DECLARATION Title of Dissertation Measuring operational efficiency and profitability of Nationalised Banks in India.

I declare

(a)That the work presented for assessment in this dissertation Report is my own, that it has not previously been presented for another assessment and that my debts (for words, data, arguments and ideas) have been appropriately acknowledged. (b)That the work conforms to the guidelines for presentation and style set out in the relevant documentation.

Date : 12-02-2013

Arpit Jain A0101911195 MBA GEN(Class of 2013)

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CERTIFICATE

I Prof. S.K Malhotra hereby certify that Arpit Jain student of Masters of Business Administration at Amity Business School, Amity University Uttar Pradesh has completed the dissertation Report on Measuring Operational Efficiency of Nationalised Banks in India, under my guidance.

Prof. S.K.Malhotra Department of Finance

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ACKNOWLEDGEMENT

I am glad to present a report on my Dissertation project titled Measuring operational efficiency and profitability of nationalised banks in India. I have put in my sincere efforts for the project. However it would not have been accomplished without the support and help of my faculty guide and teachers. I would like to express my gratitude and special thanks to Prof. S.K Malhotra , Faculty mentor for helping me and giving proper time and attention.

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TABLE OF CONTENT

CHAPTER 1: INTRODUCTION .............................................................................. 1

1.1 1.3 Purpose of the Study .................................................................................................1 Theoretical Framework ............................................................................................2

1.4

Summary.................................................................................................... 6

CHAPTER 2: LITERATURE REVIEW .................................................................. 7 CHAPTER 3: RESEARCH METHODS AND PROCEDURES .......................... 12
3.1 3.2 3.3 3.4 3.5 3.6 Research Objectives ................................................................................................12 Research Questions .................................................................................................12 Hypothesis ................................................................................................................12 Data Collection ........................................................................................................12 Research Design .......................................................................................................13 Limitations ...............................................................................................................13

CHAPTER 4: DATA ANALYSIS AND FINDINGS ............................................. 14

4.1 4.2 4.2.1 4.2.2 4.2.3 Review of Methodology ...........................................................................................14 Results of Research Questions ................................................................................14 Business Performance ................................................................................... 14 Efficiency ........................................................................................................ 21 Profit Earning Capacity ............................................................................... 29

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS ......................... 36

5.1 5.2 5.3 Summary of Findings ..............................................................................................36 Suggestions ...............................................................................................................37 Conclusion ................................................................................................................38

REFRENCE ............................................................................................................... 39
APPENDIX A. LIST OF THE NATIONALISED BANKS IN INDIA ..............................41 APPENDIX B. LIST OF ABREVIATIONS .........................................................................42

LIST OF TABLES
Table 4. 1 Business Performance of Nationalised .....................................................................15 Table 4. 2 Correlation Matrix between Business Performance Variables .................................17 Table 4. 3 ANNOVA.................................................................................................................18 Table 4. 4 Regression Analysis .................................................................................................19 Table 4. 5 Efficiency of Nationalised Banks(rupees in million) ...............................................22 Table 4. 6 Correlation matrix between efficiency variables ......................................................23 Table 4. 7 ANOVA ...................................................................................................................24 Table 4. 8 Regression analysis ..................................................................................................25 Table 4. 9 ANNOVA.................................................................................................................27 Table 4. 10 REGRESSION ANALYSIS ...................................................................................27 Table 4. 11 Profit earning capacity of Nationized banks ..........................................................29 Table 4. 12 Correlation Matrix ..................................................................................................31 Table 4. 13 ANNOVA...............................................................................................................32 Table 4. 14 Regression Analysis .................................................................................................33

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LIST OF FIGURES
Figure 1. 1 Banking Structure Of India ..................................................................................... 5 Figure 1. 2 working of Banking Industry .................................................................................. 5 Figure 4. 1 Business Performance .............................................................................................16 Figure 4. 2 Business Performance (A) ......................................................................................17 Figure 4. 3 Efficiency ................................................................................................................23 Figure 4. 4 Profitability .............................................................................................................31

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Measuring operational efficiency and profitability of Nationalised Banks in India Arpit Jain

Introduction and Statement of Problem: Nationalised banks dominate the banking system in India. In the post-Independence period, all the nationalised banks are fanning new branches throughout the country. The Government of India embarked on a comprehensive banking reforms plan in 1992 to establish a more diversified, profitable, efficient and resilient banking. A detailed analysis about macro and micro level studies on banking, it have been concluded that many studies have not found any significant difference between the efficiency indicators of nationalised banks and other banks in the post reforms period. The most recent studies also concluded that in the Indian banking sector, ownership has no definite relationship with efficiency. The researcher identified this area as research gap and hence, this study is conducted. Research Design: The current study is explorative. 20 nationalized banks were considered as samples. The study is based on secondary data collected from banking statistics published by Reserve Bank of India and Indian Banking Association. Business performance, efficiency, profit earning capacity and profitability were considered for the study. The study period was 2007-08 to 2010-11. Statistical and econometric tools such as mean, compound growth rate, correlation, multiple regression, t-test and ANOVA.

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CHAPTER 1: INTRODUCTION

1.1 Purpose of the Study

The shape of the Indian Banking Industry has changed due to the World Trade Organization, increasing international risk triggered by Basel III norms (laid down by Basel committee under the supervision of Bank for International Settlements (BIS)), Free Trade Agreements (FTAs) and the Reserve bank of India guidelines. It needs every banker to design innovative banking products and uses information technology to reduce their cost of operation. New concepts like personal banking, retail banking, bankassurance, internet banking, phone banking, mobile banking, and rural banking have emerged. In this situation, the banks have to track their performance to improve their profitability by paying attention to the key influencing factors for its timely correction and for future growth. With increased competition in the banking Industry, the Net Interest Margin (NIM) of banks have come down over the last one decade. Hence, it is necessary to improve their operational efficiency while meeting the customer requirements. Product innovations and process re- engineering will be the order of the day. All banks therefore to go for rejuvenating their costing and pricing to segregate profitable and non-profitable business. Banking industry is fragmented in its structure and has restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations. Besides this, increase in the number of foreign players poses threat to both public and private sector Banks. Therefore, it is appropriate to know the answer for the following research questions: 1. Whether efficiency expands with business performance? 2. Whether efficiency raises profit earning capacity? 3. Whether efficiency increases profitability?

