CAMELS APPROACH-

1. Capital Adequacy Ratio is calculated through-

1. Debt Equity ratio
2. Advances to total Asset ratio
3. Government securities to Total Investment ratio

2. Asset quality- we calculate

1. Net NPA to Net Advances
2. total NPA growth rate.
Net Non Performing assets is the Gross NPA minus gross provision made, unrealised
interest and unadjusted credit balances with regard to various NPA accounts.

3. Management Quality parameter is evaluated by calculating-

o Market Value to Equity Capital
o Total Advances to Total Deposits
o Business/Employee (cr)
o Profit/Employee(cr)

4. Earning Quality is calculated by-

1. Operating profits by Average working funds
2. Net Profit to Average Assets
3. Interest income to Total Income
4. Non Interest income to Total Income
5. Dividend Payout Ratio
6. Return on Asset

5. Liquidity Parameter is judged by-

1. Liquid assets to Total Assets
2. Liquid assets to Total deposits
3. Government Security to Total Security
4. Approved Security to Total Security
5. Liquidity Asset to Demand Deposit

6. Sensitivity to market risk is calculated by-

Interest rate risk basics
An institution might lose liquidity if its credit rating falls, it experiences sudden unexpected cash
outflows, or some other event causes counterparties to avoid trading with or lending to the
institution. A firm is also exposed to liquidity risk if markets on which it depends are subject to
loss of liquidity.

Objectives set before-

- To understand the financial performance of the banks.
 To describe the CAMELS model of ranking, banking institutions, so as to analyze the
comparative of various banks.
  To analyze the banks performance through CAMEL model and give suggestion for
improvement if necessary.
 Understand qualitative as well as quantitative factors for evaluating financial institutions
 Identify various risks faced by financial institutions
 Analyze financial institutions and assign overall ratings.
 To do an in-depth analysis of the model.
 To analyze 3 banks to get the desired results by using CAMELS as a tool of measuring
performance.
 To study loan procedure of Bank of India and Banking scenario.

Limitations of the work done before-

 The study was limited to three banks only.

 Time and resource constrains.
 The method discussed pertains only to banks though it can be used for performance
evaluation of other financial institutions.
 The study was completely done on the basis of ratios calculated from the balance sheets.
 It was not possible to get a personal interview with the top management employees of all
banks under study.


Rating Symbols-

A- Bank is sound in every respect

B- Bank is fundamentally sound but with moderate weaknesses
C- Financial, operational or compliance weaknesses that give cause for supervisory concern.
D- serious or immoderate finance, operational and managerial weaknesses that could impair
future viability
E- Critical financial weaknesses and there is high possibility of failure in the near future.