REVIEW OF LITERATURE

AND DESIGN OF THE STUDY

 In this chapter the researcher has made an attempt to presmt the review of
literature. To present the review of literature the researcher has studied several
committee reports appointed by the-~eserveBank of India, Books, published and
unpublished theses on the subject concerned, articles published in various reputed
journals, periodicals, websites, to glean the infirmation needed.

Luther, J.C.(1976)', chaired the committee appointed by the Reserve Bank of India
to study the productivity, efficiency and profitability of commercial banks. The
committee analysed the various issues like planning, budgeting and marketing in
commercial banks.

Matbur, O.P. (1977)'~ conducted a study on "Public sector banks in India-A case
study of State Bank of India". The main finding of his study was that the State Bank
of India, in its two decades of service, has accelerated the growth of Indian economy
in two significant ways: (i) by pursuing the policy of vigorous branch expansion in
general and its rural orientation in particular, and (ii) by playing a leading role in
introducing bank credit facility to the new fields of the priority sectors of the Indian
economy. The bank has also played a leading role in developing the backward regions
of the country.

Kulkarni, L.G. (1979f, in his study on "Development responsibility and profitability

of banks", has stated that while considering banks' costs and profits, social benefits
arising out of the operations of banks cannot be ignored. The author has also claimed
that the profit maximization approach is out of place while referring to profitability of
banks, and recognized that while filfilling the social responsibility, banks should try
to make the developmental business as successfil as possible, reduce costs, improve
banking system and increase the overall productivity.

Ganesh, K. (197934, in his study on "Monitoring profitability in banks" has

emphasized that the effectiveness of monitoring system depends upon profit plan,
identification of profit centers, setting of standards for comparison and a proper
management of information system. The author has concluded that the working funds,
as base for the purpose of compmi~gprofitability at the branch level, was inadequate
and relating it to the total business (i,e., the sum of the tdal deposits and total
advances) was more suitable.
36
Bbatia, R.C.(1980y, in his Ph:D thesis entitled "Bankiig structure and performance
A case study of the Indian banking system", has attempted to describe and analyse the
economic performance of the Indian'Banking system as it is reflected in output, price
and profitability performance during the Wod of 195068. Surrogates were used to
measure the output of the Indian Banking system. Weighlng scheme was devised to
improve the accuracy of the output measurements. The price performance was
analysed using the yield on financial instruments owned by the Indian Banking
system. Profitability of the banking system was measured by the ratios of profits
before twdcapital and profits before taxes/assets.

Nayan, Kamal (198216,has suggested a model for evaluation of the performance of

commercial banks. From his study he deduced the following conclusions; (i) the
present system of ranking the banks on the basis of aggregate deposits fails to reflect
their overall achievements; (ii) At the micro level, the existing system of performance
budgeting has left much to be desired and thus cannot be objectively used for
evaluation of branch level performance; (iii) On the basis of all the important and
quantifiable parameters of performance, an integrated performance index needs to be
developed, which will act as a model for evaluating the performance of commercial
banks.

Karkal, G.L.(1982)', in his research work on "Profit and profitability in banking",

has examined the factors that determine the volume of profit and the technique wed in
profit planning. It was suggested that some measures to improve the profitability in
banks through increasing the margin between lending and borrowing rates and
improving the productivity of staff. But the study did not touch upon the burden
related issues.

Varde et a1 (1983)", has edited the studies conducted by the National Institute of
Bank Management on the profitability of commercial banks and has compiled them in
a short book titled "Profitability of commercial banks". The book covers different
issues related to profitability of banks like profit management, productivity, profit
planning in banks, monitoring profitability of bank branches, measuring cost of funds
for banks, matching revenues and Cos$ of commercial banks and operating cost of
rurrllbankhg.
Aogrdl, V.B. and Devraj, Vd. (198319,in their papa they revealed that the
difference in cost of working funds (deposits), interest earning, social banking, fund
management, earnings from sour& other than interest, expansion of banking
business, retail banking services, as the main factors contributing to difference in
productivity and profitability ratios of the bank groups. The author concluded that in
the prevailing circumstances, changes in interest rates on deposits and credit, have a
J
decisive impact on earnings and expenses and, consequently, on the profitability of
banks.

Singh (1987)1°, stated that the profitability of the banking system has been subject to
many exogenous factors, and the important ones are: continuous increase in the SLR,
CRR, persistent emphasis on social goals, growing incidence of industrial sickness,
rapid branch expansion in unbanked and under banked rural areas, unfavorable
change in the deposit mix and growing incidence of financial disinter mediation.

Chopra, Kiran (1987)11, in his research work, "Managing profits, profitability and
productivity in public sector banking", studied about the emerging trends in the
profits and profitability of some select public sector banks at micro level. It
highlighted the n& for the introduction of essential management technique for the
better management of profits and profitability of public sector banks,

Madhukar, RK. (1988)12, in his paper on, "Evaluation of performance of

commercial banks-norms and techniques", identified six main parameters i.e., deposit
growth, credit management, social banking, house keeping, customer service and
profitability based on which banks performance is reviewed.

Asha, P. (1988)13, in her study, "Evaluation of Performance of Commercial Banks-

Norms and Techniques", has touched upon various existing norms and techniques for
assessing banks performance and provided information on group-wise performance of
public sector banks in respect of selected indicators.

Rno, H.P. (1989)14, has made a comparison of business ratios, between the profit
makmg and loss incuning rural branches of a nationalized bank for the year 1986.
The author opined that the chief &a for less profit is the low volume of business
and suggested that monitoring the bmk-even business level for the banking sector is
of great importance for inlpving profitability.
38
Nsidu, K. MPairathnun (1989)", in his study on "Steady progress in the Bankiig
Sector", has made an attempt to critically analyse the growth as well as the role of
banking in rural development in India. It was observed that after Nationalization, the
banking system made rapid strides in branch expansion, deposit mobilization and
credit deployment. It was concluded that regional rural banks have done well in
achieving their targets in the past years, y d have the potential to stand on their own,
without any link to a sponsored bank.

Piravi Perumal, A. (1990)'~~in his article entitled "Focus on profitability", has

analyzed the causes for low profitability and suggested that improvement in interest
income and other income, reducing expenditure, maximization of yield on funds,
minimization of cost on funds, improving customer service and productivity would
improve the profitability of commercial banks.

Subrshmanyam (1991)", in his article entitled "Liberalization of India's Banking

and Monetary Regime", has observed that the liberalization measures of the late
1980s have not resulted in promoting the efficiency and stability in the banking
sector. In order to have better performance of the banking sector, it is important that
further doses of liberalization should be introduced in the sector. The problems
relating to operating expenses and interest rates structure should also be reviewad in
detail. It is suggested that the main focus of reforms should be the restoration of
financial health of the banks but not privatization as such.

Panda, J. and LaU, G.S. (1991)", in their research paper they have attempted to
develop certain internal management techniques for improving the profitability of the
Indian banking system. The authors have identified productivity, development of
funds, quality of advances, information system and organizational setup and branch
expansion policy as the most important factors influencing the profitability.