1.2 Context and Significance of Study

From the early 1970s through the late 1980s, the role of market forces in Indian banking system was almost missing and excess regulation in terms of high liquidity requirements and state interventions in allocating credit and determining the prices of financial products has resulted in serious financial repression. The main consequence of this financial repression was an ascent in the volume of bad loans due to ineffective credit evolution system and poorer risk assessment policies. This led to a gradual decline in the profitability and efficiency of Indian banks, especially of public sector banks (PSBs). In fact, in 1990s Indian banking system was on the verge of a crisis and lacking viability even in its basis function of financial intermediation. Realizing the presence of the signs of financial repression and to get an escape from any potential crisis in the banking sector, the Government of India embarked on a comprehensive banking reforms plan in 1992 to establish a more diversified, profitable, efficient and resilient banking.

A detailed analysis about macro and micro level studies on banking, it have been concluded that many studies have not found any significant difference between the efficiency indicators of nationalised banks in the post reforms period. The most recent study by Reserve Bank of India also concluded that in the Indian banking sector, ownership has no definite relationship with efficiency. The researcher identified this area as research gap and hence, this study has been made here to evaluate the performance of PSBs from the post-reforms period. The first section illustrates the functions of a bank along with its classification. The second section empirically validates our hypothesis framed with a comprehensive data analysis.

1.3 Theoretical Framework Banking industry is the backbone for growth of any economy. In India, Banking was originated in the last decades of 18th century. The Reserve Bank of India is the central/apex Bank which regulates the functioning of all banks operating within the country. Reserve Bank of India Act was passed in 1934 without major government ownership. Banking Regulations Act was passed in 1949. This

regulation brought RBI under the control of the government. Also RBI has the power to supervise & control the banks.

Before pre-liberalization, the Indian Banking was different. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted in the greater involvement of the state in different segments of the economy including banking and finance.

The process of liberalization and reform of the financial sector has brought significant changes in the banking sector. The objectives of the changes were to make the system more competitive, profitable and efficient. The economic and financial sector reform has transformed the operating environment for banks and financial institutions in the country. The achievement is the improvement of the commercial banks in their capital adequacy ratios, profitability, asset quality and risk management. Also, deregulation has opened up new opportunities for the banks to increase revenues by diversifying into investment banking, insurance, credit cards, securitization and depository services.

Since 19921993, there were changes in the structure of the Indian banking system. The commercial banks saw an increase in the degree of competition in the intermediation process from term lending institutions, non-banking intermediaries (like mutual funds and leasing companies), chit funds and the capital market. Besides, new banking services like ATM machines and Internet banking have emerged due to the advancement of computers. Globalization of operations and development of new technology has led to the increase in resource productivity, increasing level of profits, credits and profitability and decrease in NPAs. The increasing competition is squeezing profitability and forcing the banks to work efficiently on shrinking spreads. Various strategies are adopted by the large banking institutions to eliminate redundancies and increase efficiency. In smaller institutions, efficiency gains are

achieved by controlling costs and generating more diverse and higher levels of non-interest revenues. The overall development has benefitted the enhancement in the efficiency of the banking industry. An efficiency rise means all round prosperity and better utilization of factors of production. Waste reduction and efficient utilization of resources result in higher profitability of the industrial units. An efficient management of banking operations that aims at ensuring growth in profits and efficiency requires up-to-date knowledge of all those factors on which the banks efficiency depends. Higher banking efficiency means better intermediation services of banks, which implies a better match between depositors and investors with all its positive effects on economic indicators. So, measuring and analyzing the operational efficiency of banks in India so to ascertain how efficiently they perform their basic functions in the economy as financial intermediaries has been an important area of inquiry among various stakeholders.

Since banking products and services are intangible in nature, measuring the efficiency and competitiveness of banks was not an easy task. Many researchers have attempted to measure the productivity of banking industry using outputs, costs, efficiency and performance. The most traditional method to measure the efficiency in the banking sector is the ratio analysis of different financial parameters, like return on assets or return on investments, net profit per employee etc. New concepts like personal banking, retail banking, banc assurance, internet banking, phone banking, mobile banking, and rural banking have emerged. So, the banks have to track their performance to improve their profitability. This can be done by paying attention to the key factors influencing for its timely correction and for future growth.

Figure 1. 1 Banking Structure Of India

Figure 1. 2 working of Banking Industry

1.4 Summary

The current study is explorative. 20 nationalized banks were considered as samples. The study is based on secondary data collected from banking statistics published by Reserve Bank of India and Indian Banking Association. Business performance, efficiency, profit earning capacity and profitability were considered for the study. The study period was 2007-08 to 2011-12.

Statistical and econometric tools such as mean, compound growth rate, correlation, multiple regression, t-test and ANOVA. Nationalised banks dominate the banking system in India. In the postIndependence period, all the nationalised banks are fanning new branches throughout the country. The Government of India embarked on a comprehensive banking reforms plan in 1992 to establish a more diversified, profitable, efficient and resilient banking. A detailed analysis about macro and micro level studies on banking, it have been concluded that many studies have not found any significant difference between the efficiency indicators of nationalised banks and other banks in the post reforms period. The most recent study by Reserve Bank of India also concluded that in the Indian banking sector, ownership has no definite relationship with efficiency. The researcher identified this area as research gap and hence, this study is conducted.

CHAPTER 2: LITERATURE REVIEW

(Bhattacharyya, 1997) measured the technical efficiency of 70 commercial banks operating in India for the period 1986-91 using Data Envelopment Analysis (DEA). They used a two-stage approach: in the first stage, they calculated the radial technical efficiency scores using DEA. In the second stage, they used stochastic frontier analysis to attribute variation in efficiency scores to three sourcestemporal, ownership, and noise component. They considered advances, investment, and deposits as outputs while interest expense and operating expense were taken as the inputs. They found that the public sector banks had much higher efficiency as compared to the private and foreign banks.

(Das, 2005) examined the output-oriented technical efficiency, cost efficiency, revenue maximizing efficiency, and profit efficiency of Indian (public, private and foreign) banks for the period 1997-2003. They considered four inputs for their studyborrowed funds (deposits and other borrowings), number of employees, fixed assets, and equity. They included in their study only those banks which had at least three branches during the entire study period. Their results indicated that the Indian banks are still not much differentiated in terms of input or output oriented technical efficiency or cost efficiency. However, they differ sharply in respect of revenue and profit efficiencies.

( Kalluru Siva Reddy and Bhat Sham K, 2008) examined the profitability determinants in Indian commercial banks by employing fixed and random effects models for an unbalanced panel data of 87 commercial banks for the period 19922006. Two alternative measures of bank profitability such as Returns on Assets (ROA) and Returns on Capital (ROC) are used. The empirical results reveal that the profitability of banks was affected not only by banks own characteristics but also by industry structural variables and macroeconomic variables. Bank ownership and political parties in power also play a vital role in determining bank profitability in India. However, the determinants of bank profitability vary significantly across the banks groups.

