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
96

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.
97

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.

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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 recapitalization 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.

99

TABLE 5.1
PHASES OF RECAPITALIZATION OF NATIONALIZED BANKS
Period/Year

No. of Banks
Recapitalized

Rs. Crore

PHASE I : REGULAR AND GENERAL

1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
Sub Total (1985-86 to
1992-93)

19
19
18
18
8
11
15
13

400
400
200
200
700
700
700
700
4000

PHASE II : PRE-DESIGNED UNDER A RECOVERY

1993-94
1994-95
Sub total (1993-94 to
1994-95)

PROGRAMME IN GENERAL
19
13

5,700
5,287
10,987

PHASE III : CASE TO CASE BASIS

1995-96
6
1996-97
6
1997-98
3
1998-99
3
19992000
Nil
20002001
Nil
Sub Total (1995-96 to
200001)
Total (1985-86 to 200001)
Source: EPW, Vol. XXXVII, No. 23, June 2002, p. 2242,

850
1590
2700
400
Nil
Nil
5459
20446

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.

100

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.
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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
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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 PSBs: 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.

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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)
Nationalised
Year
SBI
Associate Banks
PSBs
Banks
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
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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 passingacid 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
105

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
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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 periodIII (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
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profitability of banks. By 1992-93 several banks had accumulated nonperforming 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.

108

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.

109

TABLE 5.5
PROFIT PER BRANCH OF PSBS : 1992-2003
(Rs. in Lacs)
No. Name

1.
2.
3.
4.
5.
6.
7.
8.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS

.9.
AB
10. ANB
11. BOB
12.
BOI
13.
BOM
14.
CB
15. CBOI
16. COB
17.
DB
18.
IB
19. IOB
20. OBOC
21. P&SB

1992-93

1993- 1994- 199520011996-97 1997-98 1998-991999-2000 2000-01

2002-03
94
95
96
02

1992-03

(2)
2.43
1.55
2AJ3 D
0.87
0.78
5.01
1.45
1.30

(3)
3.12
0.95
3.20
1.13
0.38
3.20
1.67
1.41

(4)
(5)
8.09 93.60
1.09 3.49
5.73 6.42
2.56 3.33
0.57 4.82
4.54 7.94
3.79 -61.01
3.25 4.00

(6)
15.18
5.24
65.00
4.57
7.18
84.40
18.68
6.12

(7)
(8)
20.85 11.45
11.73 11.80
11.66 13.10
7.39
8.01
9.07
5.87
20.23 14.19
20.31
6.25
9.55
6.48

(9)
(10)
22.69 17.67
15.25
13.29
14.65
17.08
11.25
15.65
8.09
4.31
18.35
2.27
22.03
3.43
-9.90
- 14.46

(11)
26.77
20.83
25.54
29.83
10.93
32.23
19.95
17.95

(12)
34.19
25.60
33.67
46.84
19.21
43.63
22.46
25.48

Mean
(13)
23.28
10.07
18.03
11.95
6.47
21.45
5.36
9.08

1.77

2.04

3.25

7.60

12.82

14.15

13.79

22.58

30.98

10.73

0.9004

24.78

-5.88
14.70
0.33
13.90
17.39
1.27
12.59
0.89
-8.06
0.51
-57.57
3.80
25.46

.19.95
16.72
2.76
46.01
26.28
5.75
23.25
5.73
.6.24
27.77
6.53
5.49
25.73

4.10
4.54
7.16
2.06
3.61
9.55
2.73
14.84
2.65
0.97
0.74
18.45
1.01

3.65:
2.10
11.89
11.86
18.97
10.30
6.84' 9.94
7.53 3.69
9.85
11.85
4.87
1.48
35.80
40.18
5.38
22.64
.28.54 .19.26
2.81
8.08
30.49
21.78
8.29
1.74

4.18
18.90
20.38
19.82
11.87
30.76
5.23
46.74
0.97
2.36
15.89
3320
3.06

8.63
36.64
28.08
33.26
18.02
42.04
9.82
60.82
10.04
13.53
29.03
46.20
0.53

0.59
13.21
12.90
5.49
0.76
13.40
.0.39
2822
1.05
22.48
.0.69
23.50
3.42 .

13.9392
2.2283
0.6434
3.7490
16.7063
0.8974
24.8419 0.6250
9.3727
.1.3058
33.5701
0.5048
3.8983

307.45
38.23
17.29
83.90
438.94
21.05
589.74
18.57
41.76
.903
-827.91
13.41
83.13

0.93

0.32
3.44
1.12
3.70
8.24 11.11
11.25 14.55
1.14
4.10
11.54 6.50
2.40
'4.89
20.96 24.65
4.59
6.39
.90.76 .26.16
0.22
7.66
24.68 23.84
.18.86 2.84

10.01

6.88
7.17
7.64
89.50
18.20 16.36
14.63
8.00
4.82
4.43
8.78
9.46
5.67
4.72.
28.74 31.12
9.08
9.43.
.20.21 -51.97
8.19
3.92
24.97 25.58
9.14
7.88

CV
(14)
1.0861
0.8322
1.0129
1.1967
0.8519
1.1488
4.4211
0.2855

GR
(15)
5.33
24.02
12.31
30.72
21.16
10.72
56.11
23.34

110

22.
PNB
1.23
2.04 2.32
23.
SB
.43.00 .19.19 -5.87
24. UCO
24.79
.30.40 4.68
25. UBOI
0.59
2.64 5.55
26. UNBOI
21.04
.46.40 .14.79
27.
VB
13.21
0.51 3.95
NB
12.02
15.44 0.87
PSBs
-7.78
10.04 2.55
Source: Reserve Bank Of India.

2.57
1.26
13.15
4.00
17.55
2.99
3.72
0.84

6.32
4.16
-9.76
10.64
.8.55
2.28
4.57
6.96

12.58
5.10
-532
11.98
0.75
2.75
8.00
5.67

9.73
8.56
3.79
7.55
1.13
3.61
5.50
7.10

10.59
12.69
2.10
4.73
2.33
6.33
7.43
11.05

11.96
13.56
1.92
7.55
1.44
8.43
6.40
9.32

14.57
14.34
9.62
15.52
9.13
15.82
14.80
17.90

20.86
19.76
12.11
27.38
23.48
23.37
23.50
26.30

8.15
1.03
.6.01
8.92
-6.37 .
5.17
3.63
6.20

0.8528
17.5725
2.1819
0.8406
2.8918
1.7730
3.0650
1.6902

23.07
469.22
.60.70
19.39
77.55
46.65
84.93
47.91

111

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
112

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.

113

TABLE 5.6
BUSINESS PER EMPLOYEE OF PSBS : 1992-2003
(Rs. in Lacs)
No. Name

1.
2.
3.
4.
5.
6.
7.
8.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS

.9. AB
10. ANB
11. BOB
12. BOI
13.
BOM
14.
CB
15. CBOI
16. COB
17.
DB
18.
IB
19. IOB
20. OBOC
21. P&SB

1992-93
(2)
50.40
31.67
44.60
36.15
34.64
42.00
35.54
41.28

1993- 1994- 199520011996-97 1997-98 1998-99 1999-2000 2000-01

94
95
96
02
(4)
(5)
57.61 67.07
40.20 47.19
63.65 71.08
49.37 58.28
46.94 53.90
59.33 69.46
51.69 61.70
62.18 68.25

(6)
73.26
55.00
99.90
64.66
61.08
78.66
73.05
77.93

(7)
(8)
85.68 105.85
67.69 77.37
93.06 109.11
77.16 89.66
65.98 74.85
90.34 104.22
79.99 92.00
87.89 97.55

(9)
126.34
91.18
126.29
114.61
88.69
121.22
110.34
118.23

(10)
165.90
115.70
165.16
154.36
119.32
154.12
136.96
147.64

38.31 44.31 53.68 53.51

70.47

80.77

89.03

110.36

141.81 166.57 197.98

72.18
66.36
106.42
94.40
62.16
84.43
63.21
103.29
76.27
77.73
81.09
110.01
74.49

85.22
75.10
128.29
116.84
76.85
100.31
74.55
142.02
101.01
84.03
98.76
136.09
88.73

98.88
101.30
142.26
128.04
91.65
111.06
88.81
185.49
22.24
92.02
113.04
169.68
111.52

116.98
136.90
160.80
139.19
115.91
129.23
107.08
208.34
141.58
103.47
127.21
218.23
126.33

141.31
200.93
175.78
190.35
166.44
180.08
127.12
245.03
197.08
135.93
155.75
263.15
169.44

51.21
39.10'
73.26
58.39
30.70
217.17
39.74
45.21
37.16
74.48
51.17
57.16
39.59

(3)
51.46
35.52
52.37
41.88
37.64
50.32
39.43
49.58

53:21
41.76
83.38
60.84
33.23
53.33
40.22
60.54
42.80
69.89
55.98
.65.65
45.45

58.60
47.19
90.88
67.45
43.92
62.54
49.40
89.23
53.16
77.11
66.20
82.49
61.93

65.18
56.09
96.72
79.78
50.26
72.79
56.01
88.52
61.88
77.79
77.55
101.94
69.44

(11)
186.84
131.98
191.64
186.68
136.14
191.13
157.44
172.16

2002-03

166.91
219.86
245.42
225.47
193.61
203.27
172.65
276.93
213.81
156.80
191.67
313.83
182.12

(12)
207.60
151.46
226.20
220.52
146.50
245.55
184.98
269;05

19922003
Mean
(13)
107.09
76.89
111.19
99.39
78.70
109.67
93.01
102.89

CV
GR
(14)
(15)
0.5303
15.31
0.5334
15.62
0.5390
15.61
0.6270 17.8787
0.4984
14.49
0.5826 16.54
0.5297 15.56
0.5205
15.08

95.16 0.5581

194.76. 100.40
250.75 112.30
252.31 141.41
248.23 128.09
225.56 99.12
236.65 116.44
188.98 91.62
314.60 159.93
236.21 107.56
178.23 102.50
222.85 112.84
336.76 168.64
194.80 105.80

16.08

0.4873 14.04
0.6929 19.65
0.4395 12.62
0.5212 15.11
0.6850 19.66
. 0.5506 15.92
0.5675 16.24
0.5748 17.06
0.7172 18.73
0.3647 9.83
0.5015 14.51
0.5934
17.39
0.5245
15.43
114

22.
PNB
46.95 43.73
23.
SB
34.07 36.85
24. UCO
44.63 39.84
25. UBOI
42.02 51.79
26. UNBOI
39.96 41.98
27.
VB
35.70 43.71
NB
48.15 50.96
PSBs
47.84 50.49
Source:Reserve Bank Of India

