96

CHAPTER - 5

PERFORMANCE ANALYSIS OF PUBLIC SECTOR BANKS IN INDIA

(In First and Second generation reform period-1991-92 to 2003-04)

5.1. INTRODUCTION

Having discussed the development of Indian banks and the rationale

for banking sector reforms and various reform measures undertaken to

improve productivity, efficiency and profitability of banks by freeing them from

a number of regulations and review of literature, it is felt desirable to evaluate

the performance of public and private sector banks separately and as a next

step attempt made for comparison between the relative performances of

these two groups.

This chapter deals with performance evaluation of Public Sector Banks

comprising of three Parts. The First Part covers evolution of PSBs and

examines the recent trends. The Second Part is devoted to the performance

analysis in terms of efficiency and profitability indices of PSBs for the entire

study period. The Third Part deals with period-wise analyses of performance

of PSBs and grouping of banks is carried out using principle component

analysis.

5.2 PUBLIC SECTOR BANKS – EVOLUTION

Public sector in the banking industry emerged with the nationalization

of Imperial Bank of India (1921) and creating the State Bank of India (1955)

as a part of integrated scheme of rural credit proposed by the All India Rural

Credit Survey Committee (1951). The Bank is unique in several respects and

it enjoys a position of preeminence as the agent of RBI wherever RBI has no

branches. It is the single largest bank in the country with large international

presence, with a network of 48 overseas offices spread over 28 countries

covering all the time zones. One of the objectives of establishing the SBI was

97

to provide extensive banking facilities in rural areas by opening as a first step

400 branches within a period of 5 years from July 1, 1955. In 1959, eight

banking companies functioning in formerly princely states were acquired by

the SBI, which later came to be known as Associate Banks. Later, two of the

subsidiary banks', viz., the State Bank of Bikaner and Jaipur were merged to

form the State Bank of Bikaner and Jaipur, thus form eight banks in the SBI

group then making banks in the state bank group.

The Public sector in the Indian banking got widened with two rounds of

nationalization-first in July 1969 of 14 major private sector banks each with

deposits of Rs. 50 crore or more, and thereafter in April 1980, 6 more banks

with deposits of not less than Rs. 2 Crore each. It resulted in the creation of

public sector banking with a market share of 76.87 per cent in deposits and

72.92 per cent of assets in the banking industry at the end of March 2003.

With the merger of 'New Bank of India' with 'Punjab National Bank' in 1993,

the number of nationalized banks became 19 and the number of public sector

banks 27. The number of branches of public sector banks, which was 6,669

in June 1969, increased to 41874 by Mach 1990 and again to 46,752 by

March 30, 2003. The public sector banks thus came to occupy a predominant

position in the Indian banking scene. It is however, important to note that

there has been a steady decline in the share of PSB's in the total assets of

SCB's during the latter - half of 1990s. While their share was 84.5 per cent at

the end of March 1996, it declined to 81.7 per cent in 1998 and further to 81

per cent in 1999.

5.3 FINANCIAL HEALTH

Over a period of time, the financial health of PSBs continually to

deteriorate resulting in decline in their efficiency. Since so many obligations,

economic and social, are imposed on PSBs, it was thought, that their

performance should not be judged merely in terms of profits. Since 1969,

PSBs began to playa large and

dominant supplementary role to the government programmes in alleviating

poverty, employment creation and generation of fresh resources for

development.

98

They have been highly successful in achieving their principal

objective of deposit and loan expansion. Their participation in priority sector

lending is highly commendable: In June 1969, on the eve of nationalization

the share of priority sector in total credit of SCBs was mere 14 per cent (Rs.

504 crore). By March 2002, with the massive involvement of PSBs their

outstanding lending to priority sector had climbed up to Rs. 1,71,185.26

crore. As a per cent of net bank credit the same was 43.1 per cent as

against the mandated 40 per cent In terms of profitability, the SBI group has

recorded a steady rise in net profits from Rs. 244 crore in 1991-92 to Rs.

2,222 crore in 200001 and Rs. 4,512 crore in 200203. In the case of 19

nationalized banks, profitability has always been low.

During 1992-93 and 1993-94 these banks actually posted huge

losses to the tune of Rs. 3,513 crore and Rs. 4,705 crore :respectively. It is

possible to defend the low profitability by 'referring to their commitment to

social obligations imposed by the Government: as for instance opening rural

branches in large numbers, financing poverty alleviation programmes at

concessional rates of interest, priority sector lending to the extent of 40 per

cent huge NPAs, etc. As a result of their involvement in social~ banking and

other factors such as directed investment, the state of health of these banks

left much to be desired. The net profit as a per cent of Total assets became

0.99 per cent in 1992-93 and 1.1 per cent in 1993-94. Similarly, the net

profit as a per cent of Total assets of 19 nationalized banks was 1.71 per

cent in 1992-93 and 9.8 per cent in 1993- 94. Prior to reform period,

profitability was not considered as the million objectives of PSBs. The return

on assets of PSBs does not compare unfavorably with that of banks

elsewhere. As per data provided by the Bank for International Settlements

(BIS) 1999, return on assets, defined as profit before tax moved from 0.08

to 1.07 in Euro area in 1998 with most countries covering around the 0.5

mark even on free tax basis.

99

5.4 BUDGETARY SUPPORT FOR RE-CAPITALIZATION

The government has been making budgetary provisions year after year for

recapitalization of nationalized banks since 1984-85 their capital base has

eroded. The total recapitalization of Rs. 2446 Crore took place from 1985-86

to 2000-01. The Re-capitalisation measure was undertaken in three phases.

In the phase-I, i. e., in the pre-reform period from 1984-85 to 1992-93, all the

nationalized banks were recapitalized every year to meet their capital

requirements without any preset norm and special securities (perpetual at

interest rate of 7.75 per cent) were allotted to the banks. The annual exercise

in the Phase I period involved an allotment of Rs. 4000 Crore. Phase II was

period of two years, 1993-94 and 1994-95, when banking sector reforms were

being given a big push and recapitalization of all nationalized banks had to be

accorded priority. Under a well-designed recovery programme in general Rs.

10,987 crore were injected as cash capital into the banks to repay the

damage of the past.

Phase III of recapitalization of .nationalized bank is neither regular nor

pre-designed. The number of recapitalized banks comedown to six each

during 1995-C,'6 and 1996-97, three each only in 1997-98 and 1998-99 and

none during the last two years.2 Table 5.1 gives the three phases of re-

capitalization of nationalized banks The budgetary practice followed by the

Government for recapitalization since 1985-86 was the issue of special

securities bonds against equity addition of nationalized banks. As far as

Government is concerned there is no cash outgo from the budget but there is

an addition to the public debt.

100

TABLE 5.1 PHASES OF RECAPITALIZATION OF NATIONALIZED BANKS

Period/Year No. of Banks

Recapitalized Rs. Crore

PHASE I : REGULAR AND GENERAL 1985-86 19 400 1986-87 19 400 1987-88 18 200 1988-89 18 200 1989-90 8 700 1990-91 11 700 1991-92 15 700 1992-93 13 700

Sub Total (1985-86 to 1992-93)

4000

PHASE II : PRE-DESIGNED UNDER A RECOVERY PROGRAMME IN GENERAL

1993-94 19 5,700 1994-95 13 5,287

Sub total (1993-94 to 1994-95)

10,987

PHASE III : CASE TO CASE BASIS 1995-96 6 850 1996-97 6 1590 1997-98 3 2700 1998-99 3 400

19992000 Nil Nil 20002001 Nil Nil

Sub Total (1995-96 to 200001)

5459

Total (1985-86 to 200001) 20446 Source: EPW, Vol. XXXVII, No. 23, June 2002, p. 2242,

A further provision of Rs. 770 Crore in the Union Budget 2002-03 was

made mostly for the weak banks. The stronger banks were asked to

approach the market for further capital. Towards this end the banking

companies (Acquisition and Transfer of undertakings) Act, 1970-80 was

amended with effect. from July 15, 1994 for permitting banks to raise capital

up to 49 per cent from the public.

101

5.5 PRIVATISATION The banking sector reforms sought to improve profitability of banks by

lowering pre-emotions and to strengthen the banking system through

institution of capital adequacy norms, in addition to income recognition, asset

classification and provisioning requirements in line with the international

standards. Competition is sought to be promoted through the entry of new

private sector banks and more liberal entry of foreign banks. PSBs had to

make lot of improvement in their work culture and in their technology etc. to

be able to compete with the new entrants with aggressive marketing

practices.

One way to satisfy capital adequacy norms for these banks is to

approach the capital market to raise equity. Until 1991-92, all PSBs are

owned by the Government. After the reform process was initiated, the

Governments stake was permitted to be reduced to 51 per cent. The

Committee on Banking Sector Reforms (1998) recommended that PSBs

should access market to meet their needs of capital and for the purpose, the

minimum shareholding by the Government/RBI should be brought down to 33

per cent from the existing statutory minimum of 51 per cent. Till 2000-01, as

many as 12 PSBs accessed capital market and raised an amount of Rs. 64

Crore. The State Bank of India alone raised through public issue over Rs.

2200 Crore by public issue of equity shares and Rs. 1,000 Crore through

bond issue in December 1993 and January 1994. The reduction in

government stake in PSBs amounts to partial privatization of banks.

5.6 BRANCH EXPANSION Indian banking system is predominantly branch-banking system. After

nationalization of major banks, for nearly have decades there had been

massive branch expansion, primarily with the objective of covering the

unbanked centers in rural and semi-urban centers, coupled with intensive

branch network in metro urban centers to sustain profitability. In the decade

that followed 1990 (reform period) it was felt that haphazard growth should be

contained '.and there should be qualitative network in branch banking. The

Narasimham Committee-I recommended that branch licensing be abolished

and the matter of opening and closing branches are left to commercial

judgment of individual banks. This recommendation was partlyimplemented.

102

Although branch licensing has not been abolished, greater operational

freedom has been given to individual banks to open certain specialized

branches as well as expanding branches in a more systematic way in its

geographical spared. Of late, the banking system has been increasingly

looking towards technology-based delivery channels and progressive

reduction of physical branches to the extent possible.

The Table 5.2 shows the trend in number of branches of PSBs during

the period 1992-2003.

TABLE 5.2 TRENDS IN NUMBER OF BRANCHES OF PSBS DURING 1992-2003 Year SBI Associate Banks Nationalised PSBs

Banks (1) (2) (3) (4) (5)

1992-93 8736 3850 29715 42301 (%) (%) (%) (%) 1993-94 8812 3977 30472 43338 (0.86) (3.30) (2.55) (2.45) 1994-95 8839 4036 30880 43755 (0.31) (1.48) (1.33) (0.96) 1995-96 8885 4107 31342 44334 (0.52) (1.75) (1.50) (1.32) 1996-97 8888 4226 31645 44759 (0.03) (2.90) (0.97) (0.96) 1997.98 8925 4291 32077 45293 (0.42) (1.54) (1.36) (1.19) 1998-99 8982 4377 32501 45860 (0.64) (2.00) (1.32) (1.25) 19992000 9043 4439 32802 46284 (0.68) (1.42) (0.93) (0.92) 200001 9078 4481 32764 46323 (0.39) (0.95) (0.12) (0.08) 200102 9085 4508 32791 46384 (0.78) (0.60) (0.08) (0.13) 2002.03 9081 4541 33130 46752 (0.04) (0.73) (1.03) (0.79) Average (0.46) (1.67) (0.89) (1.01) Note : Figures in parentheses indicate Growth rate over previous years. Source: Compiled from various issues of Statistical Tables and Data Base: published by ISA, Mumbai.

From the Table 5.2, it is apparent that the increase in number of branches of

all groups of PSBs since 1992-93 is slow and not rapid as has happened in

the earlier two decades. Within the period, the percentage increase in the

103

number of branches of all PSBs put together was 1.01 per cent, it was 0.89

per cent for the 19 nationalized banks. The Associate Banks made a bigger

contribution (1.67) than the nationalized bank and SBI for the percentage

increase in the number of branches of all PSBs.

5.7 TREND IN EMPLOYEES OF PSB’s: 1992-93 to 2002-03

In the Table 5.3 gives the number of employees in different bank

groups. An analysis of the data presented in the Table 5.3 reveals that there

has been decline in the number of staff members of all groups of PSBs during

the period under study. The decline is prominent in the case of Nationalised

Banks (1.66) than that of SBI (075) and Associate Banks (0.58). Beginning

from 1998-99 all bank groups, SB!, Associate Banks, National Banks,'

reduced the staff through VRS and the reduction in highly pronounced in

2000-01.

TABLE 5.3 TRENDS IN NUMBER OF EMPLOYEE OF PSBS (1992-03)

Year SBI Associate Banks Nationalised PSBs Banks

1992-93 22132209 78602 567035 871846 (%) (%) (%) (%) 1993-94 229126.00 79980.00 582679.00 891785.00 (1.29) (1.72) (2.83) (2.29) 1994-95 232000 81003 581788 894791 (1.25) (1.26) (0.15) (0.33) 1995-96 233000 81252 580637 894889 (0.43) (0.31) (0.19) (0.01) 1996-97 236204 82103 570866 889173 (1.38) (1.04) (1.68) (0.64) 1997-98 239649 81513 566314 887476 (1.46) (0.72) (0.80) (0.19) 1998-99 237504 82370 562285 883648 (0.90) (1.04) (0.71) (0.43) 1999-2000 233433 82115 558021 873569 (1.71) (0.31) (0.76) (1.14) 2000-01 214845 74809 507677 797331 (-7.96) (-8.90) (-9.02) (-8.73) 2001-02 209462 74591 472572 756625 (2.51) (0.29) (-6.91) (-5.11) 2002-03 208998 73925 472514 755437 (0.22) (0.89) (0.01) (0.16) Average (0.75) (0.58) (1.66) (1.38) Note : Figures in parentheses indicate Growth rate over previous years.

104

Source: Compiled from various issues of statistical Tables and Data case published by ISA, Mumbai. 5.8. PROFITABILITY OFPSBS : 1992-93 TO 2002-03

Public sector banks before the initiation of reform measures in 1992 didn't

seem to consider profitability as a major performance indicator. With the

implementation of reform measures profitability as a measure come to the

forefront. The year-to-year profits of different group of PSBs are presented in

the Table 5.4.

TABLE 5.4

TRENDS IN NET PROFIT/LOSS OF PSBS (GROUP-WISE) (1992.93 to 2002.03)

Year SBI Associate Banks Nationalised Banks PSBs

1992-93 212 68 3573 3293 (%) (%) (%) (%)

1993-94 275 81 4705 4349 (29.72) (19.12) (31.68) (32.07)

1994-95 715 131 269 1116 (160.00) (61.73) (105.70) (125.66)

1995-96 832 38 1165 371 (16.36) (129.01) (-533.09) (133.24)

1996-97 1349 321 1445 3115 (62.14) (944.70) (224.00) (939.60)

1997-98 1861 550 6567 4979 (37.95) (71.34) (354.46) (59.84)

1998-99 1028 438 1788 3254 (44.76) (20.36) (-72.77) (34.65)

199900 2052 428 2437 5116 (99.61) (2.28) (36.30) (57.22)

200001 1604 618 2095 4317 (21.83) (44.39) (14.03) (15.62)

200102 2432 118 4852 8301 (51.62) (64.72) (131.60) (92.29)

200203 3105 1407 7784 12295 (27.67) (38.21) (60.43) (48.11)

Average (41.85) (109.26) (26.10) (110.70) Note : Figures in parentheses indicate Growth rate over previous years. Source: Compiled from various issues of statistical Tables and Data Base published by IBA, Mumbai.

As can be seen from the Table 5.4, SBI and Associate Banks barring

105

one year, throughout the period have made profits continuously. The

nationalized banks have sustained huge losses during the first two years, i.e.

1992-93, 1993-94. Since these amounts of losses far exceeded the profits of

SBI and Associate Banks, it resulted in losses for all the PSBs put together.

The nationalized banks have made huge profit of Rs. 6567 Crore in 1997-98

with annual growth rate of 354.46. But the turnaround has actually started in

1996-97. The last two years of the study period have brought bountiful profits

to all the constituents of PSBs group. In 2001-02, the profits of PSBs as a

whole were almost double to the figure of 2000-01 and profits in 2002-03 are

almost equal to the mined profits of the previous two years. In the initial years

of reform period, nationalized banks have sustained losses due to change in

the accounting pattern regarding income recognition and asset classification.

The accumulated bad and doubtful debts have impinged on the profitability of

nationalized banks.

The 27 public sector banks do not strictly speaking form a

homogeneous group. As a matter of fact, this group like any other group, is

heterogeneous in terms of geographical location of branches, varying

maturity, size, product sophistication, technological orientation as well as

clientele base.

The RBI's observation (2000) for the turn round in the profit front in

1996 deserves to be noted. The RBI says Developments in the subsequent

period indicate that a majority of PSBs have been able to progress

considerably towards the direction of passing“acid test" of achieving

competitive efficiency of progressively conforming to the international best

practices in various areas.

5.9. PERFORMANCE ANALYSIS OF PUBLIC SECTOR BANKS (PSB's)

In this chapter, the performance of 27 PSBs is evaluated during the

reform period 1992-93 and 2002-03. The analysis is carried out by

disaggregating 27 PSBs into 3 groups, namely, SBI (1), Associate Banks (7)

and Nationalized Banks (19). The level of efficiency of banks has been

106

studied in the context of branches and employees in terms of efficiency

indicators and profitability indicators.

In a service industry like banking, it is not possible to measure physical

output in the absence of clear definition. However, most of the measures that

are used to study banks' performance can be interpreted more correctly as

measuring the banks efficiency target rather than directly measuring their

productivity. The level of efficiency of banks is commonly measured at the

level of branches and employees, which are the two important wheels on

which banking industry moves.

Considering the national priorities, involvement of banks in rural areas

and development schemes and vast infrastructure developed in terms of

branches and manpower resources, it is thought appropriate to assess the

efficiency of banks in terms of the performance at the level of branches and

employees. Further, the size of banks vary widely; hence it is more

meaningful to study the performance of parameters indicating efficiency at the

level of branch and employee.

In order to measure efficiency at the branch and employees level, the

following parameters are employed: (1) Business per Branch, (2) Operating

expenses per Branch, (3) Profit per Branch, (4) Business per Employee, (5)

Establishment expenses per Employee, and (6) Profit per Employee. The

study thus measures efficiency of a bank at the level of operational units, I e.,

branch and employee, The efficiency of each branch and employee in terms

of averages of indicators can be compared to assess the relative performance

of different banks and bank groups.

BRANCH LEVEL EFFICIENCY (PSBS) 5.9.1.BUSINESSPER BRANCH

As can be seen from the Table 5.13, the percentage changes in mean

values of business per branch of all PSBs are positive in the three periods

indicating improvements in the indicators. SBI and its associate banks have

107

made remarkable improvement in percentage change in business per branch

in the three-sub periods, by comparison. The percentage growth in the mean

values of business of branches of 5 nationalized banks in period-III over

period-II decelerated compared to the percentages in period-II over period-I.

They still indicate improvements along with the remaining 15 banks which

showed larger improvements.

The percentage increase in the mean values of business per branch in period-

III (2000-03) over period-I (1992-95) is considerable and far more satisfactory.

In terms of total business mobilized, the banks, which occupy the first three

places, are ANB, SBOI and COB. The not so well performers are 18, BOB

and PNB.

5.9.2. OPERATING EXPENSES PER BRANCH (PSBS)

Operating expenses per branch includes establishment expenses, rent taxes,

lighting, printing and stationary, advertisement and publicity, depreciation. It is

the expenditure incurred to operate a branch.

When viewed at the average operating expenditure per branch, there is an

increase in it during the three periods.(Table 5-14) The overall increase in the

percentage in the case of all put)s In period-III is 147.68 per cent over the first

period. The percentage increase in period-III over period-II is less when

compared to the percentage increase in period-II over period-I. The least

percentage increase in expenditure took place in OBOC, BOB and SB. The

increase in the average value of their indicator has a negative effect on the

performance of banks.