Kothari, C.R (1991)", in his research work entitled "Indian Banking: Social
Banking and Profitability", analysed the extent of social banking through dand
semi-ban branches to total branches, priority sector advances, and differential rate.
of interest (DRI) advances to total a$mces. He also studied the profitability position
by applying Spearman's rank m l a t i o n co-efficient and anal@ thcl operational
efficiency of bank branches and identified the emerging challenges before banks and
made some important suggestions.

Sadare, A.M. (1992)~,

in his arli'cle on "Profitability in banks", has analysed
profitability in public sector, private sector and foreign banks over a period of six
years covering 1985 to 1990 The author suggkted that the policy support and as well
as the increasing effectiveness are the imbrtant factors for improving the profitability
of banks.

Chandra, M. (1992)11, has studied the profitability aspects of public sector banks. In
his study he highlighted that the step-motherly treatment being meted out to public
sector banks in spite of their predominant role in mobilizing resources and substantial
contribution made to the society and concluded that despite massive working funds,
public sector banks were not able to show better results due to high cost of operation
on account of priority sector advances and more than 56 per cent branches being mral.

Toor, N.S. (1993)", has made an attempt to find a link between the nature of business
being handled by banks and their earnings of nationalized banks. The Various aspects
of the business mjx like deposits (category wise), advances (nature wise category),
expenditure incurred on deposits and income earned on advances have been examined
and discussed by the author. The business mix in the nationalized banks is of highly
varying in degree and it certainly has a bearing on their operational efficiency and
profitability trend, the author opined. In the coming years, banks have to be alive to
the type of business they are handling with reference to the cost and benefit from such
business, he concluded.

Swami and Subrahmanyam, G. (1993)", in their article on "Comparative

Performance of Public Sector Banks in India", have ma& a comparison between the
level of efficiency in 28 public sector banks during the period of 1971.73, and 1987-
89. Compounded annual growth rates were calculated to analyse the increase in
different banking indicators during this period. Taxonomic technique was used for
daiving a single measure of performance based on several indicators of banks'
business activities.
Singh, J. (1993): the author has under taken a research work on productivity of
twenty two public sector banks which were divided into two groups-SBI group and 14
nationalized banks and has used sevkteen indicators to analyse productivity trends of
the Indian banking sector and studied the inter group differentials of SB1 group and
nationalized banks over a periodbetween 1969 to 1985.

Shankar, K. (1993)", in his paper on 4'Evaluatingbank performance-new look at

parameters" has evaluated bank performance by taking deposit growth, recovery of
loans, profitability, customer service and implementation of government schemes as
parameters. He says weightage given for the above factors should be different,
depending on the importance each one has in evaluating performance and evaluating a
bank on these parameters would be the rational objective.

Hugnr, S.S. (1993)~~,

in his edited work entitled "Trends and Challenges in lndian
Banking" included a number of articles on the profitability performance of
commercial banks in its varied dimensions. Many experts in the banking sector
presented their technical papers on profitability with their valuable suggestions for
enhancing profitability.

Amandeep (1993f7,in his study on "Profits and profitability in commercial banks"

has attempted to examine the trends in profits and profitability of twenty nationalized
commercial banks with the help of trend analysis, ratio analysis and concentration
indices of the selected parameters. The study focused on identifying the various
factors and empirical testing as to which of the identified facton have significantly
contributed towards bank profitability in either direction. Using multivariate analysis,
it was concluded that it is the efficient management of the burden (as against the
widely believed 'spread' element), which plays a major role in determining the
profitability of commercial banks. In spite of lack of control of few determinants of
burden, it is inferred that judicious management of the burden can significantly
enhance bank profitability,

Ramrchmdran, RS. and KaverA, VS. (1994)*, have conducted a study during
1993 in a nationalized bank in Mabarashtra to understand the difficulties in
management of fouad tha! the bonuwer accounts (i.e. edactcd NPA accounts for the
study) showed signals of sickncsa such as cash

41
managerial deficiencies, disputd among partners, and the like. In almost all the cases
the bank did not take prompt corrective action either to m v e r the dues or in filing
suits against the defaulten or to initiate recovery proceedings on deaeed suits. Most
of the comments in the branch inspection reports were related to the irregularities in
the documentation. All branch managerslofficers agreed that there is a neod for
strengthening the appraisal system with special reference to the managerial
capabilities of the borrowers. This reco6mendation is valid for d u c i n g the volume
of NPAs though the study is limited to one bank and a few NPA accounts in one state.

Chidambaram, R.M. and Alamelu, K. (1994f9, in their paper on "Profitability in

Banks: A matter of survival", studied the problem of declining profit margins in the
Indian public sector banks as compared to their private sector counterparts. It was
observed that in spite of similar social obligation; almost all private sector banks have
been registering both high profits and high rate of growth with respect to deposits,
advances and reserves, as compared to public sector banks. The regional orientation,
better customer service, proper monitoring of advances and appropriate marketing
strategies were the secrets behind the success of private sector banks.

Kaveri, V.S. (199~)~',in her article entitled "Relationship betwm recovery and
Profitability of Bank-A study", applied macro and micro level data analysis. The
author suggested a default risk provision to monitor and control the non-pdoming
assets, which is a major cost for reducing profitability. The researcher has also
suggested measures to improve the recovery performance and debt securitization.

Whore, C., Raut and Santosh, K Dar (1996)~',

have studied "Commcrcial banks
in India- Profitability, Growth and Development", In their study they made an at!empt
to examine, measure b d analyse the profitability trends of the lndian banking sector
over a period of twelve years i.e. from 1980 to 1992. In the process of analysis, the
various factors responsible for the variation of bank's profitability in either direction
have been identified. The authors also incorporated the empirid analysis of
profitability as well as the detedmnts of the sample bank groups.

JuJhrv, Narendrr and Ajit (1996t2, analysed "The role of banks in cconomic
development of India" during the last five decades. it was observed that despite the
overall progress made by banking system in terms of functional and geographical
coverage, doubts arise about the viability of the banking system in the coming period.
Though financial sector reforms have enabled banks in India to clear their balance
sheets and improve their hctionini,yet they face challenges especially in providing
financial services like leasing, merchant banking, mutual funds, money market and
government securities.

Mpai Smroop (199@, in his book htitlcd "Banking Laws and Practices'' has
described the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949 and the
powers of Reserve Bank of India and the Government of lnd~ato regulate and control
the activities of banks. The author described various legal aspects relating to day-to-
day banking operations, the essential features of a contract, different kinds of
contracts, banker-customer relationship, garnishee order and banks rights under lien
and set-off, legal provisions relating to indemnities and bank guarantees, letters and
credit and bill finance different kinds of securities, their valuation, mode of creation
and laws relating there to and different types of borrowers and credit facilities along
with their governing legal provisions.

Shivpuje, C.R. and Kaverl V.S. (199713",their study was basically confined to
identifying the factors influencing NPAs and suggesting measures that would prevent
the growth of NPAs and affect their speedy recovery. The emphasis was laid on
internal factors over which banks end financial institutions have direct control. They
concluded that NPA problems could be solved if proper care of internal factors is
taken. In other words, recovery of NPAs is possible if efforts of the banks and
financial institutions are strengthened. They observed that though the branoh
managers were quite clear about the RBI guidelines on the classification of advances,
they varied the actual classification of advances made by them based on their persod
experience with different borrowers. This trend, in particular, was observed in trading
accounts with persistent irregularity in cash credit account for a long time.

