“A STUDY ON THE FINANCIAL PERFORMANCE OF SELECTED

BANKS USING CAMEL MODEL”

PROJECT REPORT SUBMITTED TO SAVITRIBAI PHULE PUNE UNIVERSITY,

PUNE

IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE AWARD OF THE

DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

By

PRATHAMESH RAJESH SURVE

Under the guidance of

DR. AISHWARYA GOPALAKRISHNAN

PCET’s

S.B. PATIL INSTITUTE OF MANAGEMENT,

SECTOR NO.26 PRADHIKARAN,

NIGDI PUNE-44.

(BATCH 2019-21)
 TABLE OF CONTENTS

❖ Declaration

❖ College Certificate

❖ Acknowledgement

❖ Chapter I: Executive Summary

❖ Chapter II: Profile of the Organization

❖ Chapter III: Outline of the Problem / Task Undertaken

❖ Chapter IV: Research Methodology

❖ Chapter V: Analysis and Interpretation of Data

❖ Chapter VI: Conclusions and Suggestions

❖ Chapter VII: References

 DECLARATION

I, the undersigned, hereby declare that the Project Report “A STUDY ON THE FINANCIAL
PERFORMANCE OF SELECTED BANKS USING CAMEL MODEL” written and submitted
by me to the Savitribai Phule Pune University, Pune in partial fulfillment of the requirements
for the award of degree of Master of Business Administration under the guidance of
DR.AISHWARYA GOPALAKRISHNAN is my original work and the conclusions drawn
therein are based on the material collected by me.

Place: Pune

Date:16/05/2021 PRATHAMESH RAJESH SURVE

Ref. No.: SBPIM/SIP-2021/342/AGS-1 Date: 02 / 04 / 2021

CERTIFICATE
This is to certify that the Summer Internship Report entitled, “A

Study on the Financial Performance of selected banks in using

Camel Model” which is being submitted herewith for the partial

fulfilment of the degree of Masters of Business Administration of

Savitribai Phule Pune University is a result of the original research

work completed by Mr.Prathamesh Rajesh Surve under

my supervision and guidance and to the best of my knowledge and

belief, the work embodied in this Summer Internship report has not

been formed earlier for the award of any degree or similar title or

thisor any other University or examining body.

Dr.Aishwarya Gopalakrishnan Dr.KirtiDharwadkar

Internal Guide Director, SBPIM
 ACKNOWLEDGEMENT

I express my sincere thanks to Dr.Kirti Dharwadkar, Director, S.B.Patil Institute of Management.

I pay my deep sense of gratitude to Dr.C.N. Narayan (Chef Mentor) S.B.Patil Institute of
Management to encourage me to the highest peak and to provide me the opportunity to
prepare the project.

I feel to acknowledge my indebtedness and deep sense of Gratitude to my guide Dr.Aishwarya

Gopapalakrishnan whose valuable guidance and kind supervision given to me throughout the
project which shaped the present work as its show.

And, this project has been not possible without Dr.Padmalochana Bisoyi. I am thankful to him
for teaching me subject Business Research Methods. It was great experience and I learned a lot
from him.
 TABLE OF CONTENT

SR. NO. CONTENT PAGE NO.

CHAPTER I - EXECUTIVE SUMMARY &

THEORETICALBACKGROUND
1 1.1) Executive Summary 1-22
1.2) Theoretical Background

1.3) Literature Review

CHAPTER II - PROFILE OF THE ORGANISATION
2.1) Name, Address, Location Of The BANK 23-25
2
2.2) Introduction
2.3) Vision & Mission
Chapter III : Outline of the Problem
3 26-27
3.1) Outline of the problem

CHAPTER IV - RESEARCH METHODOLOGY

4.1) Objective Of The Project 28-29
4
4.2) Research Design & Methodology
4.3) Limitation of The Study
CHAPTER V - ANALYSIS OF DATA
5 5.1) Analysis, Interpretation of the Data 30-46

5.2) Graphical Presentation

CHAPTER VI - FINDING, CONCLUSION & SUGGESTION
6 47-51
6.1) Finding, Suggestion, Conclusion

7 CHAPTER VII - REFERENCES 52-53

 CHAPTER I

EXECUTIVE SUMMARY & THEORETICAL

BACKGROUND

1
 1.1 EXECUTIVE SUMMARY

Indian banking sector is an important component of Indian financial system. It has a strong
impact on the economic development and growth of the nation. To study multiple layers in
today’s banking structure and why they cater to the specific and varied requirements of
different customers and borrowers. To understand the structure of banking in India and how it
plays a major role in the mobilization of savings and promoting economic development. And
how the performance and strength of the banking structure improved perceptibly.
A study is made to measure the financial position, performance and efficiency of the largest
public sector bank (SBI) and private sector bank (HDFC). The objective of the study is to
identify financial position and performance of the selected banks and to examine whether any
significant difference exists in their performance. The study is based on secondary data which
has been collected from annual reports of the selected banks covering a period of five years
from 2015-16 to 2019-20. The CAMEL model has been used to assess the financial strength
of the selected banks. T-test has been used on the important parameters like capital adequacy,
asset quality, management efficiency, earnings ability and liquidity to draw the conclusion the
study.
1.2 THEORETICAL BACKGROUND

Financial Analysis of Banks

So far as the financial analysis of a bank is concerned its analysis can be done with the help of
ratio analysis. Ratio analysis enables the management of banks to identify the causes of the
changes in their advances, income, deposits, expenditure, profits and profitability over the
period of time and thus help in pin pointing the direction of action required for increasing the
deposits, income, advances and reducing the expenditure and for altering the profitability
prospects o f the banks in future. To be really helpful and practically useful for the bankers, the
package of ratios should be small in size, simple in calculation, logically consistent and
statistically valid. Over the years, various experts propounded a plethora of ratios for analyzing
the financial position o f a bank Sinkey (1998) argues that the financial analysis o f a bank can
be done with the help of four general categories of ratios viz. profitability ratio, liquidity ratio,
leverage ratio and activity ratio.

Brief descriptions of these ratios are given here:

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Profitability Ratios: - Profitability reflects the final result of business operations. There are
two types of profitability ratios: Profit margins ratios and rate of return ratios. Profit margin
ratios show the relationship between profit and sales. The two popular profit margin ratios are:
gross profit margin ratio and net profit margin ratio. Rate of return ratios reflects the
relationship between profit and investment. The important rate of return measures are: return
on total assets, earning power, and return on equity.

Solvency Ratios: - Financial solvency refers to the use of debt finance. While debt capital is
cheaper source of finance, it is also riskier source of finance. Solvency ratios help in assessing
the risk arising from the use o f debt capital. Two types of ratios are commonly used to analyze
financial solvency: Structural ratios and coverage ratios. Structural ratios are based on the
proportions of debt and equity in the financial structure of the firm. The important structural
ratios are: debt-equity ratio and debt-assets ratio. Coverage ratios show the relationship
between debt servicing commitments and the sources for meeting these burdens. The important
coverage ratios are: interest coverage ratio, fixed charges coverage ratio, and debt service
coverage ratio.

Liquidity Ratio:-Liquidity refers to the ability o f a firm to meet its obligations in the short
run, usually one year. Liquidity ratios are generally based on the relationship between current
assets and current liabilities. The important liquidity ratios are: Current ratio, acid-test ratio,
and bank finance to working capital gap ratio.

Turnover Ratios

Turnover ratios, also referred to as activity ratios or asset management ratios, measure how
efficiently the assets are employed by a firm. These ratios are based on the relationship between
the levels of activity, represented by sales or cost of goods sold, and levels o f various assets.
The important turnover ratios are: inventory turnover, average collection period, receivables
turnover, fixed assets turnover, and total assets turnover.

Financial Performance

3
Financial performance is the achievement of the company's financial performance for a certain
period covering the collection and allocation of finance measured by capital adequacy,
liquidity, solvency, efficiency, leverage and profitability. Financial performance, the
company's ability to manage and control its own resources. Cash flow, balance sheet, profit-
loss, capital change can be the basis of information for corporate managers to make decisions.
It is important to understand fundamental analysis and technical analysis, it is necessary to
learn finance to understand the company's financial behavior through economics, financial
management and accounting. The study of actual financial performance is to understand the
ideal criteria provided with input data from the empirical reality of the firm.

DEFINITION
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. The term is also used as a general measure
of a firm's overall financial health over a given period. Analysts and investors use financial
performance to compare similar firms across the same industry or to compare industries or
sectors in aggregate.

