064 .0725 .2277 .4236 .7811 .5094 .1274 .1694 -.0085 .6805 .8847 .5228 -.0079 .1311

I means

public

private . foreign public foreign public private private foreign public foreign Public private private foreign Public foreign

private foreign public private foreign public private

d i m IInd means e n s i o n overall means 1

-.1707 1.0151 .0079 .1703 .7863 1.015

foreign

public private

*. The mean difference is significant at the 0.05 level.

As per the Post Hoc Test, in the case of overall means, there is significant difference in the case of Public and Foreign Banks and private and foreign Banks while in the case of public and private banks there is no significant difference. In the case of the first and second means there is no significant difference in the three sectors.

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Table:16 RANKING OF BANKS: NET INTEREST MARGIN

SECTOR FOR FOR PVT FOR FOR PVT PUB PUB PVT PVT PUB PVT FOR PUB PUB PUB PUB PVT PUB PVT PUB PUB PUB PUB PUB

BANK CITI SCB T MC ABN-AMRO . HSBC HDFC PN B I OB K VB S. B & JAIPUR AB CUB. DBS C BI VIJAYA CORP.BANK INDIAN BANK CATHOLIC BANK SYNDICATE FED BANK ALL BANK OBC CANARA IB SBI

SCORE 4.2617 3.9483 3.8750 3.8733 3.5733 3.4183 3.2550 3.2033 3.1633 3.1583 3.0083 3.0033 2.9767 2.9617 2.9117 2.8900 2.8833 2.8767 2.8683 2.8333 2.8300 2.8000 2.7717 2.7667 2.7667 1 2 3 4 5 6 7 8 9

RANK

SECTOR FOR PVT PUB PUB PUB PUB PVT PUB PUB PUB PUB PUB PVT PUB PVT PUB PVT PVT FOR FOR FOR PVT PVT PVT

BANK SBMAUR DHAN.BANK SBT SB INDORE BOB BOM J& K BANK ST BANK MYSORE DENA BANK SB PATIALA CANARA B SBH SOUTH INDIAN BANK OF INDIA BANK OF RAJ UCO BANK KARNATAKA LVB DEUTSCHE BK BK OF BAHRAIN ABU DHABI DCB INDUSIND ICICI BANK

SCORE 2.7583 2.7500 2.7467 2.7367 2.7333 2.7067 2.6917 2.6883 2.6833 2.6500 2.5783 2.5617 2.5117 2.4583 2.4033 2.3583 2.2817 2.1700 2.1283 2.1050 2.0567 1.9383 1.8617 1.6583

RANK 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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In an attempt to assess make the performance of the Banks in the three Sectors, ranks have been assigned to individual Banks, and from the above table, we draw the following inferences: Citi Bank in Foreign sector stands out the best with first rank among all the 49 sample Banks. Sector wise the Banks in the 1st position are as under: Public Sector: Punjab National Bank Private Sector: TamilNadu mercantile Bank Foreign Bank: Citi Bank ICICI BANK in the Private Sector stood last in the above Ranking.

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III-Parameter

NET PROFIT TO TOTAL ASSETS RATIO Net Profit to total assets ratio reflects the efficiency of Banks, and is a very important indicator. Data relating to this Parameter is furnished at Annexure 4. In the Camels rating Net Profit takes the 4th place (Earnings). Banks strive to improve the profitability, as the Regulator keeps a close watch on the Return on Assets of Banks, and in extreme cases put the Banks under watch list as per the PCA (Prompt Corrective Action) guidelines. Since most Public Sector and Private Sector Shares are quoted on the Stock Exchanges and actively traded, the Investor OVERALL POSITION OF THE SAMPLE SCHEDULED COMMERCIAL BANKS: HO: There is no significant change in the Net Profit to total assets ratio of Scheduled Commercial Banks over the study period. H1: There is a significant change in the Net Profit to total assets ratio of Scheduled Commercial Banks over the study period.

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Table: 17.1

Paired Samples Statistics

Std. Deviation 49 49 .7502 .4544 Std. Error Mean .1071 .0649

Mean

Pair I means 1 II means

.7678 .9559

Table 17.2 Paired Samples Correlations

N Pair 1 I means & II means 49 Correlation .271 Sig. .060

Table: 17.3 Paired Samples Test

Paired Differences 95% Confidence Interval of Std. Std. Mean Pair 1 I means - II means -.1881 Deviation .7645 Error Mean the Difference Lower Upper .0315 t -1.722 df 48 Sig. (2tailed) .091

.1092 -.4077

Comparison of the two means reveals that there is a marginal change among all the Scheduled Commercial Banks. The second mean at

.9559 is higher when compared to the first mean of 0.7678. Paired Samples Correlations statement reveals that there is correlation, and the t tests suggests that since the significance value is greater than

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0.05, it is concluded that there is no significance in the working of SCBs. Since as per the Paired Sample Statistics, there is no significant change, the Null hypotheses is accepted. SECTORWISE ANALYSIS: PUBLIC SECTOR BANKS HYPOTHESIS:Ho: There is no significant change in the Net Profit to total assets ratio of Public Sector Banks over the study period. H1: There is a significant change in the Net Profit to total assets ratio of Public Sector Banks over the study period. Table:18.1 Paired Samples Statistics
Mean Pair 1 Ist means IInd means .4296 .9592 N 25 25 Std. Deviation .7391 .2052 Std. Mean .14782 .04105 Error

Table 18.2 : Paired Samples Correlations

N Pair1 Ist means & IInd means 25 Correlation .200 Sig. .339

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18.3 Paired Samples Test

Paired Differences Std. Deviatio n Std. Error Mean 95% Confidence Interval of the Difference Lower -.8295 Upper -.227 -3.64 24 .001 t df

Mean Ist means - IInd means

Sig. (2tailed )

Pair1

-5296

.7265

.1453

As per the able Table second mean at .9592 is significantly higher than the first mean at .4296, which indicates that there is significant difference between the means. Karl Persons Correlation test has been applied to find out if there is correlation between the means belonging to the same Sector. The results indicate positive correlation. As per the t test since the significance value is less than 0.05, it is concluded that there is significant difference between first mean and second mean with respect to Public Sector Banks and hence the null hypothesis is rejected.