Srinivasa Rao, K. (1997f, in the article entitled "Impact of Liberalization on

productive efficiency of Indian Commercial Banks", mlysed the present profitability
trends through ten profitability indicators. The author also gave a detailed analysis of
the various types of risks and methtds of measuring Assets Liability Risk (Am),It
s u t&at the~risk analysis ndmanagement are the steps to impwc profitability.
 in his unpublished doctoral thesis has evaluated the
Nagarjlm., M. (1997)~~
performance of Andhra Bank during the pre and post nationalized periods. He
evaluated the performance of the'bank in tams of branch expansion, deposit
mobilization, loans, advances and profitability. The researcher has pinpointed the
objectives of nationalization achieved by the banks.

Khubnandui, B.S. (199qn,in his bobk on "Practice and Law of Banking", has
described the essential banking case law that has grown in the past five decades. In a
competitive environment, a bank needs enhanced use of technology to be customer
oriented, efficient and competitive. In order to change a large net work of branches,
extensive use of technology in product design and delivery, accounting, infom~ation
management and communication is essential. It is therefore necessary for banks to
introduce and absorb information and communications technology extensively at a
rapid speed, not only to remain customer friendly and efficient for existing service
and business but also for managing newer forms of business and services in an
increasingly globalized environment.

Dns, A. (1997)", in his article on "Measurement of productive efficiency end its

decomposition in Indian banking finns", utilized non-parametric frontior
methodology to derive efficiency measures for 65 major banks using cross-sectional
data for the year 1995. The results indicate that the Indian banks, in general, are
technically more efficient than allocatively efficient. In addition, most of the observed
technical inefficiency is not scale related. The study also found no significant
differences in any of the efficiency measures between public and private sector banks.
Except in the matter of scale efficiency, foreign banks differed significantly from
public and private sectar banks.

Bhattneharyya, A., Lovell, C.A.K and Snhay, P. (1997)39,in their article on '"The
impact of liberalization on the productive efficiency of Indian commercial banks",
have examined the impact of partial liberalization during mid-eightiea on the
productive efficiency of different categories of banks using data envelopment
analysis. Thkr study covered 70 commercial banks which were operating during the
period 1986-91. It has been obsefvd that public sector banks had the highest
efficiency followed by foreign banks. The private banks have been noticed to be the
least dlicient. Also, they 'round temporal improvement in the perfinmance of foreign
44
banks, virtually no trend in the' performance of private sector banks; and a temporal
decline in the performance of the public sector banks.

Vanhney P.N. and MittaP, D.K. '(1999)'0, in their book on "Indian Financial
System', said that emidst the second generation reforms, financial sector continues to
be at the centre stage of path breaking policy changes, with the overall objective of
attaining strengths, soundness and intedational standards. Financial sector reforms
also owe their origin to the brisk pace of liberalization and globalization of the Indian
economy. The spate of changes in the financial sector has also added brther
dimension to the existing literature on banking and finance.

Taori, K.J. (1999)", in his study on "NPA management in SBI-Some issues", has
observed that the performing assets turning NPA has offset the gross reduction in
NPAs of SBI through recoveries, upgradation and write-off. It is further observed that
increase in NPAs mostly relates to the accounts of large industrial and business
enterprises. NPAs in priority sector, both as percentage to advances and share in total
NPAs, are declining.

Sybilapious, F. (2000)'~, in his article on "Privatization of Banks", has highlighted

the recommendations made by the various committees, which led to some of the
changes in the banking sector and major challenges faced by the banks in the
conversion of NPAs into performing assets within a short time frame. Finally, he
concluded that the banking business is, after all, 'people business' and this is the
competitive advantage which Indian Banks need to have in future to provide the right
environment.

Wahrb, A. (2001)~,has analysed the performance of the commercial banks under

reforms. He also highlighted the major issues need to be considered for Further
improvement. He concluded that reforms have favorable effects on the Wormance
of commercial banks in general but still there are some distortions like low priority
sector advances, low profitability and the like that need to be reformed again.

Ramachmdrr Reddy, B, Vijayulu W d y and Sakuntbalr (2001)', in their article

on "Management of NPAs in public Sector B W , have f d their attention on
the seriousness of NPAs in public sector banks. They argued that tfie introduction of
inknational norms of lnbomc Recognition, Asset classification and provisioning in
45
the banking sector and managilrg WAS have e m q e d as major challenges facing the
public sector banks. They felt that total elimination of NPAs is not possible in the
banking business owing to externa[i$es but their incidence can be minimized. To
reduce the seriousness of the problem, they suggested that the banks should adopt
proper policy for appraisal, supervision and follow-up of advances; special recovery
cells may be setup at regionall zonal leve?s; Recovery Officers should be appaintad at
branches having sizeable NPAs and their recovery progress may be monitorad on a
monthly basis. They further suggested that the RBI has to publish the names of the
defaulters of big loans and adv&ces of b i k s . Unless the willfiil defaulters are
compelled to do so with the threat of social exposure, confiscation of properties and
imprisonment, the NPAs cannot be recovered.

Vijayulu Reddy, S. (2001f5, in his doctoral thesis entitled "Performance evaluation

of state bank of India", has evaluated the performance of State Bank of India in terms
of deposit mobilization, credit deployment, management of NPA's and profitability
for a period of 10 years i.e., IWI to 2000. He also emphasized the preponderance of
State Bank of India in t m s of its customer service.

Ballabh, J. (2001ya, in his study on "The lndian banking industry: challenges ahead",
has analysed challenges in the post banking sector reforms. With globalization and
changes in technology, financial markets world over, have become closely integrated,
For the survival of the banks, they should adopt new policies / strategies according to
the changing environment.

Velayudham, T.K. (2002)", in his article entitled "Developments in Indian Banking:

past, present and future", has said that the lndian banking system is unique and
perhaps has no parallels in the banking history of any country in the world. The
world-wide revolution in the Information and Communication Technology (ICT) has
become the biggest force of change in banking. Though the Reserve Bank of India
and the banks have been taking steps in the last few years, computeri~tionhiis been
mostly directed towards accounting and related activities, without emphasis on critical
areas relevant to management and customa service and customized products. The
Indian Banking system will have lb d o u b l e its efforts to build the tacbnological
infrastnacture not only to provide cost effective customa serviw but also to nchieve
internatid recognition grid status.
46
Rddy, Y.V. (2002)~,in his article entitled "Indian banking-bench marking with
international experience", has said'that the reform p r o w in rwxnt years pmvidcs
greater choice and M o m to banks'and customers rather than continued proximity.
Restoration of public confidence and restructuring with a view to consolidating the
banking sector were achieved in the first two decades after independence with
considerable success. Our W i n g cannot afford to lag behind international standards
I
and not remain unaffected by global developments in banking. Taking the banking
indushy to the heights of international excellence will require a combination of new
technologies, better processes of &edit and risk appraisal, treasury management,
product diversification, internal control and external regulation and last but not the
least human resources.