BANK PERFORMANCE:

The term ‘performance’ means carrying into execution or achievement; or accomplishment of

specific activities, or the performance of an undertaking of a duty. ‘Bank performance’ may be
defined as the reflection of the way in which the resources of a bank are used in a form which
enables it to achieve its objectives.

Furthermore, the term bank performance means the adoption of a set of indicators which are
indicative of the bank’s current status and the extent of its ability to achieve the desired
objectives.

Introduction

India is not only the world’s largest independent democracy, but also an emerging economic
giant. Without a sound and effective banking system, no country can have a healthy economy.
Banks play a vital role in the economic development of a country. For the past three decades,
India’s banking system has several outstanding achievements to its credit. Financial system

4
comprises a set of sub-systems of financial institutions financial markets, financial instruments
and services which help in the formation of capital. Thus, a financial system provides a
mechanism by which savings are transformed into investments and it can be said that financial
system play an significant role in economic growth of the country by mobilizing surplus funds
and utilizing them effectively for productive purpose

The Indian banking system consists of 20 public sector banks, 22 private sector banks, 44
foreign banks, 45 regional rural banks, As of March 2019, there were 1,544 urban co-operative
banks, and 96,248 rural co-operative banks in the country. As on January 31, 2020, the total
number of ATMs in India increased to 210,263 and is further expected to increase to 407,000
by 2021(as per IBEF).

Banking Structure in India Banking which are integrated in the 2nd phase of the RBI are called
schedule banks. These banks comprise into two banks, which are known as Scheduled Co-
operative banks and Scheduled Commercial banks. There are 13 types of banks available in
India.

These are following banks:

• Central banks
• Investment banks
• Merchant banks
• Savings banks
• Offshore banks
• Commercial banks
• Retail banks
• Universal banks
• Public sector banks
• Private sector banks
• Foreign banks
• Co-operative banks
• Development bank

Meaning

5
A banking system is a group or network of institutions that provide financial services for us.
These institutions are responsible for operating a payment system, providing loans, taking
deposits, and helping with investments.

Banking Defined

The banking activity means accepting of deposits of money from public, for the purpose of
lending or investment. Banks contribute to economic development by mobilizing small and
scattered savings of the community and disbursing those as loans among enterprises. Thus,
banks perform the task of credit intermediation, and netting and settlement of payments. As
money deposited may generally be for short-term while the loans may generally require long-
term commitments, banks also perform the role of maturity transformation. The task of
managing and monitoring risks associated with lending is also crucial to banking.

Origin of Banking in India

Banking in India is indeed as old as the Himalayas. But the banking functions became an
effective force only after the first decade of 20th century. Banking is an ancient business in
India with some of oldest references in the writings of Manu (about 200 BC - was a hybrid
moral-religious-law code and one of the first written law codes of Asia). Bankers played an
important role during the Mogul period. During the early part of East India Company
era, agency houses were involved in banking. Modern banking (i.e. in the form of joint-stock
companies) may be said to have had its beginnings in India as far back as in 1786, with the
establishment of the General Bank of India.

Evolution of banking

Our banking system is divided into commercial banks (public and private banks), Regional
Rural Banks, Cooperative Banks, etc. One of the key events that marked the evolution of the
Indian banking sector is the nationalization of banks. The event made way for the Indian
economy to get a global position among the top ten economies in the world the advancement in
the Indian banking system can be classified into three different phases.

1) The pre-independence phase, i.e., before 1947

2) After independence phase, i.e. from 1947 to 1991
3) The LPG (1991) era and beyond, i.e. 1991 and beyond

6
1. The Pre-Independence Phase

• This phase is categorized by the presence of a considerable number of banks in India.

• Nearly 600 banks were present in India. The banking system started with the foundation of
Bank of Hindustan in the then capital, Calcutta (present-day Kolkata) in 1770. The bank
ceased its operations in 1832.
• Post Bank of Hindustan, many other banks evolved such as the General Bank of India
(1786-1791) and Oudh Commercial Bank (1881-1958), but they did not continue their
operations for long. Oudh Commercial Bank was the first commercial bank of India.
• Some banks of the 19th century continue to operate even now establishing themselves as
an institution of excellence. For example, Allahabad Bank was established in 1865, and
Punjab National Bank was established in 1894.
• Also, some banks such as Bank of Bengal (est. 1806), Bank of Bombay (est. 1840), and
Bank of Madras (est. 1843) were merged into one entity.
• The new body was called Imperial Bank of India which was later renamed as the State Bank
of India.
• In the year 1935, the Reserve Bank of India was commissioned upon the recommendation
of the Hilton Young Commission.
• During this phase, due to the failure of the majority of small-sized banks, the confidence of
the public was low, and people continued to engage with money lenders and unorganized
players
Pre-Independence Banks in India

Bank Name Year of Establishment

Allahabad Bank 1865

Punjab National Bank 1894

Bank of India 1906

Central Bank of India 1911

Canara Bank 1906

Bank of Baroda 1908

7
2. After independence Phase – 1947 to 1991

One of the main features of the period was the nationalization of the bank.
Why was Nationalization Needed?
1. The banks primarily catered to large businesses
2. Critical sectors such as agriculture, small-scale industries and exports were lagging
3. The moneylenders exploited masses
• Thus, in the year 1949, the Reserve Bank of India was nationalized. In two decades,
fourteen commercial banks were nationalized in July 1969 during the reign of Smt. Indira
Gandhi.
• In 1975, based on the recommendation of the Narasimham committee, Regional Rural
Banks (RRBs) were constituted with an objective of serving the unserved. The primary
goal was to reach masses and promote financial inclusion.
• Some other specialized banks were also set up to promote the activities that were required
for the economy.
• For example, NABARD was established in 1982 to support agriculture-related work.
Similarly, EXIM bank was built in 1982 for export and import.
• National Housing Bank was set up in 1988 for the Housing sector, and SIDBI was
established in 1990 for small-scale industries.

Was Nationalization Successful?

• Nationalization was a significant step in the banking sector, and it helped improve people’s
confidence in the system.
• Small and critical industries started getting access to capital that helped boost economic
growth.
• Additionally, the move added to the country’s growth across the global banking sector.

3. Third phase – The LPG (1991) Era and Beyond

1991 saw a remarkable change in the Indian economy.

• The government opened up the economy and invited foreign and private investors to invest
in India. This move marked the entry of private players in the banking sector.
• The RBI provided banking license to ten private entities of which some of the notable ones
survived such as ICICI, HDFC, Axis Bank, IndusInd Bank, and DCB.

8
• In 1998, the Narsimham committee again recommended the entry of more private players.
Thus, the RBI provided a license to Kotak Mahindra Bank in 2001 and Yes Bank in 2004.
• Nearly after a decade, the third round of licensing took place. The RBI in 2013-14, allowed
a license for IDFC bank and Bandhan Bank.
• The story didn’t end here, with an aim to make sure that every Indian gets access to finance,
the RBI introduced two new set of banks – Payments bank and small banks, and this marked
the fourth phase in the banking industry.
1. Payments Bank

• These banks are allowed to accept a nominal deposit (Rs. 1 lakh per currently).
• These banks are not allowed to provide credit (both loans and credit cards), but can operate
both current account and savings accounts.
• Other services include ATM/debit cards, net-banking, and mobile banking. Bharti Airtel
started first payments’ bank in India.
Following the six most active payments bank currently –

• Aditya Birla Payments Bank

• Airtel Payments Bank
• India Post Payments Bank
• Fino Payments Bank
• Jio Payments Bank
• Paytm Payments Bank

2. Small Finance Bank

These banks are niche banks, with basic banking service, which include acceptance of
deposits and lending. The primary objective is to serve the unserved, such as small business
units, small and marginal farmers, micro and small industries, and unorganized sectors.

Following are the small finance bank currently operational in India: – Ujjivan Small Finance,
Bank Jana Small Finance, Bank Equites Small Finance Bank, AU Small Finance Bank, Capital
Small Finance Bank, Fincare Small Finance Bank, ESAF Small Finance Bank, North East
Small Finance Bank, Suryoday Small Finance Bank, Utkarsh Small Finance Bank

I believe rapid digitization in banks coupled with the new structure of banking will continue
to remain the key theme for the fourth and ongoing phase of the banking industry.

9
Structure of banking system

The structure of banking system differs from country to country depending upon their
economic conditions, political structure, and financial system. Banks can be classified on the
basis of the volume of operations, business pattern and areas of operations. They are termed as
a system of banking.