(Lopoyetum, 2005) in his article elaborated that the profitability performance of the UCBs can be improved by strengthening the magnitude of burden ratio. The spread ratio can be increased by increasing the interest receipts faster than the interest payments. The burden ratio can be lowered by decreasing the manpower expenses, other expenses and increasing other incomes.

(Nath, 2005) studied the efficiency of 68 commercial banks operating in India for the period 1996-99 using the output oriented Charnes et al. (1978) DEA m o d e l . The parameters considered as outputs of the banking industry are: (1) deposits; (2) net profits; (3) advances given by the banks; (4) non-interest income; and (5) interest spread which is the difference between the interest earned by the bank and the interest paid by it. The five input parameters taken are: (1) net worth of the banks; (2) borrowings of the banks; (3) operating expenses which are the non-interest related expenses such as sum of establishment expenses; rent, taxes, and electricity; printing and stationery; advertising; depreciation; directors fees; auditors fees; law charges; post, telegram and telephone expenses; repair and maintenance; insurance and miscellaneous other expenses, (4) number of employees in the country; and (5) number of bank branches in the country The results of the study indicate that the private commercial banks have the highest efficiency figures and the least variation, whereas the foreign- owned banks exhibit the least average e f f i c i e n c y figure and maximum variation. The public sector commercial banks come in between

(Ramachandran. A and Kavitha. N, 2009), has examined some aspects of factors influencing total earning, total expenditure and the profitability of the Indian Scheduled Commercial Banks. The step-wise multiple regression analysis of the profitability undertaken discloses the relationship among the earning factors and expenses factors on the profitability of the Banks through which the management can easily assess the SWOT of the Banks which will ultimately boost the profitability of the Banks.

(Ravisankar, 2000) examined the efficiency of the Indian public sector banks in two phases during the period 1992-95. In the first phase, certain key ratios such as deposit to establishment expenses and advances to establishment expenses, and deposits to staff and advances to staff were c o n s i d e r e d . The b a n k s were p l o t t e d in a t wo dimensional graph to identify the better performing banks. Their study considered four input v a r i a b l e s interest e x p e n d i t u r e , establishment expenditure, non- establishment expenditure a n d s i x o u t p u t variables: deposits, a d v a n c e s , investments, non-interest income, interest spread, and total income. Their results indicated that the performance of the public sector banks (with the exception of a few) had improved over the years of study. (Ray, 2004)compared the performances of 58 public, private sector, and foreign banks using a revenue maximization efficiency approach for the period 19922000. Loans, i n v e s t m e n t s , and o t h e r i n c o m e s w e r e outputs. Their study considered deposits and operating costs as inputs. They argued that during the period, Indian banks did not have much freedom in trimming costs, especially the cost of labour. Under the circumstances, revenue maximization best describes the objective that banks have been focusing during the period. The results of their study relating to revenue maximization efficiency, technical efficiency, and allocate ef fi ci e nc y reveal: Public sector banks are significantly better placed than private sector banks on revenue maximization efficiency but there is no difference between public sector banks and foreign banks Public sector banks are significantly better than private banks in respect of technical efficiency but not in respect of allocate efficiency taken as b a n k

(Swammy, 2001) Studied the comparative performance of different bank groups since 1995-96 to 1999-2000. An attempt was made by researcher to identify factors which could have led to changes in the position of individual banks in terms of their share in the overall banking industry. He concluded that in many respects

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nationalized public sectors banks are much better than private banks, even they are better than foreign banks. (Saha and Ravisankar, 2000), examined the efficiency of the Indian public sector banks in two phases during the period 1992-95. In the first phase, certain key ratios such as deposit to establishment expenses and advances to establishment expenses, and deposits to staff and advances to staff were considered. The banks were plotted in a two dimensional graph to identify the better performing banks. Their study considered four input variablesinterest expenditure, establishment expenditure, non-establishment expenditure and six output variables: deposits, advances, investments, non-interest income, interest spread, and total income. Their results indicated that the performance of the public sector banks (with the exception of a few) had improved over the years of study. (Shobhana V K and Shanti G, 2008), assesses the operational efficiency of Foreign Banks operating in India using the data for the period 1996-97 to 2004-05. In the paper they have used ANOVA (Analysis of Variance) to find that there is no significant relationship between operational efficiency and variables such as size of assets, branch network and stall strength.

(Sarkar, 2005) used the stochastic cost frontier analysis to examine the efficiency of the Indian banking system using panel data for the period 1986-2000. They used a trans log specification of the cost frontier to estimate the efficiency of the individual banks. The dataset related to 27 public sector banks and 23 private sector banks. Their results indicated that Indian banks, on average, do exhibit the presence of cost inefficiency in their operations. However, there is a tendency for inefficiencies to decline over time. Further, they found that deregulation in the Indian banking sector resulted in an increase in the cost inefficiency of the Indian banks and a decline in the rate of inefficiency reduction. (Sinha, 2006)estimated the efficiency of Indian commercial banks using the data envelopment and free disposal hull approaches respectively. They have taken net interest income, non-interest income, and loan as the output indicators. Number of

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bank branches and borrowed capital were taken as two inputs. The results were for 1996-97, 1998-99, 2000-01, and 2002-03 respectively. The results suggest an improvement in the performance if net interest income or non-interest income is taken as the output indicator but a decline in the performance if loan is taken as the output indicator (Sergio, 1996) in a study of non-performing loans in Italy found evidence that, an increase in the riskiness of loan assets is rooted in a bank s lending policy adducing to relatively unselective and inadequate assessment of sectorial prospects. Interestingly, this study refuted that business cycle could be a primary reason for banks NPLs. The study emphasised that increase in bad debts as a consequence of recession alone is not empirically demonstrated. It was viewed that the bank-firm relationship will thus; prove effective not so much because it overcomes informational asymmetry but because it recoups certain canons of appraisal.

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CHAPTER 3: RESEARCH METHODS AND PROCEDURES

3.1 Research Objectives To evaluate the business performance in relation to profit earning capacity, efficiency and profitability of nationalized banks. To evaluate inter-relationship between selected variables among nationalised banks. 3.2 Research Questions

Whether efficiency expands with business performance? Is there any possibility of finding the factor influencing the profitability? Whether efficiency raises profit earning capacity? Is there any possibility of improving the profitability? Is there any avenue to identify the efficient bankers?

3.3 Hypothesis

H01: There is no significant relationship between total business carried out by nationalised banks and the deposits, investments, advances, number of offices and number of employees.

H02: There is no significant relationship between Total business per employee of the nationalized banks and the efficiency factors. H03: There is no significant relationship between Total business per branch of the nationalized banks and the efficiency factors H04: There is no significant relationship between Profit earning capacity of the nationalised banks and other operational expenses met and other incomes.