Rama Chandran, A. (2002f9, in his paper entitled "Profits, Profitability and Growth
of Commercial Banks", has analysed some aspects of factors influencing total
earning, total expenditure and profitability of Indian Scheduled Commercial banks.
The multivariate analysis of the profitability undertaken discloses the relationship
among the earning factors and expenses factor on the profitability of banks which
enriches the scope of the study. This study is especially used for policy makers,
bankers and researchers, as it provides adequate information about the determinants of
bank earnings and profits.

Jindal, K.K. (2002)", in his book entitled "Banking and Financial Institutions", has
explained the important topics that include Indian Banking, banks and customcr
relationship, legal aspects of banking; types of accounts including non-resident
accounts as recent topics such as Asset Liability Management (ALM), risk
management, internet banking, non-fund business and universal banking. Banking, by
nature, is a risky business-accepting deposits for short-term and lending it for long
term. In addition, after the deregulation of interest rates, rate risk is also involved.
This is one of the reasons why the banking industry is closely regulated throughout
the world. Assets liability management is one way of managing the risk.

Srinhtua Subba Rio, P. (2003)~',in his paper entitled "Is securitization ordinance
minimizing NPAs or is improving the profits of PSBs by reducing NPAs?" has stated
that the NPAs could not be reduc;dthrough courts, B o d for Musttial and Financial
ReconstrJcton (BIFR) and Govt. cstablishcd Debt Recovery Tribunals (DRTs). In
47
this situation the Govt. o f . India issued the ordinance Securitization and
Reconstruction of Financial ~ s s i sand Enforcement of Security Interest Act
(SARFAESI) bill, 2002. This ordinance has removed the main shortcomings of DRTs
and Vested enormous powers in the banks/Fls. The debt recovery tribunals
established under the 'recovery of debts' Act, 1993 was for the speedy recovery of
NPAs a h v e Rs.10 l a b of banks and financial institutions. The performance of these
tribunals in the recovery of the debts has not been satisfactory.

Rarneswad(2003)~~,
found that themonetary tools were the important parameters of
the banlung financial performance. But they had low or moderate correlation with
other variables viz., bank credit, investments, liabilities, assets, other economic, social
and political factors also influence the growth of these variables.

Prakash Singh (2003)~~,

in his article on entitled "Banks: look before you leap", has
studied the performance of the banks. The traditional analysis largely focused on
parameters like credit-deposit ratio commonly referred to as CD ratio, level of non-
performing assets (NPAs), capital adequacy ratios and the other usual earning ratios.
This paper tries to analyse some of the conventional and modem techniques that are
popularly used for bank analysis. They include parameters like size of a bank,
operational efficiency, earnings quality, capital adequacy, asset quality, management
quality, liquidity and the like and some other operating and financial ratios as modem
techniques for evaluating the bank performance.

Malyadri, P. and Sirisha, S. (2003)%, in their article entitled "Non performing

Assets in Commercial Banks-An overview", have concluded that the money locked
up in NPAs is neither available for productive use nor the income generated is
recognized. The bank is either required to write-off NPAs or make provision ranging
from 10 per cent onwards to 100 per cent which is direct charge on profitability. The
NPAs affect the credit rating image and the ability of the bank to raise low cost
resources. Banks in India have taken a number of steps to eliminate the deficiencies
but there is scope for refining the credit risk management and decision making
processes with modern technological tools.

Krishna Chritanya, V. (2003)~;in his article "Assessing the performance of three

weak public sector banks", wing composite rating method, through CAMEL model
for the period h m 2000-01 to 2004-05 found that their performance had improved.
Though none of these three banks Ached the top two ranks, it is opined by many
industry experts that the way these bahks turned the corner, in the yertrs to come these
banks would outperform the market expectations.

Kotbai, K. ( 2 0 0 3 ) ~in~his paper entitled "Banking industry, current trends and future
prospects", has analysed all the bank &ups. Public sector banks have recorded
considerable achievement in terms of branch expansion, deposit mobilization and
deployment of credit; and regarding non-performing assets the performance of the
public sector banks is good. The NPAs of this group have been showing decreasing
trend during the study period. The study reveals' that the reduction of NPAs is mainly
due to write-off of bad debts and expansion of total advances over the year.

Nagarajan Naidu,V. and Manjusnair (2003)"~ in their article entitled "Financial

sector reforms and banking sector performance in India: A study on technical
efficiency of commercial banks between pre and post reform period", discussed the
improved technical efficiency of scheduled commercial banks in India after the
implementation of Narasirnham Committee recommendations. This paper aimed at
examining whether the technical efficiency levels of scheduled commercial bank
groups has improved after the adoption of financial liberalization policy in India. The
decline in standard deviation computed from the mean levels of technical efficiency
of bank groups in the post-liberalization period as compared to the pre-liberalization
period, shows that the differences in technical efficiency levels among bank groups
has declined in the p s t liberalization period indicating enhanced competition among
bank groups.

Cheema, C.S. and Monika Agamal (2003)", in their article entitled "Banking
sector reforms: An appraisal", it is found in this paper that although there was m e
improvement in some variables after the implementation of first phase of reforms but
the overall performance of banks has not improved much. The public sector banks
showed better performance after liberalization in the case of total deposits, total
advances, and deposits per employee only. The private sector benlrs showed better
performance after liMiz8tion in thi? case of total deposits, total advances, deposits
per employee, advances per employee and non-intenst income 8s percentage b total
income.
49
Ram Moban, T.T. and Ray, S.C. (2004)'~, in their article on "Comparing
performance of public and private sector banks: A revenue maximization efficiency
approach", has made a comparison oftechnical, allocative and revenue maximization
efficiency among public, private and foreign banks. A balanced panel data set for 58
banks has been utilized for computing DEA based efficiency scores. Their study
covered the period of 1992-2000. It has been noted that PSBs performed significantly
I
better than private sector banks but not differently from foreign banks on the revenue
maximization measures. Further, the superior performance of PSBs is to be ascribed
to higher technical efficiency rather ihan higher allocative efficiency. It has also been
noted that the State Bank of India turned out to be efficient on all counts.

Vasudev Achary (2005)~', in his article entitled "Growth of banking sector in Andhra
Pradesh", emphasized that the banking industry is striving hard to achieve not only
economic objectives, but also fulfill social responsibilities. For preparing this paper
the bank wise and area-wise data have been collected on selected variables like,
number of offices, deposits and credit pertaining to Andhra Pradesh to compare the
performance of these various types of banks in terms of their branches, deposits and
credit for the year of 2004. To measure the growth in the banking sector, AGR have
been computed for the period of 1954-2004, percentages, ratios are calculated for
different purposes. It is concluded that interventionist policies surely promote the
growth and development of an economy. Banking sector is in no way an exception in
expecting states encouragement in achieving itsgoals.

Tiwari, S. (2005)". in his article entitled "Development financial institutions and

Indian banking: A paradigm shift", has examined, expressed the view that among the
financial interrnediaries.banks and financial institutions are vital players in running
the funding activities of the industries. In the bank based system the financial
institutions dominate in the aggregate assets of the financial system while in market
based system, equity market has the largest share of assets in the aggregate assets of
the financial system.