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is India's central banking institution, which controls the
monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during the
British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934 and in
1949 it was nationalized. The Central Office of the Reserve Bank was initially established in
Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the
Governor sits and where policies are formulated. Sir CD Deshmukh is the first Governor of
RBI. The RBI has four Zonal offices at Chennai, Delhi, Kolkata, Mumbai and 20 regional
offices mostly located in the state capitals and 11 sub-offices. ReserveBank of India Act, 1934
is the legislative act under which the Reserve Bank of India was formed. This act along with
the Companies Act, which was amended in 1936, were meant to

10
provide a framework for the supervision of banking firms in India. The Preamble of the Reserve
Bank of India describes the basic functions of the Reserve Bank as: "to regulate the issue of
Bank notes and keeping of reserves with a view to securing monetary stability in India and
generally to operate the currency and credit system of the country to its advantage”.

Scheduled & Non-Scheduled Banks:

Scheduled Banks in India refer to those banks which have been included in the Second
Schedule of Reserve Bank of India Act, 1934. Banks not under this Schedule are called Non-
Scheduled Banks. In other words, Banks with a reserve capital of less than 5 lakh rupees qualify
as non-scheduled banks. Unlike scheduled banks, they are not entitled to borrow from the RBI
for normal banking purposes, except, in emergency or “abnormal circumstances.”

Coastal Local Area Bank Ltd (Vijayawada, AP), Capital Local Area Bank Ltd (Phagwara,
Punjab), Krishna Bhima Samruddhi Local Area Bank Ltd (Mahbubnagar, Telangana),
Subhadra Local Area Bank Ltd (Kolhapur, Maharashtra) are the only Nonscheduled Banks in
India.

Scheduled Banks are further internally classified into Commercial Banks and Co-operative
Banks.

• Commercial Banks: A commercial bank is a type of financial institution that provides

services such as accepting deposits, making business loans, and offering basic investment
products to the general public and to companies.
• Co-operative Banks: A bank that holds deposits makes loans and provides other financial
services to cooperatives and member-owned organizations.
Commercial Banks Co-operative Banks

Registration Commercial Banks are required to be Co-operative Banks are required

registered under Banking Regulation to be registered under the
Act, 1949. Cooperative Societies Act, of the
concerned state.

Function To accept deposits from public for the To accept deposits from the
purpose of lending to industry and members and the public for the
commerce. purpose of providing loans to
farmers and small businessmen
with a motto of service.

11
Capital/Funds Huge funds are available for Limited funds are available for
Commercial Banks Co-operative Banks.

Area of They are spread across the country & Their scope is limited and
Operation some banks have foreign presence. restricted to state level.

Nationalization There are about 21 Nationalized None of the Co-operative Banks

Public sector banks are Nationalized.

Merchant Almost all the Commercial Banks Co-operative Banks do not

Banking Services provide Merchant Banking Services. provide Merchant Banking
Services.

Mutual Funds At present Canara Bank, Bank of Co-operative Banks do not

India, State Bank of India, do operate operate mutual funds.
mutual funds.

Main Motive They Operate on Commercial The basis of their operations is

principles in order to earn profits. service to its members and the
society.

Interest % They provide less interest compared Co-operative Banks provide

to Co-operative Banks. interest more than commercial
banks.

Public Sector Banks:

Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by
a government. The shares of these banks are listed on stock exchanges. There are a total of 12
PSBs in India.

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• In 1969, the Indira Gandhi-headed government nationalized 14 major commercial banks
(Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank,
Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab & Sind
Bank, Punjab National Bank, Syndicate Bank, UCO Bank, United Bank of India)
• In 1980, a further 6 banks were nationalized (Andhra Bank, Corporation Bank, New Bank
of India, Oriental Bank of Commerce, Punjab & Sindh Bank, Vijaya Bank).
• IDBI Bank is an Indian government-owned financial service company, formerly known as
Industrial Development Bank of India, headquartered in Mumbai, India. It was established
in 1964 and Nationalized in the year 2005.

SBI Merger & Consequences:

State Bank of India, which is India's largest Bank merged with five of its Associate Banks
(State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank
of Patiala and State Bank of Travancore) and Bharatiya Mahila Bank with itself. This is the
first ever large-scale consolidation in the Indian Banking Industry. With the merger, State Bank
of India will enter the league of top 50 global banks with a balance sheet size of ₹33 trillion,
278,000 employees, 420 million customers, and more than 24,000 branches and 59,000 ATMs.

Private Sector Banks:

The "private-sector banks" are banks where greater parts of share or equity are not held by
the government but by private shareholders. There are many Indian and Foreign Private
Banks in India.

HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank, IDFC Bank, RBL
Bank, Federal Bank, City Union Bank are the major private banks in India. There are also
several foreign banks in India mainly operating in urban areas and Metropolitan Cities.

Regional Rural Banks:

Regional Rural Banks were formed on Oct 2, 1975 upon the recommendations of M.
Narasimham Working Group during the tenure of Indira Gandhi's government. The objective
behind the formation of RRBs was to serve large unserved population of rural areas and
promoting financial inclusion. They have been created with a view to serve primarily the rural
areas of India with basic banking and financial services. However, RRBs may have branches
set up for urban operations and their area of operation may include urban areas too.

Co-Operative Banks:
The Co-Operative Banks are further classified into:
1. State Co-Operative Banks

13
2. Urban/Central Co-Operative Banks
3. Primary Credit Societies

State Co-Operative Banks:

State Co-Operative Banks are small financial institutions which are governed by regulations
like Banking Regulations Act, 1949 and Banking Laws Cooperative Societies Act, 1965. At
present there are about 33 State Co-Operative Banks of which 19 are scheduled.

Urban/Central Co-Operative Banks:

The term Urban Co-operative Banks (UCBs) refers to primary cooperative banks located in
urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-
agricultural purposes. This distinction does not hold today. These banks were traditionally
centered around communities; localities work place groups. They essentially lent to small
borrowers and businesses. There are about 2,104 UCBs of which 56 were scheduled banks.
About 79 percent of these are located in five states, - Andhra Pradesh, Gujarat, Karnataka,
Maharashtra and Tamil Nadu.

Primary Credit Societies:

Primary Credit Societies (or) Primary Agricultural Credit Society (PACS) is a basic unit and
smallest co-operative credit institutions in India. It works on the grassroots level (gram
panchayat and village level). It virtually functions like banks, but whose net worth is less than
Rs.1 lakh; who are not members of the payment system and to whom deposit insurance is not
extended.

1.3 Literature Review

1) Role of Reserve Bank of India in Indian Economy

Mandeep Kour Bansal

Objectives of study:

1. To explore the evolution of Reserve Bank of India (RBI).

14
2. To analyze the role and functions of RBI.
3. To assess the Monetary Control Methods of RBI.
Research Methodology
Have used secondary data by using numerous independent sources.
The information about the problem is collected from the Research Journals, Trade
Magazines, Annual Reports of Banks and the Internet. For evaluating Role, Functions and
Monetary Control Methods of RBI. They also used secondary information from Internet
based discussion forums.

Conclusion:
This paper is an attempt explore into the role, functions, and contribution of RBI in Indian
Economy. The Reserve Bank of India was established with a view to fostering the banking
business and not for impeding the growth of such business.
Functions of Reserve bank of India are:- Banker to Government, Right to Issue Bank note,
Formulates Banking policy, Licensing Authority, Banker’s Bank, Depositor Awareness and
Education, Regulation and Management of Foreign Exchange.
RBI works as the monetary authority of India and there by operates the monetary policy.
Reserve Bank of India announces Monetary Policy every year in the Month of April. This is
followed by three quarterly Reviews in July, October and January. But, RBI at its discretion
can announce the measures at any point of time. The Annual Monetary Policy is made up of
two parts viz. Part A: macroeconomic and monetary developments; Part B: Actions taken and
fresh policy measures. Monetary policy of the RBI deals with almost all other vital topics
such as financial stability, financial markets, interest rates, credit delivery, regulatory norms,
financial inclusion and institutional developments etc.

2) The impact of liberalization on the productive efficiency of Indian commercial banks

Arunava Bhattacharyya , C.A.K. Lovell , Pankaj Sahay

The objective of this paper is to examine the productive efficiency of 70 Indian commercial
banks during the early stages (1986-1991) of the ongoing period of liberalization.