5.9.3. PROFIT PER BRANCH (PSBS)

One of the objectives of banking sector reforms is to restore the

financial health of the banking system by improving the efficiency and.

profitability. Hence, prudential norms were introduced so that the balance

sheets of banks reflect the true picture of the real value of assets and also

108

profitability of banks. By 1992-93 several banks had accumulated non-

performing assets (NPA's) for which provisions had to be made. The

accumulated losses had also to be written off. Hence in the first four years

of reforms many nationalized banks sustained losses. However, due to their

intrinsic resilience and management savvy, the number of banks incurring

losses is reduced to three by 1996-97. Since then, all public sector banks

got improvement in key financial ratios. But the weak banks (IB, UCO)

continued to make losses per branch except in the last year when they

earned sizeable profits. The Table 5.5 indicates the profit per branch of

PSBs during the first and second part of period under study. From the table

it is evident that 10 nationalized banks made negative profits' per branch in

1992-93, in the next year, the number has increased to 12. The profit per

branch of nationalized banks in the first two years has thus been negative.

The average profit per branch of SBI and its associate banks have

been positive throughout the period (except SBOS in 1995-96). The profit

per branch of SBI increased from Rs. 2.43 lac in 1992-93 to Rs. 34.19 lac in

2002-03. The average profit per branch for the entire period is Rs. 23.28

lac. There has been a large increase in the profits of associate banks from

Rs. 1.77 lac in 1992-93 to Rs. 30.98 lac in 2002-03 and the average profit

per branch of associate banks for the entire period work out to be Rs. 10.73

lac. The growth rate of profit per branch of associate banks is Rs. 24.78 per

cent, which is higher than that of SBI, which is 5.33 per cent.

When viewed at the nationalized banks, the picture is altogether

different. The average profit per branch of 6 nationalized banks was

negative. They are CBOI, IB, IOB, PSB, UCO and UNBOI.

The growth rates of profit per branch of 6 out of first 19 nationalized

banks were negative during the period under study.

On the basis of mean values, the loss-making banks in order are IB

(Rs. 22.48 lac); UNBOI (Rs. -6.37 lac) and UCO (Rs. -6.01 lac). The Verma

Committee (1999) identified IB and UCO banks as weak banks.

109

The profit-making banks in orders are COB (Rs. 28.22 lac) OBOC (Rs.

23.50 lac) and SBI (Rs. 23.28 lac). As indicated by the values of CV, there

existed alarming differences with respect to this indicator. So, there is no

stability in earning profit during the period under study.

The above analysis leads us to the conclusion that the performance on

the profit front of nationalized banks on the whole makes a dismal reading.

The losses may partly be attributed to rigorous implementation of prudential

norms in the earlier period.

110

TABLE 5.5 PROFIT PER BRANCH OF PSBS : 1992-2003 (Rs. in Lacs)

No. Name 1992-93 1993-94

1994-95

1995-96 1996-97 1997-98 1998-991999-2000 2000-01 2001-

02 2002-03 1992-03

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 2.43 3.12 8.09 93.60 15.18 20.85 11.45 22.69 17.67 26.77 34.19 23.28 1.0861 5.33 2. SBBJ 1.55 0.95 1.09 3.49 5.24 11.73 11.80 15.25 13.29 20.83 25.60 10.07 0.8322 24.02 3. SBOH 2AJ3 D 3.20 5.73 6.42 65.00 11.66 13.10 14.65 17.08 25.54 33.67 18.03 1.0129 12.31 4. SBOI 0.87 1.13 2.56 3.33 4.57 7.39 8.01 11.25 15.65 29.83 46.84 11.95 1.1967 30.72 5. SBOM 0.78 0.38 0.57 4.82 7.18 9.07 5.87 8.09 4.31 10.93 19.21 6.47 0.8519 21.16 6. SBOP 5.01 3.20 4.54 7.94 84.40 20.23 14.19 18.35 2.27 32.23 43.63 21.45 1.1488 10.72 7. SBOS 1.45 1.67 3.79 -61.01 18.68 20.31 6.25 22.03 3.43 19.95 22.46 5.36 4.4211 56.11 8. SBOT 1.30 1.41 3.25 4.00 6.12 9.55 6.48 -9.90 - 14.46 17.95 25.48 9.08 0.2855 23.34

ASS 1.77 2.04 3.25 0.93 7.60 12.82 10.01 14.15 13.79 22.58 30.98 10.73 0.9004 24.78

.9. AB -5.88 .19.95 4.10 0.32 3.44 6.88 7.17 3.65: 2.10 4.18 8.63 0.59 13.9392 307.45 10. ANB 14.70 16.72 4.54 1.12 3.70 7.64 89.50 11.89 11.86 18.90 36.64 13.21 2.2283 38.23 11. BOB 0.33 2.76 7.16 8.24 11.11 18.20 16.36 18.97 10.30 20.38 28.08 12.90 0.6434 17.29 12. BOI 13.90 46.01 2.06 11.25 14.55 14.63 8.00 6.84' 9.94 19.82 33.26 5.49 3.7490 83.90 13. BOM 17.39 26.28 3.61 1.14 4.10 4.82 4.43 7.53 3.69 11.87 18.02 0.76 16.7063 438.94 14. CB 1.27 5.75 9.55 11.54 6.50 8.78 9.46 9.85 11.85 30.76 42.04 13.40 0.8974 21.05 15. CBOI 12.59 23.25 2.73 2.40 '4.89 5.67 4.72. 4.87 1.48 5.23 9.82 .0.39 24.8419 - 589.74 16. COB 0.89 5.73 14.84 20.96 24.65 28.74 31.12 35.80 40.18 46.74 60.82 2822 0.6250 18.57 17. DB -8.06 .6.24 2.65 4.59 6.39 9.08 9.43. 5.38 22.64 0.97 10.04 1.05 9.3727 41.76 18. IB 0.51 27.77 0.97 .90.76 .26.16 .20.21 -51.97 .28.54 .19.26 2.36 13.53 22.48 .1.3058 .903 19. IOB -57.57 6.53 0.74 0.22 7.66 8.19 3.92 2.81 8.08 15.89 29.03 .0.69 33.5701 -827.91 20. OBOC 3.80 5.49 18.45 24.68 23.84 24.97 25.58 30.49 21.78 3320 46.20 23.50 0.5048 13.41 21. P&SB 25.46 25.73 1.01 .18.86 2.84 9.14 7.88 8.29 1.74 3.06 0.53 3.42 . 3.8983 83.13

111

22. PNB 1.23 2.04 2.32 2.57 6.32 12.58 9.73 10.59 11.96 14.57 20.86 8.15 0.8528 23.07 23. SB .43.00 .19.19 -5.87 1.26 4.16 5.10 8.56 12.69 13.56 14.34 19.76 1.03 17.5725 469.22 24. UCO 24.79 .30.40 4.68 13.15 -9.76 -532 3.79 2.10 1.92 9.62 12.11 .6.01 2.1819 .60.70 25. UBOI 0.59 2.64 5.55 4.00 10.64 11.98 7.55 4.73 7.55 15.52 27.38 8.92 0.8406 19.39 26. UNBOI 21.04 .46.40 .14.79 17.55 .8.55 0.75 1.13 2.33 1.44 9.13 23.48 -6.37 . 2.8918 77.55 27. VB 13.21 0.51 3.95 2.99 2.28 2.75 3.61 6.33 8.43 15.82 23.37 5.17 1.7730 46.65

NB 12.02 15.44 0.87 3.72 4.57 8.00 5.50 7.43 6.40 14.80 23.50 3.63 3.0650 84.93 PSBs -7.78 10.04 2.55 0.84 6.96 5.67 7.10 11.05 9.32 17.90 26.30 6.20 1.6902 47.91

Source: Reserve Bank Of India.

112

EFFICIENCY AT EMPLOYEE LEVEL (PSBS) Employee productivity is the core of efficiency of banks. The most commonly

used measure of efficiency is the ratio of output to man-hours worked called

employee productivity. In service industry the products include deposits raised,

advances disbursed and a host of services rendered to depositors, borrowers and

others who utilize bank services. Since physical measurement in terms of output is

not possible, labour efficiency is measured in terms business per employee of

different banks in the group of PSBs. Improvement in efficiency will ultimately lead to

larger profits and lower costs. The average profit and (staff) cost per employee are

also taken as indicators to measure the efficiency of employees.

5.9.4. BUSINESS PER EMPLOYEE (PSBS)

The average business per employee is an improved measure of efficiency of

employee because the total business combines both deposits and advances. The

intermediation process between savers and borrowers becomes complete when

deposits mobilized are lent to borrowers engaged in different types of business

activities. In the Table 5.6 the average business per employee of different bank

groups and different banks belonging to the PSBs are presented. The average

business per employee has increased throughout the study period but increase is

phenomenal in the concluding three year period.

The average business per employee of all PSBs taken together increased

from Rs. 47.84 in 1992-93 to Rs. 215.60 lac in 2002-03an improvement of 4.5 times.

The nationalized banks have been able to improve average business per employee

from Rs. 48.15 lac in 1992-93 to Rs. 221.90 lac- an increase of 4.6 times. It appears

from the data that the nationalized banks have made remarkable progress in the

area of average business per employee. The average business per employee of SBI

increased from Rs. 50.40 lac in 1992-93 to Rs. 207.60 lac in 2002-03. In the case of

associate banks, the average business per employee increased from Rs. 38.31 lac

to Rs. 197.98 lac per annum during the period.

As compared to SBI and Associated Banks, the nationalized banks, on an

average, continued to register higher business per employee in the period under

113

study. Similarly, rate of growth of business per employee of nationalized banks was

higher than those of SBI and Associated Bank.

A bank-wise analysis reveals that OBOC (Rs. 168.64 lac) followed by COB

(Rs. 159.93 lac) and BOB (Rs. 141.41 lac), on an average, made the highest

business per employee during the study period. On the other hand, UCO (Rs. 81.34

lac); SBOM (Rs. 78.70 lac) and SBBJ (Rs. 76.89 lac) secured the lowest business.

Inter-bank comparison, on the basis of growth rate, revealed that ANB (19.65

per cent), DB (18.73 per cent) and SBOI (17.87 per cent) secured first three ranks

and IB (9.83 per cent), BOB (12.62 per cent) and SBOM (14.49 per cent) got bottom

three ranks in list of PSBs. There did not exist any significant variations in co-efficient

of variation.

114

TABLE 5. 6 BUSINESS PER EMPLOYEE OF PSBS : 1992-2003

(Rs. in Lacs)

No. Name 1992-93 1993-94

1994-95

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-

02 2002-03 19922003

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 50.40 51.46 57.61 67.07 73.26 85.68 105.85 126.34 165.90 186.84 207.60 107.09 0.5303 15.31 2. SBBJ 31.67 35.52 40.20 47.19 55.00 67.69 77.37 91.18 115.70 131.98 151.46 76.89 0.5334 15.62 3. SBOH 44.60 52.37 63.65 71.08 99.90 93.06 109.11 126.29 165.16 191.64 226.20 111.19 0.5390 15.61 4. SBOI 36.15 41.88 49.37 58.28 64.66 77.16 89.66 114.61 154.36 186.68 220.52 99.39 0.6270 17.8787 5. SBOM 34.64 37.64 46.94 53.90 61.08 65.98 74.85 88.69 119.32 136.14 146.50 78.70 0.4984 14.49 6. SBOP 42.00 50.32 59.33 69.46 78.66 90.34 104.22 121.22 154.12 191.13 245.55 109.67 0.5826 16.54 7. SBOS 35.54 39.43 51.69 61.70 73.05 79.99 92.00 110.34 136.96 157.44 184.98 93.01 0.5297 15.56 8. SBOT 41.28 49.58 62.18 68.25 77.93 87.89 97.55 118.23 147.64 172.16 269;05 102.89 0.5205 15.08

ASS 38.31 44.31 53.68 53.51 70.47 80.77 89.03 110.36 141.81 166.57 197.98 95.16 0.5581 16.08

.9. AB 51.21 53:21 58.60 65.18 72.18 85.22 98.88 116.98 141.31 166.91 194.76. 100.40 0.4873 14.04 10. ANB 39.10' 41.76 47.19 56.09 66.36 75.10 101.30 136.90 200.93 219.86 250.75 112.30 0.6929 19.65 11. BOB 73.26 83.38 90.88 96.72 106.42 128.29 142.26 160.80 175.78 245.42 252.31 141.41 0.4395 12.62 12. BOI 58.39 60.84 67.45 79.78 94.40 116.84 128.04 139.19 190.35 225.47 248.23 128.09 0.5212 15.11 13. BOM 30.70 33.23 43.92 50.26 62.16 76.85 91.65 115.91 166.44 193.61 225.56 99.12 0.6850 19.66 14. CB 217.17 53.33 62.54 72.79 84.43 100.31 111.06 129.23 180.08 203.27 236.65 116.44 . 0.5506 15.92 15. CBOI 39.74 40.22 49.40 56.01 63.21 74.55 88.81 107.08 127.12 172.65 188.98 91.62 0.5675 16.24 16. COB 45.21 60.54 89.23 88.52 103.29 142.02 185.49 208.34 245.03 276.93 314.60 159.93 0.5748 17.06 17. DB 37.16 42.80 53.16 61.88 76.27 101.01 22.24 141.58 197.08 213.81 236.21 107.56 0.7172 18.73 18. IB 74.48 69.89 77.11 77.79 77.73 84.03 92.02 103.47 135.93 156.80 178.23 102.50 0.3647 9.83 19. IOB 51.17 55.98 66.20 77.55 81.09 98.76 113.04 127.21 155.75 191.67 222.85 112.84 0.5015 14.51 20. OBOC 57.16 .65.65 82.49 101.94 110.01 136.09 169.68 218.23 263.15 313.83 336.76 168.64 0.5934 17.39 21. P&SB 39.59 45.45 61.93 69.44 74.49 88.73 111.52 126.33 169.44 182.12 194.80 105.80 0.5245 15.43

115

22. PNB 46.95 43.73 50.34 55.85 66.36 76.90 91.05 108.22 144.36 170.23 196.74 95.52 0.5564 15.86 23. SB 34.07 36.85 42.84 48.51 56.30 65.56 81.76 103.70 124.41 169.86 184.53 86.22 0.6162 17.56 24. UCO 44.63 39.84 43.65 48.02 52.17 61.01 70.04 83.24 108.42 155.10 188.61 81.34 0.6107 16.36 25. UBOI 42.02 51.79 68.86 80.64 94.35 107.87 126.66 150.51 186.83 236.92 273.33 129.07 0.5871 17.07 26. UNBOI 39.96 41.98 48.13 51.74 59.97 69.91 84.39 100.16 121.31 147.19 159.95 84.06 0.5078 14.73 27. VB 35.70 43.71 58.29 58.97 65.19 80.92 95.17 113.66 136.24 176.52 212.50 97.90 0.5804 16.61

NB 48.15 50.96 60.09 67.52 76.78 91.90 104.51 126.48 159.93 197.29 221.90 109.59 0.5473 15.76 PSBs 47.84 50.49 58.87 66.86 75.31 89.20 97.06 124.93 159.84 191.37 215.60 107.03 0.5453 15.66

Source:Reserve Bank Of India

116

TABLE 5.7

ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS No. Bank I Period II Period III Period

Percentage Change 1992-95 1996-99 20002003 Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 0.94 0.18 1.55 0.12 2.66 0.07 63.96 71.98 181.98 2. SBBJ 0.70 0.16 1.45 0.16 2.35 0.07 96.38 62.21 218.55 3. SBOH 0.76 0.16 1.52 0.23 2.27 0.07 99.56 49.67 198.68 4. SBOI 0.76 0.21 1.46 0.17 2.41 0.05 92.11 65.30 217.54 5. SBOM 0.73 0.10 1.43 0.13 2.61 0.07 96.79 82.28 258.72 6. SBOP 0.66 0.19 1.34 0.10 2.25 0.07 102.53 68.58 241.41 7. SBOS 0.77 0.22 1.55 0.15 2.11 0.07 102.17 36.34 175.65 8. SBOT 0.71 0.18 1.25 0.06 2.18 0.06 77.36 73.94 208.49 ASS 0.73 0.16 1.42 0.14 2.30 0.06 94.95 62.59 216.97

9. AB 0.72 0.17 1.28 0.13 2.47 0.07 76.50 93.21 241.01 10. ANB 0.74 0.23 1.39 0.15 2.72 0.12 87.44 94.98 265.47 11. BOB 0.91 0.19 1.59 0.16 2.66 0.06 75.00 67.65 193.38 12. BOI 0.86 0.22 1.52 0.13 2.72 0.11 76.36 79.12 215.89 13. BOM 0.76 0.22 1.62 0.14 2.63 0.12 114.10 62.14 247.14 14. CB 0.76 0.18 1.35 0.17 2.46 0.05 77.97 82.92 225.55 15. CBOI 0.76 0.19 1.47 0.14 2.76 0.11 93.86 87.10 262.72 16. COB 0.77 0.25 1.39 0.15 2.10 0.12 81.74 50.96 174.35 17. DB 0.87 0.22 1.61 0.15 3.48 0.13 85.06 116.36 300.38 18. IB 0.78 0.10 1.45 0.11 2.58 0.02 85.47 78.11 230.34 19. IOB 0.79 0.11 1.50 0.17 2.74 0.07 91.10 82.26 248.31 20. OBOC 0.73 0.19 1.31 0.14 2.34 0.10 80.28 78.63 222.02

117

21. P&SB 0.82 0.10 1.46 0.07 3.02 0.06 79.18 106.15 269.39 22. PNB 0.70 0.18 1.38 0.16 2.42 0.05 97.14 75.60 246.19 23. SB 0.82 0.22 1.45 0.12 3.13 0.08 76.83 116.09 282.11 24. UCO 0.78 0.11 1.37 0.09 2.52 0.14 76.07 83.50 223.08 25. UBOI 0.75 0.17 1.48 0.12 2.68 0.01 96.89 81.49 257.33 26. UNBOI 0.79 0.16 1.42 0.10 2.86 0.25 79.41 100.94 260.50 27. VB 0.79 0.17 1.44 0.07 2.90 0.23 81.93 100.92 265.55

NB 0.78 0.18 1.44 0.14 2.65 0.04 84.26 83.60 238.30 PSBs 0.82 0.18 1.46 0.12 2.62 0.04 79.18 79.04 220.82

Source:Reserve Bank Of India

118

5.9.5. ESTABLISHMENT EXPENSES PER EMPLOYEE (PSBS)

Establishment expenses (staff costs) include expenses made on salaries,

allowances, provident fund, bonus, etc. The Narasimham Committee attributed to

two factors, on income side and on expenditure side, for the poor health of banks.

Due to improper recognition of income and high costs, several banks suffered

losses. The expenses per employee increased at periodical intervals due to wage

and salary hikes, promotions, higher contribution to provident fund, etc. If the

expense per employee is high, lower will be the profit per employee.

The average expense per employee of PSBs as a group increased from Rs.

0.71 lac in 1992-93 to Rs. 2.71 lac -an increase of 3.8 times. Similarly, the average

establishment expense of nationalized banks put together increased from Rs. 0.68

lac to Rs. 2.76 lac during the period under study-an increase of four times.

The average establishment expenses of SBI increased from Rs. 0.83 lac to

Rs. 2.72 lac per annum-an increase of 3.3 times. The average establishment

expenses of Associate Banks increased from Rs. 0.63 lac to Rs. 2.33 lac. during the

study period. Inter-group analysis revealed that SBI, on an average, incurred higher

establishment expenses than the nationalized banks and associate banks. For

example, the SBI, on an average, spent Rs. 1.71 lac per employee per annum while

nationalized and associate banks spent Rs. 1.61 lac and Rs. 1.48 lac per annum

respectively. It is further observed that the rate of growth in establishment expenses

per employee of nationalized bank (13.68 per cent) is higher than that of SBI (11.70

per cent) and Associate Banks (12.84 per cent).