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PRIVATE SECTOR BANKS : HYPOTHESIS

H0: There is no significant change in the Net Profit to total assets ratio ratio of Private Sector Banks over the study period. H1: There is a significant change in the Net Profit to total assets

ratio ratio of Private Sector Banks over the study period.

Table: 19.1 Paired Sample

Std. Deviation .5342 .5720 Std. Mean .1379 .1477 Error

Mean Pair 1 Ist means IInd means 1.0095 .8856

N 15 15

Table 19.2: Paired Sample Correlations

N Pair 1 I means & II means 15 Correlation .374 Sig. .170

Table 19.3 : Paired Samples Test

Paired Differences 95% Confidence Interval of the Difference Lower -.2194 Upper t .4671 df

Mean Pair 1 Ist means IInd means .1238

Std. Std. Error Deviation Mean .61987 .1600

Sig. (2tailed)

.774 14 .452

137

Mean comparison: The first mean is computed for the period 1995-96 to 2001-2002 and the second mean is computed is computed for the period 2002-2003 to 2007-2008. The analysis shows that the performance of the Private Sector Banks has marginally declined as shown by the fact that the 1 st mean at 1.0095 is higher when compared to the second mean at .8856. As per Correlation test. there is slight positive correlation between the first mean and second mean. As per thet test, since the significance value is greater than 0.05, it is concluded that there is no significant difference between the first mean and second mean. As per the Paired Samples Statistics the Private Banks have not shown significant change in the Net Profit to total assets ratio. Hence the null hypothesis is accepted.

FOREIGN BANKS H0: There is no significant change in the Net Profit to total assets ratio ratio of Foreign Banks over the study period. H1: There is a significant change in the Net Profit to total assets ratio ratio of Foreign Banks over the study period.

138

Table: 20.1

Paired Samples Statistics Mean Ist means Pair 1 IInd means 1.3044 1.0637 N 9 9 Std. Deviation .6691 .7192 Std. Mean .22304 .23976 Error

Table 20.2 Paired Samples Correlations

N Pair 1 Ist means means & IInd 9 Correlatio n .486 Sig. .185

Table: 20.3 Paired Sample Test

Paired Differences 95% Confidence Interval of the Std. Std. Error Difference Deviation Mean Lower Upper .7053 .2351 -.3014 .7829 Sig. (2tailed) .336

Mean Pair1 Ist means IInd means .2407

t 1.024

df 8

As per Correlation test, there is slight positive correlation between the first mean and second mean at 0.486. As per the t test, since the significance value is greater than 0.05, it is concluded that there is no significant difference between the first mean and second mean. Since as per the Paired Samples Statistics, there is no significance in the case of Foreign Banks the null hypothesis is accepted.

139

.COMPARISION IN THE PERFORMANCE OF BANKS-GROUPWISE Table: 21

Group Statistics Bank type N I means public Private public Private public Private 25 15 25 15 25 15

II means overall means

Std. Deviatio Mean n .4296 .7391 1.009 .5342 5 .5200 .5975 .9747 .4937 .6474 .4569 .9576 .4567

Std. Error Mean .1478 .1379 .1195 .1274 .0913 .1179

Bank type Std. N I means Private Foreign II means overall means Private Foreign Private Foreign Mean 15 1.0095 9 1.3042 15 15 .9747 .9576 9 1.2622 Deviation .5342 .6691 .4935 .4471 .4567 .5819

Std. Error Mean .1379 .2230 .1274 .1490 .1179 .1939

9 1.2053

Bank type Std. N I means II means overall means public Foreign public Foreign public Foreign 25 9 25 9 25 9 Mean .4296 1.3044 .5200 1.2622 .6474 1.2053 Deviation .7391 .6691 .5975 .4471 .4569 .5819

Std. Error Mean .1478 .2230 .1195 .1490 .0913 .1939

A comparison of Public Sector and Private Sector Banks has been made. The results have shown that during the first phase Private

140

Banks were well ahead of Public Sector Banks, with their 1st mean of 1.009523 as against the Public Sector Banks mean of 0.4296. However, during the second Phase the performance of Private Sector Banks has slipped from 1.009523 to 0.9747 and that of the Public Sector Banks has drastically improved from 0.4296 to 0.5200. There is no significant difference in the variances of the two sectors. A similar comparison of Public Sector and Foreign Banks has also been made. The results have shown that during the first phase foreign Banks were well ahead of Public Sector Banks, with their 1st mean of 1.3044 as against the Public Sector Banks mean of 0.4296. However, during the second Phase the performance of Foreign Banks has slipped from 1.3044 to 1.2622 and that of the Public Sector Banks has drastically improved from 0.4296 to 0.5200. The performance of Private Sector Banks vis--vis Foreign Banks reveals that during the 1st phase private banks with a mean of 1.009 were behind Foreign Banks whose 1st mean is 1.3044. The position of the second means is Private Sector .9747 and Foreign Banks 1.2622. This shows that both Sectors have slipped in their performance during the second phase as revealed by thet test.

141

Table: 22
ANOVA

Sum of Squares I means Between Groups Within Groups Total II means Between Groups Within Groups Total overall means Between Groups Within Groups Total 6.328 20.690 27.018 .179 9.733 9.911 2.334 10.642 12.976 df 2 46 48 2 46 48 2 46 48

Mean Square 3.164 .450 .089 .212 1.167 .231 5.045 .010 .423 .658 F 7.034 Sig. .002

In the case of Net Profit Anova Test

has shown that there is

significant difference in the First Mean, and overall mean, while there is no significant difference in the second mean.

142

Table: 23 Post Hoc Tests

Multiple Comparisons Dep. Variable (I) bankvariable (J) bankvariable 95% Confidence Interval Std. Error .2190 .2607 .2190 .2827 .2607 .2827 .1502 .1788 .1502 .1939 .1788 .1939 .1570 .1869 .1570 .2027 .1869 .2027 Sig. .011 .002 .011 .302 .002 .302 .627 .562 .627 .363 .562 .363 .054 .005 .054 .228 .005 .228 Lower Bound -1.0208 -1.3996 .1390 -.8641 .3500 -.2745 -.2287 -.4643 -.3759 -.5684 -.2554 -.2123 -.6263 -.9341 -.0060 -.6558 .1814 -.1605
Upper
Bound

Mean Differenc e (I-J) -.5799* -.8748* .5799* -.2949 .8748* .2949 .0735 -.1044 -.0735 -.1780 .1044 .1780 -.3101 -.5578* .3101 -.2476 .5578* .2476

I means

public private bank

private foreign public foreign public private private foreign public foreign public private private foreign public foreign public private

-.1390 -.3500 1.0208 .2742 1.3996 .8645 .3759 .2554 .2287 .2123 .4643 .5684 .0060 -.1814 .6263 .1605 .9341 .6558

d i II means m e n s i o n overall 1 means

foreign bank public private bank foreign bank public private bank foreign bank

*. The mean difference is significant at the 0.05 level.