Research Methodology
In this study they have combine the two approaches in a two-step procedure, using DEA in the
first step to calculate technical efficiencies, and using SFA in the second step to explain
variation in calculated efficiencies
Conclusion:
According to research entire Indian economy is currently passing through a period of rapid
economic liberalization. The banking sector of the economy, which since 1969 has grown up
under protection and government regulatory control, has recently been moving gradually
toward a more open and less regulated market system. To accomplish this task they have used
DEA to calculate the efficiency of service provision for individual banks, and have used SFA
to attribute variation in calculated efficiencies to a set of temporal and government regulatory
policy variables.
They have found publicly-owned banks to have been the most efficient, and privately-owned
banks the least efficient, in utilizing the resources at their disposal to deliver financial services
to their customers. However the most striking finding is the rise of the foreign-owned banks

15
and the decline of the public sector banks. Foreign banks were the least efficient at the
beginning of the sample period, but by the end of the period they were nearly as efficient as
the publicly-owned banks, which exhibited a temporal decline in performance.

3) Analysis of Banks in India-A CAMEL Approach

Harsh Vineet Kaur
Objectives
1) To conduct a comparative appraisal of the performance of public, private and foreign sector
banks in India.
2) To rank the banks on the basis of composite index calculated for each bank in their respective
category
Data Base
Data used in the research is secondary in nature. These have been collected from the statistical
Tables related to banks in India from the year 2000–01 to 2006–07, available on the official
website of RBI. Report on trend and progress of banks in India for various years has also been
used.
Research Methodology
Sample For analysis of the performance of banks in India, the banks have been divided into
the following groups on ownership basis: 1. Public sector banks comprising nationalized banks,
State Bank of India (SBI) and its associates—28 banks. 2. Private sector banks comprising old
private sector banks and new private sector banks—26 banks. 3. Foreign banks—28 banks. For
analyzing performance, CAMEL analysis technique has been used. CAMEL stands for Capital
Adequacy, Asset Quality, Management Quality, Earning Quality and Liquidity
Conclusion:
The advantage of the CAMEL model is that it highlights the key aspects of a bank that an
analyst should be interested in—capital, asset quality, earnings and liquidity. For off-site
analysis purposes, it also offers the flexibility of selecting the most appropriate ratios that a
regulatory authority, feel are most applicable to its own financial environment As per the
research paper Changing financial scenario has opened up opportunities for banks to expand
their global presence through self expansion, strategic alliances, and so on. Banks are diverting
their focus on retail banking so as to obtain access to low cost funds and to expand into
relatively untapped potential areas. Banking sector is to witness the emergence of financial
supermarkets in the form of universal banks . They are providing a suite of services from retail
to corporate banking and industrial lending to investment banking, besides providing personnel
financial services which is the highest growth segment. The financial sector reforms have

16
brought the Indian financial system closer to global standards. The process of strengthening
the banking system has to be viewed as a continuous one. With India increasingly getting
integrated with the global financial world, the Indian banking sector has still a long way to go
to catch up with their counterparts.

4) A STUDY OF FINANCIAL PERFORMANCE ANALYSIS OF INDIAN BANKING

SECTOR

Dr. P.S. Vohra

Data & Sample
has used all secondary data which were primarily collected form published annual reports of
various selected banks. The research 5 attempt has been comprised on 20 Indian banks based
10 each public and private. The selection of banks was based on convenience sampling method.

Duration of Study
The research attempt has been conducted for the duration of 5 financial years of 2007-2012.

Analysis -
In the analysis part the critical examination of Deposit volume, Loan volume, Deposit & Term
loan relationship, Gross NPA & Net NPA changes, Ratio of Gross NPA & Net NPA to Term
loan have been calculated for all selected banks during the study period through tabulation to
critically understand every bank’s growth, overall market share and their individual cumulative
growth.

Conclusion:
The overall growth rate of Private banking industry from all selected private banks was
comparatively 139.3% high as compare to total growth of all selected of Public banks. But in
case of growth in the volume of deposits all selected public banks have grown up by 57% more
from all selected private banks. It shows the sound financial position of both the sectors,
because one side private banks tremendously increased his growth rate, on the side pubic
bank’s share in volume in the total amount have been increased, In case individual
comparison SBI and ICICI Bank were consistently dominating variables inside the public &
private banks respectively with 38% and 34% market share in total In the analysis part of term
loan & deposit volume ratio at Public sector maximum average rate of 48.6% was recorded at
Punjab & Sind Bank and 39% received at SBI. But the overall highest growth rate of 40.09%
had found at term loan volume at SBI among all the banks In case of Private banking,the highest
term loan & deposit volume was received at ICICI bank with 75%. In case of Changes at
volume of Gross NPA private banking figure was 148.5% less over the total amount of selected
private banks in the 5 years of study period. At Net NPA volume of selected Public

17
banks were increased with 201.2% but at selected private banking it was negative recorded of
27.5%, which is 228.7% less from selected public banks. In the analysis part of Net NPA as
percentage of Term loan amount ratio selected public banks 1.27% high compare to selected
private banks in the whole study period of 5 years.

5) Performance Evaluation Of Urban Cooperative Banks In India

Dr.K.V.S.N JAWAHAR

The objective of this paper is to evaluate the performance of the banks in India during the
period1991-05 and 2008-09.

Conclusion:

Urban Cooperative Banking is a key sector in the Indian Banking scene, which in the recent
years has gone through a lot of turmoil. Though some UCBs have shown credible performance
in the recent years, a large number of banks have shown discernible signs of weakness. The
operational efficiency is unsatisfactory and characterized by low profitability, ever growing
non-performing assets (NPA) and relatively low capital base. Also urban cooperative banks
have not been able to service the growing credit requirements of clients or the newer demands
for loans in the field of personal finance. In the interest of healthy competition, the urban
cooperative banks should be encouraged to grow. Thus a few bad eggs should not curb the
growth of a key banking entity.

6) Performance Evaluation of Regional Rural Banks in India

Dr. M. Syed Ibrahim

The objective of this paper is to evaluate the performance of the banks in India duringperiod
starting from 2001-02 to the year 2008-09.

Review of Literature

The literature available in the working and performance of RRBs in India is a little limited.
The literature obtained by investigators in the form of reports of various committees,
commissions and working groups established by the Union Government, NABARD and
Reserve Bank of India, the research studies, articles of researchers, bank officials, economists
and the comments of economic analysts and news is briefly reviewed in this part.

18
Methodology/Research

The present study is diagnostic and exploratory in nature and makes use of secondary data.
The relevant secondary data have been collected mainly through the data bases of Reserve
Bank of India (RBI), National Bank for Agricultural and Rural Development (NABARD). In
order to analyze the data and draw conclusions in this study, various statistical tools like‘t’ test
and ANOVA have been accomplished through EXCEL and SPSS Software.

Conclusion:

Depending on the context and applications, the term ‘performance’ may have different
connotations. In the present study, the performance of Regional Rural Banks, an attempt has
been made to analyze the performance in terms of certain defined parameters like number of
branches, district covered, capital funds, and mobilization of deposits, loans and investments
made by these banks. The performance of RRBs in India improved in the post-merger period.
Even though number of RRBs decreased, the branch net work has been increased. During post-
merger period, there has been increased number of districts covered by the RRBs. Total capital
funds have been increased tremendously after amalgamation took place in the year 2005-
06.Credit-deposit ratio has been. Increased over the years showing that a remarkable
deployment of credit by these banks in rural areas. However, it is the responsibility of the bank
management and the sponsored banks to take the change for corrective steps to raise the credit-
deposit ratio of the bank. The gap between CD ratio of commercial banks and the RRBs need
to be minimized. With a view to facilitate the seamless integration of RRBs with the main
payment system, there is a need to provide computerization support to them. RRBs should
extend their services in to un-banked areas and increase their credit-deposit ratio. The process
of merger should not proceed beyond the level of sponsor bank in each state.
7) CURRENT POSITION OF RRBS IN INDIA – A REVIEW

K.VENKATALAKSHMI, M. CHANDRAIAH

OBJECTIVES:-

To review the capital structure of RRBs in India;

To study the state-wise and region-wise RRBs during the study period;
To examine the deposits and outstanding loans in RRBs;
To scrutinize the SHG linkage performance in RRBs

Data base:-

The main source of the data is published annual statistics of RRBs, NABARD, published
articles, books, news papers and google search.

Period of study:-

19
This paper purposively chooses a decade period from 2005-06 to 2014-15.

Tools of analysis :-

To analyzing the collected data, average, standard deviation, co-efficiency of variation, t-cal,
percentages and growth rate

Conclusion:-

RRBs were immensely rendering the banking services to rural poor particularly farmers,
agricultural artisans, and rural entrepreneurs in providing needful financial assistance over the
study period. The capital structure itself proved in developing the strength of RRBs in India as
well as developing the branches and representation of rural financial assistance through SHG
linkage. It is found that the capital structure of RRBs shown the share of owned funds declined
in fluctuation manner from 47.65 per cent to 9.50 per cent over the study period.