Rudra Sennama (2005)", examined the efficiency of all scheduled commercial

banks in India from whom data was available for the period from 15186 to 2003. The
technique of stochastic frontier analysis has been employed in the study to estimate
bank-specific cost and pbfit efficiency of the banking. The sfudy draws the
50
conclusion that while cost efficiency of the banking industry increased during the
period, profit efficiency underwent a decline. This result is expected in an emerging
economy undergoing a process of dkgulation. h terms of bank groups, domestic
banks appear to be more efficient than foreign banks. Public sector banks have shown
higher cost efficiency than private sector banks, whereas it has been the other way
round in the case of profit efficiency. A l y says that new private and foreign banks
exhibit the least efficiency in terms of both measures.

Rama Sastri, A.S. and Jaya Ramm, A.R. (2005)", in their paper entitled "Is there
excess capacity in Indian banking? An empirical study during the post reforms
period", analysed the banking sector reforms and say that reforms have given rise .to
increase in the number of banks and the bank branches in the lndian banking sector.
Due to increased competition and technological innovations, banks have started
offering various facilities like intemet banking to customers.

Narasimham, M. ( ~ o o s )in
~ ~his
, inaugural address at the seminar on "Banking sector
reforms-looking ahead organized by Indian institute of economics, Hyderabad", has
said that over the last decade and a half, since the initiation of reforms, much progress
has been achieved. Efficiency, performance and transparency have certainly
improved.

MiUnd Sathya (~oos)~',in his article entitled "Privatization, performance and

efficiency: A study of Indian banks" examinel; the effect of reforms. The data was
taken for five years (1998-2002) and it was analysed by using differences of means
test. The banking sector in India includes domestic banks (privately owned, partially
privatized banks, fully PSB's) as well as foreign banks, and objective of this study is
to study the impact of privatization on the banking firms. It was concluded that
partially privatized banks have performed better as cornpared to fully government
owned PSBs in respect of financial performance and efficiency. Partially privatized
banks have continued to show improved performance and efficiency in the year after
privatization.

Meena Shrrma (ZOOS)*, in ha paper she made an attempt to study the problem of
Non-performing Assets OJPAs) of Indian public sector banks and also its impact on
the performance of these banks. Impact of NPAs on the profitability of the banks is
analysed by applying multiple egression model. Impact of NPAs on the productivity,
achievement of capital adequacy level, funds mobilization and deployment policy of
the banks is also analysed. NPAs not'pnly affected the performance of the banks but
also caused irreparable damage to the entire economy. It endangers the very
foundation of the credit system. Concerted efforts are required at RBI, banks and
judiciary. levels to control the menace of NPAs. Efficient legal framework,
J
improvement in credit appraisal and monitoring skills of banks and strong political
will could enable the Indian banks to find satisfactory solution to the problem.

Kumar, Pawan (2005)~', in his paper "Indian banking to day: impact of reforms",
has examined the performance of new private sector banks. He concluded that private
sector banks are working with efficiency and earning more than what is being earned
by PSBs. Therefore, PSBs should make efforts to control their wage expenses and
other expenses to improve profitability and they should expand their business in rural
area.

Gopalakrishnan, T.V. (2005)*, in his research study, has pointed out that the main
causes of NPA are willful defaults, diversion of funds, deficiency in the credit
appraisal standards and lack of follow up and supervision. Lack of market intelligence
system, want of adequate staff to supervise the credit portfolio and absence of
exchange of credit information among banks are the other major causes of NPAs as
per the survey results. The survey favours containment of NPA by intensifjwg
monitoring and follow up of standard advances to avoid slippage to sub-standard
categories.

Das Abhirmn., Ashok Nag and Subhash, C, Ray (2005)", in their article entitled
"Liberalization, Ownership and Efficiency in lndian Banking: A Non-parametric
Analysis", have examined the outputsriented technical efficiency, cost efficiency,
revenue maximizing efficiency and profit efficiency of Indian (public, private and
foreign) banks for the period from1997 to 2003.They considered four output
parameters for their study-bornwed funds (deposits and other borrowings), mb
aof
employees, fixed assets and equity. They included in their study only those banks
which had at least three branches, duiing the entire study period. Tbe rasult obtained
show that the Indian banks are still not showing much difference in tams of input or
'output oriented technical efficienlcy or cost efficiency. However, they differ sharply in
resped of revenue and profit efficiencies.

Chakrabarti, R. and Chawla, G.' (2005)", in their article entitled "Banking

efficiency in India since the reforms: an assessment", applied Data Envelopment
Analysis (DEA) to evaluate the relative efficiency of Indian banks during the period
1990-2002. They utilized two models td specify input-output vectors and labeled
those models as "Quantity and Value" approaches. The results of the study suggested
that on the value basis, the foreign banks, as a .group, have been considerably more
efficient than all other bank groups, followed by the Indian private banks. However,
from the 'quantity' perspective, private banks are seen to be doing the best while the
foreign banks are the worst performers. The authors attributed this to the general
policy of foreign banks to "cherry-pick" more profitable business rather than offering
banking services to a wider section. Further, PSBs have, in comparison, lagged behind
their private counterparts in terms of performance.

C.R.Reddy and Nagi Reddy, R. (~oos)", in their paper on "Reforms of commercial

banks: An evaluation", have highlighted the fiiture of commercial banks hinges on
their ability to build good quality assets in an increasingly competitive milieu while
maintaining capital adequacy and prudentid norms. This study used the Capital
adequacy (C), Asset Quality (A), Management Evaluation (M), Earnings potential
(E), Liquidity (L), and systems and controls (S) that are abbreviated as CAMEL. The
performance of this model is evaluated and it is concluded that the new theory of
commercial banks dmegulation and technology are the two single biggest changes in
the banking environment. The Govt. should also make use of banking sector as plat
form for achieving its social goals like population control through family planning by
linking it with banking services.

Amarendar Reddy, A. (2005)'', in his article on "Banking sector deregulation and

productivity charge decompositions of Indian banks" has studied banking sector
deregulation and productivity change of the banks. He f m d that in banks with hi&
NPAs, the decrease in profit growth contributed to decline in technical change. He
concluded that high NPAs hampk technical ptogras by putting pressure on
investment in technology.
Shilpr Baid (2006f3, in her papix on "What drives profitability of Indian commercial
banks?", has examined the relationship between banks internal factors and their
profitability measured by return on &sets. The result shows that the internal factor
explains a large portion of variation in banks profitability. Spread, capital adequacy,
asset quality and non-interest income positively contribute to banks profitability.
Operating efficiency is found to be negati e. Size is positively related to profitability
Y
of public sector banks and negatively related to profitability of private sector banks.
The overall results clearly confirm the relevance of banks intemal characteristics to
profit growth.

Mohrn Reddy, P. and Sivarami Reddy, C. (2006)", in their article "Banking sector
reforms: A perspective", have studied banking sector reforms process in India
initiated in the early 1990s. Many countries adopted a series of financial sector
liberalization measures in the late 1980s and early 1990s that included interest rate
liberalization, entry deregulations, reduction of reserve requirements and removal of
credit allocation. This is because of sound financial systems serve as an important
channel for achieving economic growth through the mobilization of financial savings
putting them to productive use and transforming various risks.

