TABLE OF CONTENTS S. NO CHAPTER DECLARATION (PARA 12 – B) CERTIFICATE (PARA 12 – C) PREFACE ACKNOWLEDGEMENT PAGE ii iii iv v 1 1 1 2 4 6 11 11 12 13 14 15 15 18 20 21 21 25 26 28 30 1 1. 1 1. 1. 1 1. 1. 2 1. 1. 3 1. 1. 4 1. 1. 5 1. 1. 6 1. 1. 7 1. 1. 8 1. 1. 9 1. 1. 10 1. 1. 11 1. 1. 12 1. 1. 13 1. 2 1. 2. 1 1. 2. 2 1. 2. 3 1. 3 1. 4 INTRODUCTION Importance of Banks in an Economy What Is A Bank?
Functions of a Bank Banking Sector in India The Role of Banking in an Economy Role of Banks in the Indian Economy The Role Of Central Bank In Indian Banking System (RBI) Basel Norms and Banking in India Recent Developments In The Indian Banking Industry Government Initiatives Challenges and Opportunities for Players Scenario Planning Of Banking Sector: 2010 Challenges Faced By the Indian Banking Industry Strategies Undertaken by Banks to Tackle the Challenges Public Sector Banks in India Evolution of the Indian Banking Nationalised Banks In India Present Scenario Private Sector Banks in India Concept of Financial Analysis . 4. 1 1. 4. 2 1. 4. 3 1. 4. 4 1. 5 1. 5. 1 1. 5. 2 1. 5. 3 1. 5. 4 1. 5. 5 1. 6 Meaning The Concept Need For A Comparative Financial Analysis Significance Of Financial Analysis Tools for Financial Analysis Ratio analysis Horizontal Analysis Vertical Analysis Funds Flow Analysis Cash Flow Statement Factors Affecting Financial Statement Analysis References 30 31 32 33 36 37 54 55 56 58 64 66 69 69 71 71 71 71 73 81 84 86 89 89 90 90 93 94 94 95 ii 2 2. 1 2. 2 2. 2. 1 2. 3 2. 4 2. 5 2. 5. 1 2. 5. 2
RESEARCH DESIGN Objective of the study Research Methodology Secondary Research Data Collection Data Analysis and Interpretation Literature Review Characteristics of banks in India Theme of the Research References 3 3. 1 3. 1. 1 3. 1. 2 3. 2 3. 3 3. 3. 1 3. 3. 2 FINANCIAL ANALYSIS OF SBI State bank of India International Presence Associate Banks Establishment Profile Deposit Loans 3. 4 3. 5 3. 5. 1 3. 5. 2 3. 5. 3 Employees Ratio Analysis of SBI Bank Liquidity Ratios Activity Ratios (Management Efficiency Ratios) Profitability Ratios References 9 100 100 104 118 125 126 126 127 129 129 130 131 132 133 133 135 136 148 154 155 177 179 182 175 188 193 iii 4 4. 1 4. 2 4. 3 4. 3. 1 4. 3. 2 4. 2. 3 4. 2. 4 4. 3 4. 3. 1 4. 3. 2 4. 3. 3 4. 3. 4 FINANCIAL ANALYSIS OF ICICI BANK Introduction History Profile Deposits Loans Organisation Employees Ratio Analysis of ICICI Bank Liquidity Ratios Leverage Ratios Activity Ratios (Management Efficiency Ratios) Profitability Ratios References 5 6 6. 1 7
COMPARATIVE STUDY OF ICICI AND SBI BANK FINANCIAL PROBLEMS IN PUBLIC SECTOR BANKS Financial Problems in Private Sector Banks CONCLUSION AND RECOMMENDATIONS REFERENCES BIBLIOGRAPHY APPENDIX I- Profit & Loss Accounts Of ICICI Bank APPENDIX II- Balance Sheets Of ICICI Bank APPENDIX III – Profit & Loss Accounts Of SBI Bank APPENDIX IV- Balance Sheets Of SBI Bank 193 196 198 iv Sample Excerpt Industry experts across the globe have conducted studies on the changes taking place in different economies, countries, people, etc.
In the past few decades, the world has witnessed changes in legal reforms, technological transformation, economic and political reforms. Authors have expressed such analogies in the Indian context, particularly in the public sector banks during the era of reforms. In a review carried out by the New Institutional Economics for bank failures, particular emphasis was laid in structuring of different techniques as per the analytical framework.
It studied the bank restructuring patterns undertaken by different nations and economies, designed to assist financial sector professionals and to assist policy makers in all situations (Andrew Sheng, 1991). The financial services sector is undergoing rapid transformation at an extremely fast pace. Recent examples are the Private Sector Banks which have broadened their product portfolio considerably, public sector banks which have started extensive promotions through innovative marketing tools, etc.