8) Productive Performance Evaluation Of The Banking Sector In India Using Data

Envelopment Analysis

Biresh K. Sahoo, Jati Sengupta, Anandadeep Mandal

The objective of this paper is to evaluate the performance of the banks in India during the
period1997-98 – 2004-05.

Data and Methodology:

1) Efficiency

2) Scale elasticity

3) DEA models to evaluating efficiency and SE

4) Alternative measures of scale elasticity

Conclusion:

The analysis of efficiency on the input-side9 is becoming increasingly common in DEA

applications for a variety of reasons. First, real world managers are never given a bundle of
inputs and told to produce the maximum output from it. Instead they are given output targets
and told to produce it most efficiently. Second, profitability in any business hinges on the
20
efficiency of operations. But if the business involves a commodity, then what depends on
efficient operations is survival. When prices are beyond companies’ control, what remain are
costs. This reflects the companies’ emphasis on the input dimensions of policies. On a tentative
basis, it has been suggested in the literature that costs (or inputs) are generally more predictable
than outputs, giving cost targets a greater credibility than those for outputs.

9) Evaluating The Performance Of Commercial Banks In India

D. K. Malhotra, Raymond Poteau, Rahul Singh

The objective of this paper is to evaluate the performance of the banks in India during the
period 2005 to 2009.

Data and Methodology:-

The data for this study was obtained from CNBC’s moneycontrol.com website. The sample
consists of 20 state owned banks and 15 private banks. Data covers the fiscal year ending March
31st 2005 to March 31st 2009.

We use a two-pronged approach to analyze the performance Indian commercial banks. First,
we divide the sample into public and private sector banks and compare their performance in
terms of several measures of returns, cost, efficiency, and safety by using a simple two-tailed
t-test for each of the five years included in our sample. Secondly, we use panel data analysis
toevaluate the performance of public and private sector banks from 2005 to 2009.

Conclusion: -

The study focuses on the impact of the current economic crisis on safety and soundness of
thepublic and private sector banks in India. We focus on analyzing the impact of the current
economic crisis on the determinants of bank intermediation costs and profitability. Our analysis
shows that the Indian banking sector remained relatively healthy during the current economic
crisis and the performance of the banks was not impacted negatively in a significant manner.
Both public and private sector banks show healthy capital adequacy ratios throughout the
sample period.

10) Operational Performance of Indian Scheduled Commercial Banks-An Analysis

Dr. M. Syed Ibrahim

Review of Literature
A considerable amount of research has been done on the working and performance of
commercial banks in India, by academicians and researchers. The literature obtained by

21
investigators, in the form of reports of various committees, commissions and working groups
established by the Union Government, Reserve Bank of India, the research studies, articles of
researchers, bank officials, economists and the comments of economic analysts and news, is
briefly reviewed in this part.

Methodology/Research
Design The present study is diagnostic and exploratory in nature and makes use of secondary
data. In order to analyze the data and draw conclusions in this study, various statistical tools
like Descriptive Statistics, ‘t’test, and Correlation have been done using through EXCEL and
SPSS Software.

Conclusion:
The analysis and discussion of this research paper reveals that the operational performance of
Indian Scheduled Commercial Banks has improved since the year 2000. Aggregate deposits
show a constant increase. The percentage of time deposits to aggregate deposits mobilized by
the Scheduled Commercial Banks was high in 2009. It was found that there is a positive
correlation between demand deposits and time deposits. Credits deployed and investments
made by these banks have shown significant performance. The Indian Scheduled Commercial
Banks have been more efficient by maintaining the C-D ratios in an increasing trend over the
period of the study. Deposits and credits of these banks per office show a constant rising year
after year.

22
 CHAPTER II
PROFILE OF THE ORGANISATION

23
2.1 Name, Address, Location of the Bank

Name: SBI
Headquarters: State Bank Bhawan, M.C. Road, Nariman Point, Mumbai,
Maharashtra, India
Number of locations: 22,141 Branches, 58,555 ATMs

Name: HDFC BANK

Headquarters: Mumbai, Maharashtra, India
Number of locations: 5,430 branches and 15,292 ATM's in 2,768 cities/towns.

2.2 Introduction
SBI Bank Profile

State Bank of India (SBI) is an Indian multinational, public sector banking and financial
services statutory body headquartered in Mumbai, Maharashtra. SBI is ranked 236th in the
Fortune Global 500 list of the world's biggest corporations of 2019. A nationalized bank, it is
the largest in India with a 23% market share by assets and a 25% share of the total loan and
deposits market. The origins of State Bank of India date back to 1806 when the Bank of
Calcutta (later called the Bank of Bengal) was established. In 1921, the Bank of Bengal and
two other banks (Bank of Madras and Bank of Bombay) were amalgamated to form the
Imperial Bank of India. In 1955, the Reserve Bank of India acquired the controlling interests
of the Imperial Bank of India and SBI was created by an act of Parliament to succeed the
Imperial Bank of India.

The SBI group consists of SBI and five associate banks which are now merged in SBI. The
group has an extensive network, with over 24000 plus branches in India and another 190 offices
in 35 countries across the world. As of 31st March 2013, the group had assets worth USD 392
billion, deposits of USD 299 billion and capital & reserves in excess of USD 23.03 billion. The
group commands over 23% share of the domestic Indian banking market.
SBI’s non- banking subsidiaries/joint ventures are market leaders in their respective areas and
provide wide ranging services, which include life insurance, merchant banking, mutual funds,
credit cards, factoring services, security trading and primary dealership, making the SBI Group
a truly large financial supermarket and India’s financial icon. SBI has arrangements with over
1500 various international / local banks to exchange financial messages through SWIFT in all
business centres of the world to facilitate trade related banking business, reinforced by
dedicated and highly skilled teams of professionals.’

24
HDFC Bank Profile
HDFC Bank was incorporated in August 1994. As of September 30, 2019, the Bank had a
nationwide distribution network 5,314 branches and 13,514 ATM's in 2,768 cities/towns.
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of RBI's liberalization of the Indian Banking Industry in 1994. The bank
was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995.
As on 30-June-2019, the authorized share capital of the Bank is Rs. 650 crore. The paid-up
share capital of the Bank as on the said date is Rs. 546,56,24,542 /- which is comprising of
273,28,12,271 equity shares of the face value of Rs 2/- each. The HDFC Group holds 21.31%
of the Bank's equity and about 18.81% of the equity is held by the ADS / GDR Depositories
(in respect of the bank's American Depository Shares (ADS) and Global Depository Receipts
(GDR) Issues). 31.37% of the equity is held by Foreign Institutional Investors (FIIs) and the
Bank has 6, 53,843 shareholders.
The shares are listed on the BSE Limited and the National Stock Exchange of India Limited.
The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange
(NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed
on Luxembourg Stock Exchange under ISIN No US40415F2002.

2.3 Vision & Mission

SBI

Vision –
To become synonymous with an inclusive idea of wealth creation with benefits having a far-
reaching impact.

Mission –

To provide unmatched products, incisive expertise and premium privileges with focus on Client
Experience and Quality in Service Delivery.

HDFC

Vision, Mission and Values

HDFC Bank’s mission is to be a world class Indian bank. We have a two-fold

objective: first, to be the preferred provider of banking services for target retail and
wholesale customer segments. The second objective is to achieve healthy growth in
profitability, consistent with the bank’s risk appetite.

The bank is committed to maintaining the highest level of ethical standards,

professional integrity, corporate governance and regulatory compliance. HDFC
Bank’s business philosophy is based on five core values: Operational Excellence,
Customer Focus, Product Leadership, People and Sustainability.

25
 Chapter III
Outline of the Problem

26
 3.1 Outline of the Problem

Indian banking sector is an important component of Indian financial system. It has a strong
impact on the economic development and growth of the nation. The present study is made to
measure the financial position, performance and efficiency of the largest public sector bank
(SBI) and private sector bank (HDFC). The objective of the study is to identify financial
position and performance of the selected banks and to examine whether any significant
difference exists in their performance.

27
 CHAPTER IV
RESEARCH METHODOLOGY

28
 4.1 Objective of the Project

Objective of the Study

• To analyze and compare the financial performance of HDFC and SBI bank in India

4.2 Research Design & Methodology

Methodology

The CAMEL model is followed to measure the relative financial position and performance of
the banks. Apart from CAMEL model, statistical tools like Mean and t-test have been used to
assess the performance of banks from each of the important parameters like capital adequacy,
asset quality, management efficiency, earning ability and liquidity to draw the logical
conclusions.