Wla, B.S. and Richaverma (2006)': in their article on "Performance of

commercial banks in India: A sectoral and temporal analysis", have discussed the
performance of the commercial banks by using standard measures like annual
compound growth rate of deposits and advances, deposits per employee, advances per
employee, non-perfarming assets as percentage to net advances for a period of 17
years i.e. fioml987-88 to 2003-04. The study brought out that the performance of
banking industry in India has improved after implementation of reforms in 1991-92.
The private sector and foreign banks have shown better performance in terms of
various parameters in comparison to public sector banks. They suggested that the
private sector banks have registered a higher growth rate in the deposits as well as in
advances in the post liberalization era than during pre liberalization period. Regarding
the proportion of non-interest income to total income, the analysis showed an
appreciable improvement during bothghases of reforms.

Uppal, RK and Kaur, R (2m7', analysed the efficiency of all the bank
have
p u p s in the post banking sector reforms era. Time period of study is relatad to
54
second post banking sector r e f o m (1999-2000 to 2004-05). This paper concludes
that the efficiency of all the bank groups has increased in the second post banking
sector reforms period but these banking sector reforms are more beneficial for new
private sector banks and foreign banks. This paper also suggests some measures for
the improvement of efficiency of Indian natjonalized banks. The study in Indian
banking industry which comprises five different ownership groups and the ratio
method is used to calculate the efficiency of different bank p u p s . New private sector
banks are competing with foreign banks for continuous improvement in their
performance.

Satish Kurnar, B. (2007)~,in his article on "~ddianBnnking industry- evaluation of

financial performance" has studied that the performance of private sector banks and
foreign banks is more appreciable than that of public sector banks. These categories of
banks make the best use of technology to their advantage.

Nagananthi, T. (2007)~,in his study on "Profitability, efficiency and non-

performing assets-A critical analysis with reference to State Bank of India and its
associates", has examined the trends in profitability, efficiency and non-performing
assets of SBI and its associate banks considering interest, working funds, interest
expenses, gross profit, net profit, spread, and the like. The study reveals that the
profitability is showing an increasing trend "Per employee" and "Per branch".
Indicators were worked out and they showed that the efficiency of the firms has
increased for all the banks during the study period while there has been decline in
gross and net NPA.

Mittal RK. and Dhlngn, S. (2007)19,conducted a study on assessing the impact of

-
computerization on "Profitability and productivity in Indian banks A comparative
study" for a period of 2003-04 and 2004-05 by using Data Envelopment Analysis
(DEA). Results show that the ICICI Bank is found to be eficient in all indicators.
Nearly 70 per cent of ICICl Bank transactions take place electronically, resulting in
lower cost of transactions, high productivity and bettor profitability. The input and
output parameters, which are ciearly affected by computerization in the banks, were
considered for productivity and profitability analysis. The output of DEA indicates
that the private banks are much better than public sector banks in tams of
productivity and pmtitabilky as indicated by many fadom d d lead to impnoved
55
performance of banks. Increased'lT investment is one of the vital contributing factors
for enhanced performance.

Iiarpreet Kohll and Chawla, AS. i2007)"0, in their paper entitled "Profitability
trends in commercial banks: A study of select commercial banks", compared the
profitability performance of Cfferent banks d&ng the study period and found that
most of the indicators that have shown the performance of the two private sactor
banks viz., ICICI Bank and Bank of Punjab have been better than the two public
sector banks viz., SBI group and Purjab National Bank. It is concluded that the entry
of private sector banks has undoubtedly contributed to the strengthening of the Indian
Banking system by creating a competitive atmosphere. Enhancing efficiency and
performance of public sector banks (2008) is a key objective of economic reforms in
many countries including India. It is believed that private ownership helps improve
efficiency and performance of banks. The study examined the impact of privatization
on bank performance and eficiency using data of banks in India for the five year
period 1998-2002. No significant performance or efficiency difference was seen in
these two associate banks. However, they continued to show improved performance
and efficiency in the year afier privatization.

SaZlir Ahmed Ansari and Nisar Ahmad Khan (2007)", in their article entitled
"Banking sector reforms: Achievements and future challenges", have studied the
prevalence of high reserve requirements, intercst rate controls and the allocation of
financial resources to priority sectors and found that they increased the degree of
financial repression. The banks must be financially strong face the risk to distribute
among creditors and more to lose for shareholders if the bank fails. The study
concentrates more on the second half of the post reform period from 1997 to 2005.
The participation of banks in nual areas during the pre and post reform periods has
especially been examined so as to measure the impact of reforms on rural banking.

Brinds Jagirdar and Amlendu K Dubey (2007)"~ in their article entitled

"Performance of public sector banks" argued that the relative performance of different
bank groups, i.e., public, private or foreign appears to be correlated with the extent of
their link with the market. Foreign b a h are found to be more profitable and efficient
than traditional private banks, which in turn are found to be more profitable than non-
traditional private banks. & their analpis they found that the private and the foreign
56
banks are not found to be sipmior to the public sector banks in any of the
performance indicatm namely ROA, OPR, NIM and OER.

Vaidym~thm,V. (2008)'~, in his study on "An empirical evaluation of the financial

performance of scheduled commercial banks in India" has examined the extent of
variation in profits and profitability are piesent& the progress of scheduled
commercial banks in lndia It is found that1allthe banks performed more or less in the
same fashion in achievement. It was revealed that banks should initiate direct efforts
to maximise revenue to improve the profitability.

Singla, H.K. (2008)'~, in his article entitled "Financial performance of banks in

India" examined how financial management plays a crucial role in the growth of
banking. It is concerned with examining the profitability position of the select sixteen
banks of banker's index for a period of six years (2001-06). The study reveals that the
profitability position was reasonable during the period of study when compared with
the previous years. Strong capital position and balance sheet place banks in better
position to deal with and absorb the economic constant over a period of time.

Prasad, A. and Panduranga Reddy, Ch. (2008t5, in their article entitled

"Challenges in India's Banking Sector", have stated that the Indian banking sector in
India needs to tackle these challenges successfully to keep growing and strengthen the
Indian financial system. The opportunities are immense to enter new business and
new markets, to develop new ways of working; to improve efficiency and to deliver
higher levels of customer service. The process of change and restructuring must be
undergone to capitalize on these opportunities which posses a challenge for many
banks. In order to extend better service to all kinds of customers as per the changing
requirements coping with all kinds of changes that are taking place in the environment
and banking sector, is the need of the hour for all banks.

Kumar, S. (~oos)')', in his article entitled "An analysis of efficiency-profitability

relationship in lndian public sector banks" explored the relationship between
efficiency and profitability using the cross-sectional data for 27 PSBs operating in
lndia during the financial year 2004-05. The technique of DEA has been employed to
compute the technical efficiency stores for individual banks. It has been found that
the banks affiliated with SBI group outperfom the banks in the nationalized banks
p u p in-terms of o p t i n g effidiency. The analysis of efficiency profitability matrix
reveals that Andhra Bank and Corporation Bank appeared as ideal benchmarks for the
laggards on the efficiency and dimensions. Further resource utilization in
48 per cent of banks is not and features the reveals of considerable waste of resources,

Ketkar, K.W. and Ketkar, S.L. (2008)~'~in iheir paper entitled "Performance and
profitability of Indian Banks in the post libbalization period, examined the impact of
reforms and liberalization on efficiency and profitability of 62 Indian commercial
banks. The analysis is confined to the period spanning from 1997 to 2004. A non
parametric data envelopment analysis approach has been employed to estimate the
efficiency scores for individual banks under the two input-output specifications. It has
been observed that the efficiency scores of all banks in general have improved
regardless of their ownership during the period of reforms under both specifications.
Further, the nationalized banks have registered the strongest gains. These gains in
efficiency have shown an improvement in bank profitability.