50.34
42.84
43.65
68.86
48.13
58.29
60.09
58.87

55.85
48.51
48.02
80.64
51.74
58.97
67.52
66.86

66.36 76.90 91.05

56.30 65.56 81.76
52.17 61.01 70.04
94.35 107.87 126.66
59.97 69.91 84.39
65.19 80.92 95.17
76.78 91.90 104.51
75.31 89.20 97.06

108.22
103.70
83.24
150.51
100.16
113.66
126.48
124.93

144.36
124.41
108.42
186.83
121.31
136.24
159.93
159.84

170.23
169.86
155.10
236.92
147.19
176.52
197.29
191.37

196.74 95.52 0.5564 15.86

184.53 86.22 0.6162
17.56
188.61 81.34 0.6107
16.36
273.33 129.07 0.5871 17.07
159.95 84.06 0.5078 14.73
212.50 97.90 0.5804
16.61
221.90 109.59 0.5473
15.76
215.60 107.03 0.5453
15.66

115

TABLE 5.7
ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
0.94
0.70
0.76
0.76
0.73
0.66
0.77
0.71
0.73
0.72
0.74
0.91
0.86
0.76
0.76
0.76
0.77
0.87
0.78
0.79
0.73

CV
(3)
0.18
0.16
0.16
0.21
0.10
0.19
0.22
0.18
0.16
0.17
0.23
0.19
0.22
0.22
0.18
0.19
0.25
0.22
0.10
0.11
0.19

Mean
(4)
1.55
1.45
1.52
1.46
1.43
1.34
1.55
1.25
1.42
1.28
1.39
1.59
1.52
1.62
1.35
1.47
1.39
1.61
1.45
1.50
1.31

CV
(5)
0.12
0.16
0.23
0.17
0.13
0.10
0.15
0.06
0.14
0.13
0.15
0.16
0.13
0.14
0.17
0.14
0.15
0.15
0.11
0.17
0.14

Mean
(6)
2.66
2.35
2.27
2.41
2.61
2.25
2.11
2.18
2.30
2.47
2.72
2.66
2.72
2.63
2.46
2.76
2.10
3.48
2.58
2.74
2.34

CV
(7)
0.07
0.07
0.07
0.05
0.07
0.07
0.07
0.06
0.06
0.07
0.12
0.06
0.11
0.12
0.05
0.11
0.12
0.13
0.02
0.07
0.10

Percentage Change
II Vs I
(8)
63.96
96.38
99.56
92.11
96.79
102.53
102.17
77.36
94.95
76.50
87.44
75.00
76.36
114.10
77.97
93.86
81.74
85.06
85.47
91.10
80.28

III Vs II
(9)
71.98
62.21
49.67
65.30
82.28
68.58
36.34
73.94
62.59
93.21
94.98
67.65
79.12
62.14
82.92
87.10
50.96
116.36
78.11
82.26
78.63

III Vs I
(10)
181.98
218.55
198.68
217.54
258.72
241.41
175.65
208.49
216.97
241.01
265.47
193.38
215.89
247.14
225.55
262.72
174.35
300.38
230.34
248.31
222.02
116

21.
22.
23.
24.
25.
26.
27.

P&SB
0.82
PNB
0.70
SB
0.82
UCO
0.78
UBOI
0.75
UNBOI
0.79
VB
0.79
NB
0.78
PSBs
0.82
Source:Reserve Bank Of India

0.10
0.18
0.22
0.11
0.17
0.16
0.17
0.18
0.18

1.46
1.38
1.45
1.37
1.48
1.42
1.44
1.44
1.46

0.07
0.16
0.12
0.09
0.12
0.10
0.07
0.14
0.12

3.02
2.42
3.13
2.52
2.68
2.86
2.90
2.65
2.62

0.06
0.05
0.08
0.14
0.01
0.25
0.23
0.04
0.04

79.18
97.14
76.83
76.07
96.89
79.41
81.93
84.26
79.18

106.15
75.60
116.09
83.50
81.49
100.94
100.92
83.60
79.04

269.39
246.19
282.11
223.08
257.33
260.50
265.55
238.30
220.82

117

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.

118

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.

119

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
CV
(14)
0.6892
0.8914
0.8448
1.2746
0.9379
1.00BI
3.8651

GR
(15)
19.02
26.61
22.73
32.47
22.11
24.50
53.99
19.82

1.
2.
3.
4.
5.
6.
7.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS

(2)
0.09
0.08
0.12
0.05
0.04
0.23
0.06

(3)
0.12
0.05
0.17
0.06
0.02
0.15
0.07

(4)
0.31
0.05
0.32
0.13
0.03
0.21
0.17

(5)
0.36
0.17
0.36
0.18
0.24
0.38
2.86

(6)
0.57
0.27
0.37
0.25
0.36
OA2
0.89

(7)
0.78
0.60
0.68
OAI
OA5
1.09
0.98

(8)
0.43
0.61
0.76
OA5
0.30
0.77
0.31

(9)
0.88
0.81
0.87
0.65
OA2
0.10
1.09

(10)
0.75
0.78
1.13
0.98'
0.26
1.35
0.19

(11)
1.16
1.24
1.68
1.91
0.67
1.97
1.10

(12)
1.49
1.54
2.25
3.06
1.19
2.76
1.26

Mean
(13)
0.63
0.56
0.79
0.74
0.36
0.86
0.30

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

9
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB'
OBOC
P&SB

0.09
-OA7
.0.90
0.02
0.06
1.06
0.05
0.74
0.04
0.55
0.03
0.26
0.18
1.56

0.10
1.61
.0.98
0.15
2.05
1.57
0.23
1.30
0.30
0.42
-IA6
1.22
0.27
1.40

0.16
.0.33
0.27
0.39
0.09
.2.34
0.38
1.63
079
0.18
0.05
0.03
0.92
.0.06

0.05
0.03
0.07
OA4
0.51
0.08
OA7
-IA5
1.14
0.33
4.91
0.01
1.32
1.06

0.39
0.28
0.24
0.61
0.68
0.28
0.27
0.30
1.33
O.7
-IA3
0.37
1.33
0.16

0.67
0.57
0.50
0.91
0.70
0.34
0.37
0.35
1.74
0.70
1.12
0.40
1:47
0.53

0.53
0.60
0.61
0.91
0.38
0.32
0.41
0.30
1.89
0.74
2.91
0.19
1.59
0.46

0.76
0.31
0.83
1.07
0.33
0.56
OA3
0.31
2.19
OA4
1.61
0.14
1.94
0.50

0.83
0.19
0.95
0.59
0.57
0.32
0.59
0.10
2A5
2.43
1.97
OA5
1.49
0.13

1.36
OAO
1.58
IAO
1.16
1.03
1.55
OAI
2.85
0.10
0.15
0.94
2.36
0.23

1.90
0.85
3.10
1.92
1.97
1.58
2.14'
0.78
3.88
1.0B
0.86
1.71
3.38
0.04

0.61
0.07
0.52
0.76
0.39
0.04
0'.63
0.23
1.69
0.06
1.30
0.25
1.48
0.18

0.9689 26.11
9.1374 214.63
2.2090 63.35
0.7290 19.62
2.5137 56.54
7.5996 .69348
1.0095 23.95
3.7268 .89.88
0.6719 20.11
1.6106 51.56
1 .2529 6.15
2.8815 71.74
0.6101 16.92
4.1923 92.12
120

22.
23.
24.
25.
26.
27.

PNB
0.06
0.10
SB
1.74.
0.78
UCO
1.24.
1.57
UBOI
0.03
0.15
UNBOI
1.23
2.72
VB
0.71
0.03
0-63
0.81
NB
PSBs
0.38
0.49
Source:Reserve Bank Of India

0.12
0.24
.0.24
0.32
0.87
0.23
005
0.12

0.13
0.05
0.69
0.24
1.04
0.17
0.20
0.04

0.35
0.18
0.52
0.70
0.51
0.13
0.25
0.35

0.72
0.23
0.29
0.81
0.05
0.16
0.45
0.56

0.57
0.40
0.21
0.52
0.07
0.21
0.32
0.37

0.63
0.62
0.12
0.33
0.15
0.37
0.44
0.59

0.80
0.77
0.11
0.55
0.10
0.53
0.41
0.54

0.97
0.98
0.65
1.22
0.66
1.11
1.03
1.10

1.43
1.35
0.83
2.15
1.72
1.68
1.65
1.63

0.51
0.17
0.28
0.64
0.33
0.32
0.27
0.40

0.9101 25.44
5.1994 145.05
2.6075 75.74
0.9457 21.94
3.4981 -94.20
1.9456 52.38
2.5778 70.61
1.5506 42.99

121

TABLE 5.9
RETURN ON ASSETS OF PSBS (1992-2003)
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
S80S
S80T
ASS
AB
ANB
BOB
801
BOM
CB
CBOI
COB

I Period

II Period

III Period

1992-95

1996-99

2000-2003

Mean
(2)
0.34
0.21
0.44
0.23
0.09
0.44
0.25
0.36
0.29
-1.82
-2.06
0.26
-1.71
-3.24
0.45
-2.15
0.56

CV
(3)
0.58
0.38
0.32
0.33
0.45
0.13
0.41
0.55
0.17
-0.88
-0.59
0.96
-1.22
-0.73
0.68
-0.79
0.78

Mean
(4)
0.74
0.78
0.73
0.56
0.69
0.99
0.96
0.53
0.75
0.68
065
0.78
0..86
0.47
0.42
0.50
1.36

CV
(5)
0.38
0.35
0.24
0.17
0.27
0.40
0.56
0.20
0.27
0.28
0.31
0.17
0.12
0.12
0.07
0.17
0.09

Mean
(6)
0.68
0.98
1.00
1.27
0.64
1.32
0.63
0.77
0.97
0.36
1.06
0.74
0.75
0.60
0.90
032
1.41

CV
(7)
0.24
0.20
0.17
0.39
0.58
0.15
0.65
0.16
0.25
0.57
0.49
0.40
0.46
'0.55
0.47
0.69
0.11

Percentage Change
II Vs I
(8)
0.40
0.58
0.29
0.33
0.60
0.55
0.72
0.16
0.46
2.50
2.71
0.52
2.57
3.71
-0.02
2.65
0.81

III Vs II
(9)
-0.06
0.20
0.27
0.71
-0.05
0,33
-0.33
0.24
0.22
-0.31
0.41
-0.04
-0.11
0.13
0.48
-0.18
0.04

III Vs I
(10)
0.34
0.78
0.56
1.04
0.55
088
0.38
0.40
0.68
2.18
3.13
0.48
2.46
3.84
0.45
2.47
0.85

122

17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

DB
-0.81
IB
-0.84
IOB
-3.05
OBOC
0.73
P&SB
-2.83
PNB
0.25
SB
-3.14
UCO
-2.78
UBOI
0.35
UNBOI
-4.31
VB
-0.65
NB
-1.13
PSBs
-0.60
Source:Reserve Bank Of India.