A bank-wise analysis reveals that establishment expenses per employee, on

an average, of SBOT (Rs. 1.38 lac) is less than of SBOP (Rs. 1.40 lac); COB (Rs.

l.4l lac, Whereas P&SB (Rs. 1.75 lac), SB (Rs. 1.75 lac) and DB (Rs. 1.92 lac) are at

the top. There did not exist any significant inter-bank variations with respect to

establishment expresses per employee.

119

5.9.6. PROFIT PER EMPLOYEE (PSBS)

The data on average profit per employee in all the years of study period are

presented in Table 5.8. During the entire period, the SBI and Associate Banks

(barring SBOS in 1995-96) made profits. The profit per employee of SBI Rs. 0.09

lac in 1992-93 increased to Rs. 1.49 lac in 2002-03. The average profit per

employee during the period is a meager amount of Rs. 0.63 lac. Per employee

profit of Associate Banks which was Rs. 0.09 lac in 1992-93 increased to Rs. 1.90

lac in 2002-03. Nationalized banks get somewhat a different picture. The

nationalized banks exceptthe three, sustained losses per employee in 1992-93.

The average loss per employee of nationalized banks in 1992-93 was Rs. (-) 0.63

lac. The situation repeated in the next year as well in which the average loss per

employee was Rs 0.81 lac. This has resulted in negative average profitability of

PSBs in the first two years of the period. It has happened despite the fact that the

profitability per employee of SBI and Associate Banks was positive. The PSBs as a

whole started making Profits per employee year after year from 1996-97. The

average profit per employee of PSBs for the entire period was Rs. 0.40 lacs. In

addition to the two banks, which are declared as weak banks by Verma Committee

(IB, UCO), three more banks (BOM, CBOI, PSB) have also showed negative profits

(mean) per employee for the entire period.

The growth rate of profitability per employee of nationalized banks and all

PSBs were 70.16 per cent and 42.99 per cent respectively. The growth rate of

Profitability per employee of six out of 19 nationalized banks was also negative. In

the first three to four years of the early period of reforms, large number of banks

sustained losses due to write off of accumulated bad and doubtful debts and higher

provisioning for NPAs. There existed exceptionally high inter-bank variations with

respect to profit per employee.

120

TABLE 5.8 PROFIT PER EMPLOYEE OF PSBS : 1992-2003

(Rs. In Lacs) No Name 1992-93 1993-94 1994.95 1995.96 1996-97 1997-98 1998-99 19992000 200001 200102 200203 19922003

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 0.09 0.12 0.31 0.36 0.57 0.78 0.43 0.88 0.75 1.16 1.49 0.63 0.6892 19.02 2. SBBJ 0.08 0.05 0.05 0.17 0.27 0.60 0.61 0.81 0.78 1.24 1.54 0.56 0.8914 26.61 3. SBOH 0.12 0.17 0.32 0.36 0.37 0.68 0.76 0.87 1.13 1.68 2.25 0.79 0.8448 22.73 4. SBOI 0.05 0.06 0.13 0.18 0.25 OAI OA5 0.65 0.98' 1.91 3.06 0.74 1.2746 32.47 5. SBOM 0.04 0.02 0.03 0.24 0.36 OA5 0.30 OA2 0.26 0.67 1.19 0.36 0.9379 22.11 6. SBOP 0.23 0.15 0.21 0.38 OA2 1.09 0.77 0.10 1.35 1.97 2.76 0.86 1.00BI 24.50 7. SBOS 0.06 0.07 0.17 2.86 0.89 0.98 0.31 1.09 0.19 1.10 1.26 0.30 3.8651 53.99

8. SBOT 0.06 0.07 0.17 0.20 0.31 OA8 0.32 0.51 0.80 0.10 1.42 0.40 1.0035 19.82

ASS 0.09 0.10 0.16 0.05 0.39 0.67 0.53 0.76 0.83 1.36 1.90 0.61 0.9689 26.11 9 AB -OA7 1.61 .0.33 0.03 0.28 0.57 0.60 0.31 0.19 OAO 0.85 0.07 9.1374 214.63

10. ANB .0.90 .0.98 0.27 0.07 0.24 0.50 0.61 0.83 0.95 1.58 3.10 0.52 2.2090 63.35 11. BOB 0.02 0.15 0.39 OA4 0.61 0.91 0.91 1.07 0.59 IAO 1.92 0.76 0.7290 19.62 12. BOI 0.06 2.05 0.09 0.51 0.68 0.70 0.38 0.33 0.57 1.16 1.97 0.39 2.5137 56.54 13. BOM 1.06 1.57 .2.34 0.08 0.28 0.34 0.32 0.56 0.32 1.03 1.58 0.04 7.5996 .69348 14. CB 0.05 0.23 0.38 OA7 0.27 0.37 0.41 OA3 0.59 1.55 2.14' 0'.63 1.0095 23.95 15. CBOI 0.74 1.30 1.63 -IA5 0.30 0.35 0.30 0.31 0.10 OAI 0.78 0.23 3.7268 .89.88 16. COB 0.04 0.30 079 1.14 1.33 1.74 1.89 2.19 2A5 2.85 3.88 1.69 0.6719 20.11 17. DB 0.55 0.42 0.18 0.33 O.7 0.70 0.74 OA4 2.43 0.10 1.0B 0.06 1.6106 51.56 18. IB 0.03 -IA6 0.05 4.91 -IA3 1.12 2.91 1.61 1.97 0.15 0.86 1.30 1 .2529 6.15 19. IOB' 0.26 1.22 0.03 0.01 0.37 0.40 0.19 0.14 OA5 0.94 1.71 0.25 2.8815 71.74 20. OBOC 0.18 0.27 0.92 1.32 1.33 1:47 1.59 1.94 1.49 2.36 3.38 1.48 0.6101 16.92 21. P&SB 1.56 1.40 .0.06 1.06 0.16 0.53 0.46 0.50 0.13 0.23 0.04 0.18 4.1923 92.12

121

22. PNB 0.06 0.10 0.12 0.13 0.35 0.72 0.57 0.63 0.80 0.97 1.43 0.51 0.9101 25.44 23. SB 1.74. 0.78 0.24 0.05 0.18 0.23 0.40 0.62 0.77 0.98 1.35 0.17 5.1994 145.05 24. UCO 1.24. 1.57 .0.24 0.69 0.52 0.29 0.21 0.12 0.11 0.65 0.83 0.28 2.6075 75.74 25. UBOI 0.03 0.15 0.32 0.24 0.70 0.81 0.52 0.33 0.55 1.22 2.15 0.64 0.9457 21.94 26. UNBOI 1.23 2.72 0.87 1.04 0.51 0.05 0.07 0.15 0.10 0.66 1.72 0.33 3.4981 -94.20 27. VB 0.71 0.03 0.23 0.17 0.13 0.16 0.21 0.37 0.53 1.11 1.68 0.32 1.9456 52.38

NB 0-63 0.81 005 0.20 0.25 0.45 0.32 0.44 0.41 1.03 1.65 0.27 2.5778 70.61 PSBs 0.38 0.49 0.12 0.04 0.35 0.56 0.37 0.59 0.54 1.10 1.63 0.40 1.5506 42.99

Source:Reserve Bank Of India

122

TABLE 5.9 RETURN ON ASSETS OF PSBS (1992-2003)

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 2000-2003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 0.34 0.58 0.74 0.38 0.68 0.24 0.40 -0.06 0.34 2. SBBJ 0.21 0.38 0.78 0.35 0.98 0.20 0.58 0.20 0.78 3. SBOH 0.44 0.32 0.73 0.24 1.00 0.17 0.29 0.27 0.56 4. SBOI 0.23 0.33 0.56 0.17 1.27 0.39 0.33 0.71 1.04 5. SBOM 0.09 0.45 0.69 0.27 0.64 0.58 0.60 -0.05 0.55 6. SBOP 0.44 0.13 0.99 0.40 1.32 0.15 0.55 0,33 088 7. S80S 0.25 0.41 0.96 0.56 0.63 0.65 0.72 -0.33 0.38 8. S80T 0.36 0.55 0.53 0.20 0.77 0.16 0.16 0.24 0.40 ASS 0.29 0.17 0.75 0.27 0.97 0.25 0.46 0.22 0.68

9. AB -1.82 -0.88 0.68 0.28 0.36 0.57 2.50 -0.31 2.18 10. ANB -2.06 -0.59 065 0.31 1.06 0.49 2.71 0.41 3.13 11. BOB 0.26 0.96 0.78 0.17 0.74 0.40 0.52 -0.04 0.48 12. 801 -1.71 -1.22 0..86 0.12 0.75 0.46 2.57 -0.11 2.46 13. BOM -3.24 -0.73 0.47 0.12 0.60 '0.55 3.71 0.13 3.84 14. CB 0.45 0.68 0.42 0.07 0.90 0.47 -0.02 0.48 0.45 15. CBOI -2.15 -0.79 0.50 0.17 032 0.69 2.65 -0.18 2.47 16. COB 0.56 0.78 1.36 0.09 1.41 0.11 0.81 0.04 0.85

123

17. DB -0.81 -1.35 0.76 0.08 -0.29 -3.74 1.58 -1.05 0.53 18. IB -0.84 -1.86 -2.32 -0.44 -0.13 -6.21 -1.48 2.19 0.71 . 19. IOB -3.05 -1.11 0.42 0.42 0.68 0.46 3.48 0.26 3.73 20. OBOC 0.73 0.67 1.34 0.11 1.03 0.29 0.60 -0.31 0.29 21. P&SB -2.83 -0.86 0.49 0.46 0.10 0.70 3.32 -0.39 2.93 22. PNB 0.25 0.27 0.62 0.88 0.83 0.16 0.37 0.21 0.58 23. SB -3.14 -0.95 0.47 0.30 0.87 0.13 3.61 0.40 4.01 24. UCO -2.78 -0.70 -0.61 -0.60 0.41 0.62 2.17 1.02 3.19 25. UBOI 0.35 0.69 1.77 0.84 0.73 0.47 1.42 -1.04 0.38 26. UNBOI -4.31 -0.63 -0.24 -2.27 0.62 0.95 4.07 0.86 4.93 27. VB -0.65 -2.46 0.24 0.06 0.78 0.34 089 0.54 1.43

NB -1.13 -0.94 0.44 0.28 0.67 0.49 1.57 0.23 1.80 PSBs -0.60 -1.22 0.55 0.30 0.70 0.39 1.15 0.15 1.30

Source:Reserve Bank Of India.

124

PROFITABILITY INDICATORS (PSBS)

The analysis makes use of indicators relating to income side to measure the

profitability of PSBs. The indicators used in the analysis are 1. Return on assets

(ROA), 2. Return on equity (ROE), 3. Net-interest Margin (spread) as a percentage

to Working Fund (NIM), 4. Non-interest Income as a percentage to total income (NIl),

and 5 credit-deposit Ratio (COR). The behavior of these parameters during the study

period is analyzed in this regard.

5.9.7 RETURN ON ASSETS (PSBS)

ROA is defined as net profit divided by average total assets. This ratio

measures a banks profit per currency unit of assets. This is the main indicator of

profitability used in international comparisons and it is one among the guidelines of

RBI for balance sheet analysis of banks. The return on assets of different banks

and different categories of public sector banks is shown in the Table

5.9.(percentage change).

It may be noted that immediately after introduction of reforms, the PSBs have

registered negative returns in the years 1992-93, 1993-94 and 1995-96. It is so

because the practice of booking income on accrual basis came to end with the

introduction of reform measures. However, since 1996-97 the situation has

changed for the better. In the year 1997-98 the return on assets of PSBs said to

0.73 per cent but in the following years, because of net losses registered by some

banks, the ROA fell and in 1999-2000, it stood at 0.57 per cent. The last two years

saw a significant improvement of ROA of PSBs. As per the data provided by the

banks for international settlement (BIS 1999), the ROA of PSBs doesn't compare

unfavorable with banks in certain other countries. There were fluctuations in the

year-to-year percentages but on the last two years it picked up to 0.7 per cent and

0.96 per cent respectively. The average return for the entire period is 0.23 per cent,

which compares very unfavorably with market of interest. The average returns of

the 19 nationalized banks exhibit the same type of behavior as that of PSBs as a

whole. SBI and the Associate banks achieved positive rate of return on assets

throughout the period, when the average return on assets of SBI is 0.60 per cent

125

and that of associate banks is 0.62 per cent.

Similarly, an Inter-banks growth rate reveals that Associate Banks (16.20 per

cent) growth is higher when compared to the growth rates of SBI (8.33 per cent)

and nationalized banks (0.01 per cent). COB (1.69 per cent) followed by OBOC

(1.48 per cent); SBOP (0.86 per cent) on an average recorded the highest ROA

while, IB (1.30 per cent), UNBOI (0.33 per cent) and UCO (0.28 per cent) on an

average, posting negative ROA. When a comparison of growth rates of different

banks is made, BOI (394.87 per cent); BOB (71.96 per cent) and SBOM (19.89 per

cent) are in the top of the PSBs list while ANB (2458.82 per cent), DB (392.86 per

cent) and VB (156.28 percent) were in the bottom. There existed large variations

among :the PSBs with regard to this indicator throughout the study period.

5.9.8. RETURN ON EQUITY (PSBS)

ROE is an indicator of the profitability of banks from the shareholders point 01

view. It is a measure of accounting profits of book equity capital. The price of

shares largely depends upon ROE, in the absence of speculation. The ability of the

banks to attract fresh capital in the market depends upon this indicator. Data

relating to ROE for the study period are presented in the Table 5.10. The ROE of

SBI and Associate banks has been on the positive side throughout the period while

that of several nationalized banks were on the negative side during the first three

years. The ROE of SBI, which was 106 per cent and 58 per cent in 1992-93 and

1993-94 respectively, shoot up throughout the remaining period (except in 1998-

99) and reached 590.30 per cent. The mean value of ROE of SBI was 276.71 per

cent while that of nationalized banks was only 2.61 per cent. The ROE of SBI

group is remarkably better than that of nationalized banks. The data on ROE

indicates that the profit earnings of nationalized banks have been poor during the~

study period, The table further reveals that growth rates of different bank groups

show the highest growth rate of nationalized banks (402.40 per cent) when

compared with associate banks (15.47 per cent) and SBI (16.00 per cent).

126

TABLE 5. 10 RETURN ON EQUITY OF PSBS : 1992-2003

(Rs. in Lacs) No Name 1992-93 1993-94 1994.95 1995.96 1996-97 1997-98 1998-99 19992000 200001 200102 200203 1992-2003

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 106.00 58.02 150.84 175.53 256.46 353.80 195.44 390.11 304.94 462.36 590.30 276.71 0.5855 16.00 2. SBBJ 52.38 33.33 38.10 72.22 111.11 180.00 184.00 240.00 210.00 330.00 406.00 168.83 0.7279 20.88 3. SBOH 100.00 141.18 258.82 294.12 305.88 570.59 658.82 752.94 882.35 13241 1770.59 642.25 0.8161 23.00 4. SBOI 33.33 44.44 100.00 66.67 94.44 155.56 172.22 250.00 355.56 694.44 1111.11 279.80 1.1987 291190 5. SBOM 33.33 16.67 25.00 72.22 111.11 141.67 94.44 133.33 72.22 183.33 322.22 109.60 0.8000 19.56 6. SBOP 120.00 80.00 116.00 208.00 236.00 572.00 404.00 524.00 644.00 932.0 1288.00 465.82 0.8185 22.70 7. SBOS -50:00 60.00 140.00 -73.25 22.61 24.84 7.96 28.34 4.46 26.11 29.62 29.15 1.7249 14.20 8. SBOT 40.00 45.00 105.00 74.29 114.29 126.00 86.00 132.00 194.00 242.00 342.00 136.42 0.6654 17.67 ASS 60.18 71.68 115.93 -7.90 66.74 107.84 85.88 123.14 121.18 199.61 275.88 110.92 0.6757 15.47

9. AB -61.27 139.92 12.28 0.77 25.91 52.23 54.66 27.94 16.19 32.39 47.84 . 4.04 14.4458 315.79 10. ANB 153.26 -66.94 10.33 2.58 6.09 12.69 25.86 34.77 26.89 44.89 100.75.. 2.18 30.0632 797.76 11. BOB 2.42 8.93 23.75 35.36 109.06 156.66 143.20 171.09 93.54 185.71 262.93 108.42 0.7781 21.17 12. BOI -70.58 -98.64 2.56 47.42 121.21 57.21 31.50 27.12 39.50 103.48 174.39 39.56 1.9923 46.28 13. BOM .106.49 -88.66 -6.13 1.74 6.28 7.48 15.71 27.19 13.60 43.81 67.07 1.67 30.9806 824.42 14.. CB 12.50 20.37 34.58 52.16 29.70 35.12 38.93 40.83 49.31 128.20 248.54 62.75 1.0939 23.79 15. CBOI 209.29 .105.79 6.44 .5.67 8.37 9.70 8.09 8.37 2.55 14.50 2722 21.41 3.3445 71.32 16. COB 5.97 24.11 65.18 93.75 122.55 139.17 160.00 193.33 218.33 215.38 290.91 138.97 0.6325 18.88 17. DB -61.22 25.27 10.60 35.37 35.27 50.72 53.14 30.43 128.50 5.31 55.07 5.54 10.3008 48.38 18. IB 3.45 .92.43 2.14 - 204.28 .59.48 12.56 31.07 .17.05 10.94 0.87 4.13 37.93 1.6581 17.74 19. IOB 203.51 32.65 0.75 0.22 31.44 33.83 16.47 11.98 26.07 51.69 93.48 2.71 27.9177 640.96 20. OBOC 26.92 25.00 59.07 89.64 93.26 108.81 119.17 144.56 105.18 166.32 236.79 106.79 0. 4.265 16.08 21. P&SB .94.20 .47.96 1.45 23.74 2.83 921 23.05 25.10 5.35 9.47 1.65 8.25 157 93.51 22. PNB 20.21 '20.60 23.63 26.37 67.81 236.14 175.47 192.45 218.87 265.09 397.17 144.64 0.9173 25.10

127

23. SB 421.38 35.64 -8.23 1.55 5.19 6.43 41.21 45.76 49.79 53.18 72.88 17.20 8.0145 165.13 24. UCO -88.80 .52.75 -5.42 1427 1026 4.65 .3.00 1.63 1.46 7.28 34.56 1220 2.6748 68.27 25. UBOI 7.97 '14.79 31.36 23.67 63.91 7396 47.34 29.88 45.86 92.90 12022 50.17 0.6909 16.54 26. UNBOI -77.50 106.92 17.64 17.04 -6.66 058 0.83 1.71 1.05 6.57 16.84 18.02 2.1387 51.84 27. VB .77.17 2.08 12.60 -9.84 3.42 4.14 5.40 20.46 19.78 3922 1 04.79 11.35 3.7563 91.44

NB -85.36 48.65 1.91 -8.84 11.23 17.07 13.37 18.46 15.51 34.72 59.24 2.61 15.1278 402.40 PSBs -73.19 42.39 7.60 2.63 22.46 30.98 22.59 35.94 29.68 55.29 86.73 15.73 2.7869 77.04

Source:Reserve Bank Of India

128

The average NIM for all PSBs was 2.80 per cent for nationalized banks, it was

2.72 per cent, which is higher than 2.02 per cent in 1992-93. The average for SBI

was 2.89 per cent while that of associate banks was on the higher side at 3.29 per

cent. One peculiar feature is that in the years 1995-96 and 1996-97 for most of the

banks, the Net-Interest margin is more than three per cent. The general conclusion is

the NIM had been on the lower side during the first two years for PSBs.