Post Hoc test revealed that the difference is significant in the case of Public and Private Banks and Public and Foreign Banks. There is no significant difference between Foreign and Private Sector Banks. In the second mean there is no significant difference between the three sectors.

143

Table : 24 Ranking of Banks: Net profit to total Assets

SECTOR PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB PUB
PUB

BANK ALL.BANK AB BOB BOI BOM CANARA CBI CORPN. B DENA BANK INDIAN BANK IOB OBC PNB SYNDICATE UCO BANK UNION BANK UNITED BANK VIJAYA BANK SBI SBIKANER SBH SB INDORE SBF MYSORE SB PATIALA
SBT

SCORE .556 1.134 .842 .754 .670 .896 .458 1.468 .110 -.232 .654 1.178 .862 .866 .476 .740 .650 .892 .744 1.084 1.010 1.252 .758 1.326
.770

RANK 44 16 28 36 40 22 46 5 48 49 41 13 27 25 45 38 42 23 37 17 20 10 35 9
33

SECTOR PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN

BANK B RAJASTHAN CATHOLIC SY CITY UNION DHANALAKSHMI FEDERAL BANK J & K BANK KARNATAKA KARUR VYSYA LAKSHMI VILAS SOUTH INDIAN TAMILNAD MERC DCB. HDFC ICICI BANK INDUSIND ABN-AMRO ABU DHABI BANK OF BAHRIN CITIBANK N.A. DBS BANK LTD. DEUTSCHE BANK HSBC LTD. SCB SB MAURITIUS

SCORE .764 .836 1.362 .612 .774 1.632 1.002 2.002 1.072 .838 1.384 .708 1.218 .876 .864 1.420 .418 .826 1.580 1.148 1.206 1.078 1.998 1.152

RANK 34 30 8 43 32 3 21 1 19 29 7 39 11 24 26 6 47 31 4 15 12 18 2 14

144

In an attempt to assess the performance of the Banks in the three Sectors, ranks have been assigned to individual Banks, and from the above table, we draw the following inferences: Karur Vysya Bank in Private sector stands out the best with first rank among all the 49 sample Banks. Sector wise the Banks in the 1st position are as under: Public Sector: Corporation Bank Private Sector: Karur Vysya Bank Foreign Banks: Standard Charatered Bank Indian Bank in the Public Sector had negative profitability and so stood last in the Ranking. IV-Parameter OPERATING EXPENSES AS PERCENTAGE OF TOTAL ASSETS One of the most important performance indicators which shows the efficient working of Banks is the ratio of Operating Expenses as per cent age of Total Assets. In the CAMELS rating of Banks, the ratio of Operating expenses as per cent age of Total Assets plays a very important role as the earnings capacity of a Bank is judged by the capacity of a Bank in achieving a substantial reduction in this ratio. This is a part of the fourth parameter which goes into the supervisory rating awarded by the Reserve Bank of India to the respective Banks. Hence Banks constantly are on the look out to achieve a reduction in the ratio, as it will directly improve the profitability of Banks. Prior to

145

the Reform period Banks have suffered the most on account of a high degree of militancy among the Bank Employees. levels were low. The productivity

Since the Banks had a very low degree of

Computerization, the operating expenses ratio was high as most operations were done manually. Post Reforms the things have improved especially with the new Private Sector Banks bringing in the new state of the art working conditions which contributed to higher productivity levels. Hence the study of this ratio will be very helpful. The Data relating to this Parameter is furnished at Annexure 5. OVERALL COMPARISON OF THE PERFORMANCE OF ALL THE SCHEDULED COMMERCIAL BANKS An attempt has been made to compare the performance of all the sample Scheduled Commercial Banks with respect to their

performance over the study period in regard to the Ratio of Net Interest Expenses. H0: There is no significant change in the ratio of Operating expenses as per cent age of Total Assets in respect of Scheduled Commercial Banks over the study period. H1: There is a significant change in the ratio of Operating expenses as per cent age of Total Assets in respect of Scheduled Commercial Banks over the study period.

146

Table: 25.1
Paired Samples Statistics Std. Error Mean .1024 .0710

Mean Pair 1 I means II means 2.4383 2.0923

N 49 49

Std. Deviation .7168 .4970

: Table 25.2 : Paired Samples Correlations N Pair 1 I means & II means 49 Correlation .210 Sig. .147

Table 25.3 : Paired Samples Test : Paired Differences Std. Deviati on .7818 Std. Error Mean .1116 95% Confidence Interval of the Difference Lower .1214 Upper .5705 t 3.09 df 48

Mean Pair 1 I means II means .3459

Sig. (2tailed) .003

Comparison of the two means reveals that there is among all the Scheduled Commercial Banks.

improvement

The second mean at Paired

2.0923 lower when compared to the first mean of 2.4383.

Samples Correlations statement reveals that there is correlation, and the t tests suggests that level of variations in the performance is significant. Hence the null hypothesis is rejected.