-1.35
-1.86
-1.11
0.67
-0.86
0.27
-0.95
-0.70
0.69
-0.63
-2.46
-0.94
-1.22

0.76
-2.32
0.42
1.34
0.49
0.62
0.47
-0.61
1.77
-0.24
0.24
0.44
0.55

0.08
-0.44
0.42
0.11
0.46
0.88
0.30
-0.60
0.84
-2.27
0.06
0.28
0.30

-0.29
-0.13
0.68
1.03
0.10
0.83
0.87
0.41
0.73
0.62
0.78
0.67
0.70

-3.74
-6.21
0.46
0.29
0.70
0.16
0.13
0.62
0.47
0.95
0.34
0.49
0.39

1.58
-1.48
3.48
0.60
3.32
0.37
3.61
2.17
1.42
4.07
089
1.57
1.15

-1.05
2.19
0.26
-0.31
-0.39
0.21
0.40
1.02
-1.04
0.86
0.54
0.23
0.15

0.53
0.71 .
3.73
0.29
2.93
0.58
4.01
3.19
0.38
4.93
1.43
1.80
1.30

123

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
124

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 199899) 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).

125

TABLE 5.10

RETURN ON EQUITY OF PSBS : 1992-2003

(Rs. in Lacs)
No

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14..
15.
16.
17.
18.
19.
20.
21.
22.

Name

1992-93 1993-94 1994.95 1995.96 1996-97 1997-98 1998-99 19992000 200001 200102 200203

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB
PNB

(2)
(3)
106.00 58.02
52.38
33.33
100.00 141.18
33.33
44.44
33.33
16.67
120.00 80.00
-50:00 60.00
40.00
45.00
60.18
71.68
-61.27 139.92
153.26 -66.94
2.42
8.93
-70.58 -98.64
.106.49 -88.66
12.50
20.37
209.29 .105.79
5.97
24.11
-61.22
25.27
3.45
.92.43
203.51 32.65
26.92
25.00
.94.20 .47.96
20.21
'20.60

(4)
150.84
38.10
258.82
100.00
25.00
116.00
140.00
105.00
115.93
12.28
10.33
23.75
2.56
-6.13
34.58
6.44
65.18
10.60
2.14 0.75
59.07
1.45
23.63

(5)
175.53
72.22
294.12
66.67
72.22
208.00
-73.25
74.29
-7.90
0.77
2.58
35.36
47.42
1.74
52.16
.5.67
93.75
35.37
204.28
0.22
89.64
23.74
26.37

(6)
256.46
111.11
305.88
94.44
111.11
236.00
22.61
114.29
66.74
25.91
6.09
109.06
121.21
6.28
29.70
8.37
122.55
35.27
.59.48
31.44
93.26
2.83
67.81

(7)
353.80
180.00
570.59
155.56
141.67
572.00
24.84
126.00
107.84
52.23
12.69
156.66
57.21
7.48
35.12
9.70
139.17
50.72
12.56
33.83
108.81
921
236.14

(8)
195.44
184.00
658.82
172.22
94.44
404.00
7.96
86.00
85.88
54.66
25.86
143.20
31.50
15.71
38.93
8.09
160.00
53.14
31.07
16.47
119.17
23.05
175.47

(9)
390.11
240.00
752.94
250.00
133.33
524.00
28.34
132.00
123.14
27.94
34.77
171.09
27.12
27.19
40.83
8.37
193.33
30.43
.17.05
11.98
144.56
25.10
192.45

(10)
304.94
210.00
882.35
355.56
72.22
644.00
4.46
194.00
121.18
16.19
26.89
93.54
39.50
13.60
49.31
2.55
218.33
128.50
10.94
26.07
105.18
5.35
218.87

(11)
462.36
330.00
13241
694.44
183.33
932.0
26.11
242.00
199.61
32.39
44.89
185.71
103.48
43.81
128.20
14.50
215.38
5.31
0.87
51.69
166.32
9.47
265.09

(12)
590.30
406.00
1770.59
1111.11
322.22
1288.00
29.62
342.00
275.88
47.84
100.75..
262.93
174.39
67.07
248.54
2722
290.91
55.07
4.13
93.48
236.79
1.65
397.17

1992-2003
Mean
CV
GR
(13)
(14)
(15)
276.71
0.5855 16.00
168.83
0.7279 20.88
642.25
0.8161 23.00
279.80
1.1987 291190
109.60
0.8000 19.56
465.82
0.8185 22.70
29.15
1.7249 14.20
136.42
0.6654
17.67
110.92 0.6757
15.47
. 4.04 14.4458 315.79
2.18
30.0632 797.76
108.42 0.7781
21.17
39.56
1.9923
46.28
1.67
30.9806 824.42
62.75
1.0939 23.79
21.41
3.3445 71.32
138.97 0.6325
18.88
5.54
10.3008 48.38
37.93
1.6581 17.74
2.71
27.9177 640.96
106.79 0. 4.265
16.08
8.25
157
93.51
144.64 0.9173
25.10
126

23.
SB
421.38 35.64
24. UCO
-88.80 .52.75
25. UBOI
7.97
'14.79
26. UNBOI -77.50 106.92
27.
VB
.77.17
2.08
NB
-85.36 48.65
PSBs
-73.19 42.39
Source:Reserve Bank Of India

-8.23
-5.42
31.36
17.64
12.60
1.91
7.60

1.55
1427
23.67
17.04
-9.84
-8.84
2.63

5.19
1026
63.91
-6.66
3.42
11.23
22.46

6.43
4.65
7396
058
4.14
17.07
30.98

41.21
.3.00
47.34
0.83
5.40
13.37
22.59

45.76
1.63
29.88
1.71
20.46
18.46
35.94

49.79
1.46
45.86
1.05
19.78
15.51
29.68

53.18
7.28
92.90
6.57
3922
34.72
55.29

72.88 17.20
34.56
1220
12022 50.17
16.84 18.02
1 04.79 11.35
59.24
2.61
86.73 15.73

8.0145
2.6748
0.6909
2.1387
3.7563
15.1278
2.7869

165.13
68.27
16.54
51.84
91.44
402.40
77.04

127

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.
128

TABLE 5.11
NON-INTEREST INCOME AS A PERCENTAGE TO TOTAL INCOME OF PSBS : 1992-2003
(Rs. in Lacs)
No Name

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14..
15.
16.
17.
18.
19.
20.
21.
22.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB
PNB

1992-93

199319961994.951995.96
1997-98 1998-99 19992000 200001 200102 200203
94
97

(2)
(3)
13.08 14.58
13.72
1531
13.60 14.82
12.85. 13.81
12.35 16.35
7.34
8.4
14.81 14.42
11.33 15.04
1203 13.85
10.80 8.34
9.47 11.29
8.46 1665
9.98 12.03
8.72 8.23
11.32 13.00
8:58
9.46
12.35 17.32
8.96
10.61
8.72
10.82
16.98 20.09
7-71.
8.51
9.23
10.89
7.32
13.21

(4)
15.96
1695
16.32
1634
1560
6.48
15.25
14.33
14.19
11.24
15.36
12.84
11.73
9.54
13.57
11.75
15.97
12.01
12.85
11.53
9.87
10.55
11.91

(5)
17.54
15.05
15.28
13.44
15.26
12.00
17.26
13.22
14.33
11.99
10.37
11.67
12.71
9.43
13.68
11.15
14.15
10.74
11.30
7.90
8.95
10.12
9.05

(6)
15.02
14.83
13.27
12.21
12.70
9.22
14.15
12.02
12.51
12.40
11.11
10.87
12.24
8.53
11.76
10.75
11.88
9.80
12.19
9.34
7.70
11.12
11.37

(7)
15.08
16.05
14.13
15.13
13.61
9.44
15065
13.16
1.64
13.56
11.28
11.52
12.84
8.59
13.72
10.74
12.30
13.15
12.13
9.45
8.67
12,02
13.75

(8)
14.67
14.55
13.42
15.24
14.69
11.48
13.17
13.05
13.50
11.59
12.25
10.70
11.12
870
12.46
9.61
13.18
9.30
10.91
9.84
8.50
10.19
10.92

(9)
1385
16.47
15.27
1931
17.01
12.88
14.06
14.40
15.36
12.22
13.45
11.65
14.23
11.20
14.70
10.44
14.45
12.53
12.65
9.60
8.25
12.06
12.38

(10)
12.93
15.88
14.54
18.64
15.75
11.24
12.75
1287
14.31
10.34
9.84
10.93
13.95
11.53
14.04
9.91
13.93
10.39
12.83
9.77
8.85
11.85
11.72

(11)
12.28
18.14
16.00
2364
19.37
14.95
17.07
13.67
17.09
14.48
1303
14.29
16.44
13.34
18.32
11.42
16.41
17.12
17.95
14.34
13.48
15.28
12.82

(12)
15.59
19.12
18.27
23.45
22.09
16.41
19.21
15.92
18.76
16.93
21.58
17.15
21.69
14.74
18.51
9.85
20.20
19.78
17.17
12.98
14.10
19.30
14.31

1992-2003
Mean
(13)
14.60
16.01
14.99
16.73
15.89
10.90
15.25
13.55
14.51
12.17
12.64
12.43
13.54
10.23
14.10
10.33
14.74
12.22
12.68
11.98
9.51
12.06
11.71

CV
(14)
0.1037
0.0998
0.0990
0.2413
0.1801
02833
0.1266
0.0974
0.1343
0.1857
0.2710
0.2116
0.2363
0.2140
0.1668
00917
0.1718
0.2779
0.2126
0.3152
0.2317
0.2364
0.1750

GR
(15)
0.89
2.12
1.40
6.22
3.84
7.43
1.05
1.11
310
3.86
4.19
209
5.69
538
3.97
0.58
1.97
5.81
5.20
3.42
4.63
5.64
2.99
129

23.
SB
10.11
8.46
24. UCO
12.96
7.76
25. UBOI
9.86
9.56
26. UNBOI 6.36
8.01
27.
VB
14.75 12.96
NB
9.88 12.13
PSBs
11.04 12.98
Source:Reserve Bank Of India

9.79
11.51
9.17
10.71
14.74
11.94
13.30

9.43
10.73
8.66
10.66
8.80
10.85
13.13

8.93
8.89
7.95
8.89
7.95
10.55
12.01

11.51
11.75
7.66
9.63
9.15
11.61
12.75

11.58
9.95
8.40
7.33
9.83
10.53
11.96

11.15
11.19
8.27
7.63
8.90
11.71
12.65

9.16
11.57
7.70
7.86
10.33
11.15
11.95

8.74
18.66
11.06
16.22
10.93
14.50
14.10

14.69
17.90
16.08
16.80
17.15
16.68
16.56

10.32
12.08
9.49
10.01
11.41
11.96
12.95

0.1764
0.2803
0.2548
0.3486
0.2654
0.1656
0.1123

2.52
5.30
3.06
6.29
0.61
3.26
1.93

130

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.