Net-interest margin as a percentage to working funds, on an average, was

more in Associate Banks (3.29 per cent) when compared to SBI (2.89 per cent) and

nationalized banks (2.72 per cent).

Bank group-wise analysis, on the basis of growth rate revealed that SBI (1.73

per cent) have registered lower negative growth rate with regard to this indicator

when compared to nationalized (2.21 per cent) and Associate Banks (0.30 per cent).

An insight reveals that SBOP (3.64 per cent) followed by SBOI (3.49 per cent)

and SBOM (3.47 per cent) on an average, registered the l1ighest NIM when

compared to IB (1.41 per cent); UNBOI (1.83 per cent) and UCO (1.96 per cent),

which registered hover margins.

The Inter-bank analysis on the basis of growth rates revealed that UNBOI

(13.14 per cent), UCO (7.65 per cent) and AB (6.13 per cent) secured top ranks

whereas CB (2.36 per cent), SBOS (1.79 per cent) and SBIOI (1.73 per cent) got

lower ranks. There exist hardly any significant variations in CV with respect to this

indicator.

5.9.9. NON INTEREST INCOME AS PERCENTAGE OF TOTAL INCOME (PSBS)

Total income of banks comprises of interest income and non-interest income.

Non-interest income consists of:

(i) Commission, exchange and Brokerage,

(ii) Profit on 'sale of investments (net),

(iii) Profit on revaluation of investments,

(iv) Profit/loss on sale of land, buildings and other asserts,

(v) Profit on exchange transactions (net),

(vi) Miscellaneous however, forms 15 per cent of the total income of the

banks.With the deregulation of interest rates, banks are finding it tough

to earn steady income from interest sources. Thus, this made banks in

India to diversify their activities.

129

TABLE 5.11 NON-INTEREST INCOME AS A PERCENTAGE TO TOTAL INCOME OF PSBS : 1992-2003

(Rs. in Lacs)

No Name 1992-93 1993-94 1994.951995.96 1996-

97 1997-98 1998-99 19992000 200001 200102 200203 1992-2003

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 13.08 14.58 15.96 17.54 15.02 15.08 14.67 1385 12.93 12.28 15.59 14.60 0.1037 0.89 2. SBBJ 13.72 1531 1695 15.05 14.83 16.05 14.55 16.47 15.88 18.14 19.12 16.01 0.0998 2.12 3. SBOH 13.60 14.82 16.32 15.28 13.27 14.13 13.42 15.27 14.54 16.00 18.27 14.99 0.0990 1.40 4. SBOI 12.85. 13.81 1634 13.44 12.21 15.13 15.24 1931 18.64 2364 23.45 16.73 0.2413 6.22 5. SBOM 12.35 16.35 1560 15.26 12.70 13.61 14.69 17.01 15.75 19.37 22.09 15.89 0.1801 3.84 6. SBOP 7.34 8.4 6.48 12.00 9.22 9.44 11.48 12.88 11.24 14.95 16.41 10.90 02833 7.43 7. SBOS 14.81 14.42 15.25 17.26 14.15 15065 13.17 14.06 12.75 17.07 19.21 15.25 0.1266 1.05 8. SBOT 11.33 15.04 14.33 13.22 12.02 13.16 13.05 14.40 1287 13.67 15.92 13.55 0.0974 1.11 ASS 1203 13.85 14.19 14.33 12.51 1.64 13.50 15.36 14.31 17.09 18.76 14.51 0.1343 310

9. AB 10.80 8.34 11.24 11.99 12.40 13.56 11.59 12.22 10.34 14.48 16.93 12.17 0.1857 3.86 10. ANB 9.47 11.29 15.36 10.37 11.11 11.28 12.25 13.45 9.84 1303 21.58 12.64 0.2710 4.19 11. BOB 8.46 1665 12.84 11.67 10.87 11.52 10.70 11.65 10.93 14.29 17.15 12.43 0.2116 209 12. BOI 9.98 12.03 11.73 12.71 12.24 12.84 11.12 14.23 13.95 16.44 21.69 13.54 0.2363 5.69 13. BOM 8.72 8.23 9.54 9.43 8.53 8.59 870 11.20 11.53 13.34 14.74 10.23 0.2140 538 14.. CB 11.32 13.00 13.57 13.68 11.76 13.72 12.46 14.70 14.04 18.32 18.51 14.10 0.1668 3.97 15. CBOI 8:58 9.46 11.75 11.15 10.75 10.74 9.61 10.44 9.91 11.42 9.85 10.33 00917 0.58 16. COB 12.35 17.32 15.97 14.15 11.88 12.30 13.18 14.45 13.93 16.41 20.20 14.74 0.1718 1.97 17. DB 8.96 10.61 12.01 10.74 9.80 13.15 9.30 12.53 10.39 17.12 19.78 12.22 0.2779 5.81 18. IB 8.72 10.82 12.85 11.30 12.19 12.13 10.91 12.65 12.83 17.95 17.17 12.68 0.2126 5.20 19. IOB 16.98 20.09 11.53 7.90 9.34 9.45 9.84 9.60 9.77 14.34 12.98 11.98 0.3152 3.42 20. OBOC 7-71. 8.51 9.87 8.95 7.70 8.67 8.50 8.25 8.85 13.48 14.10 9.51 0.2317 4.63 21. P&SB 9.23 10.89 10.55 10.12 11.12 12,02 10.19 12.06 11.85 15.28 19.30 12.06 0.2364 5.64 22. PNB 7.32 13.21 11.91 9.05 11.37 13.75 10.92 12.38 11.72 12.82 14.31 11.71 0.1750 2.99

130

23. SB 10.11 8.46 9.79 9.43 8.93 11.51 11.58 11.15 9.16 8.74 14.69 10.32 0.1764 2.52 24. UCO 12.96 7.76 11.51 10.73 8.89 11.75 9.95 11.19 11.57 18.66 17.90 12.08 0.2803 5.30 25. UBOI 9.86 9.56 9.17 8.66 7.95 7.66 8.40 8.27 7.70 11.06 16.08 9.49 0.2548 3.06 26. UNBOI 6.36 8.01 10.71 10.66 8.89 9.63 7.33 7.63 7.86 16.22 16.80 10.01 0.3486 6.29 27. VB 14.75 12.96 14.74 8.80 7.95 9.15 9.83 8.90 10.33 10.93 17.15 11.41 0.2654 0.61

NB 9.88 12.13 11.94 10.85 10.55 11.61 10.53 11.71 11.15 14.50 16.68 11.96 0.1656 3.26 PSBs 11.04 12.98 13.30 13.13 12.01 12.75 11.96 12.65 11.95 14.10 16.56 12.95 0.1123 1.93

Source:Reserve Bank Of India

131

The components of interest income and non-interest income of SCBs show

that interest income on advances and discounts has been falling during 1997-2003.

Interest income from investments has been increasing. This goes to show that

banks are preferring safe government securities rather than advancing loans where

lower risks are involved. Their investment in government securities far exceeds the

SLR of 25 per cent. Non-interest income is still lagging behind interest income of all

groups of banks. In the case of SBI and associates and nationalized banks, the per

cent of non-interest income is 86 and 97 per cent respectively. The importance of

non-interest income is that it could exert a stabilizing influence on banks results by

off setting the fluctuations in the interest income. The Non-interest income as a

percentage to total income of PSBs for different years in the study period is

presented in the Table. 5.11.

Non-interest income as a percentage of total income of PSBs increased from

11.04 per cent in 1992-93 to 13.13 per cent by 1995-96 and then started declining

slowly. But in the last two years it picked up to 14.1 and 16.56 per cent respectively

giving an average of 12.95 per cent for the entire period. Nationalized banks are just

one step behind the PSBs, their average being, 11.96 per cent comparatively, SBI

is a better performer followed' by associate banks. Till 1995-96, there has been an

increase in the percentage and it started declining till 2001-02, perhaps because of

tough competition posed by new private sector banks. The Associate banks

improved their percentage in the last three years to 14.31 per cent and 17.09 per

cent and 18.76 per cent respectively. The average per cent of non-interest income

to total income of SBI was 14.6 and that of associate banks was 14.51 per cent,

which is higher than that of nationalized banks. Inter-bank group analysis, on the

basis of growth rates reveals that nationalized banks (3.26 per cent) have registered

higher growth compared to nationalized banks (3.10 per cent) and SBI even

registered negative growth (0.89 per cent).

Bank-wise analysis showed that the first three ranks are occupied by SBOI

(16.73 per cent); SBBJ (16.01 per cent) and SBOM (15.89 per cent) with regard to

this indicator while UBOI (9.49 per cent), OBOC (9.51 per cent) and UNBOI (10.01

per cent) are in the bottom of the list of PSBs.

132

When we consider the growth rate of different banks SBOP (7.43 per cent),

SBOI (6.22 per cent) and UNBOI (6.29 per cent) were at the top while IOB (3.42 per

cent), SBI (0.89 per cent) and VB (0.61 per cent were at the bottom of the list.

5.9.10. CREDIT - DEPOSIT RATIOS (PSBS)

This ratio indicates the deployment of bank resources by way of loans and

advances. The ratio of 60 per cent is considered as a norm for banks. The CD ratios

for all PSBs during the reform period (1992-93 to 200203) are shown in theTable 5.12.

From the data it is evident that CD ratios of SBI and associate banks are

higher than those of Nationalised banks in all the years. Consequently while the

average CD ratio of nationalized banks was 48.26 per cent, the average CD ratio of

SB! was 54.06 and that of associate banks 54.83 per cent. For most of the years,

the CD ratio of nationalized banks is less than 60. Even in the case of SBI the CD

ratio exceeded 60 per cent only in two years, i.e., 1992-93, 1995-96.

For PSBs as a whole, the CD ratio touched an all time low figure of 46.50 per

cent in the year 1998-99. The rapid increase in investments and deposit ratio since

1992 provides the reason for low credit-deposit ratio of PSBs. These banks are

making larger investments in zero risk-weighted assets than statutorily

required.Inter-Bank analysis, on an average, with respect to this indicator reveals

that SBOI (56.75 per cent), SBOS (56.56 per cent) and SBOT (56.36 per cent)

occupied top three ranks with higher CD ratio while BOM (41.87 per cent), VB (41.11

per cent) UNBOI (33.28 per cent) were in the bottom. . COB (4.63 per cent) followed

by SB (2.93 per cent) and .ANB (1.59 per cent) have registered higher growth rates

as far as CD ratio is concerned, whereas IS (4.41 per cent), SB! (3.85 per cent) and

UNBOI (2.88 per cent) posted lower growth rates.

The inter-bank variations (CV) with regard to this indicator did not exhibit huge

variations.

133

TABLE 5.12 CREDIT-DEPOSIT RATIO OF PSBS : 1992-2003

(Rs. in Lacs)

No Name 1992-93 1993-94 1994.951995.96 1996-

97 1997-98 1998-99 19992000 200001 200102 200203 19922003

Mean CV GR (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

1. SBI 71.92 54.31 57.01 6206 56.22 56.63 48.72 49.84 46.78 44.65 46.52 54.06 0.1489 3.85 2. SBBJ 58.49 51.78 52.37 52.52 5560 56.10 49.62 48.50 50.05 50.86 51.18 52.46 0.0587 1.07 3. SBOH 57.96 49.33 59.36 63.63 55.83 53.54 SO 2.3 46.54 47.76 46.40 46.91 52.87 0.1056 2.23 4. SBOI 61.86 58.01 60.79 59.65 57.45 56.45 52.63 55.77 51.17 54.17 56.23 56.75 0.0582 1.36 5. SBOM 58.91 51.34 54.70 53.66 55.12 55.19 53.56 56.16 56.34 57.65 58.37 55.55 0.0406 0.50 6. SBOP 60.84 49.11 52.34 53.21 52.39 53.06 54.41 56.71 59.04 62.23 60.13 55.77 0.0764 1.27 7. SBOS 62.56 53.45 58.54 57.68 56.26 60.05 56.94 55.36 53.88 54.07 51.36 56.56 0.0581 1.18 8. SBOT 59.10 56.28 65.27 61.75 56.61. 53.57 49.11 50.39 55.28 55.24 57.59 56.36 0.0869 1.17 ASS 59.60 52.10 57.50 57.56 55.57 54.86 51.68 52.38 53.11 54.38 54.20 54.83 0.0460 0.75

9. AB 51.43 44.01 45.90 47.45 42.79 42.27 44.46 47.73 47.66 48.50 49.26 46.50 0.0616 0.30 10. ANB 45.54 39.11 45.37 43.24 41.00 41.62 43.34 38.66 40.58 52.34 54.66 44.13 0.1171 1.59 11. BOB 56.17 54.73 56.56 56.44 51.39 50.61 47.28 47.57 SO.71 54.47 53.26 52.65 0.0642 0.95 12. BOI 59.16 50.99 49.87 56.66 57.35 55.96 52.67 55.10 62.26 64.16 66.14 57.32 0.0915 1.85 13. BOM 47.87 40.32 43.88 45.09 42.24 39.64 37.17 39.17 39.19 43.15 42.88 41.87 0.0744 0.98 14.. CB 48.84 41.76 48.40 49.90 45.84 44.22 46.55 49.06 47.12 51.74 56.14 48.14 0.0795 1.35 15. CBOI 49.26 37.53 44.24 45.07 38.13 40.49 41.76 44.06 45.36 45.16 45.26 43.30 0.0806 0.32 16. COB 43.24 34.56 33.66 42.59 45.18 46.01 49.88 54.46 52.33 58.06 55.37 46.85 0.1728 4.63 17. DB 47.97 43.83 49.68 52.52 51.44 50.89 54.23 53.57 48.05 48.99 51.16 50.21 0.0590 0.66 18. IB 67A5 56.86 61.81 59.13 47.91 47.08 43.85 42.92 43.49 45.38 45.44 51.03 0.1695 4.41 19. IOB 56.53 49.42 52.24 51.44 45.42 44.84 46.17 47.59 47.77 47.67 47.54 48.78 0.0705 1.35 20. OBOC 51.89 49.00 52.88 53.63 48.60 48.39 45.87 42.21 44.88 49.70 52.59 49.06 0.0739 0.79

134

21. P&SB 45.78 42.15 46.20 47.47 43.75 41.87 43.17 45.14 43.52 44.68 44.56 44.39 0.0386 0.18 22. PNB 54.36 45.00 47.01 46.75 45.66 45.61 46.71 47.54 49.96 53.60 53.06 48.66 0.0715 0.74 23. SB 47.68 39.77 37.54 42.44 39.02 41.39 46.76 51.60 52.27 52.14 53.18 45.80 0.1303 2.93 24. UCO 58.12 49.23 47.21 43.54 38.87 38.79 38.29 41.55 46.83 47.69 50.80 45.54 0.1338 0.97 25. UBOI 48.18 43.74 46.29 48.52 45.83 44.57 38.80 48.25 50.18 53.74 57.02 47.74 0.1028 1.68 26. UNBOI 47.51 39.37 35.00 32.44 29.26 28.01 26.48 27.18 31.06 34.79 34.96 33.28 0.1854 2.8 27. VB 48.53 42.51 40.14 40.81 36.26 39.25 38.88 42.78 45.28 42.21 35.58 41.11 0.0917 0.97

NB 53.34 45.77 48.00 49.28 45.57 45.33 44.95 46.74 48.34 51.17 52.32 48.26 0.0612 0.23 PSBs 58.47 48.41 50.95 53.10 49.02 48.88 46.50 48.02 48.28 49.62 . 50.89 50.19 0.0651 0.24

Source: RBI bulletin

135

5.10. PERIOD-WISE EVALUATION OF PSBs

The study period of first 11 years from 1992-93 to 2002-03 is divided into

three sub-periods of three years each with a time lag of one year between second

and third sub-periods. The three sub-periods are: (i) March end 1992 to March end

1995, (ii) March end 1996 to March end 1999, and (iii) March end 2000 to March end

2003. There after the study of second part 0f 8 years from 2003-04 to 2010-11 has

been done. .

This division into three sub-periods is necessitated for the following reasons.

The implementation of reforms started in the year 1992-93. The first period (1992-

95) is the most difficult period of response and adjustment for banks to reformat

measures. The new guidelines relating to prudential norms of income recognition,

asset classification and capital adequacy had to be implemented by banks afresh.

The impact of these measures was assumed to be felt during the second three year

period (1996-99) which commences with a time lag of one year and with the year in

which data relating to new private sector banks being published. In the year 1998,

the Committee on Banking Sector Reforms (Narasimham II) was constituted to

review the progress of the reform measures so far undertaken and to make fresh

suggestions for improving the performance of banks. Hence, after giving a time lag

of one year, the third period is made to commence from April 1, 1999. By the end of

third period, (March 2000-03), the reform measures assumed to have exerted their

full impact so that one can assess the improvements made by the banking sector in

its efficiency and profitability over the entire period.

Percentage changes in the mean values of select indicators at branch and employee

levels, are calculated for period-II over period-I, period-III over period-II and period-III

over period. This exercise enables us to analyse the percentage changes in the

mean values of indicators period-wise and thereby find out improvements from one

period to the next' in the indicators relating to efficiency and profitability.

IMPACT OF REFORMS ON EFFICIENCY INDICATORS (PSBS)

The efficiency of PSBs at the branch and employees level are analyzed by

136

comparing the percentage changes in the mean values of each of the six selected

indicators in one period with that of the earlier periods. If the percentage changes in

period II are more than that in period-I and the percentage changes in period-III are

higher than that in period-II, we can conclude that reform measures have improved the efficiency of banks. The percentage changes in the mean values of

six indicators at the branch and employee level in period-II over period-I, period-III

over period-II and period-III over period-I are shown in the Table 5.13 to Table 5.17.

a) BRANCH LEVEL EFFICIENCY (PSBS) 5.10.1 BUSINESS PER BRANCH

As can be seen from the Table 5.13, the percentage changes in mean values

of business per branch of all PSBs are positive in the three periods indicating

improvements in the indicators. SBI and its associate banks have made remarkable

improvement in percentage change in business per branch in the three-sub periods,

by comparison. The percentage growth in the mean values of business of branches

of 5 nationalized banks in period-III over period-II decelerated compared to the

percentages in period-II over period-I. They still indicate improvements along with

the remaining 15 banks which showed larger improvements.

The percentage increase in the mean values of business per branch in period-III

(2000-03) over period-I (1992-95) is considerable and far more satisfactory. In terms

of total business mobilized, the banks, which occupy the first three places, are ANB,

SBOI and COB. The not so well performers are 18, BOB and PNB.

5.10.2. OPERATING EXPENSES PER BRANCH (PSBS)

Operating expenses per branch includes establishment expenses,rent taxes,

lighting, printing and stationary, advertisement and publicity, depreciation. It is the

expenditure incurred to operate a branch.

When viewed at the average operating expenditure per branch, there is an increase

in it during the three periods.(Table 5-14) The overall increase in the percentage in

the case of all put)s In period-III is 147.68 per cent over the first period. The

137

percentage increase in period-III over period-II is less when compared to the

percentage increase in period-II over period-I. The least percentage increase in

expenditure took place in OBOC, BOB and SB. The increase in the average value of

their indicator has a negative effect on the performance of banks.

A close look at the table reveals that the operating expenses per branch of

SBI, Associate banks, Nationalised banks are lower than the respective the mean,

value up to 1997-98. From 1998-99 onwards, they were higher than the averages for

all the groups of banks. It means that in the last five-year period the rate of growth is

higher. The average operating expenditure per branch of all PSBs put together was

Rs. 24.12 lac in 1992-95 period and Rs. 59.74 lac in 2000-03, representing an

increase of almost 2.5 times.It is thus observed that the operating expenses per

branch have increased almost three-fold during the ll-year period. This is perhaps

one of the important reasons for low profitability of nationalized banks.