3.4 Data Collection

Data is collected from various bulletins published by the Reserve Bank of India and the data available on the websites of various banks.

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3.5 Research Design The current study is explorative in nature. 19 nationalized banks were considered as samples. The study is based on secondary data collected from banking statistics published by Reserve Bank of India and Indian Banking Association. The study period was 2007-08 to 2010-11. The following statistical tools had been applied between the financial parameters of sample Nationalised Banks. They are: Mean Standard deviation Coefficient of variation Coefficient of correlation Multiple linear regression

These formulas are applied in Microsoft Excel and SPSS software.

3.6 Limitations The study is mainly based on the secondary data only and the number of the employees per bank may differ due their transfer or retirement which could affect the productivity and profit earning capacity of individual banks.

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CHAPTER 4: DATA ANALYSIS AND FINDINGS 4.1 Review of Methodology The research is majorly based on secondary data gathered from various journals and bulletins published by various government bodies and banks. Excel and SPSS were used to analyse the data and make interpretations. Statistical tools such as coefficient of variation, correlation coefficient and multiple linear regressions are used. 4.2 Results of Research Questions The focus of all banks in India has shifted their approach to 'cost', determined by revenue minus profit. This means that all the resources should be used efficiently to better the efficiency and ensure a win-win situation. To survive in the long run, it is essential to focus on cost saving. Previously, banks focused on the 'revenue' model which is equal to cost plus profit. After the banking reforms, banks shifted their approach to the 'profit' model, which meant that banks aimed at higher profit maximization.

4.2.1

Business Performance

The current section of the study analyses the business performances of the nationalised banks in relation to expansion of branches, recruitment of employees, deposits, advances, investments and total business carried out by the nationalized banks in India during the period 2007-08 to 2011-12.

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Table 4. 1 Business Performance of Nationalised

(Rupees
Year 2006-07 2007-08 2008-09 2010-11 2011-12 MEAN S.D C.V C.V (%) CAGR (%) No. of offices 39255 40956 43452 46288 50013 43992.8 4285.79394 0.097420349 9.742034925 4.963326255 no of employees 466400 462926 473041 471727 491132 473045.2 10902.14308 0.023046726 2.304672593 1.038743787 deposits 16799930 21057056 25839338 31265862 35969893 26186415.8 7682026.27 0.293359211 29.33592107 16.44647189 advances 12036784 15197619 18430819 23102793 27263212 19206245 6086242 0.316889 31.68887 17.76421

in million)
total business 28836714 36254675 44270157 54368655 63233105 45392661.2 13763285.35 0.303205077 30.32050774 17.00374093

investments 5360181 6550419 8281248 9503797 10867544 8112637.8 2211888.758 0.272647296 27.26472958 15.18353168

(source: RBI journal)

The above table shows the business performance of nationalised banks in India during the period 2007-12. The number of branches of all nationalised banks grew from 39255 in 2007-08 to 50013 in 2011-12. It registered an annual growth of 4.96 per cent, with an average of 43992 branches functioning every year. The number of employees of all nationalised banks increased from 466400 in 2006-07 to 4730452 in 2011-12. It registered a n n u a l growth of 1.03 per cent, with an average of 473045 employees working every year. The deposits of all nationalised banks grew from 16799930 million in 2007-08 to 35969893 million in 2011-12. It registered an annual growth of 16.44 per cent, with an average of 26186415.8 million deposits every year. The advances of all nationalised banks grew from 12036784 million in 2007-08 to 27263212 million in 2011-12. It

registered an annual growth of 17.76 per cent, with an average of 19206245 million advances every year. The investments of all nationalised banks grew from 5360181 million in 2007-08 to 10867544 million in 2011-12. It

registered an annual growth of 15.18 per cent, with an average of 8112637.8 million investments every year. The total business of all nationalised banks grew

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from 28836714 million in 2007-08 to 63233105 million in 2011-12. It registered an annual growth of 17.00 per cent, with an average of 45392661.2 million businesses every year. The co-efficient of variation of branch expansion and employees recruitment are relatively low. The group which has less coefficient of

variation is said to be more stable. The coefficient of variation of other variables such as deposits, advances, investments and total business are high. A high coefficient of variation indicates less consistency or less homogeneity. At a glance it is evidenced that the growth rate of deposits, advances and total business is more than the growth of branch expansion and employee recruitment. It shows that the business performance of nationalised banks is improved during the study period. Figure 4. 1 Business Performance

BUSINESS PERFORMANCE
70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 deposits advances investments total business RUPEES IN MILLION

2006-07 16799930 12036784 5360181 28836714

2007-08 21057056 15197619 6550419 36254675

2008-09 25839338 18430819 8281248 44270157

2010-11 31265862 23102793 9503797 54368655

2011-12 35969893 27263212 10867544 63233105

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Figure 4. 2 Business Performance (A)

BUSINESS PERFORMANCE(A)
600000 500000 400000 UNITS 300000 200000 100000 0 2006-07 2007-08 2008-09 YEAR 2010-11 2011-12

Table 4. 2 Correlation Matrix between Business Performance Variables

No. of offices No. of offices no of employees Deposits Advances investments total business 1 0.89929848 0.993153386 0.99684313 0.988207133 0.995144551 1 0.849360458 1 1 1 1 0.862048089 0.998533048 no of employees deposits advances investments total business

0.851070105 0.997679589 0.993199201

0.855278511 0.999713309 0.999543223 0.996059491

The above table explains the correlation between the business performances variables. It is found that branch expansion, employee recruitment, d e p o s i t s , advances, investments and business performance are positively correlated to other variables.

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Regression analysis: The

multiple

regression

models

had

been

framed

business performance parameter considered dependent variable and the other related variables were considered as independent. The linear regression model is shown in equation: BP = 0+ 1NO+ 2NE+ 3 DP+4IN+5 AD + i Where Xi1 Xi2 Xi3 Xi4 Xi5 i The = = = = = = underlying Number of Branches Number of Employees Deposits Investments Advances Error term assumptions of linearity, normality, constant

variation and independence of error terms must be satisfied in order to get a more valid model. The TB treated as dependent variable and NO, NE, DP, IN and AD are independent variables and the following hypothesis is being tested.