131

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.

132

TABLE 5.12
CREDIT-DEPOSIT RATIO OF PSBS : 1992-2003
(Rs. in Lacs)
No Name

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14..
15.
16.
17.
18.
19.
20.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC

1992-93
(2)
71.92
58.49
57.96
61.86
58.91
60.84
62.56
59.10
59.60
51.43
45.54
56.17
59.16
47.87
48.84
49.26
43.24
47.97
67A5
56.53
51.89

199319961994.951995.96
1997-98 1998-99 19992000 200001 200102 200203
94
97
(3)
54.31
51.78
49.33
58.01
51.34
49.11
53.45
56.28
52.10
44.01
39.11
54.73
50.99
40.32
41.76
37.53
34.56
43.83
56.86
49.42
49.00

(4)
57.01
52.37
59.36
60.79
54.70
52.34
58.54
65.27
57.50
45.90
45.37
56.56
49.87
43.88
48.40
44.24
33.66
49.68
61.81
52.24
52.88

(5)
6206
52.52
63.63
59.65
53.66
53.21
57.68
61.75
57.56
47.45
43.24
56.44
56.66
45.09
49.90
45.07
42.59
52.52
59.13
51.44
53.63

(6)
56.22
5560
55.83
57.45
55.12
52.39
56.26
56.61.
55.57
42.79
41.00
51.39
57.35
42.24
45.84
38.13
45.18
51.44
47.91
45.42
48.60

(7)
56.63
56.10
53.54
56.45
55.19
53.06
60.05
53.57
54.86
42.27
41.62
50.61
55.96
39.64
44.22
40.49
46.01
50.89
47.08
44.84
48.39

(8)
48.72
49.62
SO 2.3
52.63
53.56
54.41
56.94
49.11
51.68
44.46
43.34
47.28
52.67
37.17
46.55
41.76
49.88
54.23
43.85
46.17
45.87

(9)
49.84
48.50
46.54
55.77
56.16
56.71
55.36
50.39
52.38
47.73
38.66
47.57
55.10
39.17
49.06
44.06
54.46
53.57
42.92
47.59
42.21

(10)
46.78
50.05
47.76
51.17
56.34
59.04
53.88
55.28
53.11
47.66
40.58
SO.71
62.26
39.19
47.12
45.36
52.33
48.05
43.49
47.77
44.88

(11)
44.65
50.86
46.40
54.17
57.65
62.23
54.07
55.24
54.38
48.50
52.34
54.47
64.16
43.15
51.74
45.16
58.06
48.99
45.38
47.67
49.70

(12)
46.52
51.18
46.91
56.23
58.37
60.13
51.36
57.59
54.20
49.26
54.66
53.26
66.14
42.88
56.14
45.26
55.37
51.16
45.44
47.54
52.59

19922003
Mean
(13)
54.06
52.46
52.87
56.75
55.55
55.77
56.56
56.36
54.83
46.50
44.13
52.65
57.32
41.87
48.14
43.30
46.85
50.21
51.03
48.78
49.06

CV
(14)
0.1489
0.0587
0.1056
0.0582
0.0406
0.0764
0.0581
0.0869
0.0460
0.0616
0.1171
0.0642
0.0915
0.0744
0.0795
0.0806
0.1728
0.0590
0.1695
0.0705
0.0739

GR
(15)
3.85
1.07
2.23
1.36
0.50
1.27
1.18
1.17
0.75
0.30
1.59
0.95
1.85
0.98
1.35
0.32
4.63
0.66
4.41
1.35
0.79
133

21. P&SB
45.78
22. PNB
54.36
23.
SB
47.68
24. UCO
58.12
25. UBOI
48.18
26. UNBOI 47.51
27.
VB
48.53
NB
53.34
PSBs
58.47
Source: RBI bulletin

42.15
45.00
39.77
49.23
43.74
39.37
42.51
45.77
48.41

46.20
47.01
37.54
47.21
46.29
35.00
40.14
48.00
50.95

47.47
46.75
42.44
43.54
48.52
32.44
40.81
49.28
53.10

43.75
45.66
39.02
38.87
45.83
29.26
36.26
45.57
49.02

41.87
45.61
41.39
38.79
44.57
28.01
39.25
45.33
48.88

43.17
46.71
46.76
38.29
38.80
26.48
38.88
44.95
46.50

45.14
47.54
51.60
41.55
48.25
27.18
42.78
46.74
48.02

43.52
49.96
52.27
46.83
50.18
31.06
45.28
48.34
48.28

44.68
53.60
52.14
47.69
53.74
34.79
42.21
51.17
49.62

44.56
53.06
53.18
50.80
57.02
34.96
35.58
52.32
. 50.89

44.39
48.66
45.80
45.54
47.74
33.28
41.11
48.26
50.19

0.0386
0.0715
0.1303
0.1338
0.1028
0.1854
0.0917
0.0612
0.0651

0.18
0.74
2.93
0.97
1.68
2.8
0.97
0.23
0.24

134

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 (199295) 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
135

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
136

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).
137

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).

138

TABLE 5. 13
BUSINESS PER BRANCH OF PSBS PERIOD-WISE AN ALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
1385.00
732.67
983.67
813.00
807.33
1084.00
946.67
1015.67
916.67
677 .33
713.67
1509.67
1395.33
580.00
1594.67
740.67
1252.00
648.67
1386.67
1265.33
1388.33
865.67

CV
(3)
0.08
0.13
0.16
0.14
0.17
0.16
0.17
0.20
0.16
0.06
0.11
0.10
0.08
0.15
0.07
0.11
0.31
0.17
0.04
0.12
0.17
0.27

Mean
(4)
2348.67
1135.33
1623.67
1388.00
1337.33
1723.33
1693.67
1743.33
1548.67
1033.67
1218.67
2281.33
2397.67
1095.67
2328.33'
1212.00
2440.67
1307.00
1528.67
2002.67
2336.67
1577.67

CV
(5)
0.18
0.30
0.14
0.15
0.10
0.10
0.10
0.11
0.12
0.15
0.20
0.13
0.14
0.17
0.12
0.15
0.24
0.20
0.07
0.15 .
0.16
0.20

Mean
(6)
4337.33
2233.00
2933.67
2920.00
2187.00
3172.33
2893.33
3172.67
2782.33
1756.33
2705.67
3437.33
3778.67
2252.33
4096.67
2174.00
4447.67
2016.00
2513.00
3282.33
4281.67
2409.00

CV
(7)
0.10
0.13
0.15
0.15
0.09
0.21
0.14
0.17
0.15
0.12
0.08
0.10
0.12
0.14
0.13
0.10
0.12
0.09
0.13
0.15
0.09
0.05

Percentage Change
II Vs I
(8)
69.58
54.96
65.06
70.73
65.65
58.98
78.91
71.64
68.95
52.61
70.76
51.12
71.83
88.91
46.01
63.64
94.94
101.49
10.24
58.27
68.31
82.25

III Vs II
(9)
84.67
96.68
80.68
110.37
63.53
84.08
70.83
81.99
79.66
69.91
122.02
50.67
57.60
105.57
75.95
79.37
82.23
54.25
64.39
63.90
83.24
52.69

III Vs I
(10)
213.16
204.78
198.24
259.16
170.89
192.65
205.63
212.37
203.53
159.30
279.12
127.69
170.81
288.33
156.90
193.52
255.24
210.79
81.23
159.40
208.40
178.28
139

22.
23.
24.
25.
26.
27.

PNB
878.33
SB
926.00
UCO
834.67
UBOI
937.67
UNBOI
738.33
VB
822.00
NB
1008.33
PSBs
1076.33
Source: RBI bulletin

0.03
0.11
0.07
0.24
0.09
0.22
0.11
0.11

1369.00
1500.33
1112.67
1625.67
1178.67
1367.67
1623.33
1759.33

0.14
0.15
0.13
0.13
0.16
0.18
0.15
0.15

2241.00
2461.67
2304.67
3018.00
2018.00
2552.00
2524.67
3119.33

0.13
0.10
0.20
0.15
0.09
0.15
0.34
0.12

55.86
62.02
33.31
73.37
59.64
66.38
60.99
63.46

63.70
64.07
107.13
85.65
71.21
86.60.
55.52
77.30

155.14
165.84
176.12
221.86
113.32
210.46
150.38
189.81

140

TABLE 5. 14
OPERATING EXPENSES PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS
No.

Bank

(1)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
ST
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB

I Period

IIPeriod

III Period

1992-95

1996-99

2000-2003

Mean
(2)
34.60
20.11
21.08
22.07
20.68
21.66
24.15
19.95
21.14
13.97
19.38
26.33
26.66
16.09
29.22
18.02
22.81
16.67
24.22
25.08
26.41
20.35

CV
(3)
0.17
0.14
0.17
0.17
0.11
0.19
0.15
0.16
0.16
0.18
0.28
.' 0.19
0.18
0.16
0.16
0.14
0.21
0.21
0.11
0.10
0.23
0.18

Mean
(4)
56.78
36.94
32.66
37.96
37.30
34.14
42.22
34.27
36.63
22.85
28.86
41. 72
46.70
29.06
45.61
30.98
39.82
29.00
34.80
41.14
36.86
35.67

CV
(5)
0.14
0.15
0.02
0.14
0.12
0.08
0.13
0.05
0.12
0.07
0.11
0.13
0.09
0.10
0.12
0.14
0.10
0.12
0.08
0.15
0.11
0.08

Mean
(6)
86.10
53.77
49.57
55.43
54.61
51.64
59.09
52.58
53.18
39.76
47.33
59.48
64.45
41.85
69.23
47.17
59.81
44.71
52.99
62.77
56.59
53.02

CV
(7)
0.07
0.06
0.05
0.04
0.05
0.04
0.04
0.05
0.04
0.18
0.14
0.02
0.07
0.06
0.04
0.03
0.14
0.09
0.03
0.05
0.04
0.04

Percentage Change
II Vs I
(8)
64.10
83.68
54.93
71.98
80.37
57.63
74.85
71.80
73.25
63.59
48.94
58.46
75.15
80.59
56.09
71.95
74.55
73.93
43.67
64.00
39.57
75.27

III Vs II
(9)
51.63
45.55
51.78
46.04
46.42
51.26
39.97
53.42
45.17
73.98
64.01
42.59
38.01
43.98
51.77
52.25
50.20
54.18
52.28
52.58
53.54
48.64

III Vs I
(10)
148.83
167.34
135.15
151.17
164.09
138.43
144.73
163.58
151.51
184.61
144.28
125.94
141.72
160.02
136.89
161 .79
162.17
168.17
118.79
150.23
114.30
160.52
141

22.
23.
24.
25.
26.
27.