It appears that by and large the banks with small business per branch (AB,

BOM, UNBOI and DB) incurred the lowest operating expenditure per branch while

the banks whose branches did more business (SBI, CB, BOI and BOB) also incurred

more operating expenses. The co-efficient of variation revealed that hardly any

disparities exist with respect to the aforesaid indicator.

5.10.3. PROFIT PER BRANCH (PSBS)

Coming to profitability indicator, the mean values of profit per branch of three

nationalized banks are negative in period-II indicating thereby that they have made

losses. In period-III, barring the three banks, the average profit per branch of the

remaining PSBs is positive (Table 5.15). It means that in period-III these banks have

been able to wipe out losses and make substantial profits. It is a healthy sign in the

sense that as reform process continued banks have been able to well adjust to new

situation. In period-III, except the Indian Bank, the two other banks also have been

able to make profit along with other banks (except Dena Bank which sustained

losses).

138

It may be noted that public sector banks as a group made improvements in

earning profits in each period-over its preceding period. The SBI and assonate banks

recorded substantial improvement in profits during the third period. The two weak

banks made huge losses in period-II but in period-III g they made profits (except

UCO).

139

TABLE 5. 13 BUSINESS PER BRANCH OF PSBS PERIOD-WISE AN ALYSIS No. Bank I Period II Period III Period

Percentage Change 1992-95 1996-99 20002003 Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 1385.00 0.08 2348.67 0.18 4337.33 0.10 69.58 84.67 213.16 2. SBBJ 732.67 0.13 1135.33 0.30 2233.00 0.13 54.96 96.68 204.78 3. SBOH 983.67 0.16 1623.67 0.14 2933.67 0.15 65.06 80.68 198.24 4. SBOI 813.00 0.14 1388.00 0.15 2920.00 0.15 70.73 110.37 259.16 5. SBOM 807.33 0.17 1337.33 0.10 2187.00 0.09 65.65 63.53 170.89 6. SBOP 1084.00 0.16 1723.33 0.10 3172.33 0.21 58.98 84.08 192.65 7. SBOS 946.67 0.17 1693.67 0.10 2893.33 0.14 78.91 70.83 205.63 8. SBOT 1015.67 0.20 1743.33 0.11 3172.67 0.17 71.64 81.99 212.37 ASS 916.67 0.16 1548.67 0.12 2782.33 0.15 68.95 79.66 203.53

9. AB 677 .33 0.06 1033.67 0.15 1756.33 0.12 52.61 69.91 159.30 10. ANB 713.67 0.11 1218.67 0.20 2705.67 0.08 70.76 122.02 279.12 11. BOB 1509.67 0.10 2281.33 0.13 3437.33 0.10 51.12 50.67 127.69 12. BOI 1395.33 0.08 2397.67 0.14 3778.67 0.12 71.83 57.60 170.81 13. BOM 580.00 0.15 1095.67 0.17 2252.33 0.14 88.91 105.57 288.33 14. CB 1594.67 0.07 2328.33' 0.12 4096.67 0.13 46.01 75.95 156.90 15. CBOI 740.67 0.11 1212.00 0.15 2174.00 0.10 63.64 79.37 193.52 16. COB 1252.00 0.31 2440.67 0.24 4447.67 0.12 94.94 82.23 255.24 17. DB 648.67 0.17 1307.00 0.20 2016.00 0.09 101.49 54.25 210.79 18. IB 1386.67 0.04 1528.67 0.07 2513.00 0.13 10.24 64.39 81.23 19. IOB 1265.33 0.12 2002.67 0.15 . 3282.33 0.15 58.27 63.90 159.40 20. OBOC 1388.33 0.17 2336.67 0.16 4281.67 0.09 68.31 83.24 208.40 21. P&SB 865.67 0.27 1577.67 0.20 2409.00 0.05 82.25 52.69 178.28

140

22. PNB 878.33 0.03 1369.00 0.14 2241.00 0.13 55.86 63.70 155.14 23. SB 926.00 0.11 1500.33 0.15 2461.67 0.10 62.02 64.07 165.84 24. UCO 834.67 0.07 1112.67 0.13 2304.67 0.20 33.31 107.13 176.12 25. UBOI 937.67 0.24 1625.67 0.13 3018.00 0.15 73.37 85.65 221.86 26. UNBOI 738.33 0.09 1178.67 0.16 2018.00 0.09 59.64 71.21 113.32 27. VB 822.00 0.22 1367.67 0.18 2552.00 0.15 66.38 86.60. 210.46

NB 1008.33 0.11 1623.33 0.15 2524.67 0.34 60.99 55.52 150.38 PSBs 1076.33 0.11 1759.33 0.15 3119.33 0.12 63.46 77.30 189.81

Source: RBI bulletin

141

TABLE 5. 14 OPERATING EXPENSES PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period IIPeriod III Period Percentage Change 1992-95 1996-99 2000-2003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 34.60 0.17 56.78 0.14 86.10 0.07 64.10 51.63 148.83 2. SBBJ 20.11 0.14 36.94 0.15 53.77 0.06 83.68 45.55 167.34 3. SBOH 21.08 0.17 32.66 0.02 49.57 0.05 54.93 51.78 135.15 4. SBOI 22.07 0.17 37.96 0.14 55.43 0.04 71.98 46.04 151.17 5. SBOM 20.68 0.11 37.30 0.12 54.61 0.05 80.37 46.42 164.09 6. SBOP 21.66 0.19 34.14 0.08 51.64 0.04 57.63 51.26 138.43 7. SBOS 24.15 0.15 42.22 0.13 59.09 0.04 74.85 39.97 144.73 8. ST 19.95 0.16 34.27 0.05 52.58 0.05 71.80 53.42 163.58 ASS 21.14 0.16 36.63 0.12 53.18 0.04 73.25 45.17 151.51

9. AB 13.97 0.18 22.85 0.07 39.76 0.18 63.59 73.98 184.61 10. ANB 19.38 0.28 28.86 0.11 47.33 0.14 48.94 64.01 144.28 11. BOB 26.33 .' 0.19 41. 72 0.13 59.48 0.02 58.46 42.59 125.94 12. BOI 26.66 0.18 46.70 0.09 64.45 0.07 75.15 38.01 141.72 13. BOM 16.09 0.16 29.06 0.10 41.85 0.06 80.59 43.98 160.02 14. CB 29.22 0.16 45.61 0.12 69.23 0.04 56.09 51.77 136.89 15. CBOI 18.02 0.14 30.98 0.14 47.17 0.03 71.95 52.25 161 .79 16. COB 22.81 0.21 39.82 0.10 59.81 0.14 74.55 50.20 162.17 17. DB 16.67 0.21 29.00 0.12 44.71 0.09 73.93 54.18 168.17 18. IB 24.22 0.11 34.80 0.08 52.99 0.03 43.67 52.28 118.79 19. IOB 25.08 0.10 41.14 0.15 62.77 0.05 64.00 52.58 150.23 20. OBOC 26.41 0.23 36.86 0.11 56.59 0.04 39.57 53.54 114.30 21. P&SB 20.35 0.18 35.67 0.08 53.02 0.04 75.27 48.64 160.52

142

22. PNB 19.28 0.16 31.34 0.13 48.62 0.04 62.57 55.11 152.16 23. SB 26.61 0.18 40.70 0.09 61.11 0.03 52.96 50.14 129.65 24. UCO 19.83 0.09 30.54 0.08 47.62 0.08 54.01 55.93 140.14 25. UBOI 19.14 0.18 33.30 0.10 49.28 0.03 73.97 47.96 157.41 26. UNBOI 17.26 0.13 28.66 0.07 48.31 0.18 66.04 68.53 179.82 27. VB 20.28 0.13 34.35 0.10 56.35 0.15 69.33 64.07 177.83

NB 21.49 0.16 35.11 0.11 53.37 0.04 63.35 52.02 148.33 PSBs 24.12 0.16 39.52 0.12 59.74 0.04 63.86 51.15 147.68

Source: RBI bulletin

143

TABLE 5. 15 PROFIT PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 2000-2003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 4.55 0.68 15.83 0.30 26.21 0.32 248.09 65.61 476.47 2. SBBJ 1.20 0.26 9.59 0.39 19.91 0.31 701.39 107.58 1563.51 3. SBOH 3.75 0.47 29.92 1.02 25.43 0.33 697.16 15.01 577 .53 4. SBOI 1.52 0.60 6.66 0.28 30.77 0.51 337.94 362.29 1924.56 5. SBOM 0.58 0.35 7.37 0.22 11.48 0.65 1178.06 55.74 1891.33 6. SBOP 4.25 0.22 19.61 0.98 26.04 0.82 361 .92 34.25 512.78

7. SBOS 2.30 0.56 15.08 0.51 15.28 0.68 554.70 1.33 563.39

8. SBOT 1.99 0.55 7.38 0.26 19.30 0.29 271.64 161.35 871.31 ASS 2.35 0.33 10.14 0.26 22.45 0.38 331.02 121.33 853.97

9. AB -9.98 0.87 5.83 0.36 4.97 0.67 158.44 14.75 149.82 10. ANB 11.99 0.54 33.61 1.44 22.47 0.57 380.42 33.16 287.43 11. BOB 3.42 1.01 15.22 0.24 19.59 0.46 345.56 28.66 473.27 12. BOI 19.28 1.27 12.39 0.31 21.01 0.56 164.27 69.50 208.94 13. BOM -15.76 -0.72 4.45 0.08 11.19 0.64 -128.24 151.54 -171.02 14. CB 5.52 0.75 8.25 0.19 28.22 0.54 49.31 242.16 410.86 15. CBOI -12.86 -0.80 5.09 0.10 5.51 0.76 -139.62 8.18 -142.86 16. COB 7.15 0.99 28.17 0.12 49.25 0.21 293.80 74.82 588.44 17. DB -3.88 -1.48 8.30 0.20 -3.88 -4.35 -313.73 -146.71 -0.17 18. IB -8.76 -1.88 -32.78 -0.52 -1.12 -14.84 274.06 -96.57 -87.18 19. IOB -27.79 -1.05 6.59 0.35 17.67 0.60 -123.72 168.08 -163.58 20. OBOC 9.25 0.87 24.80 0.04 33.73 0.36 168.17 36.01 264.74

144

21. P&SB -17.40 -0.82 6.62 0.50 1.78 0.71 -138.05 -73.16 -110.21 22. PNB .1.86 0.30 9.54 0.33 15.80 0.29 412.16 65.53 747.76 23. SB -22.69 -0.83 5.94 0.39 15.89 0.21 -126.18 167.45 -170.03 24. UCO -19.96 -0.68 -6.29 -0.49 7.88 0.67 -68.48 -225.33 -139.50 25. UBOI 2.93 0.85 10.06 0.23 16.82 0.59 243.62 67.22 474.60 26. UNBOI -27.41 -0.61 -2.22 -2.47 11.35 0.99 -91.89 -610.49 -141.41 27. VB -2.92 -3.11 2.88 0.23 15.87 0.47 -198.74 451.16 -644.23

NB -8.86 -0.97 6.02 0.29 14.90 0.57 -167.96 147.37 -268.11 PSBs -5.09 -1.32 6.58 0.12 17.84 0.48 -229.21 171 .26 -450.49

Source: RBI bulletin

145

b) EMPLOYEE LEVEL EFFICIENCY (PSBS)

5.10.4. BUSINESSPER EMPLOYEE (PSBS)

As far as percentage change in average business per employee in period-II

over I and period-III over II are concerned in the case of all PSBs they are positive

and encouraging.(Table 5.16) When the mean values of the three indicators in

period-III with those in period-I are compared, the percentage improvement is far

more satisfactory. The percentage improvement is 260.57 per cent of all PSBs in

period-III over 1. The SBI associate banks have recorded a higher percentage

improvement (271.50 per cent)

when compared to SBI (251.38 per cent) and nationalized banks (263.77 per cent).

Among the SBI associate banks, SBOI (340.78 per cent) and among the nationalized

banks, BOM (442.99 per cent), ANB (424.44 per cent) and DB (386.10 per cent) are

top performers (Table 5.16).

5.10.5. ESTABLISHMENT EXPENSES PER EMPLOYEE (PSBS)

An insight into the data reveals that the Establishment expenses per

employee have increases in the three periods. When expenditure per employee of

PSBs as a group is considered, it is found that the percentage increase in period-II

over I and in III over II is about 79. When percentage change in period-III over

period-II is compared with that of period-II over I, there is deceleration ir the case of

all associate banks and 9 nationalized banks. The percentage increase in staff cost

in the last period, it amount to 220.82. It means that the staff costs have been going

on increasing during the entire period under study.(Table 5.17)

This will have an adverse impact of profitability. The least increase in staff

cost over the period relate to SBOS (175.65 per cent), and SBOH (198.68 per cent)

among the associate banks. Among the nationalized banks, the least percentage in

staff cost took place in COB (174.35) and, BOB (193.38), DB (300.38 per cent) and

SB (282.11 per cent) take first and second places in percentage increase in

expenditure over the entire period.

146

5.10.7. PROFIT PER EMPLOYEE (PSBS)

On the profitability front, it is observed that 13 out of 19 nationalized banks on

an average sustained losses per employee in I period. Although, the mean values of

State Bank group are somewhat positive, the public sector banks as a group have

sustained losses per employee in period-I. In period-II, the three showed losses per

employee. In the case of IB, the loss per employee increased by 295.65 per cent in

period-II over I. In the case of other two banks, there are declines in percentage

changes in losses by -66.56 per cent in the case of UCO bank and by - 91.91 per

cent in the case of UNBOI The State Bank group as a whole made more profits per

employee in period-II over I (Table 5.18)

147

TABLE 5.16 BUSINESS PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 20002003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 53.16 0.07 88.26 0.19 186.78 0.11 66.04 111.62 251.38 2. SBBJ 35.80 0.12 66.95 0.16 133.05 0.13 87.02 98.74 271.67 3. SBOH 53.54 0.18 94.02 0.16 194.33 0.16 75.61 106.69 262.97 4. SBOI 42.47 0.16 77.16 0.16 187.19 0.18 81.70 142.60 340.78 5. SBOM 39.74 0.16 67.30 0.10 133.99 0.10 69.36 99.08 237.16 6. SBOP 50.55 0.17 91.07 0.14 196.93 0.23 80.16 116.24 289.58 7. SBOS 42.22 0.20 81. 68 0.12 159.79 0.15 93.46 95.63 278.48 8. SBOT 51.01 0.21 87.79 0.11 176.28 0.18 72.09 100.80 245.56 ASS 45.43 0.17 80.09 0.12 168.79 0.17 76.28 110.75 271.50

9. AB 54.34 0.07 85.43 0.16 167.66 0.16 57.21 96.26 208.54 10. ANB 42.68 0.10 80.92 0.22 223.85 0.11 89.58 176.63 424.44 11. BOB 82.51 0.11 125.66 0.14 224.50 0.19 52.30 78.66 172.10 12. BOI 62.2.3 0.08 113.09 0.15 221.35 0.13 81.74 95.72 255.72 13. BOM 35:95 0.20 76.89 0.19 195.20 0.15 113.87 153.88 442.99 14. CB 54.35 0.14 98.60 0.14 206.67 0.14 81.43 109.60 280.27 15. CBOI 43.12 0.13 75.52 0.17 162.92 0.20 75.15 115.72 277 .82 16. COB 64.99 0.34 143.60 0.29 278.85 0.12 120.95 94.19 329.05 17. DB 44.37 0.18 66.51 0.61 215.70 0.09 49.88 224.33 386.10 18. IB 73.83 0.05 84.59 0.08 156.99 0.13 14.58 85.58 112.64 19. IOB 57.78 0.13 97.63 0.16 190.09 0.18 . 68.96 94.70 228.97 20. OBOC 68.43 0.19 138.59 0.22 304.58 0.12 102.52 119.77 345.08 21. P&SB 48.99 0.24 91.58 0.20 182.12 0.07 86.94 98.86 271.75

148

22. PNB 47.01 0.07 178.10 0.16 170.44 0.15 66.15 118.23 262.59 23. SB 37.92 0.12 67.87 0.19 159.60 0.20 78.99 135.14 320.89 24. UCO 42.71 0.06 61.07 0.15 150.71 0.27 43.01 146.77 252.90 25. UBOI 54.22 0.25 109.63 0:15 232.36 0.19 102.18 111.96 328.52 26. UNBOI 43.36 0.10 71.42 0.17 1 2.2 0.14 64.73 99.96 229.40 27. VB 45.90 0.25 80.43 0.19 1f175.09 0.22 75.22 117.70 281 .45

NB 53.07 0.12 91.06 0.15 ,,0 193.04 0.16 71.60 111.98 263.77 PSBs 52.40 0.11 87.19 0.13 188.94 0.15 66.39 116.70 260.57

Source: RBI bulletin

149

TABLE 5.17 ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 20002003

Mean CV Mean CV Mean CV I Vs II III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 0.94 0.18 1.55 0.12 2.66 0.07 63.96 71.98 181.98 2. SBBJ 0.7' 0.16 1.45 0.16 2.35 0.07 96.38 62.21 218.55 3. SBOH 0.76 0.16 1.52 0.23 2.27 0.07 99.56 49.67 198.68 4. SBOI 0.76 0.21 1.46 0.17 2.41 0.05 92.11 65.30 217.54 5. SBOM 0.73 0.10 1.43 0.13 2.61 0.07 96.79 82.28 258.72 6. SBOP 0.66 0.19 1.34 0.10 2.25 0.07 102.53 68.58 241.41 7. SBOS 0.77 0.22 1.55 0.15 2.11 0.07 102.17 36.34 175.65 8. SBOT 0.71 0.18 1.25 0.06 2.18 0.06 77.36 73.94 208.49 ASS 0.73 0.16 1.42 0.14 2.30 0.06 94.95 62.59 216.97

9. AB 0.72 0.17 1.28 0.13 2.47 0.07 76.50 93.21 241.01 10. ANB 0.74 0.23 1.39 0.15 2.72 0.12 87.44 94.98 265.47 11. BOB 0.91 0.19 1.59 0.16 2.66 0.06 75.00 67.65 193.38 12. BOI 0.86 0.22 1.52 0.13 2.72 0.11 76.36 79.12 215.89 13. BOM 0.76 0.22 1.62 0.14 2.63 0.12 114.10 62.14 247.14 14. CB 0.76 0.18 1.35 0.17 2.46 0.05 77.97 82.92 225.55 15. CBOI 0.76 0.19 1.47 0.14 2.76 0.11 93.86 87.10 262.72 16. COB 0.77 0.25 1.39 0.15 2.10 0.12 81.74 50.96 174.35 17. DB 0.87 0.22 1.61 0.15 3.48 0.13 85.06 116.36 300.38 18. IB 0.78 0.10 1.45 0.11 2.58 0.02 85.47 78.11 230.34 19. IOB 0.79 0.11 1.50 0.17 2.74 0.07 91.10 82.26 248.31 20. OBOC 0.73 0.19 1.31 0.14 2.34 0.10 80.28 78.63 222.02 21. P&SB 0.82 0.10 1.46 0.07 3.02 0.06 79.18 106.15 269.39

150

22. PNB 0.70 0.18 1.38 0.16 2.42 0.05 97.14 75.60 246.19 23. SB 0.82 0.22 1.45 0.12 3.13 0.08 76.83 116.09 282.11 24. UCO 0.78 0.11 1.37 0.09 2.52 0.14 76.07 83.50 223.08 25. UBOI 0.75 0.17 1.48 0.12 2.68 0.01 96.89 81.49 257.33 26. UNBOI 0.79 0.16 1.42 0.10 2.86 0.25 79.41 100.94 260.50 27. VB 0.79 0.17 1.44 0.07 2.90 0.23 81.93 100.92 265.55

NB 0.78 0.18 1.44 0.14 2.65 0.04 84.26 83.60 238.30 PSBs 0.82 0.18 1.46 0.12 2.62 0.04 79.18 79.04 220.82

Source: RBI bulletin

151

When profit/loss in period-III over period-I is compared, the losses per employee of

DB and IB experienced percentage increases. The PSBs as a group made

substantial improvements of 536 percentage points in profit per employee in period-

III compared to I. The outstanding achievement is that of employees in associate

banks of SBI who improved their profitability by 354.29 per cent in period-II over

period-I, 157.23 in period-III over period-II and 1068.57 per cent in period-III over

period-I. These banks have shown consistency in improvement in all the indicators in

each sub-period over the preceding period (Table 5.18).