147

SECTORWISE ANALYSIS: PUBLIC SECTOR BANKS The following is the sector wise performance of Scheduled Commercial Banks in respect of the ratio of Operating expenses as per cent age of Total Assets. H0: There is no significant change in the ratio of Operating expenses as per cent age of Total Assets in respect of Public Sector Banks over the study period. H1: There is a significant change in the ratio of Operating expenses as per cent age of Total Assets in respect Sector Banks over the study period.
Table:26.1 Paired Samples Statistics Std. Mean .07520 .05278 Error

of Public

Mean Pair 1 I means II means 2.7376 2.0027

N 25 25

Std. Deviation .37600 .26394

Table 26.2 : Paired Samples Correlations N Pair 1 I means & II means 25 Correlation .705 Sig. .000

Table 26.3 : Paired Samples Test Paired Differences 95% Confidence Interval of the Difference Lower .6248 Upper .8448 t 13.78 df 24

Mean Pair 1 I meansII means .7348

Std. Deviati on .2665

Std. Error Mean .0533

Sig. (2tailed) .000

148

Mean comparison test reveals that the Second mean at 2.0027 is significantly lower than the first mean at 2.7376, which indicates that there is significant difference between the means. This shows substantial improvement in the working of the Public Sector Banks. As per Karl Persons Correlation test, the results indicate that there is positive correlation As per the t test since the Significance value is less than 0.05, we conclude that there is significant difference between first mean and second mean with respect to Public Sector Banks. As per the Paired Samples Statistics the Public Sector Banks have shown significant change in the ratio of the ratio of Operating expenses as per cent age of Total Assets in the case Public Sector Banks. Hence the null hypothesis is rejected. SECTORWISE ANALYSIS: PRIVATE SECTOR BANKS We now proceed to see the sector wise performance of Private Sector in respect of the ratio of Operating expenses as per cent age of Total Assets. The following is the hypothesis: H0: There is no significant change in the ratio of Operating

expenses as per cent age of Total Assets Of Private Sector Banks over the study period. H1: There is a significant change in the ratio of Operating expenses as per cent age of Total Assets In respect of Private Sector Banks over the study period.

149

Table: 27.1
Paired Samples Statistics Mean Pair 1 I means II means 1.8172 2.0338 N 15 15 Std. Deviation .6144 .4886 Std. Error Mean .1586 .1261

Table 27.2 : Paired Samples Correlations N Pair 1 I means & IInd means 15 Correlation .280 Sig. .312

Table 27.3 : Paired Samples Test Paired Differences Std. Deviati on .6695 Std. Error Mean .17286 95% Confidence Interval of the Difference Lower -.587 Upper .154 t -1.25 df Sig. (2tailed )

Mean Pair 1 I means II means -.2166

14 .231

As per the above Table second mean at 2.0338 is marginally higher than the 1st mean at 1.8172 which indicates that there is no significant difference between the means. This shows that in fact the working of the Private Sector Banks has deteriorated during the study period. As per Correlation test has, the results indicate that there is positive correlation, but statistically very insignificant.

150

As per thet test, since the significance value is more than 0.05, it is concluded that there is no significant difference between first mean and second mean with respect to Private Sector Banks. As per the Paired Samples Statistics the Private Sector Banks have not shown any significant change in the ratio of Operating Expenses as a percentage of Total Assets in the case of Private Sector Banks. Hence the null hypothesis is accepted. SECTORWISE ANALYSIS: FOREIGN BANKS The following is the sector wise performance of Foreign Banks in respect of the ratio of Operating Expenses as a percentage of Total Assets. H0: There is no significant improvement in the ratio of Operating Expenses as a percentage of Total Assets study period. H1: There is a significant improvement in the ratio of Operating Expenses as a percentage of Total Assets in respect Banks over the study period. of Foreign of Foreign Banks over the

151

Table: 28.1 Paired Samples Statistics

Std. Mean .3245 .2767 Error

Mean Pair 1 I means II means 2.6420 2.4381

N 9 9

Std. Deviation .9737 .8301

Table 28.2 : Paired Samples Correlations N Pair 1 I means means & II 9 Correlation .035 Sig. .929

Table 28.3 : Paired Samples Test Paired Differences 95% Confidence Interval of the Std. Error Difference Mean Lower Upper .4191 -.762 1.170 Sig. (2tailed ) .640

Mean Pair 1 I means & II .2035 means

Std. Deviati on 1.2573

df

.486 8

The first mean is computed for the period 1995-96 to 2001-2002 and the second mean is computed is computed for the period 2002-2003 to 2007-2008. The second mean at 2.4385 is slightly lower than the first mean at 2.6420, which indicates that there is no significant difference between the means in the working of the Foreign Banks. As per the Correlation test, the results indicate very slight positive correlation which is not statistically significant.

152

As per the t test, since the significance value is more than 0.05, it is concluded that there is no significant difference between first mean and second mean with respect to Foreign Banks. As per the Paired Samples Statistics the Foreign Banks have not shown any significant change in the ratio of ratio of Operating Expenses as a percentage of Total Assets. Hence the null hypothesis is accepted. Table: 29 COMPARISION IN THE PERFORMANCE OF BANKS-GROUPWISE
Group Statistics Bank type N I means II means overall means public private public private public private Bank type N I means II means overall means private foreign private foreign private foreign 15 9 15 9 15 9 Mean 1.8172 2.6420 2.0338 2.4385 1.9034 2.5630 Std. Deviation .61449 .97377 .48860 .83018 .46637 .68272 25 15 25 15 25 15 Mean 2.737600 1.817238 2.002733 2.033889 2.443840 1.903460 Std. Deviation .3760077 .6144930 .2639479 .4886086 .3099928 .4663746 Std. Error Mean .0752015 .1586614 .0527896 .1261582 .0619986 .1204174 Std. Error Mean .15866 .32459 .12615 .27672 .12041 .22757

Bank type N I means II means overall means public foreign public foreign public foreign 25 9 25 9 25 9 Mean 2.7376 2.6420 2.0027 2.4385 2.4438 2.5630 Std. Deviation .376 .9737 .2639 .8301 .3099 .6827

Std. Error Mean .0752 .3245 .0527 .2767 .0619 .2275

153

A comparison of Public Sector and Private Sector Banks has

been

made. The results have shown that during the first phase Public Sector Banks were behind Private Sector Banks, with their 1st mean of 2.7376as against the Private Sector Banks mean of 1.8172. During the second Phase the performance of Private Sector Banks is more or less similar ratio of 2.0338 as compared to the Public Sector Banks ratio of 2.0027. A similar comparison of Public Sector and Foreign Banks has also been made. The results have shown that during the first phase foreign Banks were slightly ahead of Public Sector Banks, with their 1st mean of 2.6420 as against the Public Sector Banks mean of 2.7376. However during the second Phase the performance of Foreign Banks is lower at a ratio of 2.4385 as compared to the Public Sector Banks ratio of 2.0027. The performance of Private Sector Banks vis--vis Foreign Banks reveals that during the 1st phase private banks with a mean of 1.1872 were ahead of Foreign Banks whose 1st mean is 2.6420. during the second phase, the position of the However