PNB
19.28
SB
26.61
UCO
19.83
UBOI
19.14
UNBOI
17.26
VB
20.28
NB
21.49
PSBs
24.12
Source: RBI bulletin

0.16
0.18
0.09
0.18
0.13
0.13
0.16
0.16

31.34
40.70
30.54
33.30
28.66
34.35
35.11
39.52

0.13
0.09
0.08
0.10
0.07
0.10
0.11
0.12

48.62
61.11
47.62
49.28
48.31
56.35
53.37
59.74

0.04
0.03
0.08
0.03
0.18
0.15
0.04
0.04

62.57
52.96
54.01
73.97
66.04
69.33
63.35
63.86

55.11
50.14
55.93
47.96
68.53
64.07
52.02
51.15

152.16
129.65
140.14
157.41
179.82
177.83
148.33
147.68

142

TABLE 5. 15
PROFIT PER BRANCH OF PSBS-PERIOD-WISE ANALYSIS
No.

Bank

I Period

II Period

III Period

1992-95

1996-99

2000-2003

1.
2.
3.
4.
5.
6.

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP

Mean
(2)
4.55
1.20
3.75
1.52
0.58
4.25

CV
(3)
0.68
0.26
0.47
0.60
0.35
0.22

Mean
(4)
15.83
9.59
29.92
6.66
7.37
19.61

CV
(5)
0.30
0.39
1.02
0.28
0.22
0.98

7.

SBOS

2.30

0.56

15.08

0.51

15.28

8.

SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC

1.99
2.35
-9.98
11.99
3.42
19.28
-15.76
5.52
-12.86
7.15
-3.88
-8.76
-27.79
9.25

0.55
0.33
0.87
0.54
1.01
1.27
-0.72
0.75
-0.80
0.99
-1.48
-1.88
-1.05
0.87

7.38
10.14
5.83
33.61
15.22
12.39
4.45
8.25
5.09
28.17
8.30
-32.78
6.59
24.80

0.26
0.26
0.36
1.44
0.24
0.31
0.08
0.19
0.10
0.12
0.20
-0.52
0.35
0.04

19.30
22.45
4.97
22.47
19.59
21.01
11.19
28.22
5.51
49.25
-3.88
-1.12
17.67
33.73

9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

Mean
(6)
26.21
19.91
25.43
30.77
11.48
26.04

Percentage Change

CV
(7)
0.32
0.31
0.33
0.51
0.65
0.82

II Vs I
(8)
248.09
701.39
697.16
337.94
1178.06
361 .92

III Vs II
(9)
65.61
107.58
15.01
362.29
55.74
34.25

III Vs I
(10)
476.47
1563.51
577 .53
1924.56
1891.33
512.78

0.68

554.70

1.33

563.39

0.29
0.38
0.67
0.57
0.46
0.56
0.64
0.54
0.76
0.21
-4.35
-14.84
0.60
0.36

271.64
331.02
158.44
380.42
345.56
164.27
-128.24
49.31
-139.62
293.80
-313.73
274.06
-123.72
168.17

161.35
121.33
14.75
33.16
28.66
69.50
151.54
242.16
8.18
74.82
-146.71
-96.57
168.08
36.01

871.31
853.97
149.82
287.43
473.27
208.94
-171.02
410.86
-142.86
588.44
-0.17
-87.18
-163.58
264.74
143

21.
22.
23.
24.
25.
26.
27.

P&SB
PNB
SB
UCO
UBOI
UNBOI
VB
NB
PSBs
Source: RBI bulletin

-17.40
.1.86
-22.69
-19.96
2.93
-27.41
-2.92
-8.86
-5.09

-0.82
0.30
-0.83
-0.68
0.85
-0.61
-3.11
-0.97
-1.32

6.62
9.54
5.94
-6.29
10.06
-2.22
2.88
6.02
6.58

0.50
0.33
0.39
-0.49
0.23
-2.47
0.23
0.29
0.12

1.78
15.80
15.89
7.88
16.82
11.35
15.87
14.90
17.84

0.71
0.29
0.21
0.67
0.59
0.99
0.47
0.57
0.48

-138.05
412.16
-126.18
-68.48
243.62
-91.89
-198.74
-167.96
-229.21

-73.16
65.53
167.45
-225.33
67.22
-610.49
451.16
147.37
171 .26

-110.21
747.76
-170.03
-139.50
474.60
-141.41
-644.23
-268.11
-450.49

144

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.
145

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)

146

TABLE 5.16
BUSINESS PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
53.16
35.80
53.54
42.47
39.74
50.55
42.22
51.01
45.43
54.34
42.68
82.51
62.2.3
35:95
54.35
43.12
64.99
44.37
73.83
57.78
68.43
48.99

CV
(3)
0.07
0.12
0.18
0.16
0.16
0.17
0.20
0.21
0.17
0.07
0.10
0.11
0.08
0.20
0.14
0.13
0.34
0.18
0.05
0.13
0.19
0.24

Mean
(4)
88.26
66.95
94.02
77.16
67.30
91.07
81. 68
87.79
80.09
85.43
80.92
125.66
113.09
76.89
98.60
75.52
143.60
66.51
84.59
97.63
138.59
91.58

CV
(5)
0.19
0.16
0.16
0.16
0.10
0.14
0.12
0.11
0.12
0.16
0.22
0.14
0.15
0.19
0.14
0.17
0.29
0.61
0.08
0.16
0.22
0.20

Mean
(6)
186.78
133.05
194.33
187.19
133.99
196.93
159.79
176.28
168.79
167.66
223.85
224.50
221.35
195.20
206.67
162.92
278.85
215.70
156.99
190.09
304.58
182.12

CV
(7)
0.11
0.13
0.16
0.18
0.10
0.23
0.15
0.18
0.17
0.16
0.11
0.19
0.13
0.15
0.14
0.20
0.12
0.09
0.13
0.18
0.12
0.07

Percentage Change
II Vs I
(8)
66.04
87.02
75.61
81.70
69.36
80.16
93.46
72.09
76.28
57.21
89.58
52.30
81.74
113.87
81.43
75.15
120.95
49.88
14.58
. 68.96
102.52
86.94

III Vs II
(9)
111.62
98.74
106.69
142.60
99.08
116.24
95.63
100.80
110.75
96.26
176.63
78.66
95.72
153.88
109.60
115.72
94.19
224.33
85.58
94.70
119.77
98.86

III Vs I
(10)
251.38
271.67
262.97
340.78
237.16
289.58
278.48
245.56
271.50
208.54
424.44
172.10
255.72
442.99
280.27
277 .82
329.05
386.10
112.64
228.97
345.08
271.75
147

22.
23.
24.
25.
26.
27.

PNB
47.01
SB
37.92
UCO
42.71
UBOI
54.22
UNBOI
43.36
VB
45.90
NB
53.07
PSBs
52.40
Source: RBI bulletin

0.07
0.12
0.06
0.25
0.10
0.25
0.12
0.11

178.10
67.87
61.07
109.63
71.42
80.43
91.06
87.19

0.16
0.19
0.15
0:15
0.17
0.19
0.15
0.13

170.44
159.60
150.71
232.36
1 2.2
1f175.09
,,0 193.04
188.94

0.15
0.20
0.27
0.19
0.14
0.22
0.16
0.15

66.15
78.99
43.01
102.18
64.73
75.22
71.60
66.39

118.23
135.14
146.77
111.96
99.96
117.70
111.98
116.70

262.59
320.89
252.90
328.52
229.40
281 .45
263.77
260.57

148

TABLE 5.17
ESTABLISHMENT EXPENSES PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
0.94
0.7'
0.76
0.76
0.73
0.66
0.77
0.71
0.73
0.72
0.74
0.91
0.86
0.76
0.76
0.76
0.77
0.87
0.78
0.79
0.73
0.82

CV
(3)
0.18
0.16
0.16
0.21
0.10
0.19
0.22
0.18
0.16
0.17
0.23
0.19
0.22
0.22
0.18
0.19
0.25
0.22
0.10
0.11
0.19
0.10

Mean
(4)
1.55
1.45
1.52
1.46
1.43
1.34
1.55
1.25
1.42
1.28
1.39
1.59
1.52
1.62
1.35
1.47
1.39
1.61
1.45
1.50
1.31
1.46

CV
(5)
0.12
0.16
0.23
0.17
0.13
0.10
0.15
0.06
0.14
0.13
0.15
0.16
0.13
0.14
0.17
0.14
0.15
0.15
0.11
0.17
0.14
0.07

Mean
(6)
2.66
2.35
2.27
2.41
2.61
2.25
2.11
2.18
2.30
2.47
2.72
2.66
2.72
2.63
2.46
2.76
2.10
3.48
2.58
2.74
2.34
3.02

CV
(7)
0.07
0.07
0.07
0.05
0.07
0.07
0.07
0.06
0.06
0.07
0.12
0.06
0.11
0.12
0.05
0.11
0.12
0.13
0.02
0.07
0.10
0.06

Percentage Change
I Vs II
(8)
63.96
96.38
99.56
92.11
96.79
102.53
102.17
77.36
94.95
76.50
87.44
75.00
76.36
114.10
77.97
93.86
81.74
85.06
85.47
91.10
80.28
79.18

III Vs II
(9)
71.98
62.21
49.67
65.30
82.28
68.58
36.34
73.94
62.59
93.21
94.98
67.65
79.12
62.14
82.92
87.10
50.96
116.36
78.11
82.26
78.63
106.15

III Vs I
(10)
181.98
218.55
198.68
217.54
258.72
241.41
175.65
208.49
216.97
241.01
265.47
193.38
215.89
247.14
225.55
262.72
174.35
300.38
230.34
248.31
222.02
269.39
149

22.
23.
24.
25.
26.
27.