Database

The present study is analytical in nature. It is purely based on the secondary data. The data have
been collected from various research articles, journals, annual reports of SBI and HDFC and
web-based resources.

Study Period

The study covers a period of five years from 2015-16 to 2019-20.

Hypothesis:

Ho: There is no significant difference in the financial position and performance of SBI and
HDFC bank in India

H1: There is a significant difference in the financial position and performance of SBI and HDFC
bank in India

29
 CHAPTER V
ANALYSIS OF DATA

30
 5.1 Analysis, Interpretation of the Data& Graphical Presentation

Financial Performance

Financial Performance of SBI and HDFC bank has been shown below with the help of
following tables by using various parameters like total income, net interest income, operating
profit and net profit over the last five years from the year 2015-16 to 2019-20.

Table-1: Total income of SBI and HDFC Bank

During the year 2015-16 to 2019-20

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 Mean

SBI 191843 210979 265100 279643 302545 250022

HDFC 70973 81602 95461 116597 138073 100541.2

Rs. in Crore

Source: Annual Reports of SBI and HDFC of various years and Money Control

From the above table it has been observed that the total income of both SBI and HDFC has
been increasing over the years but the increasing rate of HDFC bank is higher than SBI. But
the mean of total income of SBI is higher than HDFC

Table-2: Net profit of SBI and HDFC Bank During the year 2015-1 to 2019-20

Rs. in Crore
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 Mean

SBI 9950.65 10484.1 -6547.45 862.23 14488.11 5847.528

HDFC 9570.6 14486.17 17097.55 13528.08 14114.93 1768.101

From the above table it is observed that net profit of SBI has a fluctuating trend i.e. both
increasing and decreasing trend over the last five years from 2015-16 to 2019-20 but SBI has
incurred net loss in the year 2017-18 . On the other hand, HDFC has a continuous increasing
trend in its net profit over the last five years. Mean of net profit of HDFC is also higher than
SBI.

Analysis and Discussion

31
The CAMEL model and its parameters are shown and discussed below on the basis of
secondary data to measure the financial performance of the selected banks.

Capital Adequacy
Short Form Parameters of CAMEL Ratio of Measuring CAMEL
Parameters

C Capital Adequacy Capital Adequacy Ratio

Debt Equity Ratio

A Asset Quality Asset Turnover Ratio

Loan Ratio
Net NPA

M Management Efficiency Credit Deposit Ratio

Net Profit per Employee

E Earning Ability Net Profit Ratio

Dividend per Share
Return on Net worth
L Liquidity Current Ratio
Quick ratio

It indicates whether the bank has enough capital to absorb unexpected losses. It maintains the
depositors’ confidence and prevents the bank from bankruptcy. It indicates the overall financial
condition of banks and the ability of management to meet the requirement of additional capital.
The following ratios are considered in the present study for the assessment of capital adequacy
of the selected banks.

Capital Adequacy Ratio (CAR):

This ratio measures the ability of the bank regarding absorption of losses arising from the risk
weighted assets. It is a measurement of Tire-1 and Tire-II capital to the aggregate of risk
weighted assets. CAR = (Tire 1 Capital + Tire 2 Capital) / Risk Weighted Assets:

Table-3: Capital Adequacy Ratio (CAR)

Years SBI HDFC

2015-16 13.12 15.53
2016-17 13.11 14.55
2017-18 12.6 14.82
2018-19 12.72 17.11
2019-20 13.13 18.52
MEAN 12.936 16.106

32
 t-Test: Two-Sample Assuming Equal Variances

PARTICULARS Variable 1 Variable 2

Mean 12.936 16.106
Variance 0.06533 2.81053
Observations 5 5
Pooled Variance 1.43793
Hypothesized Mean Difference 0
df 8
t Stat -4.17984709
P(T<=t) one-tail 0.001540132
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.003080264
t Critical two-tail 2.306004133
Observation: significant p value 0.003 is less than 0.05 than Null hypothesis is rejected.
Variable 1 is sbi and variable 2 is hdfc .

Debt-Equity Ratio:

Bank’s financial leverage is measured by this ratio. It is the proportion of total external
liabilities to net worth. The ratio indicates how much portion of the bank’s business is financed
by debt and how much portion is financed through equity. Higher ratio signifies less protection
for creditors and depositors of the bank. DE Ratio=Debt/Net worth

Table-4: Debt-Equity Ratio

Years SBI HDFC

2015-16 14.5 8.25
2016-17 13.5 8.02
2017-18 13.4 8.58
2018-19 14.3 6.97
2019-20 14.4 7.56
MEAN 14.02 7.876

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 15.816 7.876
Variance 1.44433 0.39423
Observations 5 5
Pooled Variance 0.91928
Hypothesized Mean Difference 0

33
 df 8
t Stat 13.09382707
P(T<=t) one-tail 5.49953E-07
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.0000011
t Critical two-tail 2.306004133
Observation: it is seen that the significant p value is 0.0000011 small than 0.05 than Null
hypothesis is rejected. Variable 1 is sbi and variable 2 is hdfc.

Asset Quality

It indicates the types of advance made by the bank to generate interest income. The bank
provides credit at a lower rate to the highly rated companies compare to lower rated doubtful
companies. It determines the nature of debtors of bank. This ratio helps the bank to decide the
financial risk and potential losses attached with their various assets. The following ratios are
considered in this study to assess the asset quality of the selected banks.

Asset Turnover Ratio

It determines the efficiency of the bank in asset utilization. It is measured by dividing sales
with total assets.

Table-5: Asset Turnover Ratio

Years SBI HDFC

2015-16 0.08 0.09
2016-17 0.07 0.09
2017-18 0.08 0.08
2018-19 0.07 0.08
2019-20 0.07 0.08

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 0.074 0.084
Variance 0.00003 0.00003

34
 Observations 5 5
Pooled Variance 0.00003
Hypothesized Mean Difference 0
df 8
t Stat -2.88675135
P(T<=t) one-tail 0.010150047
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.02030
t Critical two-tail 2.306004133

Observation: From the above table- 5, it is seen that the significant p value is 0.02030 less than
0.05 than Null hypothesis is rejected. Variable 1 is sbi and variable 2 is hdfc.

Loan Ratio

The ratio measures the financial position of banks and its ability to meet outstanding loans. It
is calculated by dividing amount of loans with total assets.

Table-6: Loan Ratio

Years SBI HDFC

2015-16 0.12 0.15
2016-17 0.12 0.14
2017-18 0.13 0.13
2018-19 0.12 0.13
2019-20 0.11 0.13
t-Test: Two-Sample Assuming Equal Variances

Variable
particulars Variable 1 2
Mean 0.12 0.136
Variance 0.00005 8E-05
Observations 5 5
Pooled Variance 0.000065
Hypothesized Mean Difference 0
df 8
t Stat -3.13785816
P(T<=t) one-tail 0.006924971
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.013849941
t Critical two-tail 2.306004133
Observation: From the above, it is seen that the significant p value is 0.013 less than 0.05 than
Null hypothesis is rejected.

35
Net NPA

The ratio measures the proportion of bad loans of the bank out of total advances given. Higher
ratio signifies the bank’s inability to recover the loan and that leads to huge capital losses. So,
lower ratio is expected to be positive for bank. It is calculated by dividing total NPA with total
advances.

Table-7: Net NPA

Years SBI HDFC

2015-16 3.81 0.28
2016-17 3.71 0.33
2017-18 5.73 0.4
2018-19 3.01 0.39
2019-20 2.23 0.36

t-Test: Two-Sample Assuming Equal Variances

particular Variable 1 Variable 2

Mean 3.698 0.352
Variance 1.69252 0.00237
Observations 5 5
Pooled Variance 0.847445
Hypothesized Mean Difference 0
df 8
t Stat 5.746986542
P(T<=t) one-tail 0.000215241
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.000430481
t Critical two-tail 2.306004133
Observation: From the above table, it is seen that the significant p value is 0.0004 less than
0.05 than Null hypothesis is rejected.

Management Efficiency

The growth and survival of bank is ensured by the management efficiency. It evaluates the
management quality to assign premium to better quality and discount to the poor quality
management. This parameter analyses the efficiency of the management in generating business
and maximizing profits. The following ratios are considered in the present study to assess the
management efficiency of the selected banks.

Credit Deposit Ratio

36
This ratio shows the proportion of lending out of its total deposit mobilization. It indicates the
ability of the bank to convert its deposits into high earning advances. It is calculated by dividing
total advances with total customer deposits.