Private Sector Banks

has improved and they are ahead of Foreign Banks with their IInd Mean of 2.0338 as 2.4385. against the ratio of Foreign Banks which is

154

Table: 30
ANOVA Sum of Squares df I means Between Groups Within Groups II means Total Between Groups Within Groups Total Between Groups Within Groups Total 8.399 16.265 24.664 1.331 10.528 11.859 3.499 9.080 12.579 2 46 48 2 46 48 2 46 48 Mean Square 4.199 .354 .665 .229 1.749 .197 2.907 .065

F 11.876

Sig. .000

overall means

8.862

.001

In the case of Operating Expenses Anova Test has shown that i)there is significant difference in the case of the First mean ii) there is no significant difference in the case of the second mean iii) there is significant difference in the case of the overall between different sectors of Banks.

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Table: 31 Post Hoc Tests

Multiple Comparisons Depende (I) bank (J) bank Mean nt type type Differe Variable nce (I- Std. J) Error I means public private foreign II means public private foreign overall means public private foreign private foreign public foreign public private private foreign public foreign public private private foreign public foreign public private .9203 .0955 -.9203 -.8248 -.0955 .8248 -.0311 -.4357* .0311 -.4046 .4357 .4046 .5403 -.1191 -.5403 -.6595 .1191 .6595 .1942 .2311 .1942 .2507 .2311 .2507 .1562 .1859 .1562 .2017 .1859 .2017 .14510 .1727 .1451 .1873 .1704 .1873 95% Confidence Interval Sig. .000 .681 .000 .002 .681 .002 .843 .023 .843 .051 .023 .051 .001 .494 .001 .001 .494 .001 Lower Bound .5294 -.3697 -1.3112 -1.3295 -.5608 .320 -.3456 -.8101 -.2833 -.8106 .0614 -.00139 .248297 -.4668 -.8324 -1.0366 -.2284 .2824 Upper Bound 1.3112 .5608 -.5294 -.3201 .3697 1.3295 .2833 -.0614 .3456 .0013 .8101 .8106 .8324 .2284 -.2482 -.2824 .4668 1.0366

*. The mean difference is significant at the 0.05 level.

Post Hoc Test has shown that in the case of the I mean the difference is significant between Public and Private Sector and Private and Foreign Banks, while there is no significant difference between Public Sector and Foreign Banks. In the case of the overall mean the difference is significant in the case of public and private banks and private and foreign banks, while there is no significant in the case of foreign and public banks.

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Table: 32 RANKING OF BANKS: OPERATING EXPENSES

SECTOR FB FB PV PV PS PS PV PS PV PS PV PS PS PS PV PV PV PS PS PS PV PS PS PV PV NAME SBM DBS J&K KARNATAKA SBP OBC CUB UBI INDUS SBH FED. SBT CORP CANARA KVB VIJAYA SOUTH INDIAN SB INDORE UCO BANK B0I ICICI BOM B0B TMC LVB SCORE 1.1500 1.2250 1.3150 1.4900 1.5000 1.5200 1.6000 1.6550 1.6700 1.7350 1.7950 1.8100 1.8150 1.8400 1.8400 1.9100 1.9150 1.9300 1.9450 1.9550 1.9800 1.9900 2.0950 2.1050 2.1150 RANK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SECTOR PS PS PV PS PS PS PS PV FB FB PS FB PS PS PS PS PV PV PS FB FB PV FB FB NAME ALLAHABAD IOB B.RAJASTHAN SBI INDIAN DENA PNB HDFC ABU DHABI BAHRAIN & KUWAIT ANDHRA BANK SCB CBI SYNDICATE UBI BIKANER &J DHANALAKSHMI CATHOLIC S SB MYSORE HSBC CITI DCB. DEUTSCHE ABN-AMRO SCORE 2.1200 2.1350 2.1400 2.1500 2.1750 2.1800 2.2000 2.2050 2.2050 2.2400 2.2750 2.3200 2.3800 2.3900 2.4300 2.5600 2.5850 2.6250 2.6600 2.7850 2.9950 3.2000 3.3800 3.5200 RANK 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

157

In an attempt to assess the performance of the Banks in the three Sectors, ranks have been assigned to individual Banks, and from the above table, we draw the following inferences: State Bank of Mauritius Ltd in Foreign sector stands out the best with first rank among all the 49 sample Banks. Banks in the 1st position are as under: Public Sector Private Sector Foreign Bank : : : State Bank of Patiala Jammu & Kashmir Bank Ltd State Bank of Mauritius Ltd Sector wise the

ABN-AMRO Bank in the Foreign Sector stood last in the above ranking.

158

V-Parameter INTEREST EXPENDED AS PERCENTAGE OF TOTAL ASSETS One of the most important performance indicators which shows the efficient working of Banks is the ratio of INTEREST EXPENDED AS PER CENTAGE OF TOTAL ASSETS. Data pertaining to this Parameter is furnished at Annexure 6. In the CAMELS rating of Banks, the ratio of INTEREST EXPENDED AS PER CENTAGE OF TOTAL ASSETS plays a very important role as the earnings capacity of a Bank is judged by the capacity of a Bank in achieving a substantial reduction in this ratio. This is a part of the fourth parameter which goes into the supervisory rating awarded by the Reserve Bank of India to the respective Banks. Hence Banks constantly are on the look out to achieve a reduction in the ratio, as it will directly improve the profitability of Banks. This is an important profitability indicator. Prior to the Reform period Banks have suffered the most on account of Regulated Regime of Interest Rates which left very little scope for launching innovative products which would help reduction in this ratio. Post Reforms the interest rates have been de regulated except in the case of Savings Bank Accounts. As per the Reserve Bank of India Governor

Dr.Duvvuru Subba Rao, the RBI is contemplating to de regulate even this restriction.