5.11. IMPACT ON PROFITABILITY INDICES (PSBS) 5.11.1.RETURN ON ASSETS (PSBS)

To compare the performance of PSBs at profit front, changes in percentage

points in five indicators (which are expressed in percentages) in each period over

earlier periods are calculated and presented in the Tables 5.19 to 5.23.

When PSBs a whole are considered, the rate of return on assets in period-II

over period-I improved by 1.15 percentage points. There is an increase in

percentage points of ROA of all PSBs in period-II over I barring CB (-0.02),

IB (-1.48). When ROA in period-III is compared with that in period-II, there is an

improvement of 0.15 percentage points of all PSBs taken together. But this

improvement is less than that in period-II over period-I. The ROA of SBI, SBOM,

AB, BOB, BOI, CBOI, DB, OBOC, P&SB and UBOI have decreased in period-III

compared to those in period-II. When improvements in period-III over period-I is

considered, all the 27 PSBs (including three weak banks) have made improvement

in ROA. The highest increase is found in the case of UNBOI and SB with increase

of more than four percentage points (Table 5.19).

5.11.2. RETURN ON EQUITY (PSBS)

When return on equity (ROE) is taken into consideration, the mean values of

percent of ROE of 13 natioanlised banks in period-I is negative.

152

In period-II it is negative only in the case of three banks-UCO, 6 IB (-34.37)

and UNBOI (-1.75). In period-III, the mean value of ROE is negative in the case of

DB and IB. Against this background the period-wise comparative picture (Table 5.27)

reveals that the ROE in period-II over period-I is positive in the case of all banks,

except two banks SBOS (-64.86 percentage points) and 18 (-5.42 percentage

points). The ROE of SBOH is the highest showing an improvement of 345.10

percentage points indicating thereby that ROE which was negative in period-I has

become positive, in period-II. In period-III compared to period-II, the changes in

percentage points are less than those of period-II over I. This is a usual feature of all

profitability parameters. Obviously, period-III showed improvements over period-I

and the reform measures had full impact.

In the concluding third period over period-I, SBOH (160.78), SBOI (661.11)

and SBI (347.58) have experienced highest increases. The banks which experienced

decline in percentage points of ROE was SBOS (-63.27) alone.(Table 5.20)

5.11.3. NET INTEREST MARGIN (SPREAD) (PSBS)

The Net interest margin (spread) asa percentage to working funds of

natioanlised banks, improved by 0.60 percentage points in period-II over period-I.

While it is 0.4 percentage points for all PSBs taken together. There is a decline in the

case of three banks-BOB (-0.07), CB (-0.26) and IB (-1.03) in period-II. When NIM in

period-III over period-II is compared, there is a decline in 18 PSBs. The percentage

points improvement in period-III over period-I is less than that in period-II over

period-I. In the case of 8 banks NIM in period-III is less than that of period-I. The

decline is because of deregulation of interest rates, which led to a decline in both

deposit rates and lending rates of banks.

When viewed at the interest income, there is a larger declines in period-II

compared to those in period-I and also in period-III compared to period-I. The NIM

therefore in period-III of all PSBs has become negative when compared to that in

period II. In period-III compared to period-II and period-I, it is negative only in the

case of three banks-UCO, 6 IB (-34.37) and UNBOI (-1.75). In period-III, the mean

value of ROE is negative in the case of DB and IB. This is perhaps due to reduction

153

in the rates of interest on loans and advances.( Table 5.21)

5.11.4. NON-INTEREST INCOME (PSBS)

Since interest income has been declining due to reform measures, banks had

to take steps to increase non-interest income by enlarging their services. When the

data of Non Interest Income (NII) is viewed in Table 5.22, it appears that NII made

an improvement in period-III compared to period-II considerably. When the total

period is taken into consideration, the improvement is again considerable. But when

we compare the figures in period-II over period-I , there is a decline in NIl of 15

banks.( Table 5.22)

5.11.5. CREDIT DEPOSIT RATIO (PSBS)

If the Credit Deposit (CD) ratio is higher, a larger percentage of deposits

mobilized is lent to different sectors and it will lead to an improvement in profitability

of banks. The CD ratio in period II of almost all banks is less when compared period-

I. It means that the banks became conservative in their lending policies. In period-III

as well, the SBI and associate banks have reduced their CD ratio when compared to

those in period-I and period II. When the data of PSBs as a whole is considered, the

CD ratio in period-III is less than that in period-I. Exceptions are AB, ANB, BOI, CB,

CBOI, COB, DB and PNB, etc. (Table 5.23). The data for the entire period shows

that CD ratio is less than 60 percent in all the years. It means that the banks have

not been able to hit the acceptable level. The corporate sector started raising funds

from one another and in the market; hence they did not borrow from banks on the

same level as they used to do previously.

154

TABLE 5. 18 PROFIT PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 20002003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 0.17 0.69 0.59 0.30 1.13 0.33 242.31 91.01 553.85 2. SBBJ 0.06 0.29 0.49 0.39 1.19 0.32 722.22 140.54 1877.78 3. SBOH 0.20 0.51 0.60 0.34 1.69 0.33 196.72 179.56 729.51 4. SBOI 0.08 0.54 0.37 0.29 1.98 0.53 362.50 436.04 2379.17 5. SBOM 0.03 0.33 Q,31o 0.20 0.71 0.66 1133.33 90.99 2255.56 6. SBOP 0.20 0.21 0.76 0.44 2.03 0.35 286.44 166.67 930.51 7. SBOS 0.10 0.61 0.73 0.50 0.85 0.68 626.67 16.97 750.00 8. SBOT 0.10 0.61 0.37 0.26 0.77 0.85 270.00 109.01 673.33 ASS 0.12 0.32 0.53 0.26 1.36 0.39 354.29 157.23 1068.57

9. AB -0.80 -0.87 0.48 0.37 0.48 0.70 -160.17 -0.69 -159.75 10. ANB -0.72 -0.54 0.45 0.42 1.88 0.59 -162.79 317.04 -361 .86 11. BOB 0.19 1.01 0.81 0.21 1.30 0.51 333.93 60.91 598.21 12. BOI -0.67 -1.77 0.59 0.31 1.23 0.57 -187.13 110.23 -283.17 13. BOM -1.66 -0..39 0..31 0..10. 0..98 0..65 -118.91 211.70. -158.95 14. CB 0..22 0..75 0..35 0..21 1.43 0..55 59.0.9 30.7.62 548.48 15. CBOI -1.22 -0.37 0.32 0.09 0.43 0.79 -125.89 35.79 -135.15 16. COB 0..38 1.0.1 1.65 0..18 3.0.6 0.24 338.94 85.0.8 712.39 17. DB -0..26 -1.48 o.64 0..23 -0..42 -4.35 -341.77 -165.45 58.23 18. IB -0..46 -,1.88 -1.83 -0..53 -0..32 -4.60. 295.65 -82.42 -30.43 19. IOB -0.48 -1.35 0..32 0..35 1.0.3 0..61 -166.21 222.92 -313.79 20. OBOC 0.46 0.88 1.46 0..0.9 2.41 0..39 220..44 64.69 427.74 21. P&SB -1.01 -0.82 0.38 0..51 0..13 0..71 -138.0.8 -65.22 -113.25

155

22. PNB 0.09 0.33 0.55 0..34 1.17 0..31 485.71 95.12 10.42.86 23. SB -0.92 -0.83 0.27 0..43 1.03 0..28 -129.35 282.72 -212.32 24. UCO -1.0.2 -0..68 -0.34 -0..47 0..53 0..71 -66.56 -255.88 -152.13 25. UBOI 0.17 0..87 0.68 0.22 1.31 0..61 306.00 93.10 684.00 26. UNBOI -1.61 -0..61 -0.13 -2.53 0..83 1.0.0. -91.91 -735.90. -151.45 27. VB -0..15 -3.30. 0.17 0.24 1.11 0..52 -211.11 564.0.0. -837.78

NB -0..46 -0..98 0.34 0.30 1.03 0.60 -173.38 202.94 -322.30 PSBs -0.25 -1.30 0.43 0.27 1.09 0.50 -270.67 155.47 -536.00

Source: RBI bulletin

156

TABLE 5. 19 RETURN ON ASSETS OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 20002003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 0.34 0.58 0.74 0.38 0.68 0.24 0.40 -0.06 0.34 2. SBBJ 0.21 0.38 0.78 0.35 0.98 0.20 0.58 0.20 0.78 3. SBOH 0.44 0.32 0.73 0.24 1.00 0.17 0.29 0.27 0.56 4. SBOI 0.23 0.33 0.56 0.17 1.27 0.39 0.33 0.71 1.04 5. SBOM 0.09 0.45 0.69 0.27 0.64 0.58 0.60 -0.05 0.55 6. SBOP 0.44 0.13 0.99 0.40 1.32 0.15 0.55 0,33 088 7. SBOS 0.25 0.41 0.96 0.56 0.63 0.65 0.72 -0.33 0.38 8. SBOT 0.36 0.55 0.53 0.20 0.77 0.16 0.16 0.24 0.40 ASS 0.29 0.17 0.75 0.27 0.97 0.25 0.46 0.22 0.68

9. AB -1.82 -0.88 0.68 0.28 0.36 0.57 2.50 -0.31 2.18 10. ANB -2.06 -0.59 065 0.31 1.06 0.49 2.71 0.41 3.13 11. BOB 0.26 0.96 0.78 0.17 0.74 0.40 0.52 -0.04 0.48 12. BOI -1.71 -1.22 0..86 0.12 0.75 0.46 2.57 -0.11 2.46 13. BOM -3.24 -0.73 0.47 0.12 0.60 0.55 3.71 0.13 3.84 14. CB 0.45 0.68 0.42 0.07 0.90 0.47 -0.02 0.48 0.45 15. CBOI -2.15 -0.79 0.50 0.17 032 0.69 2.65 -0.18 2.47 16. COB 0.56 0.78 1.36 0.09 1.41 0.11 0.81 0.04 0.85 17. DB -0.81 -1.35 0.76 0.08 -0.29 -3.74 1.58 -1.05 0.53

157

18. IB -0.84 -1.86 -2.32 -0.44 -0.13 -6.21 -1.48 2.19 0.71 19. IOB -3.05 -1.11 0.42 0.42 0.68 0.46 3.48 0.26 3.73 20. OBOC 0.73 0.67 1.34 0.11 1.03 0.29 0.60 -0.31 0.29 21. P&SB -2.83 -0.86 0.49 0.46 0.10 0.70 3.32 -0.39 2.93 22. PNB 0.25 0.27 0.62 0.88 0.83 0.16 0.37 0.21 0.58 23. SB -3.14 -0.95 0.47 0.30 0.87 0.13 3.61 0.40 4.01 24. UCO -2.78 -0.70 -0.61 -0.60 0.41 0.62 2.17 1.02 3.19 25. UBOI 0.35 0.69 1.77 0.84 0.73 0.47 1.42 -1.04 0.38 26. UNBOI -4.31 -0.63 -0.24 -2.27 0.62 0.95 4.07 0.86 4.93 27. VB -0.65 -2.46 0.24 0.06 0.78 0.34 089 0.54 1.43

NB -1.13 -0.94 0.44 0.28 0.67 0.49 1.57 0.23 1.80 PSBs -0.60 -1.22 0.55 0.30 0.70 0.39 1.15 0.15 1.30

Source: RBI bulletin

158

TABLE 5. 20 RETURN ON EQUITY OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 20002003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 104.95 0.44 268.57 0.30 452.53 0.32 163.61 183.97 347.58 2. SBBJ 41.27 0.24 158.37 0.26 315.33 0.31 117.10 156.96 274.06 3. SBOH 166.67 0.49 511.76 0.36 1327.45 0.33 345.10 815.69 1160.78 4. SBOI 59.26 0.60 140.74 0.29 720.37 0.53 81.48 579.63 661.11 5. SBOM 25.00 0 0.33 115.74 0.21 192.59 0.65 90.74 76.85 167.59 6. SBOP 105.,j3 0.21 404.00 0.42 954.67 0.34 298.67 550.67 849.33 7. SBOS 83.33 0.59 18.47 0.50 20.06 0.68 -64.86 1.59 -63.27 8. SBOT 63.33 0.57 108.76 0.19 259.33 0.29 45.43 150.57 196.00 ASS 82.60 0.36 86.82 0.24 198.89 0.39 4.22 112.07 116.29

9. AB -71.16 -0.90 44.26 0.36 32.14 0.49 115.42 -12.12 103.30 10. ANB -76.84 -0.94 14.88 0.68 57.51 0.67 91.73 42.63 134.35 11. BOB 11.70 0.93 136.30 0.18 180.73 0.47 124.60 44.42 169.02 12. BOI -55.55 -0.94 69.98 0.66 105.79 0.64 125.53 35.81 161.34 13. BOM -67.09 -0.80 9.82 0.52 41.49 0.65 76.91 31.67 1 08.58 14. CB 22.48 0.50 34.58 0.13 142.02 0.71 12.10 107.43 119.53 15. CBOI -102.88 -1.05 8.72 0.10 14.76 0.84 111.60 6.04 117.64 16. COB 31.75 0.96 140.57 0.13 241.54 0.18 108.82 100.97 209.79 17. DB -25.30 -1.42 46.38 0.21 -22.71 -4.18 71.67 -69.08 2.59

159

18. IB -28.95 -1.90 -34.37 -0.69 -1.9 -4.00 -5.42 32.39 26.97 19. IOB -78.47 -1.40 27.25 0.35 .J)78 0.60 105.72 29.83 135.55 20. OBOC 37.00 0.52 107.08 0.12 169.43 0.39 70.08 62.35 132.43 21. P&SB -47.87 -0.97. 11.69 0.88 5.49 0.71 59.56 -6.21 53.36 22. PNB 21.48 0.09 '. 159.8'1 0.53 293.71 0.32 138.32 133.91 272.23 23. SB -155.08 -1.49 17.61 1.16 58.62 0.21 172.70 41.00 213.70 24. UCO -48.99 -0.85 -5.97 -0.64 14.43 1.22 43.0 20.40 -63..42 25. UBOI 18.04 0.67 61.74 0.22 86.32 0.44 43.69 24.59 68.28 26. UNBOI -67.35 -0.68 -1.75. -2.43 8.15 0.98 65.60 9.90 75.51 27. VB -20.83 -2.36 4.32 0.23 54.60 0.82 25.14 50.28 75.42

NB -44.03 -1.00 13.89 0.21 36.49 0.60 57.93 22.59 80.52 PSBs -36.00 -1.13 25.34 0.19 57.23 0.50 61.34 31.89 93.23

Source: RBI bulletin

160

TABLE 5. 21

NET INTEREST MARGIN AS % TO WF OF PSBS-PERIOD-WISE ANALYSIS No. Bank I Period II Period III Period

Percentage Change 1992-95 1996-99 20002003 Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 2.94 0.11 3.05 0.12 2.64 0.01 0.12 -0.41 -0.30 2. SBBJ 2.88 0.08 3.41 0.07 3.16 0.04 0.52 -0.25 0.28 3. SBOH 3.18 0.09 3.61 0.02 3.04 0.08 0.3 -0.57 -0.14 4. SBOI 3.43 0.14 4.02 0.06 2.99 0.07 0.60 -1.03 -0.43 5. SBOM 3.12 0.06 3.91 0.08 3.26 0.06 0.79 -0.65 0.14 6. SBOP 3.56 0.03 3.64 0.03 3.73 0.14 0.07 0.09 0.16 7. SBOS 3.57 0.12 3.58 0.02 2.95 0.01 0.01 -0.63 -0.62 8. SBOT 2.65 0.09 2.77 0.19 2.68 0.04 0.12 -0.09 0.03 ASS 3.17 0.06 3.50 0.06 3.16 0.03 0.33 -0.34 -0.01

9. AB 1.73 0.24 2.90 0.05 3.10 0.05 1.17 0.20 1.37 10. ANB 1.85 0.33 3.09 0.08 2.75 0.11 1.24 -0.34 0.90 11. BOB 3.12 0.14 3.04 0.05 2.82 0.08 -0.07 -0.22 -0.30 12. BOI 2.16 0.18 2.79 0.07 2:69 0.03 0.63 -0.10 0.53 13. BOM 1.94 0.34 3.48 0.06 2.79 0.04 1.55 -0.69 0.85 14. CB 3.21 0.17 2.95 0.14 2.69 0.06 -0.26 -0.26 -0.52 15. CBOI 1.93 0.26 3.08 0.03 3.10 0.07 1.15 0.02 1.17 16. COB 2.86 0.03 3.27 0.22 2.87 0.07 0.41 -0.40 0.01 17. DB 2.68 0.18 3.43 0.13 2.56 0.09 0.75 -0.87 -0.12

161

18. IB 1.76 0.02 0.73 0.24 1.98 0.15 -1.03 1.24 0.22 19. IOB 1.15 0.51 2.33 0.02 2.87 0.04 1.18 0.54 1.72 20. OBOC 3.31 0.15 3.46 0.12 3.16 0.11 0.15 -0.30 -0.15 21. P&SB 1.61 0.59 2.54 0.05 2:49 0.07 0.93 -0.05 0.88 22. PNB 2.80 0.03 3.43 0.05 3.33 0.08 0.63 -0.10 0.52 23. SB 2.25 0.26 3.26 0.14 3.62 0.06 1.01' 0.36 1.37 24. UCO 1.26 0.68 2.01 0.06 2.43 0.04 0.75 0.42 1.17 25. UBOI 2.93 0.13 3.08 0.12 3.02 0.03 0.15 -0.06 0.10 26. UNBOI 0.69 0.32 2.10 0.30 2.67 0.11 1.42 0.56 1.98 27. VB 2.46 0.13 2.84 0.03 3.20 0.06 0.39 0.36 0.75

NB 2.31 0.16 2.91 0.04 2.88 0.04 0.60 -0.03 0.57 PSBs 2.56 0.12 2.96 0.06 2.83 0.03 0.40 -0.13 0.27

Source: RBI bulletin

162

TABLE 5.22

NON-INTEREST INCOME AS % TO TOTAL INCOME OF PSBS-PERIOD-WISE ANALYSIS No. Bank I Period II Period III Period

Percentage Change 1992-95 1996-99 20002003 Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 14.54 0.10 14.92 0.01 13.60 0.13 0.38 -1.32 -0.94 2. SBBJ 15.33 0.11 15.14 0.05 17.71 0.09 -0.18 2.57 2.39 3. SBOH 14.91 0.09 13.61 0.03 16.27 0.12 -1.31 2.66 1.36 4. SBOI 14.33 0.13 14.19 0.12 21.91 0.13 -0.14 7.72 7.58 5. SBOM 14.77 0.14 13.67 0.07 19.07 0.17 -1.10 5.40 4.30 6. SBOP 7.43 0.13 10.05 0.12 14.20 0.19 2.61 4.15 6.77 7. SSOS 14.83 0.03 14.32 0.09 16.34 0.20 -0.50 2.02 2.02 8. SBOT 13.57 0.15 12.74 0.05 14.15 0.11 -0.82 1.41 1.41 ASS 13.36 0.09 13.22 0.05 16.72' 0.13 -0.14 3.50 3.36