Several reasons have been accredited for this occurrence, like competition from non-traditional institutions, erosion of geographic and product boundaries, new information technologies, more liberal government reforms, less processing charges, and many more (Dwight B Crane, Zvi Bodie, 1996). The experiences and advancements taking place in the Hungarian banking industry from a centralized economy to a more liberal, market-oriented structure was studied by Hasan, Iftekhar and Marton, Katherin (2003).
In their study, they concluded that flexible approaches to privatization, early recognition initiatives and open trade policies towards foreign banks are the factors responsible for building a relatively stable and efficient banking system. 5 The analysis of the merger of two banks in Scandinavia also led renowned author Peter (2003) to believe the same. The analysis explained the changes in reforms, legislative structure, competitive environment, and the challenges and opportunities in merging a smaller and successful bank in a state-owned bank. n this book, the most crucial part was the predicted effects of the merger on the profitability and market position. Similarly, Kipper et al (2003), presented in his study two diverse sets of data. The authors used a sophisticated model and descriptive statistics to test the validity of two basic premises of the theories on optimal ranges. Rather than supporting the widely accepted assumptions, it was found that people appear not too pay accurately and are different in usage of coins and notes.
When Portugal entered the European Community in 1986, it transformed its repressed banking system into an altogether new one with privatization and deregulation. Albeit such a competitive industry, a priori was expected as a result of an increase in operational efficiency. Canhoto et al (2003) quantified the magnitude of efficiency gains over the years 1990-1995. The case of Portugal banking industry gives an insight into the effects of deregulation and the imposition of new banking licenses on a reformed efficiency in operations of the banking system. In another scenario, the performance of Swiss banks was studied by Rime et al (2003).
They implemented a broad definition of bank output, and provided theories of profit inefficiencies and large relative costs. A condensed view definition focuses on traditional activities with the outcome being even lower efficiency estimates. All in all, the largest of banks witness the evidence on scope economies. The results suggested the apparent benefits of the trend towards universal banks in Switzerland. 6 ? E-banking The extraordinary growth of B2C e-commerce has led to parallel changes in the nature of businesses of the banking and finance industry.
Customers have not undertaken ecommerce in the banking industry to that extent, as a result f the risks of phishing involved. Trust is defined as a function of the degree of risk involved in the e-banking transaction. The resulting scenario of trust is assessed to be reduced perceived risk, leading to positive intentions towards adoption of e-banking (Yousafzai, Shumaila Y. ; Pallister, John G. and Foxall, Gordon R. (2003). There is an increased focus on branch banking, despite the rising popularity of internet banking.
There was also a push on the customers towards the usage of automated teller machines (ATMs). According to John D. Hawke (2003), the United States had imposed reforms prohibiting linking loans and services are contrary to the “tied lending” rule which presupposes that no one bank stands dominant over bank credit. Cross-marketing and Cross-selling are the common business dealings in India. The RBI in India formed several committees periodically with different goals and executed a team of Academicians or experts from various fields through the 1980s and 90s.
Public sector banks started realizing the ill-effects o not implementing the modern methods of banking then. They witnessed a tremendous change in policies at the apex level, cut-throat competition from private sector and foreign banks and the importance of advent of technology during the late 1980s. They initiated a change in policies and products after recommendations from Expert Committees. Keeping in view the changes in global scenario and extensive policy changes due to the reforms in the banking sectors, authors conducted studies on the changes in the banking sector.
Bhattacharya et al (1997) studied the pre-liberalization productive efficiency of 70 commercial banks in India during their early stages (1986-1991). To analyse the results, they used Stochastic Frontier Analysis to attribute variation and Data Envelopment Analysis to calculate radical 7 technical efficiency in the efficiency scores to three sources: an ownership component, a temporal component and random noise component. It was found in this study that public sector banks were the most efficient in the Indian banking industry, followed by foreign-owned banks and private banks.
They explained the terms of the evolving regulatory practices of the government. As explained by Rohit Rao (2000), the economic situation of an economy can be seen in its banking performance. As long as the banks perform their primary function of lending to the economic constituents, they have a competitive edge over other. 8 REFERENCES ? Andrew Sheng (1991), “The Art of Bank Restructuring: Issues and Techniques”, Working Paper, Economic Development Institute of the World Bank, Washington, D. C. , June. ? Dwight B. Crane and Zvi Bodie (1996), “The Transformation of Banking”, Harvard Business Review, Mar. Apr. , pp. 109-117 ? Hasan, Iftekhar and Marton, Katherin (2003), “Development and Efficiency of the Banking Sector in a Transitional Economy: Hungarian Experience”, Journal of Banking & Finance, Vol. 27, Issue 12, pp. 2249-2272 ? Canhoto, Ana and Dermine, Jean (2003), “A Note on Banking Efficiency in Portugal, New Vs. Old Banks”, Journal of Banking & Finance, Vol. 27, Issue 11, pp. 2087-2099 ? Rime, Bertrand and Stiroh, Kevin L. (2003). “The Performance of Universal Banks Evidnce from Switzerland”, Journal of Banking & Finance, Vol 27, Issue 11, pp. 212151. 9