PNB
0.70
SB
0.82
UCO
0.78
UBOI
0.75
UNBOI
0.79
VB
0.79
NB
0.78
PSBs
0.82
Source: RBI bulletin

0.18
0.22
0.11
0.17
0.16
0.17
0.18
0.18

1.38
1.45
1.37
1.48
1.42
1.44
1.44
1.46

0.16
0.12
0.09
0.12
0.10
0.07
0.14
0.12

2.42
3.13
2.52
2.68
2.86
2.90
2.65
2.62

0.05
0.08
0.14
0.01
0.25
0.23
0.04
0.04

97.14
76.83
76.07
96.89
79.41
81.93
84.26
79.18

75.60
116.09
83.50
81.49
100.94
100.92
83.60
79.04

246.19
282.11
223.08
257.33
260.50
265.55
238.30
220.82

150

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 periodIII 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.
151

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
152

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 periodI. 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.

153

TABLE 5. 18
PROFIT PER EMPLOYEE OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB
IB
IOB
OBOC
P&SB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
0.17
0.06
0.20
0.08
0.03
0.20
0.10
0.10
0.12
-0.80
-0.72
0.19
-0.67
-1.66
0..22
-1.22
0..38
-0..26
-0..46
-0.48
0.46
-1.01

CV
(3)
0.69
0.29
0.51
0.54
0.33
0.21
0.61
0.61
0.32
-0.87
-0.54
1.01
-1.77
-0..39
0..75
-0.37
1.0.1
-1.48
-,1.88
-1.35
0.88
-0.82

Mean
(4)
0.59
0.49
0.60
0.37
Q,31o
0.76
0.73
0.37
0.53
0.48
0.45
0.81
0.59
0..31
0..35
0.32
1.65
o.64
-1.83
0..32
1.46
0.38

CV
(5)
0.30
0.39
0.34
0.29
0.20
0.44
0.50
0.26
0.26
0.37
0.42
0.21
0.31
0..10.
0..21
0.09
0..18
0..23
-0..53
0..35
0..0.9
0..51

Mean
(6)
1.13
1.19
1.69
1.98
0.71
2.03
0.85
0.77
1.36
0.48
1.88
1.30
1.23
0..98
1.43
0.43
3.0.6
-0..42
-0..32
1.0.3
2.41
0..13

CV
(7)
0.33
0.32
0.33
0.53
0.66
0.35
0.68
0.85
0.39
0.70
0.59
0.51
0.57
0..65
0..55
0.79
0.24
-4.35
-4.60.
0..61
0..39
0..71

Percentage Change
II Vs I
(8)
242.31
722.22
196.72
362.50
1133.33
286.44
626.67
270.00
354.29
-160.17
-162.79
333.93
-187.13
-118.91
59.0.9
-125.89
338.94
-341.77
295.65
-166.21
220..44
-138.0.8

III Vs II
(9)
91.01
140.54
179.56
436.04
90.99
166.67
16.97
109.01
157.23
-0.69
317.04
60.91
110.23
211.70.
30.7.62
35.79
85.0.8
-165.45
-82.42
222.92
64.69
-65.22

III Vs I
(10)
553.85
1877.78
729.51
2379.17
2255.56
930.51
750.00
673.33
1068.57
-159.75
-361 .86
598.21
-283.17
-158.95
548.48
-135.15
712.39
58.23
-30.43
-313.79
427.74
-113.25
154

22.
23.
24.
25.
26.
27.

PNB
0.09
SB
-0.92
UCO
-1.0.2
UBOI
0.17
UNBOI
-1.61
VB
-0..15
NB
-0..46
PSBs
-0.25
Source: RBI bulletin

0.33
-0.83
-0..68
0..87
-0..61
-3.30.
-0..98
-1.30

0.55
0.27
-0.34
0.68
-0.13
0.17
0.34
0.43

0..34
0..43
-0..47
0.22
-2.53
0.24
0.30
0.27

1.17
1.03
0..53
1.31
0..83
1.11
1.03
1.09

0..31
0..28
0..71
0..61
1.0.0.
0..52
0.60
0.50

485.71
-129.35
-66.56
306.00
-91.91
-211.11
-173.38
-270.67

95.12
282.72
-255.88
93.10
-735.90.
564.0.0.
202.94
155.47

10.42.86
-212.32
-152.13
684.00
-151.45
-837.78
-322.30
-536.00

155

TABLE 5. 19
RETURN ON ASSETS OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
0.34
0.21
0.44
0.23
0.09
0.44
0.25
0.36
0.29
-1.82
-2.06
0.26
-1.71
-3.24
0.45
-2.15
0.56
-0.81

CV
(3)
0.58
0.38
0.32
0.33
0.45
0.13
0.41
0.55
0.17
-0.88
-0.59
0.96
-1.22
-0.73
0.68
-0.79
0.78
-1.35

Mean
(4)
0.74
0.78
0.73
0.56
0.69
0.99
0.96
0.53
0.75
0.68
065
0.78
0..86
0.47
0.42
0.50
1.36
0.76

CV
(5)
0.38
0.35
0.24
0.17
0.27
0.40
0.56
0.20
0.27
0.28
0.31
0.17
0.12
0.12
0.07
0.17
0.09
0.08

Mean
(6)
0.68
0.98
1.00
1.27
0.64
1.32
0.63
0.77
0.97
0.36
1.06
0.74
0.75
0.60
0.90
032
1.41
-0.29

CV
(7)
0.24
0.20
0.17
0.39
0.58
0.15
0.65
0.16
0.25
0.57
0.49
0.40
0.46
0.55
0.47
0.69
0.11
-3.74

Percentage Change
II Vs I
(8)
0.40
0.58
0.29
0.33
0.60
0.55
0.72
0.16
0.46
2.50
2.71
0.52
2.57
3.71
-0.02
2.65
0.81
1.58

III Vs II
(9)
-0.06
0.20
0.27
0.71
-0.05
0,33
-0.33
0.24
0.22
-0.31
0.41
-0.04
-0.11
0.13
0.48
-0.18
0.04
-1.05

III Vs I
(10)
0.34
0.78
0.56
1.04
0.55
088
0.38
0.40
0.68
2.18
3.13
0.48
2.46
3.84
0.45
2.47
0.85
0.53

156

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

IB
-0.84
IOB
-3.05
OBOC
0.73
P&SB
-2.83
PNB
0.25
SB
-3.14
UCO
-2.78
UBOI
0.35
UNBOI
-4.31
VB
-0.65
NB
-1.13
PSBs
-0.60
Source: RBI bulletin

-1.86
-1.11
0.67
-0.86
0.27
-0.95
-0.70
0.69
-0.63
-2.46
-0.94
-1.22

-2.32
0.42
1.34
0.49
0.62
0.47
-0.61
1.77
-0.24
0.24
0.44
0.55

-0.44
0.42
0.11
0.46
0.88
0.30
-0.60
0.84
-2.27
0.06
0.28
0.30

-0.13
0.68
1.03
0.10
0.83
0.87
0.41
0.73
0.62
0.78
0.67
0.70

-6.21
0.46
0.29
0.70
0.16
0.13
0.62
0.47
0.95
0.34
0.49
0.39

-1.48
3.48
0.60
3.32
0.37
3.61
2.17
1.42
4.07
089
1.57
1.15

2.19
0.26
-0.31
-0.39
0.21
0.40
1.02
-1.04
0.86
0.54
0.23
0.15

0.71
3.73
0.29
2.93
0.58
4.01
3.19
0.38
4.93
1.43
1.80
1.30

157

TABLE 5. 20
RETURN ON EQUITY OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
104.95
41.27
166.67
59.26
25.00 0
105.,j3
83.33
63.33
82.60
-71.16
-76.84
11.70
-55.55
-67.09
22.48
-102.88
31.75
-25.30

CV
(3)
0.44
0.24
0.49
0.60
0.33
0.21
0.59
0.57
0.36
-0.90
-0.94
0.93
-0.94
-0.80
0.50
-1.05
0.96
-1.42

Mean
(4)
268.57
158.37
511.76
140.74
115.74
404.00
18.47
108.76
86.82
44.26
14.88
136.30
69.98
9.82
34.58
8.72
140.57
46.38

CV
(5)
0.30
0.26
0.36
0.29
0.21
0.42
0.50
0.19
0.24
0.36
0.68
0.18
0.66
0.52
0.13
0.10
0.13
0.21

Mean
(6)
452.53
315.33
1327.45
720.37
192.59
954.67
20.06
259.33
198.89
32.14
57.51
180.73
105.79
41.49
142.02
14.76
241.54
-22.71

CV
(7)
0.32
0.31
0.33
0.53
0.65
0.34
0.68
0.29
0.39
0.49
0.67
0.47
0.64
0.65
0.71
0.84
0.18
-4.18

Percentage Change
II Vs I
(8)
163.61
117.10
345.10
81.48
90.74
298.67
-64.86
45.43
4.22
115.42
91.73
124.60
125.53
76.91
12.10
111.60
108.82
71.67

III Vs II
(9)
183.97
156.96
815.69
579.63
76.85
550.67
1.59
150.57
112.07
-12.12
42.63
44.42
35.81
31.67
107.43
6.04
100.97
-69.08

III Vs I
(10)
347.58
274.06
1160.78
661.11
167.59
849.33
-63.27
196.00
116.29
103.30
134.35
169.02
161.34
1 08.58
119.53
117.64
209.79
2.59
158

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

IB
-28.95
IOB
-78.47
OBOC
37.00
P&SB
-47.87
PNB
21.48
SB
-155.08
UCO
-48.99
UBOI
18.04
UNBOI
-67.35
VB
-20.83
NB
-44.03
PSBs
-36.00
Source: RBI bulletin