Karampal and Puja Goyal, M.S. (2008)", in their article entitled "Productivity
performance of banking industry in India: An inter-sectoral analysis", have analysad
the cross relationship among various components of productivity like earning per
employee, business p employee and profit per employee for public, private and
foreign sector banks within Indian banking industry using data for five years starting
from 2001-02 and ending with 2005-06. Various statistical tools like averages,
ACGR, correlation, regression and parametric tests have been used to establish,
evaluate and quantify the cross sectional relationship among the variables. Ownership
characteristics of banks are also incorporated into the analysis to examine productivity
across ownership groups. The suggestions made in this paper may be useful to the
policymaker as it shows the relation between earning per employee and their
productivity is not very significant. Therefore, they may have to search out for other
factors that contribute to higher productivity.

Selva Kumar, M. and Maniclu Maherh, N. (2008)", in their article entitled

"Banking sector r e f o m in India- An overview", have studied the major impact of the
reforms on the overall efficiency and stability of the banking system in India The
presant capital adequacy of Indian banks is comparable to that at internabonal level,
C m t l y , the focus is rightly shifting to legislation, m d e t s , &&nology and beyond
58
banks to non-banks. Competitidn and risk management are no doubt uitical to the
future of banking in order to ensure the efficiency in (CAMEL) Capital, Asset quality,
Management, Earning quality and ~ i ~ k d i t ~ .

Irfan Ahmed (2008)~,in his article entitled "Banking sector ~.eformsin India since
Liberalization", has discussed the rationale of banking sector reforms in India, capital
adequacy ratio, SLR, CRR and challenges! facing lndian Banking. He concluded that
the banking sector reforms have produced favourable effects on the performance of
commercial banks in general. The global environment is continually changing and
creating new directions, dimensions and immense opportunities for the banking
industry.

Tirumalaiah, G. OW)^', in his doctoral thesis on "Performance evaluation of lndian

Bank", has evaluated the performance of Indian Bank in terms of resource
mobilization, deployment of funds, profitability, management of NPAs and customer
service for a period of 10 years i.e., from 1999 to 2008. He has emphasized in his
study that the performance of Indian Bank in terms of these parameters is impressive.

Rajender, K. (2010t2, in his article entitled "Management of Non-performing Assets

in Public Sector Banks-An analysis", has emphasized that the Public Sector Banks arc
lending in the Scheduled Commercial Banks, which welcome the radical changes,
make the organizations fit for the changes without much difficulty and achieved the
tasks and targets time to time and continuously retained a good position mating a
record in the use of information technology by providing any where any time banking
facilities and fully computerization their branches very rapidly . The study reveals that
the asset wise classification recorded a high degree negative correlation between
performing and no-performing assets. The study also clears that the ratio of Gross and
Net NPAs to total advances have consistently decreased from 13.95per cent and 6.89
per cent to 2.66 per cent and 1.03 per cent respectively at the end-March 2000 to
2007. It is an indication of good recovery and sufficient provisioning for doubtful
debts and writeoff bad debts. The study also depicted that the distribution of PSBs by
the ratio of net NPAs to net advances come under the category below 2 per cent net
NPA at the end March 2007, earlier there was no bank lie under this category at the
end March 2000.
Federntbn of Indlrn c h a d e ~of. commerce and tndusby (~oIo)", have
conducted a survey on "Indian Banking System, the Current State and Road ahead",
and submitted their report in ~ e 2010. In
b their report
~ they mentioned that some
of the major strengths of the Indian banking industry, which makes it resilient in the
current economic climate as highlighted by thesurvey were regulatory system (93.75
per cent), economic growth (75 per cent) apd relative insulation from external market
(68.75 per cent). Regulatory systems of Indian banks were rated better than China,
Brazil, Russia and UK and at par with Japan, Singapore and Hong Kong. Respondents
rated India's risk management systems are more advanced than those of China, Brazil
and Russia 75 per cent of the respondents feel that the risk management system are
above or at par with Japan 55.55 per cent with Hong Kong, Singapore and UK and
62.5 per cent with USA.

Uppal, RK. (2011)~', in his study entitled "Banking sector reforms: policy
implications and fi-esh outlook", has found that the present paper reviews the banking
sector reforms policy, crucial issues and agenda for the future.On the basis of certain
parameters, like productivity, profitability and NPAs management, the paper
concludes that foreign banks and new private sector banks are much better in
performance as compared to our nationalized banks in the post-banking sector
reforms period. The paper ends with the b r e agenda for the Indian banking
industry, particularly for public sector banks to make them efftcient and strong, to
compete with the global banks.

Syed lbrahim, M. (20ll)'~, in his article entitled "Performance of loans and

advances of commercial banks in India- an analysis", has emphasized that the Indian
banking system is significantly different from those of other nations because of the
country's unique geographical, social and economic policies enunciated in successive
five year plans, particularly concerning equitable distribution of income, balanced
regional economic growth and the elimination of private sector monopolies in trade
and industry. About 92 per cent of the country's banking segment is under the state
control while balance comprises private sector and foreign banks, The banking sector
has been assigned the role of providing financial support to the economic sector such
as agriculture, small scale industries, exports and the like. An effort has also been
made to analyse the perfonpance of loans and advances of the commercial banks in
India. The study is diagnostic an'd exploratory in n a t m and makes use of secondary
data. The study concludes that the banks have sigmficantly improved their
performance in-terms of extending lo& and advances to their customers.

Vikas Chowdary md Suman Trndan (2011)%, in their paper on "Performance

evaluation of commercial barks in India", haie attempted to analyse the financial
performance of public sector banks in lndd. Public sector banks form a major part of
total banking system in India. So there is a need to evaluate the performance of these
banks. The study is based on secondaty data covt3ing the period from 1997-2007. For
analyzing the performance compound annual growth rates and coefficient of variation
of advances, deposits, total assets, return on assets, and return on equity and spread
ratios are calculated. Decline in growth of NPAs ratio is also considered for this
evaluation. It is concluded that the CAGR of various variables have shown variations
from bank to bank. State bank of lndore has shown maximum (CAGR in case of total
advances, total deposits and assets. Punjab National bank and Syndicate Bank have
shown the least growth of deposits and advances and State Bank of India has the least
growth of deposits.

Jappanjyot Kaur Kalra and Singla, S.K. (2011)~, in their article entitled
"Comparison of non-performing assets of selected public sector banks", have studied
the loan follow up procedure and causes and suggestions of NPAs of Punjab and Sind
Bank and Central Bank of India, in Ludhiana. The major causes for the occun:cnce of
NPAs were lack of proper planning, wrong selection of the customer by the banks and
the recessionary trend. This paper compares the non performing assets of selected
public sector banks. This paper concluded that by developing proper management
information system and improving the coordination between the banks and providing
the list of the defaults, the NPAs level can be reduced to a great extent by the banks.