9. AB 10.13 0.15 12.52 0.08 13.92 0.24 2.39 1.40 3.79 10. ANB 12.04 0.25 11.55 0.05 14.82 0.41 -0.49 3.27 2.78 11. BOB 12.65 0.32 11.03 0.04 14.12 0.22 -1.62 3.09 1.47 12. BOI 11.25 0.10 12.07 0.07 17.36 0.23 0.82 5.29 6.11 13. BOM 8.83 0.07 8.61 0.01 13.20 0.12 0.22 4.60 4.37 14. CB 12.63 0.09 12.65 0.08 16.96 0.15 0.02 4.31 4.33 15. CBOI 9.93 0.16 10.37 0.06 10.39 0.09 0.44 0.03 0.46 16. COB 15.21 0.17 12.45 0.05 16.85 0.19 -2.76 4.39 1.63 17. DB 10.53 0.15 10.75 0.19 15.76 0.31 0.22 5.01 5.24

163

18. IB 10.80 0.19 11.74 0.06 15.98 0.17 0.95 4.24 5.19 19. IOB 16.20 0.27 9.54 0.03 12.36 0.19 -6.66 2.82 -3.84 20. OBOC 8.70 0.13 8.29 0.06 12.14 0.24 -0.41 3.85 3.45 21. P&SB 10.22 0.09 11.11 0.08 15.48 0.24 0.89 4.37 5.25 22. PNB 10.81 0.29 12.0; 0.13 12.95 0.10 1.20 0.94 2.14 23. SB 9.45 0.09 10.67 0.14 10.86 0.31 1.22 0.19 1.41 24. UCO 10.74 0.25 10.20 0.14 16.04 0.24 -0.55 5.85 5.30 25. UBOI 9.53 0.04 8.00 0.05 11.61 0.36 -1.53 3.61 2.08 26. UNBOI 8.36 0.26 8.62 0.14 13.63 0.37 0.26 5.01 5.27 27. VB 14.15 0.07 8.98 0.11 12.80 0.29 -5.17 3.83 -1.35

NB 11.32 0.11 10.90 0.06 14.11 0.20 -0.42 3.21 2.79 PSBs 12.44 0.10 12.24 0.04 14.20 0.16 -0.20 1.96 1.76

Source: RBI bulletin

164

TABLE 5.23 CREDIT DEPOSIT RATIO AS % TO TOTAL INCOME OF PSBS-PERIOD-WISE ANALYSIS

No. Bank I Period II Period III Period Percentage Change 1992-95 1996-99 2000-2003

Mean CV Mean CV Mean CV II Vs I III Vs II III Vs I (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

1. SBI 61.08 0.16 53.86 0.08 45.98 0.03 -7.22 -7.87 -15.10 2. SBBJ 54.21 0.07 53.84 0.07 50.70 0.01 -0.37 -3.14 -3.52 3. SBOH 55.56 0.10 53.20 0.05 47.70 0.02 -2.36 -5.50 -7.86 4. SBOI 60.23 0.03 55.51 0.05 53.86 0.05 -4.72 -1.65 -6.37 5. SBOM 54.98 0.07 54.62 0.02 57.45 0.02 -0.36 2.83 2.47 6. SBOP 54.10 0.11 53.29 0.02. 60.47 0.03 -0.81 7.18 6.37 7. SBOS 58.18 0.08 58.42 0.03 53.10 0.03 0.23 -5.31 -5.08 8. SBOT 60.22 0.08 51.34 0.06 56.04 0.02 -8.88 4.70 -4.18 ASS E6.40 0.07 54.11 0.04 53.90 0.01 -2.29 -0.21 -2.50

9. AB 47.11 0.08 43.17 0.03 48.47 0.02 -3.94 5.30 1.36 10. ANB 43.34 0.08 41.99 0.03 49.19 0.15 -1.35 7.21 5.85 11. BOB 55.82 0.02 49.76 0.04 52.81 0.04 -6.06 3.05 -3.01 12. BOI 53.35 0.10 55.40 0.04 . 64.19 0.03 2.05 8.79 10.84 13. BOM 44.02 0.09 39.68 0.06 41.74 0.05 -4.34 2.06 -2.28 14. CB 46.33 0.09 45.54 0.03 51.67 0.09 -0.80 6.13 5.33 15. CBOI 43.68 0.13 40.13 0.05 45.26 0.00 -3.55 5.13 1.58 16. COB 37.15 0.14 47.02 0.05 55.25 0.05 9.87 8.23 18.10 17. DB 47.16 0.06 52.19 0.03 49.40 0.03 5.03 -2.79 2.24

165

18. IB 62.04 0.09 46.28 0.05 44.77 0.02 -15.76 -1.51 -17.0 19. IOB 52.73 0.07 45.48 0.01 47.66 0.00 -7.25 2.18 -5.07 20. OBOC 51.26 0.04 47.62 0.03 49.06 0.08 -3.64 1.44 -2.20 21. P&SB 44.71 0.05 42.93 0.02 44.25 0.01 -1. 78 1.32 -0.46 22. PNB 48.79 0.10 45.99 0.01 52.21 0.04 -2.80 6.21 3.42 23. SB 41.66 0.13 42.39 0.09 52.53 0.01 0.73 10.14 10.87 24. UCO 51.52 0.11 38.65 0.01 48.44 0.04 -12.87 9.79 -3.08 25. UBOI 46.07 0.05 43.07 0.09 53.65 0.06 -3.00 10.58 7.58 26. UNBOI 40.63 0.16 27.92 0.05 33.60 0.07 -12.7"1 5.69 -7.02 27. VB 43.73 0.10 38.13 0.04 41.02 0.12 -5.60 2.89 -2.70

NB 49.04 0.08 45.28 0.01 50.61 0.04 -3.75 5.33 1.57 PSBs 52.61 0.10 48.13 0.03 49.60 0.03 -4.48 1.46 -3.01

Source: RBI bulletin

166

5.12.PERIOD-WISE GROUPING OF PSB's(PRINCIPLECOMPONENT ANALYSIS)

A stage is reached, when the principle component analysis can be

utilized to rank banks on the basis of composite score calculated by

combining 6 efficiency parameters and 5 profitability indicators separately in

each of the sub-periods. On the basis of ranks obtained by different banks,

they are grouped into three grades-‘A’ (ranks from 1 to 9), ‘B’ (ranks from 10

to 18) and ‘C’ (ranks from 19 to 27). This will enable to trace the movements

of banks in between the three groups from one period to another. This

procedure will also enable to identify those banks, which have

improved/deteriorated their performance/efficiency/profitability, in each

succeeding period.

To present the final outcome of the statistical analysis, composite score

is calculated combining all the efficiency and profitability parameters using

again the principal component analysis. Here also banks are grouped into

three categories high performers (A), average performers and (B) low

performers (C) on the basis of ranks obtained by them as per the composite

score. Again, attempt is made to trace the movement of banks in between the

three grades from one group to another group in each of the succeeding

periods.

5.12.1.GROUPING OF PSBS ON COMPOSITE SCORE OF EFFICIENCY INDICES (A) GROUPING IN I AND II PERIODS

In the Table 5.24 ranks obtained by banks on the basis of composite

score in sub-period-I (1992-95) are shown vertically and ranks obtained in

sub-period-II (1996-99) are shown horizontally. This procedure will identify the

banks which moved from one grade/group in period-I and to another in period-

II. This will also enable to identify those banks which have improved or

deteriorated their performance in efficiency. The movement of banks among

three grade / groups on efficiency are as follows:

(i) Six banks-BOB, OBOC, COB, BOI, SBOH and SBOI have remained

167

on the basis of composite score in 'AA' grade in both periods I and II,

In other words, these banks are considered as high performers in both

the sub-period.

(ii) Two banks-UBOI and SBOT are in 'BA' grade in the sub-periods I

and II. These banks ranked as 12 and 13 in period-I have improved

their performance in efficiency and occupied 8 and 7 ranks in sub-

period-II.

(iii) Six banks-SB, DB, UCO, CBOI, UNBOI and SOM have remained in 'C’

grade in both the sub-periods. It indicates that these banks secured

ranks above 19 on the basis of composite score of the six efficiency

indicators in both the sub-period and branded as low performers.

considered as average performers on the basis of composite score in

both the sub-periods as they secure 'B' grade in both the sub-periods

with ranks ranging between 10 and 18.

(iv) SBI and CB secured' AB' grade in the two sub-periods which indicate

that these banks secured 2 and 4 ranks respectively in period-I and

subsequently moved down to 13 and 14 in the next period.

(v) About ANB, which occupied 22nd ranks in the period-I has remarkably

improved its position to 4th in sub period-II. Whereas IB, which was

ranked as 6th in period-I slipped down its position to 27th.

168

TABLE 5.24 Mobility of PSBs According to Efficiency during 1992-95 to

1996-99 (I & II Periods) I Period 1992-95 II-Period (1996-99)

A Grade B Grade C Grade 1992-95 (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

-9 r

ank)

BOB (I.1 & II.6) SBI (I.2 & II.13) IB (I.6 & II.27)

OBOC (I.3 & II.2) CB (I.4 & II.10) COB (I.5 & II.1) BOI (I.7 & II.9) SBOH(I.8 &II.5) SBOP(I.9 & II.3

B G

rade

(1

0-18

ran

ks)

UBOI (I.12 & II.8) SBOS (I.10 & II.14) VB (I.16 & II.21) SBOT(I.13 & II.7) IOB (I.11 & II.16) SBOM (I.17 & II.19)

SBOI (I.14 & II.18) PNB (I.15 & II.12) SBBJ (I.18 & II.17)

C G

rade

(1

9-27

ran

ks)

ANB (I.22 & II.4) P&SB (I.21 & II.15) SB (I.19 & II.25) AB (I.24 & II.11) DB (I.20 & II.22) UCO(I.23 & II.26) CBOI (I.25 & II.20) UNBOI (I.26 & II.25) SOM (I.27 & II.24)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin. (B) GROUPING IN II AND III PERIODS

In the Table 5.25, ranks obtained by banks in sub-period-II (1996-99)

are shown vertically and ranks obtained in sub period-III (2000-03) are

shown horizontally. The movement of banks among the three grades/groups

are as follows:

(i) Six banks-COB, OBOC, SBOP, ANB, SBOH and SBOT have

169

remained in ' A' grade in both the sub-periods II and III. It indicates that

these banks secured ranks below 9 in both the sub-periods and they

are considered as high performers in efficiency.

(ii) Three banks-CB, AB SBOS are considered as average performers in

both the sub-periods I! and III as they secured ranks, on the basis of

composite score between 10 to 18.

(iii) CBOI, VB, DB, SB, UNBQI and IB have remained in 'C' grade in both

the sub-periods. These banks secured ranks above 18 and hence

branded as low performers.

(iv) Interesting observation is that PNB, SBBJ and SBOI which secured

12th, 17th and 18th ranks respectively, have remarkably improved

their performance and occupied 8th, 9th and 5th ranks in the last

period.

(v) Another finding is that BOB, UBOI and BOI, which secured better

ranks-6th, 8th and 9th respectively in period-I! slipped down in their

positions and reached 15th, 11th and 17th ranks in the sub-period-III.

170

TABLE 5.25 Mobility of PSBs According to Efficiency during

1996.99 to 2000.03 (II & III Periods) II Period1996-99 III-Period (2000-03)

A Grade B Grade C Grade (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

-9 r

anks

) COB (II.1 & III.1) BOB (II.6 & III.15)

OBOC (II.2 & III.2) UBOI (II.8 & III.11) SBOP (II.3 & III.3) BOI (II.9 & III.17) ANB (II.4 & III.6

SBOH(II.5 & III.4) SBOT(II.7 & III.7)

B G

rade

(1

0-18

ran

ks)

PNB(II.12 & III.8) CB (II.10 & III.13) SBI (II.13 & III.22)

SBBJ(II.17 & III.9) AB (II.11 & III.14 P&SB(II.5 &III.26)

SBOI (II.18 & III.5) SBOS(II.14 & III.10) IOB(II.6 & III.19)

C G

rade

(1

9-27

ran

ks)

SBOM (II.19 & III.18) CBOI (II.20 & III.22) BOM (II.24 & III.12) VB (II.21 & III.20) UCO (II.26 & III.16) SB (II.23 & III.25) UNBOI (II.25 & III.21) IB (II.27 & III.24)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin. (C )EFFICIENCY OF PSBS IN I AND II PERIODS

An analysis of performance of PSBs with regard to the composite score

of efficiency indicators in all the three periods reveal that OBOC, COB, SBOH

and SBOP have remained in the top grade 'AA' with ranks below 9. Hence,

they are considered as high performers in all the three sub-periods. SB, DB,

CBOI and UNBOI have continuously occupied ranks above 18 throughout the

three sub-periods. So, they are branded as low performers in efficiency.

SBOS is the only public sector bank, which secured ranks between 10 to 18,

171

in all the three sub periods. Hence it is considered as average performer in

efficiency.

5.12.2 GROUPING OF PSBS ON COMPOSITE SCORE OF PROFITABILITY INDICES

(A) GROUPING IN I AND II PERIODS

As has been done in the case of efficiency indices, the 27 PSBs are ranked

on the basis of composite score obtained by combining five profitability

indices in each sub-period and classified into three grades/groups A, Band C

in each of the three sub-periods.

TABLE 5.26 Mobility of PSBs According to Profitability Indices during

1992-95 To 1996.99 (I &II Periods) II-Period(1996-99) A Grade B Grade C Grade I-Period(1992-

95 (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

-9 r

anks

)

SBOP (I.1 & II.3) SBOS (I.5 & 11.12) CB (I.7 & 11.22) OBOC (I.2 & II.2) PNB (I.8 & II.10) SBOH (I.3 & II04) SBI (I.9 & II.17) UBOI (I.4 & II.1) SBOI (I.7 & II.9)

B G

rade

(1

0-18

ran

ks)

COB (I.11 & II.5) BOB (I.10 & II.11) SBOT (I.12 & II.21) SBOM (I.13 & II.7) SBBJ (I.14 & II.14) VB (I.16 & II.20)

DB (I.15 & II.8) BOI (I.18 & II.18) IB (I.17 & II.27)

C G

rade

(1

9-27

ran

ks)

BOM (1.21 & 11.6) BOB (1.10 & 11.11) AB (1.19 & 11.19) SBBJ (1.14 & 11.14) P&SB (1.23 & 11.24) BOI (1.18 & 11.18) UCO (1.25 & 11.26)

UNBOI (1.26 & 11.25)

IOB (1.27 & 11.23)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin.

172

In the Table 5.26, ranks obtained by different banks in sub period-I

(1992-95) are shown vertically and ranks obtained in sub-period-II (1996-99)

are presented horizontally. This procedure will enable us to identify the banks,

which moved from one grade/group in period-I to another in period-II. This will

also enable us to identify these banks, which have improved or deteriorated

their performance in profitability. It is evident from the Table 5.26 that:

(i) Five banks-SBOP, OBOC, SBOH, UBOI and SBOI have remained in

'A’ grade as they obtained ranks below 9 in both sub-period-II and I.

Hence, they are treated as high performers in profitability.

(ii) Three banks, namely, BOB, SBB], and BOI are considered as average

performers in both the sub periods as they occupied ranks between 10

to 18 and secured 'B' grade in period-II and I.

(iii) AB, P&SB, UCO, UNBOI and IOB are branded as low performers in

period-II and I. Also because they secured ranks above 18 and

occupied ‘C’ grade in both the periods.

(iv) An interesting observation is that COB, SBOM, and DB which were in

the B grade with 11th; 13th and 15th ranks respectively in period-I

have remarkably improved their position and attained A grade with 5th,

7th and 8th ranks in the sub-period-1I.

(v) Another notable feature is that SBOS, PNB and SBI, which were in the

A grade during 1992-95 slipped down in their position and moved to 'B'

grade during 1996-99.

(vi) Similarly, the performance of CB which was considered high during the

first period, unfortunately, failed to retain or improve its performance

and miserably fell in to the C grade in period-II.

173

(B) GROUPING IN II AND III PERIODS

In the Table 5.27, ranks obtained by different banks in sub period-II (1996-99)

are shown vertically and ranks obtained in sub-period-III (2000-03) are shown

horizontally. The movement of banks between ,the three groups / grades are

as follows:

(i) OBOC, SBOP, SBOH, COB, SBOM, and SBOI have remained in

the ‘A’ grade in both the sub-period-II and III as they have secured

ranks below 9. Hence they are considered as high performers in

profitability in both the periods.

(ii) (ii) BOB, SBOS, ANB, and BOI, were in the 'BB' grade in both the

periods, as they secured ranks between 10 to 18,So they are

treated as average performers in profitability in both the sub-

periods.

(iii) Low performers in profitability in both the sub periods are AB,

P&SB, UNBOI, UCO, and IB. Since they were in 'C' grade and

obtained ranks above 18, they were treated like this.

(iv) An analysis of the Table 5.27 revealed that PNB, SB and SBBJ

which were in 'B' grade during 1996-99 with 10th, 13th and 14th

ranks have attained better ranks-5th; 3rd and 8th and found a

place in 'A' grade during 2000-03

(v) A notable feature is that UBOI which secured rank one in the sub-

period-II slipped down to 10th in the next period.

(vi) Similarly, BOM and DB with 6th and 8th ranks respectively in the

period-II, have miserably moved down to 22nd and 26th ranks in

the sub-period-III.

174

(vii) The profitability performance of, SBOT, CB and IOB also worth

mentioning in this analysis. In the sub period-II, they were in 'C'

grade but moved into 'B' grade in the next period by improving

their ranks.

TABLE 5.27

Mobility of PSBs According to Profitability Indices during 1996-99

to 2000-03 (II & III Periods) III-Period (2000-03) A Grade B Grade C Grade

II Period 1996-95 (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

-9 r

anks

)

OBOC (II.2 & III.7) UBOI (II.1 & III.10) DB (II.8 & III.26 SBOP (II.3 & III.1) BOM (II.6 & III.22)

SBOH (II.4 & III.2) COB (II.5 & III.6)

SBOM (II.7 & III.9) SBOI (II.9 & IliA)

B G

rade

(I

0-18

ran

ks)

PNB (II.10 & III.5) BOB (II.11 & II1.13) CBOI (II.15 & III.20) SB (II.13 & III.3) SBOS (II.12 & III.17) SBI (II.17 & III.19)

SBBJ (II.14 & III.8) ANB (II.16 & III.15) BOI (II.18 & III.14)

C G

rade

(I

9-27

ran

ks)

VB (II.20 & III.11) AB (II.19 & III.21)

SBOT (II.21 & III.12) P&SB (II.24 & III.25)

CB (II.22 & III.18) UNBOI (II.25 & III.23)

IOB(II.23 & III.16) UCO (II.26 & III.24) IB (II.27 & III.27)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin.

175

(C) PROFITABILITY OF PSBS IN II AND III PERIODS

An analysis of the performance PSBs with regard to profitability indices

in all the three sub-periods reveals that SBOP, OBOC, SBOH and SBOI were

in the top 'A’ grade with ranks below 9. Hence, they are considered as high

performers in all the three sub-periods Le., 1992-95; 1996-99 and 2000-03. It

is further observed that low performers in all the three sub periods are AB,

P&SB, UCO, and UNBOI. As these banks secured ranks above 19 and are

placed in the least grade 'C' in all the three sub-periods. BOB and BOI were

branded as average performers in profitability front as they found in 'B' grade

with ranks between 10 to 18, in all the three sub-periods. An interesting

observation is that the performance of SBI, Associate Banks is better when

compared to other PSBs with respect to this set of indices in all the three sub-

periods.

5.12.3 GROUPING OF PSB'S ON THE BASIS OF PERIOD-WISE COMPOSITE INDICES OF ALL THE INDICATORS

To get the final picture, grouping of banks is carried out on the basis of

ranks obtained by combining all the eleven (6 efficiency indices and 5

profitability indices) efficiency and profitability indices in each sub-period and

by assigning weights through principle component analysis. By this process

the movement from one group to another can be traced on the basis of overall

performance during the three sub-periods 1992-95, 1996-99 and 2000-03.