H01: There is no significant relationship between total business carried out by nationalised banks and the deposits, investments, advances, number of offices and number of employees. Table 4. 3 ANNOVA
Model Summary Adjusted R Model 1 R 1.000
a

Std. Error of the Estimate 9741.951

R Square 1.000

Square 1.000

a. Predictors: (Constant), investments, No. Of employees, advances

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ANOVA Sum of Model 1 Regression Residual Squares 7.577E14 94905603.970 df 3 1

Mean Square 2.526E14 94905603.97 0

F 2661282.960

Sig. .000
a

Total

7.577E14

a. Predictors: (Constant), investments, No. Of employees, advances b. Dependent Variable: total business

Table 4. 4 Regression Analysis

Coefficients

Standardi zed Unstandardized Coefficients Std. Model 1 (Constant) B Error Beta t 29.079 Sig. Coefficient s 95.0% Confidence Interval for B Lower Bound Upper Bound 16515357 .502 -14.136

11493357 395239.9 .873 42 .885 -.020

.022 6471358.2 44

No. Of employees Advances

-25.379

28.681

.022

-36.623

1.767

.007

.782 247.26 5

.003

1.677

1.858

Investments

1.474

.019

.237 77.637

.008

1.233

1.715

a. Dependent Variable: total business

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Excluded Variables

Collinearity Partial Model 1 No. of offices deposits Beta In .823 .558

a a

Statistics Tolerance 1.849E-7 4.021E-7

t . .

Sig. . .

Correlation 1.000 1.000

a. Predictors in the Model: (Constant), investments, No. Of employees, advances b. Dependent Variable: total business

The above regression leads to following results:

No. of offices and deposits were excluded by SPSS and are not considered significant enough.

I.

Standard error of estimate: The value of SE is 9741.95 and mean of y is 45392661.2 On comparing standard error of estimate with mean of y we see that is standard error of estimate is small enough and thus we conclude that the fit is good enough for forecasting.

II.

Significance check at 95% confidence level Following p values are obtained: No. of employees: .022 < .05 Advances: .003 < .05 Investments: .008< .05

As the p values obtained for above variables are less that .05 therefore we conclude that we have enough evidence to reject H0 and thus there is existence of linear relationship.

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III.

R2 (Coefficient of determination)

It tells about the strength of the relationship and is used to estimate the goodness of fit of the estimated regression model.

R2 for this model is 100% which means that 100% of the variability in total business of the banks is explained by no. of employees, advances and investments . Such a high level of R2 shows that estimated regression model is a good fit. IV. F test

It tells about the validity of the model. The p-value for the f test is .000 .00 < .05 Thus we infer that we do have sufficient evidence to prove that the estimated regression model is valid.

4.2.2 Efficiency

Efficiency is defined as the ratio of output to input. The indicators commonly used for assessing the efficiency of banks are business per employee/ branch, advances per employee/ branch, number of accounts per employee / branch etc. a. Employee Performance: Employee performance is considered the most relevant factor in banking sector. Employee performance is measured in relation to total business per employee, advances, deposits and profit per employee of the nationalized banks. b. Branch Performance: Branch performance is considered the most relevant factor in banking sector. It is measured in relation to total business per employee, advances, deposits and profit per employee of the nationalized banks.

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Table 4. 5 Efficiency of Nationalised Banks(rupees in million)

YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 MEAN S.D C.V C.V(%) CAGR(%) BPE 61.83 78.32 93.59 115.25 128.75 95.548 27.05588 0.283165 28.31653 15.80028 DPE 36.02 45.49 54.62 66.28 73.24 55.13 15.08871 0.273693 27.36932 15.25 APE 25.81 32.83 38.96 48.97 55.51 40.416 11.97917 0.296397 29.63968 16.55117 PPE 0.38 0.49 0.57 0.7 0.7 0.568 0.138094 0.243124 24.31235 12.99595 BPB 734.6 885.21 1018.83 1174.57 1264.33 1015.508 213.9574 0.21069 21.069 11.471 DPB 427.97 514.14 594.66 675.46 719.21 586.288 118.2792 0.201743 20.17426 10.94008 APB 306.63 371.07 424.17 499.11 545.12 429.22 95.85491 0.223323 22.33235 12.19551 PPB 4.48 5.49 6.17 7.14 6.83 6.022 1.070687 0.177796 17.77959 8.79991

(source: RBI journal)

The above table shows the efficiency performance of nationalised banks during the period 2007-12. The business per employee of all nationalised banks grew from 61.83 million in 2007-08 to 128.75 million in 2011-12. It registered an annual growth of 15.8 per cent, with an average of 95.54 million. The deposits per employees of all nationalised banks increased from 36.02 million in 2007-08 to 73.24 million in 2011-12. It registered an annual growth of 15.25 per cent, with an average of 55.13 million. The advances per employee of all nationalised banks grew from 25.81 million in 2007-08 to 55.51 million in 2011-12. It registered an annual growth of 16.55 per cent, with an average of 40.41 million. The profit per employee of all nationalised banks grew from .38 million in 2007-08 to .7 million in 2011-12. It registered an annual growth of 12.99 per cent, with an average of . 5 million. The business per branch of all nationalised banks grew from 734.6 million in 2007-08 to 1264.33 million in 2011-12. It registered an annual growth of 11.47 per cent, with an average of 1015.50 million. The advances per employee of all nationalised banks grew from 306.3 million in 2007-08 to 545.12 million in 2011-12. It registered an annual growth of 12.19 per cent, with an average of 429.22 million. The profit per employee of all nationalised banks grew from 4.48 million in 2007-08 to 5.16 million in 2011-12. It registered an annual growth of 8.799 per cent, with an average of 6.02 million. The deposit per branch of all nationalised banks grew from 427.97 million in 2007-08 to 719.21 million in 2011-12. It registered an annual growth of 10.94 per cent, with an average of 586.2 million. The co-efficient of variation of all variables are relatively high. The group

which has high Coefficient of Variation is said to be more volatile or less homogeneity.

23

At a glance it is evidenced that the growth rate of business, deposits, advances and profit per employee and branch are high. It shows that the efficiency performance of employees and branches are improved during the period.

Figure 4. 3 Efficiency

EFFICIENCY
1400 1200 RUPEES IN MILLION BPE 1000 800 600 400 200 0 2007-08 2008-09 2009-10 YEAR 2010-11 2011-12 DPE APE PPE BPB DPB APB PPB

Table 4. 6 Correlation matrix between efficiency variables

EMPLOYEES EMPLOYEES BPE DPE APE PPE BPB DPB APB PPB OFFICES 1 0.824627088 0.81671348 0.833768986 0.70607418 0.801243835 0.788812621 0.815105457 0.616178818 0.89929848 1 0.999657 0.999446 0.981073 0.997838 0.994866 0.999664 0.946918 0.987937 1 0.998231 0.984552 0.999139 0.997122 0.999784 0.953546 0.984686 1 0.975706 0.995196 0.991014 0.998522 0.937593 0.991069 1 0.988461 0.99066 0.983924 0.990696 0.939492 1 0.999331 0.998981 0.962376 0.978164 1 0.996662 0.968974 0.971324 1 0.952461 0.9848 1 0.886495 1 BPE DPE APE PPE BPB DPB APB PPB OFFICES

24

The above table explains the correlation between the efficiency performances variables. It is found that business, deposits, advances and profit per employee and branch are positively correlated to other variables. It shows that all the efficiency parameter variables are inter-related to each other.