159

OVERALL PERFORMANCE OF THE SAMPE SCHEDULED COMMERCIAL BANKS H0: There is no significant change in the ratio of Net Interest Expended as a percentage of Total Assets of Scheduled Commercial Banks over the study period. H1: There is a significant change in the ratio of Net Interest Expended as a percentage of Total Assets in respect Commercial Banks over the study period. Table: 33.1
Paired Samples Statistics Std. Error Mean Pair 1 I means II nd means 6.5296 4.4982 N 49 49 Std. Deviation .9464 .8603 Mean .1352 .1229

of Scheduled

Table 33.2 Paired Samples Correlations N Pair 1 I means & II nd means 49 Correlation .499 Sig. .000

Table 33.3 Paired Samples Test Paired Differences 95% Confidence Std. Deviatio Mean Pair 1 I means - IInd means 2.0314 n .9074 Std. Error Mean .1296 Interval of the Difference Lower 1.7708 Upper 2.2920 t 15.671 df 48 Sig. (2tailed) .000

160

As per the Paired Samples Statistics the Scheduled Commercial Banks have shown significant change in the ratio of Net Interest Expended as percentage of Total Assets. Hence the null hypothesis is rejected. SECTORWISE ANALYSIS: PUBLIC SECTOR BANKS The following is the sector wise performance of Scheduled Commercial Banks in respect of the ratio of Net Interest Expended as a percentage of Total Assets. The following is the hypothesis for the purpose of

testing with the help of t test. H0: There is no significant change in the ratio of Net Interest Expended as a percentage of Total Assets of Public Sector Banks over the study period. H1: There is a significant change in the ratio of Net Interest Expended as a percentage of Total Assets in respect Sector Banks over the study period. Table: 34.1
Paired Samples Statistics Std. Error Mean .0774 .0465

of Public

Mean Pair 1 I means IInd means 6.3088 4.4898

N 25 25

Std. Deviation .3872 .2326

Table 34.2: Paired Samples Correlations N Pair 1 I means & IInd means 25 Correlation .244 Sig. .240

161

Table 34.3 Paired Samples Test Paired Differences Std. Deviati on .4002 Std. Error Mean .0800 95% Confidence Interval of the Difference Lower 1.6537 Upper 1.9841 t df Sig. (2taile d)

Mean Pai I means r 1 IInd means 1.818

22.72 24 .000

Mean comparison has been made between the first mean and the mean. The first mean is computed for the period 1995-96 to 20012002 and the second mean is computed is computed for the period 2002-2003 to 2007-2008. The second mean at 4.4898 is significantly lower than the 1st mean at 6.3088, which indicates that there is significant different between the means. This shows substantial improvement in the working of the Public Sector Banks. As per Karl Persons Correlation test, the results indicate positive correlation. As per the t test, since the significance value is less than 0.05, it is concluded that there is significant difference between first mean and second mean with respect to Public Sector Banks. As per the Paired Samples Statistics the Public Sector Banks have shown significant change in the ratio of Net Interest Expended as percentage of Total Assets. Hence the null hypothesis is rejected.

162

SECTORWISE ANALYSIS: PRIVATE SECTOR BANKS The following is the sector wise performance of Private Sector Banks in respect of the ratio of Net Interest Expended as a percentage of Total Assets. H0: There is no significant change in the ratio of Net Interest Expended as a percentage of Total Assets of Private Sector Banks over the study period. H1: There is a significant change in the ratio of Net Interest Expended as a percentage of Total Assets in respect Sector Banks over the study period.
Table: 35.1 Paired Samples Statistics Std. Std. Mean Pair 1 I means IInd means 7.1038 4.9134 N 15 15 Deviation 1.0636 .6416 Error Mean .2746 .1656

of Private

Table 35.2 : Paired Samples Correlations N Pair 1 I means & IInd means 15 Correlation .465 Sig. .081

163

Table 35.3 : Paired Samples Test Paired Differences Std. Deviati on .9534 Std. Error Mean .2461 95% Confidence Interval of the Difference Lower 1.6623 Upper 2.7183 t df 8.89 14 Sig. (2tailed ) .000

Mean Pair 1 I means IInd means 2.1903

As per the above Table the second mean at 4.9134 is significantly lower than the first mean at 7.1038, which indicates that there is significant difference between the means. This shows substantial improvement in the working of the Private Sector Banks. As per Karl Persons Correlation test, the results indicate positive correlation. As per the t test, since the significance value is less than 0.05, it is concluded that there is significance difference between first mean and second mean. As per the Paired Samples Statistics the Private Sector Banks have shown significant change in the ratio of Net Interest Expended as percentage of Total Assets. Hence the null hypothesis is rejected

164

SECTORWISE ANALYSIS: FOREIGN BANKS HYPOTHESIS: H0 There is no significant change in the ratio of Net Interest Expended as percentage of Total Assets of Foreign Banks over the study period. H1: There is a significant change in the ratio of Net Interest

Expended as a percentage of Total Assets in respect of Foreign Banks over the study period.

The following is the analysis of Foreign Banks in respect of the ratio of Net Interest Expended as a percentage of Total Assets.
Table: 36.1 Paired Samples Statistics Std. Error Mean .4762 .5509

Mean Pair 1 I means IInd means 6.1863 3.8294

N 9 9

Std. Deviation 1.4286 1.6527

Table 36.2 : Paired Samples Correlations N Pair 1 I means IInd means 9 Correlation .468 Sig. .204

Table 36.3 Paired Samples statistics Paired Differences 95% Confidence Std. Mean Pair 1 I means - IInd means 2.3560 n Std. Mean Interval of the Difference Lower 1.1266 Upper t df 3.5871 4.418 Deviatio Error 1.6005 .5335 Sig. (2taile d) 8 .002

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The mean comparison reveals that there is substantial improvement in the working of the Foreign Banks. The second mean of 38294 is far lower than the first mean of 6.1863. There is positive correlation as per the Karl Pearson Correlation test. The t test is indicating a highly significant difference. As per the Paired Samples Statistics the Foreign Banks have shown significant change in the ratio of Net Interest Expended as percentage of Total Assets. Hence the null hypothesis is rejected Table: 37 COMPARISION IN THE PERFORMANCE OF BANKS-GROUPWISE
Group Statistics bank type I means IInd means overall means public pri bank public pri bank public pri bank N 25 15 25 15 25 15 Mean 6.3088 7.1038 4.4898 4.9134 5.5806 6.2270 Std. Deviation .3872 1.0636 .2326 .6416 .2687 .7862 Std. Mean .0774 .2746 .0465 .1656 .0537 .2030 Error