Table-8: Credit Deposit Ratio

Years SBI HDFC

2015-16 83.56 83.24
2016-17 80.38 85.64
2017-18 73.79 84.68
2018-19 73.35 86.32
2019-20 73.32 87.56

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 76.88 85.488
Variance 22.88875 2.67872
Observations 5 5
Pooled Variance 12.783735
Hypothesized Mean Difference 0
df 8
t Stat -3.80665382
P(T<=t) one-tail 0.00259364
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.00518728
t Critical two-tail 2.306004133
Observation: From the above table, it is seen that the significant p value is 0.005 less than 0.05
than Null hypothesis is rejected.

Net Profit per Employee

It reveals the productivity and efficiency of human resources of bank. It is arrived at by

dividing net profit with total number of employees.

Table-9: Net Profit per Employee

Years SBI(rs) HDFC(rs)

2015-16 478997.8 1404398.7
2016-17 500274.5 1725424.3
2017-18 -247971.1 1981431.6
t-Test: Two-Sample 2018-19 0 214945.2 Assuming Equal
Variances 2019-20 80806.8 2244771.3

particulars Variable 1 Variable 2

Mean 162421.6 1514194.22

37
 Variance 1.03957E+11 6.24194E+11
Observations 5 5
Pooled Variance 3.64075E+11
Hypothesized Mean Difference 0
df 8
t Stat -3.5422396
P(T<=t) one-tail 0.00379749
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.00759498
t Critical two-tail 2.306004133
Observation: From the above table, it is seen that the significant p value is 0.007 less than 0.05
than Null hypothesis is rejected.

Earning Ability

It reflects the profitability of a bank. It also explains the sustainability and growth of earning
in future. Higher earnings indicate the healthy performance of a bank. Generation of adequate
earnings is the key to exits in long run for a bank. The following ratios are considered in the
present study for the assessment of earning ability of the selected banks.

Net Profit Ratio

It shows the operational efficiency of a business. Increasing ratio indicates better performance
and decreasing ratio shows inefficiency in management and excessive operational expenses. It
is calculated by dividing net profit with total income.

Table-9: Net Profit Ratio

Years SBI HDFC

2015-16 6.06 20.41
2016-17 5.97 20.99
2017-18 -2.96 21.79
2018-19 0.35 21.29
2019-20 5.63 22.86

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 3.01 21.468
Variance 16.91125 0.85522
Observations 5 5
Pooled Variance 8.883235
Hypothesized Mean Difference 0
df 8
t Stat -9.79194737
P(T<=t) one-tail 4.96432E-06

38
 t Critical one-tail 1.859548033
P(T<=t) two-tail 0.000010
t Critical two-tail 2.306004133
Observation: it is seen that the significant p value is 0.000010 is less than 0.05 then null
hypothesis is rejected.

Return on Net Worth:

Return on net worth is the amount of net income returned as a percentage of shareholders
equity. It is a measure of the profitability of the bank.

Table-11: Return on Net Worth

Years SBI HDFC

2015-16 6.89 16.91
2016-17 6.69 16.26
2017-18 -3.37 16.45
2018-19 0.43 14.12
2019-20 6.95 15.35

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 3.518 15.818
Variance 22.54772 1.22237
Observations 5 5
Pooled Variance 11.885045
Hypothesized Mean Difference 0
df 8
t Stat -5.64124161
P(T<=t) one-tail 0.00024317
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.000486341
t Critical two-tail 2.306004133
Observation: From the above table, it is seen that the significant p value is 0.0004 less than
0.05 than Null hypothesis is rejected.

Dividend per Share

It indicates the dividend earned by each shareholder in hand. Higher the ratio higher is the
operational efficiency of the business. It is calculated by dividing dividend in equity share
capital with number of equity shares.( 2012-13 to 2016-17)

Table-12: Dividend per Share

Years SBI HDFC

2012-13 4.15 5.5

39
 2013-14 3 6.85
2014-15 3.5 8
2015-16 2.6 9.5
2016-17 2.6 11

t-Test: Two-Sample Assuming Equal Variances

particular Variable 1 Variable 2

Mean 3.17 8.17
Variance 0.437 4.6695
Observations 5 5
Pooled Variance 2.55325
Hypothesized Mean Difference 0
df 8
t Stat -4.94758585
P(T<=t) one-tail 0.000562145
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.001124289
t Critical two-tail 2.306004133

Observation: From the above table, it is seen that the significant p value is 0.0011 less than
0.05 than Null hypothesis is rejected. Variable 1 is sbi and variable 2 is hdfc.

Liquidity

The liquidity measures the bank’s ability to meet the short term financial obligations. Adequate
liquidity position can be achieved when the business can obtain sufficient liquid fund either by
converting its assets into cash or increasing liability. Higher ratio indicates that the business is
wealthier. The following ratios are considered to assess the liquidity of the selected banks.

Current Ratio

It measures the sufficiency of current assets to pay off the current liabilities. It helps the bank
to determine its working capital requirement. The ratio is calculated by dividing current assets
with current liabilities.

Table-13: Current Ratio

Years SBI HDFC

2015-16 0.07 0.07
2016-17 0.07 0.06
2017-18 0.08 0.04
2018-19 0.09 0.05

40
 2019-20 0.09 0.04

t-Test: Two-Sample Assuming Equal Variances

particulars Variable 1 Variable 2

Mean 0.08 0.052
Variance 1E-04 0.00017
Observations 5 5
Pooled Variance 0.000135
Hypothesized Mean Difference 0
df 8
t Stat 3.810317378
P(T<=t) one-tail 0.002580151
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.005160303
t Critical two-tail 2.306004133
Observation: From the above table, it is seen that the significant p value is 0.005 less than 0.05
than Null hypothesis is rejected.

Quick ratio

It measures overall liquidity position of a business. It is calculated by dividing liquid assets

with liquid liability.

Table-14: Quick ratio

Years SBI HDFC

2015-16 10.89 14.51
2016-17 11.94 11.19
2017-18 13.83 17.48
2018-19 18.06 16.61
2019-20 17.05 16.62
t-Test: Two-Sample Assuming Equal Variances

particular Variable 1 Variable 2

Mean 14.354 15.282
Variance 9.77603 6.43137
Observations 5 5
Pooled Variance 8.1037
Hypothesized Mean Difference 0
df 8
t Stat -0.51543785
P(T<=t) one-tail 0.310092243
t Critical one-tail 1.859548033
P(T<=t) two-tail 0.620184485
t Critical two-tail 2.306004133

41
Observation: From the above, it is seen that the significant p value is 0.62 greater than 0.05
than Null hypothesis is accepted.

5.2 Graphical Presentation

Capital Adequacy Ratio (CAR)

20
15
10 SBI
5
HDFC
0

From the above graph we are able to understand that HDFC has high Capital Adequacy Ratio
than SBI which means HDFC has enough cushion to absorb a reasonable amount of losses
before they become insolvent and consequently lose depositors’ funds

Debt-Equity Ratio

15

10
SBI
5
HDFC
0

From the above graph we are able to understand that SBI has high Debt-Equity Ratio than
HDFC. SBI has higher leverage ratios tend to indicate a company or stock with higher risk to
shareholders.

Asset Turnover Ratio

42
 0.1
0.08
0.06
0.04 SBI
0.02
0 HDFC

From the above graph we are able to understand that HDFC has high Asset Turnover Ratio
than SBI which means HDFC is efficient in utilizing its asset.

Loan Ratio

0.15
0.1
SBI
0.05
HDFC
0

From the above graph we are able to understand that HDFC has high Loan Ratio than SBI
which means HDFC bank is in financial position and has ability to meet outstanding loans more
efficiently than SBI

Net NPA

6
4
2 SBI
0 HDFC

NPAs is financial burden on the bank; a significant number of NPAs over a period of time may
indicate to regulators that the financial health of the bank is in jeopardy. From the above graph
we are able to understand that SBI has high Net NPA than HDFC. Which means
Nonperforming assets (NPAs) are recorded on a SBI balance sheet after a prolonged period of
non-payment by the borrower

Credit Deposit Ratio

43
 90
85
80
75 SBI
70 HDFC
65

Credit Deposit Ratio is the ratio of how much a bank lends out of the deposits. RBI does not
stipulate a minimum or maximum level for the ratio, but a very low ratio indicates banks are
not making full use of their resources. Alternatively, a high ratio indicates more reliance on
deposits for lending and a likely pressure on resources. From the above graph we are able to
understand that HDFC lends more out of the deposits they have.

Net Profit per Employee

2500000
2000000
1500000
1000000 SBI(rs)
500000 HDFC(rs)
0
2015-16
2016-17
2017-18
2018-19
2019-20

-500000

Net Profit per Employee is an important ratio that roughly measures how much money each
employee generates for the bank. Net Profit per Employee is more in HDFC bank. In 2017-18
Net Profit per Employee is negative for SBI bank.