Regression Analysis : The linear regression model is shown in equation:

E= 0+ 1 BPE + 2 DPE + 3 APE +4 APE + i Where Xi1 Xi2 Xi3 Ei = = = = Business per employee Deposits per employee Profit per per employee Advances employee Error term

PPE treated as dependent variable and BPE, DPE, APE are independent variables and the following hypothesis is being tested.

H02: There is no significant relationship between profit per employee and other efficiency variables.

Table 4. 7 ANOVA

Model Summary Adjusted R Model 1 R .992

a

Std. Error of the Estimate

R Square .984

Square .967

.02508

a. Predictors: (Constant), advances per employee, deposit per employee

25

ANOVA Model 1 Regression Residual Total Sum of Squares .075 .001 .076 df

Mean Square 2 2 4 .038 .001

F 59.643

Sig. .016
a

a. Predictors: (Constant), advances per employee, deposit per employee b. Dependent Variable: profit per employee

Table 4. 8 Regression analysis

Coefficients
Unstandardized Coefficients Model 1 (Constant) deposit per employee advances per employee a. Dependent Variable: profit per employee B -.004 .027 -.023 Std. Error .075 .014 .018 2.983 -2.002
a

Standardized Coefficients Beta t -.060 1.953 -1.311 Sig. .957 .190 .320

95.0% Confidence Interval for B Lower Bound Upper Bound -.325 -.033 -.099 .316 .087 .053

Excluded Variables

Collinearity Partial Model 1 business per employee Beta In -979.804

a

Statistics Tolerance 1.031E-8

t -1.225

Sig. .436

Correlation -.775

a. Predictors in the Model: (Constant), advances per employee, deposit per employee b. Dependent Variable: profit per employee

26

The above regression leads to following results:

Business per employee was excluded by SPSS and are not considered significant enough.

I.

Standard error of estimate: The value of SE is .02508 and mean of y is .568 On comparing standard error of estimate with mean of y we see that is standard error of estimate is not small enough and thus we conclude that the fit is not good enough for forecasting.

II.

Significance check at 95% confidence level Following p values are obtained: Deposit per employee: .190 > .05 Advances per employee: .320>.05

As the p values obtained for above variables are greater than .05 therefore we conclude that we do not have enough evidence to reject H0 and thus there is no existence of linear relationship
Regression Analysis : The linear regression model is shown in equation:

E= 0+ 1 DPB + 2 APB + 3 BPB +i

Xi1 Xi2 Xi3 i

= = = =

Deposits per branch Advances per branch Total business per branch Error term

PPB treated as dependent variable and BPB, DPB, APB are independent variables and the following hypothesis is being tested.

27

H03: There is no significant relationship between profit per branch and other efficiency variables.

Table 4. 9 ANNOVA
Model Summary Adjusted R Model 1 R .983
a

Std. Error of the Estimate

R Square .966

Square .933

.27776

a. Predictors: (Constant), advances per branch, deposit per branch

ANOVA Model 1 Regression Residual Total Sum of Squares 4.436 .154 4.590 df

Mean Square 2 2 4 2.218 .077

F 28.746

Sig. .034
a

a. Predictors: (Constant), advances per branch, deposit per branch b. Dependent Variable: profit per branch

Table 4. 10 REGRESSION ANALYSIS

Coefficients
a

Standardize Unstandardized Coefficients d Coefficients Lower Model 1 (Constant) deposit per branch advances per branch B -.111 .027 -.022 Std. Error 1.052 .014 .018 2.952 -1.990 Beta t -.105 1.860 -1.253 Sig. .926 .204 .337 Bound -4.639 -.035 -.099 95.0% Confidence Interval for B Upper Bound 4.417 .089 .054

28

Coefficients

Standardize Unstandardized Coefficients d Coefficients Lower Model 1 (Constant) deposit per branch advances per branch a. Dependent Variable: profit per branch B -.111 .027 -.022 Std. Error 1.052 .014 .018 2.952 -1.990 Beta t -.105 1.860 -1.253 Sig. .926 .204 .337 Bound -4.639 -.035 -.099 95.0% Confidence Interval for B Upper Bound 4.417 .089 .054

Excluded Variables

Collinearity Partial Model 1 business per branch Beta In .

a

Statistics Tolerance . .000

t .

Sig. .

Correlation

a. Predictors in the Model: (Constant), advances per branch, deposit per branch b. Dependent Variable: profit per branch

The above regression leads to following results:

Business per branch was excluded by SPSS and is not considered significant enough.

I.

Standard error of estimate: The value of SE is .27775 and mean of y 6.022 On comparing standard error of estimate with mean of y we see that is standard error of estimate is not small enough and thus we conclude that the fit is not good enough for forecasting.

29

II.

Significance check at 95% confidence level Following p values are obtained: Deposit per branch : .204 < .05 Advances per branch : .337 < .05

As the p values obtained for above variables are greater that .05 therefore we conclude that we do not have enough evidence to reject H0 and thus there is existence of linear relationship

4.2.3 Profit Earning Capacity

Banks are commercial organisations and like any such organisation all of their activities should be directed towards earning profit. Essentially, banks must

give a fair return on capital after providing adequately for business risks. This has warranted banks to earn profit.

Table 4. 11 Profit earning capacity of Nationized banks

YEAR II OI IE 2007-08 1426469 209794 1010933 2008-09 1838924 263936 1316762 2009-10 2080289 304996 1457115 2010-11 2563064 287249 1641351 2011-12 3412524 324674 2396879 MEAN 2264254 278129.8 1564608 S.D 762306.3 44279.12 519158.7 C.V 0.33667 0.159203 0.331814 C.V(%) 33.667 15.92031 33.18139 CAGR(%) 19.05912 9.126667 18.84605 OE 296700 354160 407922 538193 574750 434345 118924.3 0.273801 27.38014 14.13853 TI 1636262 2102860 2385285 2850314 3737197 2542384 800205.8 0.314746 31.47463 17.96105 TE 1307633 1670922 1865037 2179544 2971628 1998953 628921.9 0.314626 31.46257 17.84244 NP 328629 431938 520248 670770 765569 543430.8 176542.2 0.324866 32.4866 18.42835

(source: RBI journal)

The above table shows the Profit Earning Capacity of nationalised banks during the period 2004-11. The interest income of all nationalised banks grew from 1426469 million in 2007-08 to 3412524 million in 2011-12. It registered an annual growth of 33.67 per cent, with an average of 2264254 million. The other