The final picture of the statistical analysis made so far can be presented.

(A) OVERALL GROUPING IN I AND II PERIODS

As stated already, using principle component analysis, the 27 P5Bs are

ranked on the basis of overall composite scores obtained by combining

eleven indicators (6 efficiency and 5 profitability indices) in both the sub-

period-I and II. These banks are classified into three grades/ groups A, B and

C in each sub-period.

176

In the Table 5.28, ranks obtained by banks in sub-period-I (1992-95)

are shown vertically and ranks obtained in sub period-II (1996-99) are shown

horizontally. This procedure will enable to identify the banks which moved

from one group/ grade in period-I to another in period-II. This procedure also

will enable to identify those banks that have improved or deteriorated their

overall performance. The movement among the three groups in sub-periods I

and II are presented in Table 5.28.

177

TABLE 5.28 Mobility of PSBs According to Aggregated Weighted Index

during 1992-95 to 1996-99 (I & II Periods) 1996-99 II-Period (1996-99) A Grade B Grade C Grade

1992-95 (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

0-18

rank

s) SBOP (I.1 & II.3) SBOS (I.5 & 11.12) CB (I.7 & II.22)

OBOC (I.2 & II.2) SBOH (I.3 & II04) SBI (I.9 & II.17) UBOI (I.4 & II.1) SBOI (I.7 & II.9)

B G

rade

(1

-9 r

anks

)

COB (I.11 & II.5) BOB (I.10 & II.11) SBOT (I.12 & II.21) SBOM (I.13 & II.7) SBBJ (I.14 & II.14) VB (I.16 & II.20)

C G

rade

(1

9-27

ran

ks)

BOM (1.21 & 11.6) BOB (1.10 & 11.11) AB (1.19 & 11.19) SBBJ (1.14 & 11.14) P&SB (1.23 & 11.24) BOI (1.18 & 11.18) UCO (1.25 & 11.26)

UNBOI (1.26 & 11.25)

IOB (1.27 & 11.23)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin.

(i) An analysis of the Table 5.28 reveals that SBOH, SBOP, SBOS and

OBOC have remained in the' A' grade in sub-period-I and II. Hence,

they are considered as high performers in efficiency as well as in

profitability during the period 1992-95 and 1996-99.

(ii) An insight into the data reveals that SBI, DB and AB were in the same

group / grade 'B' in both the periods by securing ranks between 10 and

18. So, these banks were branded as B grade.

178

(iii) Low performers in the sub-period-I and II as per the data in table are

CBOI, UCO, lOB, P&SB, SB and UNBOI, as they secured ranks above

19 placed in C grade/ group in both the periods.

(iv) A notable feature is that COB, PNB, UBOI and BOB, which were

found in grade B, have improved their grade to A in the second period.

Similarly, ANB which was in 20th rank during 1992-95 has remarkably

improved its position to 6th during 1996-99.

(v) Another peculiar feature is that SBOI, SBOT, SBB] and SBOM, which

were in grade' A' and considered as high performers moved down to

grade 'B' during the next period. Similarly, CB with 9th rank in the sub-

period-l slipped down. to 20th ranks in the second period.

(B) OVERALL GROUPING IN II AND III PERIOD

In the Table 5.29, ranks given to PSBs in sub-period-II (1996-99) are

shown vertically and those in sub-period-III (2000-03) are shown horizontally.

This arrangement enables to identify the banks, which moved from one group

in sub-period II to another group in sub-period-Ill. The movement of banks

among .tees three Grade/ groups in sub-period-II and III are shown as follows:

(i) Analysis of this data in the table reveals that OBOC, SBOP, COB,

SBOH and PNB are considered high performers. These banks were

found in A grade with ranks below 9 in sub-period-II and III.

(ii) The performance of AB remained stagnant and stable in sub-period-II

and III as it secured 13th rank in both the periods. Similarly, the

performance of the BOI during these periods remained stable with

ranks 15th and 16th in period-II and III

(iii) An analysis of the data in sub-period-II and III reveal that CBOI, P&SB,

lOB, UNBOI, UCO and IS were found in least C grade in both the sub-

179

periods. Out of these six low performers, Verma Committee identified

18, UCO as weak banks.

(iv) An interesting finding is that UBOI, ANB, BOB and SBOS which

secured 5th, 6th, 7th and 9th rank in period-II have unfortunately

moved down to 14th, 11th, 17th and 10th ranks in the last period.

TABLE 5.29 Mobility of PSBs According to Aggregated Weighted Index

during 1996-99 to 2000-03 (II & III Periods) III-Period (2000-03) A Grade B Grade C Grade II- Period 1996-97 (1-9 ranks) (10-18 ranks) (19-27 ranks)

A G

rade

(1

-9 r

anks

)

OBOC (II.1 & III.8) UBOI (II.5 & III.14) SBOP (II.2 & III.1) ANB (II.6 & III.11) COB (II.3 & III.1) BOB (II.7 & III.17)

SBOH (II.4 & III.2) SBOS (II.9 & 1II.10) PNB (II.8 & III.6)

B G

rade

(1

0-18

ran

ks)

SBOI (II.10 & III.3) AB (II.13 & III.13) DB (II.11 & III.27) SBOM (II.12 & III.7 BOI (II.15 & III.16) SBI (II.16 & III.24) SBBJ II.14 & III.5) SBOT (II.17 & III.9) BOM (II.18 & III.19)

C G

rade

(I

9-27

ran

ks)

CB (II.20 & III.15) CBOI (II.19 & III.21) SB (II.21 & III:12) P&SB (II.22 & III.25) VB (II.24 & III.18) IOB (II.23 & III.22) UNBOI (II.25 & III.23) UCO (II.26 & III.20) IB (II.27 & III.26)

Note: Roman letters indicates periods and normal number indicates ranks in different periods. Source: Compiled from RBI Bulletin. (C) OVERALL PERFORMANCE OF PSBS IN I, II AND IIIPERIODS

An analysis of the performance of PSBs (efficiency and profitability) in all

the three sub-periods reveals that SBOH, SBOP and OBOC were in the

highest grade with ranks below 9. Hence, they are considered as high

180

performers in 11 years period. It is further observed that low performers in all

the three sub-periods are CBOI, UCO, lOB, PSB and UNBOL Since these

banks occupier C grade and obtained ranks above 19 in all the three sub-

periods, they are treated as low performers out of these four least performers,

UCO banks was identified as weak banks by RBI. As far as AB is concerned,

it is branded as average performers as it was placed in 'B' grade and .secured

a rank between 10 and 18 in each of the succeeding sub-periods.

5.13 PERFORMANCE ANALYSIS OF ALL BANKS(2nd POST REFORM PERIOD)

After the second generation reforms, ,the efficiency of all banks measured on

different parameters. All main banks divided in to Five Groups namely i)

Nationalized banks ii) SBI & Its Associates iii) Old Pvt. Sector Banks iv) New

Pvt. Sector Banks and v) Foreign Banks. In order to measure efficiency and

impact of reforms at the branch and employees level, the following

parameters are employed: (1) Business per Branch, (2) Operating expenses

per Branch, (3) Profit per Branch, (4) Business per Employee, (5)

Establishment expenses per Employee, and (6) Profit per Employee. The

study thus measures efficiency of a bank at the level of operational units, ie.,

branch and employee, The efficiency of each branch and employee in terms

of averages of indicators can be compared to assess the relative performance

of different banks and bank groups.

a). BRANCH LEVEL EFFICIENCY

5.13.1. BUSINESS PER BRANCH

As financial intermediaries banks mobilize savings in the form of various

types of deposits and utilize such funds for granting loans and advances. The

total business of the bank may be estimated by adding advances to deposits.

In the present analysis, the total business is taken as one of the indicators to

measure efficiency. As a matter of fact banks render agency and general

utility and in modern times they have been undertaking Para-banking

181

activities. Since it is difficult to quantify the value of various services rendered

by banks, the total business is taken as an indicator. It may be seen from the

table that the growth of business accelerated from 1999-2000. In the case of

SBI, the average business per branch is less than the mean up to 1997-98.

The same is the case with the associate banks and the nationalized banks.

TABLE-5.30

BUSINESS PER BRANCH OF ALL BANKS (Rs. in Crores)

Years NationalizedBanks

SBI & its Associates

Old Pvt. Sector banks

New Pvt. Sector Banks

Foreign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

2152 2478 2446 1295 3612 4242 2704.17 1058.07 39.13

2860 3411 3793 4260 6196 7454 6662.17 1782.07 38.22

2255 2633 2904 4035 3891 4149 3311 812.63 24.54

14989 11131 16673 20733 20766 21656 17659.17 4144.05 23.47

54800 62272 70929 69025 67787 114768 73263.17 21155.42 28.88

Source:Performance highlights of1999 to 2005.IBA Mumbai.

From the above table on an average the per branch business is lower in

Nationalized banks, SBI & Associates, and Old Pvt. Sector banks as

compare to New pvt. Sector banks & Foreign banks. It was only Rs. 2704.17

Cr. in case of Nationalized bank where as it was Rs. 17659.17 in New pvt

sector bank and Rs.73263’17 Cr.In Foreign banks. In this parameter foreign

banks have lion’s share among all Indian bank groups.Hence the new private

Sector in India has led the way in this regards because of the better use of

technology and other infrastructure.

5.13.2 . EXPENSES PER BRANCH OF ALL BANKS

Among the Indian banks, average per branch expenses incurred by new

private sector banks is at the tune of Rs.1169.06 crores as compared to

Nationalised Banks, SBI and Associates, Old Pvt. Banks, with branch

expenses of Rs.205.34, 303.38 & 228.74 crores respectively. But branch

182

expenses are highest in Foreign Banks, having amount of Rs.6364.72 crores

for each branch.

TABLE 5.31

EXPENSES PER BRANCH OF ALL BANKS ( Rs. In Crores)

Years Nationalized Banks

SBI & its Associates

Old Pvt. Sector banks

New Pvt. Sector Banks

Foreign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

166 189 206 217 224 230

205.3423.99 11.68

232 274 304 326 338 346 303.38 43.43 14.32

182 200 234 288 239 230 228.74 36.52 15.97

747 820 934 1905 1450 1159 1169.06 441.82 37.80

5985 6502 6883 5866 5129 7824 6364.72931.51 14.64

Source:Performance highlights of1999 to 2005.IBA Mumbai.

5.13.3. PROFITABILITY PER BRANCH : For Indian public sector banks, the profits per branch were in the range of

Rs.6.39 to 41.08 cr. during the study period. Among the Indian banks

displayed the highest profits per branch that lie between Rs.19.09 to 174.34

cr. But overall, foreign banks show excellent results in this parameter. The

profitability per branch was in the range of Rs.623.56 to 1405.67cr. On an

inter-temporal basis, per branch profits have been increasing gradually in the

Indian banking sector.

The growth in branch profits for Indian banks is attributable to the overall

increase in profitability in the banking industry. In the case of the foreign peer

group, profitability per branch shows a small increase over the period covered

by this study. Hence, on an average, branch profitability of foreign banks is

higher than that of Nationalized Banks, SBI and Associates, Old Pvt. Banks

and New Pvt. Sector Banks. But, we can also say that New Pvt. Sector Banks

is quite active and competing with foreign banks.(Table 5.32)

183

TABLE-5.32 PROFITABILITY PER BRANCH OF ALL BANKS

(Rs. in Crores) Years Nationalized

Banks SBI & its

AssociatesOld Pvt.

Sector banksNew Pvt.

Sector BanksForeign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

7.43 6.39

14.80 23.50 32.70 27.98 18.80 10.92 58.19

19.67 16.39 25.37 33.12 41.08 41.06 29.48 10.61 35.99

14.30 14.24 24.17 35.32 61.12 71.87 36.84 24.49 66.48

123.70 76.44 83.91 174.34 123.96 19.09 100.24 52.96 52.83

623.56 637.06 897.33 1032.39 1029.27 1405.67 937.55 292.25 31.17

Source:Performance highlights of1999 to 2005.IBA Mumbai.

b). EFFICIENCY AT EMPLOYEE LEVEL : 5.13.4. BUSINESS PER EMPLOYEE OF ALL BANKS : Since different employees in a bank contribute in different ways to the

revenues and profits of a blank, it is difficult to come up with one universal

metric that captures the business per employee accurately. The business per

employee is quite low in other counter parts i.e Nationalized banks SBI &

Associates, old pvt. Banks as compared to New pvt, sector banks and

Foreign banks. The average per employee business is the highest in New

Pvt. Sector Banks i.e Rs.905.83 crores and Foreign Banks has an average of

Rs.901.50 crores in the study period.

Thus, deposits mobilization and advances per employee are higher in New

Pvt. Sector Banks Foreign Banks. These bank groups are providing a better

interest on deposits and lower interest on advances; their market policies are

quite effective as compared to Indian public sector banks.

184

TABLE-5.33

BUSINESS PER EMPLOYEE OF ALL BANKS (Rs. In Crores)

Years Nationalized Banks

SBI & its Associates

Old Pvt. Sector banks

New Pvt. Sector Banks

Foreign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

126 160 197 222 256 308 211.50 65.59 31.06

122 160 182 205 302 379 223.50 93.83 41.98

171 202 227 299 317 355 261.83 72.32 27.62

938 749 906 1094 873 875 905.83 112.31 12.40

699 817 958 1014 981 940 901.50 119.83 13.29

Source:Performance highlights of1999 to 2005.IBA Mumbai.

5.13.5. EXPENSES PER EMPLOYEE OF ALL BANKS : On Employee, Indian banks pays less as compared banks. Among Indian banks, new

private sector banks pay on an average Rs.59.83 crores as compared to first three

categories, who pay Rs.14.00,14.43 & 18.07 crores respectively. The highest

expenses per employee incurred by foreign banks, having Rs.79.84 crores per

employee. The New Pvt. Sector Banks & Foreign Banks pays higher and attractive

salary to the efficient employees; they also provide better facilities and incentives to

their employees. Due to this reason, per employee expenses are higher even return

per employee is much higher as compared to their counterparts.

TABLE 5.34 EXPENSES PER EMPLOYEE : ALL BANKS

(Rs. in Crores) Years Nationalized

Banks SBI & its Associates

Old Pvt. Sector banks

New Pvt. Sector Banks

Foreign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

9.76 12.22 14.30 15.20 15.85 16.68 14.00 2.58 18.43

9.93 12.83 14.55 15.62 16.48 17.19 14.43 2.69 18.64

13.80 15.35 18.34 21.33 19.88 19.73 18.07 2.91 16.10

44.76 55.26 50.76 100.51 60.9 46.79 59.83 20.77 34.72

76.33 85.26 92.99 26.17 74.21 64.10 79.84 10.34 12.95

Source:Performance highlights of1999 to 2005.IBA Mumbai.

185

Overall, we may conclude that among the Indian bank groups, new private sector

banks had shown excellent growth in their efficiency and this group is competing

with foreign banks in terms of many parameters of efficiency. Number of factors

are contributing in their excellent efficiency performance like work culture,

dedication, loyalty, technology, better facilities, new products/services,

management, transparency etc.

5.13.6. PROFITABILITY PER EMPLOYEE : The profit per employee is in the range of Rs.0.41 to 2.32 Crores during the second

part of study period in Nationalized Banks, similarly,it was between Rs.0.77 to 2.04

Crores in SBI & Associates,Rs.1.08 to 6.15 Crores in Old Pvt. Sector Banks and

Rs.8.07 to 15.17 Crores in Foreign Banks. The Public sector Banks, even Old

private sector banks have shown poor efficiency in terms of profit per employee as

compared to New private sector banks and Foreign banks. But our New private

sector banks are competing with the foreign banks whose average performance is

higher (18.14) as compared to foreign banks where average is only 11.68 in at the

end of the study period.

This overall trend of increasing employee profitability may be attributed to the

reduction in the number of employees following the launch of VRS by some of the

Indian banks as well as higher profits by the banks. On an average, new private

sector banks enjoy a higher increase in their profitability per employee, as

compared with their counter part public sector banks. This may be attributed

largely to the better technology that the new private sector banks employ, besides

the advantage of carrying no historical baggage. ICICI and HDFC Banks in New

pvt. Sector banks are dominating in profit per employee whereas Corporation

Bank, OBC and PNB have the higher per employee profit in nationalized bank,

whereas Punjab & Sindh Bank, UCO Bank and Dena Bank are responsible for

lowering the profit per employee.

186

TABLE 5.35 PROFITABILITY PER EMPLOYEE OF ALL BANKS ( Rs. In Crores )

Years Nationalized Banks

SBI & its Associates

Old Pvt. Sector banks

New Pvt. Sector Banks

Foreign Banks

1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Average S.D C.V (%0

0.44 0.41 0.65 1.65 2.32 2.03 1.26 0.85 67.46

0.85 0.77 1.21 1.59 2.00 2.04 1.42 0.55 38.73

1.08 1.09 1.89 2.62 5.09 6.15 2.98 2.15 72.15

7.75 5.14 4.56 9.20 5.20 0.77 5.44 2.91 53.49

8.07 8.35 12.12 15.17 14.89 11.52 11.68 3.06 26.20

Source:Performance highlights of1999 to 2005.IBA Mumbai.

5.14. CONCLUSION

An analysis of the performance of PSBs (efficiency and profitability)

reveals that SBOH, SSBOI and OBOC were in the highest grade with ranks

below 9. Hence, they are considered as high performers in 11 years period. It

is further observed that low performers in all the three sub-periods are CBOI,

UCO, lOB, PSB and UNBOL Since these banks occupier C grade and

obtained ranks above 19 in all the three sub-periods, they are treated as low

performers out of these four least performers, UCO banks was identified as

weak banks by RBI. As far as AB is concerned, it is branded as average

performers as it was placed in 'B' grade and .secured a rank between 10 and

18 in each of the succeeding sub-periods.

In brief, the analysis of PSBs at branch level reveal that business,

operating expenses and profits on an average, have increased at a faster

rate during the period under study. The increase is significant especially in

the case of business and operating expenses. Inter-group analysis indicates

that the performance of SBI and Associate banks, on an average, is better

than that of Nationalized banks in business and profit but they could not

control their operating expenses. The performance of NBs on profit front

187

cpnsidere9 to be weak when compared to other two groups.

The analysis of efficiency at employee level reveals that business,

establishment expenses and profits have, on an average, increased and the

increase is prominent in the case of business and establishment expenses.

5BI and Associate banks would have earned more profit per employee for

the business. They did, if they show concern about their establishment

expenses.

Performance of PSBs on profitability front is good both in terms of

mean values and growth rates, especially in ROA, ROE, and NIL The Spread

has declined during the first three years due to slashing down of interest

rates. Deployment of resources by way of loans and advances is rather weak

and they could not reach the desired standards of Cod ratio.

Period-wise analysis of P5Bs showed that there is an improvement in

all the indicators during the three sub-periods. The reform measures appear

to have improved the performance of PSBs as a whole. For most of the

indicators the improvement in period-III over in period-I and in period-II over I

is encouraging but in Period-III over II is on the lower side. An analysis of the

behavior of most of the indicators suggest that by and large immediately after

introduction of banking sector reforms (period-I) most of the banks struggled

to adjust the new environment.

It appears that all public sector banks have not responded to the

process of reforms in the same degree and spirit. Some of them, for

instance, OBOC, SBOH and SBOP, etc. recorded a marked improvement,

while other banks like UCO, UNBOI, CBOI, IOB and P&SB failed to show

any significant improvement.

Thus the above analysis indicates that the public sector banks in India

have made significant progress after some changes of the liberalization and

reforms. After studying the performance of public sector banks, we will study

the performance of private sector banks in the forthcoming chapter.