Group Statistics bank type I means IInd means overall means pri forn Pri. forn Pri. forn N 15 9 15 9 15 9 Mean 7.1038 6.1863 4.9134 3.8294 6.2270 5.2552 Std. Deviation 1.0636 1.4286 .64163 1.6527 .78624 1.3152 Std. Mean .2746 .4762 .1656 .5509 .2030 .4384 Error

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Group Statistics Bank type N I means II nd means overall means public forn public forn public forn 25 9 25 9 25 9 Mean 6.3088 6.1863 4.4898 3.8294 5.5806 5.2552 Std. Deviation .3872 1.4286 .2326 1.6527 .2687 1.3152 Std. Error Mean .07745 .4762 .0465 .5509 .0537 .4384

A comparison of Public Sector and Private Sector Banks has been made. The results have shown that during the first phase Public Sector Banks were well ahead of Private Sector Banks, with their 1st mean of 6.3088 against the Private Sector Banks mean of 7.1038. Even, during the second Phase the performance of Private Sector Banks is lower with a ratio of 4.9134 as compared to the Sector Banks ratio of 4.4898. A similar comparison of Public Sector and Foreign Banks has also been made. The results have shown that during the first phase foreign Banks were ahead of Public Sector Banks, with their 1st mean of 6.1863 as against the Public Sector Banks mean of 6.30888. Even during the second Phase the performance of Foreign Banks is lower at a ratio of 3.8292 as compared to the Public Sector Banks ratio of 4.4898. Public

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The performance of Private Sector Banks vis--vis Foreign Banks reveals that during the first phase private banks with a mean of 7.1038 were behind Foreign Banks whose first mean is 6.1863. Even during the second phase, the position of the Private Sector Banks is lower with a ratio of 4.9134 as against the ratio of Foreign Banks which is 3.8294.

Table: 38 ANOVA Sum of Squares df I means Between Groups Total Between Groups Within Groups Total Between Groups Total 7.225 2 46 48 2 46 48 2 46 48 Mean Square 3.612 .778 3.307 .629 3.142 .527 5.967 .005 5.260 .009 F 4.646 Sig. .015

Within Groups 35.769 II nd means 42.994 6.613 28.915 35.529 6.285

overall means

Within Groups 24.228 30.513

The Anova table suggests that there is significant difference between the three groups with respect to 1st means, IInd Mean and the overall means. Hence we conclude that there is homogeneity between the three sectors of Banks.

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Table: 39 Ranking of Banks: Interested expended to total Assets

SECTOR FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN PVT SEC PVT SEC PUB PUB PUB PUB PUB PUB PUB PUB PVT SEC FOREIGN PUB PUB PUB PUB PUB PUB PUB BANK Deutche Bank Ltd. HSBC LTD. CITIBANK N.A. DBS BANK LTD. STANCHART ABN-AMRO HDFC BANK BANK OF RAJ PNB CORP. BANK B0B INDIAN BANK SYNDICATE BOI S. BIKANER SB OF PATIALA J & K BANK BANK OF BAHRAIN SBI S B MYSORE CBI AB SBH IOB VIJAYA 2.74 2.83 3.03 3.05 3.17 3.19 3.89 4.02 4.08 4.12 4.17 4.28 4.28 4.29 4.32 4.39 4.40 4.48 4.50 4.51 4.53 4.53 4.55 4.60 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PUB PUB PUB PUB PUB FOREIGN PUB PUB PUB PVT PVT PUB PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC PVT SEC FOREIGN SCORE 2.73 RANK 1 SECTOR PUB BANK SBNK OF INDORE UNION BANK UNITED BANK CANARA BANK DENA BANK SB T SB. MAURITIUS BOM AL. BANK UCO BANK KVB FED BANK OBC DHAN.BK SOUTH INDIAN B DCB CUB ICICI BANK LAKSHMI VILAS CATHOLIC SYRIAN INDUSIND BANK KARNATAKA BANK TMC ABU DHABI BANK 4.63 4.64 4.66 4.68 4.69 4.73 4.73 4.75 4.78 4.80 4.83 4.85 5.00 5.04 5.19 5.23 5.23 5.29 5.30 5.38 5.42 5.53 7.79 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 SCORE 4.60 RANK 26

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In an attempt to assess the performance of the Banks in the three Sectors, ranks have been assigned to individual Banks, and from the above table, we draw the following inferences: Deutsche Bank in Foreign sector stands out the best with first rank among all the 49 sample Banks. Sector wise the Banks in the 1 st position are as under: Public Sector Private Sector Foreign Banks : : : Punjab National Bank HDFC Bank Deutsche Bank

Abu Dhabi Commercial Bank in the foreign sector stood last in the above ranking.

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TableNo:40 Composite Ranking Table Based On All Parameters

SECTOR

BANK

R1

R2

R3

R4

R5

AVG.

C.RANK R

FOREIGN SEC PUB BANK FOREIGN SEC PVT SEC FOREIGN SEC FOREIGN SEC PVT SEC PUB BANK FOREIGN SEC PVT SEC PUB BANK PUB BANK PUB BANK PUB BANK PUB BANK PUB BANK PUB BANK FOREIGN SEC PVT SEC FOREIGN SEC PUB BANK PUB BANK PVT SEC PUB BANK PUB BANK PUB BANK PVT SEC PUB BANK PUB BANK

DBS BANK LTD. CORPORATION BANK STANDARD CHARTERED HDFC BANK CITIBANK N.A. ABN-AMRO BANK N.V. J & K BANK STATE BANK OF PATIALA HSBC LTD. KARUR VYSYA BANK ORIENTAL BANK PUNJAB NATIONAL BANK ANDHRA BANK VIJAYA BANK STATE BANK OF INDORE S BH STATE BANK OF B& J DEUTSCHE BANK CITY UNION BANK S BANK OF MAURITIUS SYNDICATE BANK BANK OF BARODA TAMILNADU MERCANTILE INDIAN OVERSEAS BANK SBTRAVANCORE CANARA BANK FEDERAL BANK LTD. INDIAN BANK BANK OF INDIA