-1.90
-1.40
0.52
-0.97.
0.09 '.
-1.49
-0.85
0.67
-0.68
-2.36
-1.00
-1.13

-34.37
27.25
107.08
11.69
159.8'1
17.61
-5.97
61.74
-1.75.
4.32
13.89
25.34

-0.69
0.35
0.12
0.88
0.53
1.16
-0.64
0.22
-2.43
0.23
0.21
0.19

-1.9
.J)78
169.43
5.49
293.71
58.62
14.43
86.32
8.15
54.60
36.49
57.23

-4.00
0.60
0.39
0.71
0.32
0.21
1.22
0.44
0.98
0.82
0.60
0.50

-5.42
105.72
70.08
59.56
138.32
172.70
43.0
43.69
65.60
25.14
57.93
61.34

32.39
29.83
62.35
-6.21
133.91
41.00
20.40
24.59
9.90
50.28
22.59
31.89

26.97
135.55
132.43
53.36
272.23
213.70
-63..42
68.28
75.51
75.42
80.52
93.23

159

TABLE 5. 21
NET INTEREST MARGIN AS % TO WF OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SBOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
2.94
2.88
3.18
3.43
3.12
3.56
3.57
2.65
3.17
1.73
1.85
3.12
2.16
1.94
3.21
1.93
2.86
2.68

CV
(3)
0.11
0.08
0.09
0.14
0.06
0.03
0.12
0.09
0.06
0.24
0.33
0.14
0.18
0.34
0.17
0.26
0.03
0.18

Mean
(4)
3.05
3.41
3.61
4.02
3.91
3.64
3.58
2.77
3.50
2.90
3.09
3.04
2.79
3.48
2.95
3.08
3.27
3.43

CV
(5)
0.12
0.07
0.02
0.06
0.08
0.03
0.02
0.19
0.06
0.05
0.08
0.05
0.07
0.06
0.14
0.03
0.22
0.13

Mean
(6)
2.64
3.16
3.04
2.99
3.26
3.73
2.95
2.68
3.16
3.10
2.75
2.82
2:69
2.79
2.69
3.10
2.87
2.56

CV
(7)
0.01
0.04
0.08
0.07
0.06
0.14
0.01
0.04
0.03
0.05
0.11
0.08
0.03
0.04
0.06
0.07
0.07
0.09

Percentage Change
II Vs I
(8)
0.12
0.52
0.3
0.60
0.79
0.07
0.01
0.12
0.33
1.17
1.24
-0.07
0.63
1.55
-0.26
1.15
0.41
0.75

III Vs II
(9)
-0.41
-0.25
-0.57
-1.03
-0.65
0.09
-0.63
-0.09
-0.34
0.20
-0.34
-0.22
-0.10
-0.69
-0.26
0.02
-0.40
-0.87

III Vs I
(10)
-0.30
0.28
-0.14
-0.43
0.14
0.16
-0.62
0.03
-0.01
1.37
0.90
-0.30
0.53
0.85
-0.52
1.17
0.01
-0.12
160

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

IB
1.76
IOB
1.15
OBOC
3.31
P&SB
1.61
PNB
2.80
SB
2.25
UCO
1.26
UBOI
2.93
UNBOI
0.69
VB
2.46
NB
2.31
PSBs
2.56
Source: RBI bulletin

0.02
0.51
0.15
0.59
0.03
0.26
0.68
0.13
0.32
0.13
0.16
0.12

0.73
2.33
3.46
2.54
3.43
3.26
2.01
3.08
2.10
2.84
2.91
2.96

0.24
0.02
0.12
0.05
0.05
0.14
0.06
0.12
0.30
0.03
0.04
0.06

1.98
2.87
3.16
2:49
3.33
3.62
2.43
3.02
2.67
3.20
2.88
2.83

0.15
0.04
0.11
0.07
0.08
0.06
0.04
0.03
0.11
0.06
0.04
0.03

-1.03
1.18
0.15
0.93
0.63
1.01'
0.75
0.15
1.42
0.39
0.60
0.40

1.24
0.54
-0.30
-0.05
-0.10
0.36
0.42
-0.06
0.56
0.36
-0.03
-0.13

0.22
1.72
-0.15
0.88
0.52
1.37
1.17
0.10
1.98
0.75
0.57
0.27

161

TABLE 5.22
NON-INTEREST INCOME AS % TO TOTAL INCOME OF PSBS-PERIOD-WISE ANALYSIS
No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Bank

(1)
SBI
SBBJ
SBOH
SBOI
SBOM
SBOP
SSOS
SBOT
ASS
AB
ANB
BOB
BOI
BOM
CB
CBOI
COB
DB

I Period

II Period

III Period

1992-95

1996-99

20002003

Mean
(2)
14.54
15.33
14.91
14.33
14.77
7.43
14.83
13.57
13.36
10.13
12.04
12.65
11.25
8.83
12.63
9.93
15.21
10.53

CV
(3)
0.10
0.11
0.09
0.13
0.14
0.13
0.03
0.15
0.09
0.15
0.25
0.32
0.10
0.07
0.09
0.16
0.17
0.15

Mean
(4)
14.92
15.14
13.61
14.19
13.67
10.05
14.32
12.74
13.22
12.52
11.55
11.03
12.07
8.61
12.65
10.37
12.45
10.75

CV
(5)
0.01
0.05
0.03
0.12
0.07
0.12
0.09
0.05
0.05
0.08
0.05
0.04
0.07
0.01
0.08
0.06
0.05
0.19

Mean
(6)
13.60
17.71
16.27
21.91
19.07
14.20
16.34
14.15
16.72'
13.92
14.82
14.12
17.36
13.20
16.96
10.39
16.85
15.76

CV
(7)
0.13
0.09
0.12
0.13
0.17
0.19
0.20
0.11
0.13
0.24
0.41
0.22
0.23
0.12
0.15
0.09
0.19
0.31

Percentage Change
II Vs I
(8)
0.38
-0.18
-1.31
-0.14
-1.10
2.61
-0.50
-0.82
-0.14
2.39
-0.49
-1.62
0.82
0.22
0.02
0.44
-2.76
0.22

III Vs II
(9)
-1.32
2.57
2.66
7.72
5.40
4.15
2.02
1.41
3.50
1.40
3.27
3.09
5.29
4.60
4.31
0.03
4.39
5.01

III Vs I
(10)
-0.94
2.39
1.36
7.58
4.30
6.77
2.02
1.41
3.36
3.79
2.78
1.47
6.11
4.37
4.33
0.46
1.63
5.24
162

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

IB
10.80
IOB
16.20
OBOC
8.70
P&SB
10.22
PNB
10.81
SB
9.45
UCO
10.74
UBOI
9.53
UNBOI
8.36
VB
14.15
NB
11.32
PSBs
12.44
Source: RBI bulletin

0.19
0.27
0.13
0.09
0.29
0.09
0.25
0.04
0.26
0.07
0.11
0.10

11.74
9.54
8.29
11.11
12.0;
10.67
10.20
8.00
8.62
8.98
10.90
12.24

0.06
0.03
0.06
0.08
0.13
0.14
0.14
0.05
0.14
0.11
0.06
0.04

15.98
12.36
12.14
15.48
12.95
10.86
16.04
11.61
13.63
12.80
14.11
14.20

0.17
0.19
0.24
0.24
0.10
0.31
0.24
0.36
0.37
0.29
0.20
0.16

0.95
-6.66
-0.41
0.89
1.20
1.22
-0.55
-1.53
0.26
-5.17
-0.42
-0.20

4.24
2.82
3.85
4.37
0.94
0.19
5.85
3.61
5.01
3.83
3.21
1.96

5.19
-3.84
3.45
5.25
2.14
1.41
5.30
2.08
5.27
-1.35
2.79
1.76

163

TABLE 5.23
CREDIT DEPOSIT RATIO AS % TO TOTAL INCOME OF PSBS-PERIOD-WISE ANALYSIS
No.

Bank

(1)
1.
SBI
2.
SBBJ
3.
SBOH
4.
SBOI
5.
SBOM
6.
SBOP
7. SBOS
8.
SBOT
ASS
9.
AB
10.
ANB
11.
BOB
12.
BOI
13.
BOM
14.
CB
15.
CBOI
16.
COB
17.
DB

I Period

II Period

III Period

1992-95

1996-99

2000-2003

Mean
(2)
61.08
54.21
55.56
60.23
54.98
54.10
58.18
60.22
E6.40
47.11
43.34
55.82
53.35
44.02
46.33
43.68
37.15
47.16

CV
(3)
0.16
0.07
0.10
0.03
0.07
0.11
0.08
0.08
0.07
0.08
0.08
0.02
0.10
0.09
0.09
0.13
0.14
0.06

Mean
(4)
53.86
53.84
53.20
55.51
54.62
53.29
58.42
51.34
54.11
43.17
41.99
49.76
55.40
39.68
45.54
40.13
47.02
52.19

CV
(5)
0.08
0.07
0.05
0.05
0.02
0.02.
0.03
0.06
0.04
0.03
0.03
0.04
0.04
0.06
0.03
0.05
0.05
0.03

Mean
(6)
45.98
50.70
47.70
53.86
57.45
60.47
53.10
56.04
53.90
48.47
49.19
52.81
. 64.19
41.74
51.67
45.26
55.25
49.40

CV
(7)
0.03
0.01
0.02
0.05
0.02
0.03
0.03
0.02
0.01
0.02
0.15
0.04
0.03
0.05
0.09
0.00
0.05
0.03

Percentage Change
II Vs I
(8)
-7.22
-0.37
-2.36
-4.72
-0.36
-0.81
0.23
-8.88
-2.29
-3.94
-1.35
-6.06
2.05
-4.34
-0.80
-3.55
9.87
5.03

III Vs II
(9)
-7.87
-3.14
-5.50
-1.65
2.83
7.18
-5.31
4.70
-0.21
5.30
7.21
3.05
8.79
2.06
6.13
5.13
8.23
-2.79

III Vs I
(10)
-15.10
-3.52
-7.86
-6.37
2.47
6.37
-5.08
-4.18
-2.50
1.36
5.85
-3.01
10.84
-2.28
5.33
1.58
18.10
2.24

164

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

IB
62.04
IOB
52.73
OBOC
51.26
P&SB
44.71
PNB
48.79
SB
41.66
UCO
51.52
UBOI
46.07
UNBOI
40.63
VB
43.73
NB
49.04
PSBs
52.61
Source: RBI bulletin

0.09
0.07
0.04
0.05
0.10
0.13
0.11
0.05
0.16
0.10
0.08
0.10

46.28
45.48
47.62
42.93
45.99
42.39
38.65
43.07
27.92
38.13
45.28
48.13

0.05
0.01
0.03
0.02
0.01
0.09
0.01
0.09
0.05
0.04
0.01
0.03

44.77
47.66
49.06
44.25
52.21
52.53
48.44
53.65
33.60
41.02
50.61
49.60

0.02
0.00
0.08
0.01
0.04
0.01
0.04
0.06
0.07
0.12
0.04
0.03

-15.76
-7.25
-3.64
-1. 78
-2.80
0.73
-12.87
-3.00
-12.7"1
-5.60
-3.75
-4.48

-1.51
2.18
1.44
1.32
6.21
10.14
9.79
10.58
5.69
2.89
5.33
1.46

-17.0
-5.07
-2.20
-0.46
3.42
10.87
-3.08
7.58
-7.02
-2.70
1.57
-3.01

165

5.12.PERIOD-WISE
ANALYSIS)

GROUPING

OF

PSB's(PRINCIPLECOMPONENT

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

improved/deteriorated

enable
their

to

identify

those

banks,

which

performance/efficiency/profitability,

in

have
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 periodII. 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
166

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

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 subperiod-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.