30

income of nationalised banks increased from 209794 million in 2007-08 to 3 2 4 6 7 4 million in 2011-12. It registered an annual growth of 15.92 per cent, with an average of 278129.8 million. The interest expenditure of all nationalised banks grew from 1010933 million in 2007-08 to 2396879 million in 2011-12. It registered an annual growth of 18.84 per cent, with an average of 1564608 million. The operating expenses of all nationalised banks grew from 296700 million in 2007-08 to 574750 million in 2011-12. It registered an annual growth of 14.13 per cent, with an average of 434345 million. The total income of all nationalised banks grew from 1636262 million in 2007-08 to 3737197 million in 2011-12. It registered an annual growth of 17.48 per cent, with an average of 2542384 million. The total expenditure of all nationalised banks increased from 1307633 million in 200304 to 2971628 million in 2011-12. It registered an annual growth of 17.84 per cent, with an average of 1998953 million. The net profit of all nationalised banks grew from 328629 million in 2007-08 to 765569 million in 2011-12. It registered an

annual growth of 18.42 per cent, with an average of 35502.63million. The co-efficient of variation of all variables are relatively high. The group which has high Coefficient of Variation is said to be more volatile or less homogeneity. To sum up the growth rate of interest income and other income is less than the proportionate growth of interest expenses and operating expenses. It creates pressure on profit earnings of nationalised banks.

31

Figure 4. 4 Profitability

PROFITABILITY
4000000 3500000 RUPEES IN MILLION 3000000 2500000 2000000 1500000 1000000 500000 0 2007-08 2008-09 2009-10 YEAR 2010-11 2011-12 II OI IE OE TI TE NP

Table 4. 12 Correlation Matrix

II II OI IE OE TI TE NP 1 0.848156 0.990287 0.955628 0.99957 0.998157 0.974832 OI 1 0.847218 0.822105 0.863321 0.85481 0.867927 IE OE TI TE NP

1 0.906005 1 0.990265 0.955859 1 0.996792 0.936975 0.998183 1 0.937518 0.994661 0.976689 0.961979

The above table explains the correlation between the profit earning capacity variables. It is found that interest income, other income, interest expenses, other expenses are positively correlated to net profit as well as with other variables also. It shows that all the profit earning capacity parameter variables are inter-related to each other

32

Regression Analysis: The linear regression model is shown in equation: PEC = 0+ 1INI+ 2OI+ 3IE+4OE+5TI+6TE+ i Where: Xi1 Xi2 Xi3 Xi4 Xi5 Xi6 i = = = = = = = Interest income other income Interest Operating Total income Total expense Error term expenditure expenses

NP as dependent variable and INI, OI Other income, IE, OE, TI and TE are independent variables and the following hypothesis is being tested.

H04:There is no significant relationship between Total business per branch of the

nationalized banks and the efficiency factors. Table 4. 13 ANNOVA

Model Summary Adjusted R Model 1 R 1.000

a

Std. Error of the Estimate 1197.075

R Square 1.000

Square 1.000

a. Predictors: (Constant), TOTAL EXPENSE, OTHER INCOME, OTHER ESPENSE

ANOVA Model 1 Regression Residual Total Sum of Squares 1.247E11 1432988.754 1.247E11 df

Mean Square 3 1 4 4.156E10 1432988.754

F 28999.325

Sig. .004
a

33

ANOVA Model 1 Regression Residual Total Sum of Squares 1.247E11 1432988.754 1.247E11 df

Mean Square 3 1 4 4.156E10 1432988.754

F 28999.325

Sig. .004
a

a. Predictors: (Constant), TOTAL EXPENSE, OTHER INCOME, OTHER ESPENSE b. Dependent Variable: NET PROFIT

It has been revealed from the above econometric analysis that F ratio 28999.325 is statistically significant at 5 per cent level of significance. R 2 value depicts 99 per cent variations between the profit earning capacity variables tested for the nationalised bank
Table 4. 14 Regression Analysis Coefficients Unstandardized Coefficients Model 1 (Constant) B 154779.301 OTHER INCOME OTHER ESPENSE TOTAL EXPENSE a. Dependent Variable: NET PROFIT .047 .003 .169 15.773 .040 .009 .086 .442 1.106 .026 .015 .111 .745 16.846 76.266 .038 .008 .109 .922 .775 1.290 Std. Error 4611.785
a

Standardized Coefficients Beta t -33.562 Sig. .019

95.0% Confidence Interval for B Lower Bound Upper Bound -213377.590 -96181.012

Excluded Variables

Collinearity Partial Model 1 INTEREST INCOME INTEREST EXPENSE TOTAL INCOME Beta In 4.316 .
a

Statistics Tolerance 6.171E-7 .000 5.595E-7

t . . .

Sig. . . .

Correlation 1.000 . 1.000

a a

4.533

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Excluded Variables

Collinearity Partial Model 1 INTEREST INCOME INTEREST EXPENSE TOTAL INCOME Beta In 4.316 .
a

Statistics Tolerance 6.171E-7 .000 5.595E-7

t . . .

Sig. . . .

Correlation 1.000 . 1.000

a a

4.533

a. Predictors in the Model: (Constant), TOTAL EXPENSE, OTHER INCOME, OTHER ESPENSE b. Dependent Variable: NET PROFIT

The above regression leads to following results:

Interest income, interest expense, total income was excluded by SPSS and are not considered significant enough.

III.

Standard error of estimate: The value of SE is 1197.05 and mean of y is 543430.8 On comparing standard error of estimate with mean of y we see that is standard error of estimate is small enough and thus we conclude that the fit is good enough for forecasting.

IV.

Significance check at 95% confidence level Following p values are obtained: Other income : .038 < .05 Other expense : .008 < .05 Total expense : .040< .05

As the p values obtained for above variables are less that .05 therefore we conclude that we have enough evidence to reject H0 and thus there is existence of linear relationship V. R2 (Coefficient of determination)

35

It tells about the strength of the relationship and is used to estimate the goodness of fit of the estimated regression model.

R2 for this model is 100% which means that 100% of the variability in total business of the banks is explained by no. of employees, advances and investments . Such a high level of R2 shows that estimated regression model is a good fit. VI. F test

It tells about the validity of the model. The p-value for the f test is .004 .004 < .05 Thus we infer that we do have sufficient evidence to prove that the estimated regression model is valid.