18 10 9 2 13 5 15 7 4 16 22 12 3 11 14 8 17 1 40 43 21 27 3 22 19 23 25 24 31

13 16 2 6 1 4 32 33 5 9 13 7 11 15 29 37 10 44 12 26 19 30 7 8 28 36 20 17 39

15 5 2 11 4 6 3 9 18 1 6 27 16 23 10 20 17 12 8 14 25 28 24 41 33 22 32 49 36

2 13 37 34 46 49 3 5 45 15 38 32 36 16 18 10 41 48 7 1 39 23 48 27 12 15 11 30 20

4 10 5 7 3 6 17 16 2 36 17 9 22 25 26 23 15 1 43 32 13 11 24 24 31 29 37 12 14

10 11 11 12 13 14 14 14 15 15 11 17 18 18 19 20 20 21 22 23 23 24 23 24 25 25 25 26 28

1 2 3 4 5 7 7 7 9 10 6 12 13 14 15 16 17 18 19 20 21 22 38 24 25 27 27 28 30

171 PVT SEC PUB BANK PUB BANK PVT SEC PUB BANK PUB BANK PUB BANK PUB BANK PVT SEC PVT SEC PVT SEC PUB BANK PVT SEC PUB BANK FOREIGN SEC PVT SEC PUB BANK PVT SEC PVT SEC FOREIGN SEC BANK OF RAJASTHAN STATE BANK OF INDIA UNION BANK OF INDIA KARNATAKA BANK ALLAHABAD BANK STATE BANK OF MYSORE BANK OF MAHARASHTRA CENTRAL BANK OF INDIA SOUTH INDIAN BANK ICICI BANK INDUSIND BANK LTD. UNITED BANK OF INDIA LAKSHMI VILAS BANK UCO BANK B. OF BAHRAIN CATHOLIC SYRIAN BANK DENA BANK DHANALAKSHMI BANK D CREDIT BANK ABU DHABI L BANK LTD. 30 32 49 37 28 20 29 39 36 26 34 33 41 35 47 42 46 44 45 48 40 25 23 42 21 35 31 14 38 49 48 25 43 41 45 18 34 27 47 46 34 37 38 21 44 35 40 46 29 24 26 42 19 45 31 30 48 43 39 47 28 29 8 4 26 44 22 38 17 21 9 40 25 19 35 43 31 42 47 34 8 19 27 47 34 20 33 21 40 43 46 28 44 35 18 45 30 39 41 49 28 28 29 30 31 31 31 32 32 33 33 34 34 35 35 36 38 39 44 45 30 31 32 33 34 35 36 37 38 40 40 41 42 43 44 45 46 47 48 49

R=RANK C=COMPOSITE

In an attempt to assess the Overall performance of the Banks in the three Sectors, Composite ranks based on all the five parameters have been assigned to individual Banks, and from the above table, we

draw the following inferences: Development Bank of Singapore Ltd. in the foreign Sector stands out the best with first rank among all the 49 sample Banks. Sector wise the Banks in the 1st position are as under:

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Public Sector Private Sector Foreign Banks

: : :

Corporation Bank Ltd. HDFC BANK Ltd Development Bank of Singapore Ltd.

Abu Dhabi Commercial Bank in the Foreign Sector stood last in the above Ranking.

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VI-Parameter: CAPITAL ADEQUACY (CA) The following Table shows the position of Banks in the three Sectors regarding Capital Adequacy during the study period: Table No.41.1 PUBLIC SECTOR BANKS
PERIOD No. of Banks with negative CA No. of Banks with CA of below 8% No. of Banks with CA between 8-10% No. of Banks with CA above 10% TOTAL 1996 2 4 14 5 25 2002 -1 2 22 25 2008 --1 24 25

Table No.41.2 PRIVATE SECTOR BANKS

PERIOD No. of Banks with negative CA No. of Banks with CA of below 8% No. of Banks with CA between 8-10% No. of Banks with CA above 10% TOTAL 1996 -1 4 10 15 2002 --1 14 15 2008 --1 14 15

Table No.41.3 FOREIGN BANKS

PERIOD No. of Banks with negative CA No. of Banks with CA of below 8% No. of Banks with CA between 8-10% No. of Banks with CA above 10% 1996 -1 3 5 2002 --1 8 2008 ---9

TOTAL

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Table No.41.4 POSITION OF SCHEDULED COMMERCIAL BANKS

PERIOD No. of Banks with negative CA No. of Banks with CA of below 8% No. of Banks with CA between 8-10% No. of Banks with CA above 10% TOTAL 1996 2 6 21 20 49 2002 -1 4 44 49 2008 --2 47 49

Table No.41.5 The Banks with highest capital adequacy during 2008 are the following Sector wise:

SECTOR

NAME OF THE BANK

CAPITAL ADEQUACY PER CENT 13.5 22.5

PUBLIC SECTOR PRIVATE SECTOR

STATE BANK OF INDIA FEDERAL BANK ABUDABHI COMMERCIAL BANK

FOREIGN BANKS

51.71

The issue of lower capital adequacy had negative connotations both nationally and internationally. The Reserve Bank of India addressed this issue on priority and convinced the Government of India to recapitalize the ailing Public Sector Banks. This process started even before the study period, and by 1996 the no. of Banks with negative

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capital adequacy are 2

viz., Indian Bank and Vijaya Bank in the

Public Sector, while there are no Banks in the Private Sector and Foreign Banks with negative capital adequacy. During this period Banks with capital adequacy of below 8% are 4, 1and 1 in the Public Sector, Private Sector and Foreign Banks respectively. Banks with

capital adequacy of between 1-10% are 14, 4, and 3 in the Public Sector, Private Sector and Foreign Banks respectively. The no. of

Banks with capital Adequacy of more than 10% were 5, 10 and 5 respectively. The benefits Prompt Corrective Action, CAMELS rating can be directly seen in this very important area of capital adequacy. By 2002 all

Banks are positively capitalised, and there is only one Bank with capital below 8% viz., Indian Bank. This is the benchmark capital

adequacy prescribed by Basel Accord. 4 Banks were between 8-10%, and 44 Banks have enjoyed capital adequacy of above 10%, much above the requirements of Basel Committee8% and the Reserve Bank Guidelines of 9%. The position has further improved by 2008 with all the Banks enjoying capital adequacy above the regulatory

requirements.

During this period 2 Banks had capital adequacy

between 8-10% while the rest 47 had capital adequacy of over 10%.