Net Profit Ratio

30
20
10 SBI
0 HDFC
-10

44
From the above graph we are able to understand that HDFC has high Net Profit Ratio than SBI
which means HDFC bank indicates better performance and SBI ratio shows inefficiency in
management and excessive operational expenses.

Return on Net Worth

20
15
10 SBI
5
HDFC
0
-5

Return on net worth is the amount of net income returned as a percentage of shareholders
equity. From the above graph we are able to understand that HDFC has high Return on Net
Worth than SBI.

Dividend per Share

15
10 SBI
5 HDFC
0
2012-13 2013-14 2014-15 2015-16 2016-17

Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. In 2012-13 SBI had highest Dividend per share but afterwards
HDFC was more efficient in the operational of the business It indicates that more dividend
was earned by each shareholder in HDFC bank.

Current Ratio

0.1
0.08
0.06
0.04 SBI
0.02 HDFC
0

45
From the above graph we are able to understand that SBI has high Current Ratio than HDFC.
This means SBI has enough resources to meet its short-term obligations. Which means SBI
knows its working capital requirement.

Quick ratio

20

15

10 SBI
5 HDFC

The quick ratio is an indicator of a company’s short-term liquidity position and measures a
company’s ability to meet its short-term obligations with its most liquid assets. In this graph
we are able to see that in 2015-16 SBI was less efficient to meet its short-term obligations
with its most liquid assets but afterwards quick ratio started increasing. In 2017,2019 and
2020 HDFC had lowest quick ratio as compared with SBI.

46
 CHAPTER VI
FINDINGS, SUGGESTIONS & CONCLUSION

47
 6.1 FINDINGS, SUGGESTIONS & CONCLUSION

Findings

From the above analysis the following outcomes are found on the financial performance of SBI
and HDFC bank:

• SBI has higher debt equity ratio of than HDFC. SBI is trying to taking advantage of
financial leverage and is also exposed to greater financial risk. HDFC is quite risk averse
and trying to provide high margin of safety to the depositors.
• HDFC bank has higher asset turnover ratio. So, it has the ability to generate more revenue
with respect to given amount of total assets. SBI bank is less efficient in utilization of their
assets.
• The loan ratio of SBI bank is less than HDFC bank. So, SBI is taking more risks compared
to HDFC.
• The net NPA is higher for SBI than HDFC. It can be concluded that efficiency in
management of advances given to customers are not good for SBI.
• The credit deposit ratio for HFDC is higher than SBI. It means that SBI is providing more
credits to their customers from their deposits. It is clear that SBI is taking advantages of
leverage and also generating more risks for the depositors.
• Net Profit per Employee is higher in HDFC bank than SBI. It may be concluded that the
efficiency and productivity of human resources of HDFC bank is better than SBI.
• Net profit ratio is also high for HDFC bank. So, HDFC has a better profitability and better
management efficiency than SBI.
• Both the dividend per share and earnings per share are high for HDFC. So, HFDC has better
profit potentiality to satisfy their stakeholders than SBI.
• Return on Net worth is the overall barometer of overall performance of any institution.
HDFC bank has high Return on Net worth ratio. It may be concluded that the performance
of SBI is poor compared to HDFC bank.
• HDFC bank has higher result for all the liquidity ratios like Current ration and Quick ratio.
It may be commented that the liquidity position of HDFC bank is much more than SBI
bank

48
Hypothesis Testing at a Glance

Null Hypothesis - There is no significant difference in the financial position and

performance of SBI and HDFC bank in India
No. Students t test Accept/Reject Ho

1 Capital Adequacy Ratio (CAR) Reject

2 Debt-Equity Ratio Reject

3 Asset Turnover Ratio Reject

4 Loan Ratio Reject

5 Net NPA Reject

6 Credit Deposit Ratio Reject

7 Net Profit per Employee Reject

8 Return on Net Worth: Reject

9 Dividend per Share Reject

11 Quick Ratio Accepted

12 Net Profit Ratio Reject

49
SUGGESTIONS

SBI net npa mean for 5 year is 3.698 and HDFC is 0.352, SBI should reduce its npa. Immediate
solution is to sell Nonperforming assets. Banks should thoroughly inspect the company they
are giving loans to. Loans to bad companies will lead to lack of money for good investments.
It’s better to display the defaulters’ name list publicly. This will cause fear and acts as a
deterrent. After granting loan, banks should observe the capacity of the company continuously
and should be able to assess whether it is about to bankrupt. In this way, banks can sell the
assets before the loans become NPA. Though Indian government is rescuing banks, NPA
problem will not be solved without preventing the grant of bad loans. Banks should assess the
companies thoroughly before granting loans and should act strictly towards will full defaulters.

The banks must maintain the capital adequacy ratio (CAR) as specified by RBI from time to
time. As per the latest RBI norms, the banks should maintain a CAR of 12%. It was found from
the table 3, that both the banks have shown a good sign towards CAR. But, HDFC with mean
value 16.10 of is highly successful when compared to SBI Bank with mean value of 12.936
SBI should maintain the higher car, so that it will be able to withstand a financial downturn or
other unforeseen losses.

In terms of debt-equity ratio, table 4 shows that, SBI mean is 15.5 and HDFC mean is 7.8. It
indicates how much of the bank businesses financed through debt and how much through
equity. The most logical step a SBI can take to reduce its debt-to-capital ratio is by increasing
revenues and hopefully profits. This can be achieved by raising prices, increasing profit,
or reducing costs. The extra cash generated can then be used to pay off existing debt.

For the asset turnover ratio, the higher, the better. A higher number indicates that you're using
your assets efficiently. Mean of asset turnover of SBI is 0.074 and HDFC is 0.1 SBI should
find ways to use their assets more efficiently. RBI does not stipulate a minimum or maximum
level for Credit Deposit Ratio, but a very low ratio indicates banks are not making full use of
their resources. Alternatively, a high ratio indicates more reliance on deposits for lending and
a likely pressure on resources.

In the present study, total 11 ratios have been measured under CAMEL model; the average
result of HDFC bank is best in Ratios. So, it is established that largest private sector bank
HFDC bank has better financial performance and efficiency compared to largest public sector
bank SBI.
50
Conclusion
The existing banking structure in India has evolved over several decades, is elaborate and has
been serving the credit and banking services needs of the economy. There are multiple layers
in today’s banking structure to cater to the specific and varied requirements of different
customers and borrowers. The structure of banking in India played a major role in the
mobilization of savings and promoting economic development. In the post-financial sector
reforms (1991) phase, the performance and strength of the banking structure improved
perceptibly.
State Bank of India (SBI) and (HDFC) Bank are the two largest banks in India in public and
private sectors respectively. To compare the financial performance of the banks, various ratios
have been used to measure the banks’ profitability, solvency position, and management
efficiency. The CAMEL model is followed to measure the relative financial position and
performance of the banks. Apart from CAMEL model, statistical tools like Mean and t-test
have been used to assess the performance of banks from each of the important parameters like
capital adequacy, asset quality, management efficiency, earning ability and liquidity to draw
the logical conclusions. According to the analysis, both the banks are maintaining the required
standards and running profitably. From the present study HDFC has been a better performer in
terms of profitability and management efficiency as compared to SBI for the study period

51
CHAPTER VII
REFERENCES

52
REFERENCES

1) Role of Reserve Bank of India in Indian Economy

Mandeep Kour Bansal
2) The impact of liberalization on the productive efficiency of Indian commercial banks
Arunava Bhattacharyya , C.A.K. Lovell , Pankaj Sahay

3) Analysis of Banks in India-A CAMEL Approach

Harsh Vineet Kaur
4) A STUDY OF FINANCIAL PERFORMANCE ANALYSIS OF INDIAN BANKING
SECTOR Dr. P.S. Vohra

5) Operational Performance of Indian Scheduled Commercial Banks-An Analysis

Dr. M. Syed Ibrahim

6) Performance Evaluation of Regional Rural Banks in India

Dr. M. Syed Ibrahim

7) CURRENT POSITION OF RRBS IN INDIA – A REVIEW

K.VENKATALAKSHMI, M. CHANDRAIAH

8) Moneycontrol Site

9) College Notes

10) Performance Evaluation Of Urban Cooperative Banks In India Dr.K.V.S.N JAWAHAR

11) Evaluating the Performance Of Commercial Banks In India D. K. Malhotra, Raymond

Poteau, Rahul Singh

12) Online website (bank websites)

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