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CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of Findings The overall objective of the study is to evaluate the efficiency and profitability of the 20 nationalised banks in India. The data collected is subdued into suitable tabulator form for analysis. Quantitative techniques like mean, co-efficient variation and compound growth rate are applied. Having identified the factors which are likely to influence the efficiency and profitability, the significance of the factors so identified have been statistically tested. In order to maintain

sequence and continuity conclusion are presented in chronological order. a. Business performance: Right from the second phase of economic liberalisation the Public Sector Banks in India aimed at reduction of manpower and improving their operation feasibility. The Branch expansion growth was considered significant. Deposit mobilization, granting advances and business expansion of PSBs are gathered momentum with a view to compete with global players. The difference between growth rate of deposit mobilization and advance granted is more. It has been concluded that

deposits and number of employees did not directly influenced the business performance.

b. Efficiency: With the presence of international banks in India, nationalised banks are in verge to improve their standards. Adoption of technological innovations resulted fostering of the efficiency of employees and branch performances. Even though efficiency of banks improved over the period of study, Indian PSBs are far behind to the performance of global banks. The coefficient of variation of all the factors is high and there is no linear relationship present among these variables.

37

c. Profit Earning Capacity: RBI as an apex body which controls and fixes interest rate. Interest income of all Nationalised banks constantly increased throughout the period due to increase in granting loans and advances. Similarly the interest expenses too. Non-interest income was

highly volatile, but the operating expenses steadily increased throughout the period. In general the proportionate growth rate of total income (17.84 %) was almost equal to the growth rate of total expenditure (17.96%), which is not a very good sign as the growth rate of total income should be higher. It been

concluded that net profit earning of the nationalised banks was directly influenced by operational factors and except in the case of other income and operating expenses.

5.2 Suggestions

In view of the foregoing issues, it may be meaningful to suggest the following strategies for the nationalized banks for enhancing operational efficiency and profitability. a. Business expansion through setup branches paves way bringing out large geographical area customer coverage by the banks. Thereby exploring the unexplored segment of clients is possible b. Even though efficiency of banks improved over the period of study, Indian banks are far behind to the performance of global banks. Banks have to take steps to improve the efficiency by adopting new technologies c. Added thrust is required for enhancing the non-interest income. This can significantly improve profitability. Non-interest income can be improved through undertaking more of fee based activities, besides the traditional fund based activities like providing credit. In this regard, it may be pointed out that higher

investments in technology would help to improve the non-interest income of banks.

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5.3 Conclusion Banking industry in India was all poised for a major leap in year 2004. Banking sector witnessed some major positive changes. Going by the performance for the year 2008-09, Indian nationalised banks have not just survived the crisis but appear to have emerged even stronger from the recession and even gone ahead and posted reasonable profits. The profitability of the nationalized banks is expected to remain under pressure due to increased cost of borrowing, declining interest spreads, and lower fee income due to slowdown in retail lending. Profit levels are also likely to be impacted by mark-to-mark provisions on investment portfolios and considerably lower profit on sale of investments, as compared with previous years. Moreover the efficiency factors such as business, deposit and advances per employee improved over the period of study from 2007to 2012.

39

REFRENCE
Bhattacharyya. (1997). The Impact of Liberalisation on the Productive Efficiency of Indian Commercial Banks, European Journal of Operational Research, Vol. 98, pp. 332-345. Das. (2005). Liberalisation, Ownership and Efficiency in Indian BankingA Nonparametric Analysis, Economic and Political Weekly, March 19. Kalluru Siva Reddy and Bhat Sham K (2008), An Empirical Analysis of Profitability Determinants in Indian Commercial Banks During Post Reform Period, The Icfai University Journal of Industrial 38 Economics, Vol. V, No. 4, pp. 38-56

Nath. (2005). Efficiency Benchmarking of Indian Commercial Banks in the Deregulated Financial Environment, in Ranjan Ghosh and Chiranjib Neogi (Eds.), Theory and Application of Productivity and Efficiency Econometric and DEA Approach, Macmillan. Ravisankar, S. a. (2000). Rating of Indian Commercial Banks: A DEA Approach, European Journal of Operational Research, Vol. 124, No. 1, pp. 187-203. Ray, R. a. (2004). Liberalisation, Ownership and Efficiency in Indian BankingA Nonparametric Analysis, Economic and Political Weekly, March 19. Ramachandran. A and Kavitha . N, (2009), Profitability of the Indian Scheduled Commercial Banks: A Case Analysis, The IUP Journal of Bank Management, Vol. VIII, No.s 3 & 4, pp. 129-139

Sarkar, K. a. (2005). Deregulation, Ownership, and Efficiency Change in Indian Banking: An Application of Stochastic Frontier Analysis, in Ranjan Ghosh and Chiranjib Neogi (Eds.), Theory and Application of Productivity and Efficiency Econometric and DEA Approach, Macmillan.

40

Sinha. (2006). Intermediation Cost Efficiency: A Tale of Two Bank Groups, The Icfai Journal of Bank Management, February, Hyderabad

Saha A and Ravisankar T S (2000), Rating of Indian Commercial Banks: A DEA Approach, 203 Shobhana V K and Shanti G (2008), Operational Efficiency of Foreign Banks Operating in India: A Non-Parametric Model, The IUP Journal of Bank Management, Volume 7 (1), pp. 41-49 European Journal of Operational Research, Vol. 124, No. 1, pp. 187-

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APPENDIX A. LIST OF THE NATIONALISED BANKS IN INDIA

1. Andhra Bank 2. Allahabad Bank 3. Bank of Baroda 4. Bank of India 5. Bank of Maharashtra 6. Canara Bank 7. Central Bank of India 8. Corporation Bank 9. Dena Bank 10. Indian Overseas Bank 11. Indian Bank 12. Oriental Bank of Commerce 13. Punjab National Bank 14. Punjab and Sind Bank 15. Syndicate Bank 16. Union Bank of India 17. United Bank of India 18. UCO Bank 19. Vijaya Bank 20. Idbi Bank

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APPENDIX B. LIST OF ABREVIATIONS

1. BPE : BUSINESS PER EMPLOYEE 2. DPE : DEPOSIT PER EMPLOYEE 3. APE : ADVANCES PER EMPLOYEE 4. PPE : PROFIT PER EMPLOYEE 5. BPB : BUSINESS PER BRANCH 6. DPB : DEPOSIT PER BRANCH 7. APB : ADVANCES PER BRANCH 8. PPB : PROFIT PER BRANCH 9. II : INTEREST INCOME

10. OI : OTHER INCOME 11. IE : INTEREST EXPENSE 12. OE : OTHER EXPENSE 13. TI : TOTAL INCOME 14. TE : TOTAL EXPENSE 15. NP : NET PROFIT 16. C.V: COEFICIENT OF VARIATION 17. S.D: STANDARD DEVIATION 18. ANNOVA: ANALYSIS OF VARIANCE 19. CAGR: COMPUND ANNUAL GROWTH RATE