167

B Grade
(10-18 ranks)

A Grade
(1-9 rank)

TABLE 5.24
Mobility of PSBs According to Efficiency during 1992-95 to
1996-99 (I & II Periods)
I Period 1992II-Period (1996-99)
95
A Grade
B Grade
C Grade
1992-95
(1-9 ranks)
(10-18 ranks)
(19-27 ranks)
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
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)
SB (I.19 & II.25)
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.
C Grade
(19-27 ranks)

ANB (I.22 & II.4)

P&SB (I.21 & II.15)

AB (I.24 & II.11)

(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

168

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.

169

TABLE 5.25
Mobility of PSBs According to Efficiency during
1996.99 to 2000.03 (II & III Periods)

B Grade
(10-18 ranks)

A Grade
(1-9 ranks)

II
Period1996-99

III-Period (2000-03)
A Grade
(1-9 ranks)
COB (II.1 & III.1)
OBOC (II.2 & III.2)

B Grade
(10-18 ranks)
BOB (II.6 & III.15)
UBOI (II.8 & III.11)

C Grade
(19-27 ranks)

SBOP (II.3 & III.3)

ANB (II.4 & III.6
SBOH(II.5 & III.4)
SBOT(II.7 & III.7)
PNB(II.12 & III.8)

BOI (II.9 & III.17)

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 Grade
(19-27 ranks)

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,
170

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)

B Grade
(10-18 ranks)

A Grade
(1-9 ranks)

I-Period(199295

A Grade

II-Period(1996-99)
B Grade

C Grade

(1-9 ranks)

(10-18 ranks)

(19-27 ranks)

SBOP (I.1 & II.3)

OBOC (I.2 & II.2)
SBOH (I.3 & II04)
UBOI (I.4 & II.1)
SBOI (I.7 & II.9)

SBOS (I.5 & 11.12)

PNB (I.8 & II.10)
SBI (I.9 & II.17)

CB (I.7 & 11.22)

COB (I.11 & II.5)

SBOM (I.13 & II.7)
DB (I.15 & II.8)

BOB (I.10 & II.11)

SBBJ (I.14 & II.14)
BOI (I.18 & II.18)

SBOT (I.12 & II.21)

VB (I.16 & II.20)
IB (I.17 & II.27)

C Grade
(19-27 ranks)

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.
171

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.

172

(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 subperiods.

(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 subperiod-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.
173

(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)

B Grade
(I0-18 ranks)

A Grade
(1-9 ranks)

II Period
1996-95

A Grade

III-Period (2000-03)
B Grade

C Grade

(1-9 ranks)

(10-18 ranks)

(19-27 ranks)

OBOC (II.2 & III.7)

SBOP (II.3 & III.1)
SBOH (II.4 & III.2)
COB (II.5 & III.6)
SBOM (II.7 & III.9)
SBOI (II.9 & IliA)
PNB (II.10 & III.5)
SB (II.13 & III.3)
SBBJ (II.14 & III.8)

UBOI (II.1 & III.10)

DB (II.8 & III.26

BOM (II.6 & III.22)

BOB (II.11 & II1.13) CBOI (II.15 & III.20)

SBOS (II.12 & III.17) SBI (II.17 & III.19)
ANB (II.16 & III.15)
BOI (II.18 & III.14)

C Grade
(I9-27 ranks)

VB (II.20 & III.11)

AB (II.19 & III.21)

P&SB (II.24 &
SBOT (II.21 & III.12)
III.25)
UNBOI (II.25 &
CB (II.22 & III.18)
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.

174

(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 subperiods.

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 subperiod-I and II. These banks are classified into three grades/ groups A, B and
C in each sub-period.
175

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.

176

TABLE 5.28
Mobility of PSBs According to Aggregated Weighted Index
during 1992-95 to 1996-99 (I & II Periods)
1996-99

B Grade
(1-9 ranks)

A Grade
(10-18 ranks)

A Grade
1992-95
(1-9 ranks)
SBOP (I.1 & II.3)
OBOC (I.2 & II.2)
SBOH (I.3 & II04)
UBOI (I.4 & II.1)
SBOI (I.7 & II.9)
COB (I.11 & II.5)
SBOM (I.13 & II.7)

C Grade
(19-27 ranks)

BOM (1.21 & 11.6)

II-Period (1996-99)
B Grade
(10-18 ranks)
SBOS (I.5 & 11.12)

C Grade
(19-27 ranks)
CB (I.7 & II.22)

SBI (I.9 & II.17)

BOB (I.10 & II.11)

SBBJ (I.14 & II.14)

SBOT (I.12 & II.21)

VB (I.16 & II.20)

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.

177

(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 subperiod-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 sub178

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)

B Grade
(10-18 ranks)

A Grade
(1-9 ranks)

II- Period
1996-97

A Grade

III-Period (2000-03)
B Grade

C Grade

(1-9 ranks)

(10-18 ranks)

(19-27 ranks)

OBOC (II.1 & III.8)

SBOP (II.2 & III.1)
COB (II.3 & III.1)
SBOH (II.4 & III.2)
PNB (II.8 & III.6)
SBOI (II.10 & III.3)
SBOM (II.12 & III.7
SBBJ II.14 & III.5)

UBOI (II.5 & III.14)

ANB (II.6 & III.11)
BOB (II.7 & III.17)
SBOS (II.9 & 1II.10)

AB (II.13 & III.13)

BOI (II.15 & III.16)
SBOT (II.17 & III.9)

DB (II.11 & III.27)

SBI (II.16 & III.24)
BOM (II.18 & III.19)

CBOI (II.19 & III.21)

P&SB (II.22 & III.25)
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 Grade
(I9-27 ranks)

CB (II.20 & III.15)

SB (II.21 & III:12)
VB (II.24 & III.18)

(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
179

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 subperiods, 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
180

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
Years

NationalizedSBI & its

Banks
Associates

1999-20002152
2000-01 2478
2001-02 2446
2002-03 1295
2003-04 3612
2004-05 4242
Average 2704.17
S.D
1058.07
C.V (%039.13

2860
3411
3793
4260
6196
7454
6662.17
1782.07
38.22

(Rs. in Crores)
Old Pvt.
New Pvt.
Foreign
Sector banks Sector Banks Banks
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.7326317 Cr.In Foreign banks. In this parameter foreign
banks have lions 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
expenses

Banks, SBI and Associates, Old Pvt. Banks, with branch

of Rs.205.34, 303.38 & 228.74 crores respectively. But branch

181

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
Nationaliz
SBI & its Old Pvt.
New Pvt.
Foreign
ed
AssociatesSector banksSector BanksBanks
Banks
1999-2000
166 232
182
747
5985
2000-01
189 274
200
820
6502
2001-02
206 304
234
934
6883
2002-03
217 326
288
1905
5866
2003-04
224 338
239
1450
5129
2004-05
230 346
230
1159
7824
Average 205.34 303.38
228.74
1169.06
6364.72
S.D
23.99 43.43
36.52
441.82
931.51
C.V (%0 11.68 14.32
15.97
37.80
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)

182

TABLE-5.32
PROFITABILITY PER BRANCH OF ALL BANKS
(Rs. in Crores)
Years
Nationalized SBI & its
Old Pvt.
New Pvt. Foreign
Banks
Associates Sector banks Sector BanksBanks
1999-2000
7.43
19.67
14.30
123.70
623.56
2000-01
6.39
16.39
14.24
76.44
637.06
2001-02
14.80
25.37
24.17
83.91
897.33
2002-03
23.50
33.12
35.32
174.34
1032.39
2003-04
32.70
41.08
61.12
123.96
1029.27
2004-05
27.98
41.06
71.87
19.09
1405.67
Average
18.80
29.48
36.84
100.24
937.55
S.D
10.92
10.61
24.49
52.96
292.25
C.V (%0
58.19
35.99
66.48
52.83
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.

183

TABLE-5.33
BUSINESS PER EMPLOYEE OF ALL BANKS
Years
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
Average
S.D
C.V (%0

Nationalized
Banks
126
160
197
222
256
308
211.50
65.59
31.06

SBI & its

Associates
122
160
182
205
302
379
223.50
93.83
41.98

(Rs. In Crores)
Old Pvt.
New Pvt.
Foreign
Sector banks Sector Banks Banks
171
938
699
202
749
817
227
906
958
299
1094
1014
317
873
981
355
875
940
261.83
905.83
901.50
72.32
112.31
119.83
27.62
12.40
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 SBI & its
Old Pvt.
New Pvt.
Foreign
Banks
Associates Sector banks Sector Banks Banks
1999-2000 9.76
9.93
13.80
44.76
76.33
2000-01
12.22
12.83
15.35
55.26
85.26
2001-02
14.30
14.55
18.34
50.76
92.99
2002-03
15.20
15.62
21.33
100.51
26.17
2003-04
15.85
16.48
19.88
60.9
74.21
2004-05
16.68
17.19
19.73
46.79
64.10
Average
14.00
14.43
18.07
59.83
79.84
S.D
2.58
2.69
2.91
20.77
10.34
C.V (%0 18.43
18.64
16.10
34.72
12.95
Source:Performance highlights of1999 to 2005.IBA Mumbai.

184

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.

185

Years
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
Average
S.D
C.V (%0

TABLE 5.35
PROFITABILITY PER EMPLOYEE OF ALL BANKS
( Rs. In Crores )
Nationalized SBI & its
Old Pvt.
New Pvt.
Foreign
Banks
Associates Sector banks Sector Banks Banks
0.44
0.85
1.08
7.75
8.07
0.41
0.77
1.09
5.14
8.35
0.65
1.21
1.89
4.56
12.12
1.65
1.59
2.62
9.20
15.17
2.32
2.00
5.09
5.20
14.89
2.03
2.04
6.15
0.77
11.52
1.26
1.42
2.98
5.44
11.68
0.85
0.55
2.15
2.91
3.06
67.46
38.73
72.15
53.49
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
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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.
187