Ashok Wursnr and Kanika Goyal (201 I ) ~ in, their article entitled "Performance
of public sector banks: an analysis", have emphasized that the Indian banking system
has been exposed to increased competition with the enhanced presence of foreign
banks and entry of new private sector banks. Since public sector banks form major
part of total banking system in India, 'there is a need to evaluate the perfomance of
these banks. Profitability and performance are common measwes of auccess of
commercial undertakings. 'l;he whole . W y is analytical in nature and it is based on
61
the secondary data retrieved from report on trend and progress of banking in India,
report on ccurrncy and finance and the like. The scope of the study is limited b
analysis of the performance, risk and &urn of the public sector banks (state bank and
its associates, and nationalized banks) and all commercial banks (SBI and its
associates, nationalized banks, private sector baplcs, and foreign banks) for the period
b m 2001-02 to 2006-07. It examines the productivity and efficiency of public sactor
banks vs commercial banks, trend of operating costitotal cost, cost to income,
labourlnon-labour cost, net interest income, non performing assets and capital to risk
weighted assets ratio and the like. The study observed that there is a need for
increased absorption of enhanced technological ~apabilityby several banks to further
argument yield of the banking sector.

ArtiGaur and Sunita Sukhija (2011)", in their article entitled "A study of financial
performance of selected private banks in India", have emphasized that the banking
sector is the most dominant sector of the financial system in India, and with good
valuations and increasing profits, the sector has been among the top performers in the
markets. Undoubtedly, being tech-sawy and full of expertise, private banks have
played a major role in the development of Indian banking industry. In the process they
have jolted public sector banks out of complacency and forced them to become more
competitive. At present, private banks in India include leading balks like IClCI Bank,
MG Vysya Bank, Kotak Mahindra Bank, SBI commercial and international banks
and the like. Private Banks such as HDFC Bank and ICICI Bank are posting a rapid
increase in their asset base every year as compared to public sector banks. The
analysis reveals that HDFC is the most efficient bank in t m s of generating earning
per share. Kotak Mahindra Bank has higher private bank ratio.

Anuparn Jain, Vlnita Jaln and Swati Jain (2012)'~', in their paper entitled "Non
Performing Assets in India", have explained the concept of NPA and NPAs in Indian
commercial banks. They made an attempt to look at the determinants of NPA by
examining some of the external and internal factors like, the extent of competition,
total assets of a bank, size of operations, proportion of rural branches, investments and
the like can influence NPA. It is in .our interest to examine, among various bank
p u p s (viz., SBI, Nationalized Banks, Private Banks and Foreign Banks), which i$
the most efficient group the recovery of loans and what are the factors that
detemine this efficiency. The) have taken up a field survey based exercise
concerning the SSI sector to understand the actual workings of the loan recovery
process and the associated problems. io particular, we are intemted in examining the
factors that have influenced recovery of loans in this segment of the Indian economy.
The issue of NPAs in the Indian banking sector i s discussed in general with trends of
NPAs. They analysed the NPA data of cqmmercial banks in a panel h e work to
identify the determinants of NPA. This is done for the total advances and also for
advances to the SSI sector.

STATEMENT OF THE PROBLEM

The scheduled commercial banks including public sector banks, private sector
banks, foreign banks in India and Regional Rural Banks (RRBs) have been working in
the Indian economic system since long. The banking system in India is so strong,
vigilant, vibrant and dynamic than elsewhere in the world. When we come to the
performance of scheduled commercial banks it is understood from the available
statistics that the performance of all scheduled commercial banks on an average is
good. When we come to specific banking sector it is understood from the studies
undertaken by the various researchers that the performance of public sector banks is
significant than the performance of private sector banks and foreign banks in terms of
deposit mobilization, branch expansion, credit lending and the like. In the sense that
the performance of public sector banks is so consistent over the entire study period
than private sector banks and foreign banks.

The Committee on Financial System, popularly known as Narasimham

Committee, was setup in 1991, to recommend suitable measures for bringing about
the necessary reforms in the financial sector. Narasimham Committee appraised and
acknowledged the success and progress of Indian banks since the major banks were
nationalized on 19' July 1969. Unfortunately, the developments were witnessed only
in the field of expansion and spread of bank branches, generation of huge employment
and mobilization of savings rather than improvement in the eficiency that counts a
lot. Besides, comption, fraud, mis-utilization in public money, outdated technology
and politicization in policy making were found to be major drawbacks in the teal
p r o p s of the banks. As the banking stctor plays an important and crucial role in the
economy of a country for ib stabilizqtion and balanced growth, major r e f a were
urgently felt, long after 30 years bfnationdization, to revive Indian banks in the field
not only of pmfitability but also of the overall efficiency viz., better management of
Non-Performing Assets (NPAs), saiisfying capital requirements, increased cost
effectiveness and control, enhanced customer senice, improved technology,
establishmg competitive interest rate, effective-man-powerplanning, introduction of
asset liability management, better pquctivity, launching new products, and
becoming more competent to face the upcoming challenges and competition from
foreign as well as private sector banks in the era of globalization and liberalization.

NEED FOR THE STUDY

Effective and efficient performance of the commercial banks is very important
to the nation. The efficient working of banking industry is yet another requirement for
the healthy economic system in my progressive economy. Study on knowing the
performance of banking sector from time to time is very much essential. No doubt,
there are many studies on the performance of commercial banks as well as on regional
rural banks, but comparative studies are scant. Therefore, the present study is an
attempt in that direction. For the purpose of comparison, two commercial banks, one
from private sector banks and the other from the public sector banks, are chosen for
the present study.

OBJECTIVES

The primary objective of the present study is to examine the performance of

scheduled commercial banks in general and the performance of Andhra Bank and
ICICI Bank in particular. The specific objectives of the present study are:
To review the performance of scheduled commercial banks in India.

To assess the growth and progress of select commercial banks in tcnns of

deposit mobilization and lending of loans and advances.

To ascertain the profitability management in select commercial banke.

To examine the non-performing assets in select commercial banks.

HYPOTHESES
1 There is no significant differenacein the performance of scheduled commercial
banks in terms of deposit mobilization and credit lending over a specific
period of time.
2 There is no significant difference in the'growth and development in terms of
deposit mobilization and credit ldnding between Andhra Bank and lCICI
Bank.
3 There is no significant difference in the profitability management of Andhra
Bank and IClCI Bank.
4 There is no significant difference in the magnitude of non-performing assets
between the Andhra Bank and ICICI Bank.

RESEARCH METHODOLOGY

Sources of Data

The present study is diagnostic and exploratory in nature and makes use of
secondary data. The secondary data have been collected h m books, journals,
magazines, periodicals, handouts, annual reports of the Andhra Bank and the IClCI
Bank, special issues of Indian Banks Association, RBI publications like repon on
trend and progress of banking in India, statistical tables relating to banks, various
reports, the Indian Journal of Commerce, IIB journals, Banking Finance, Dailies like
Financial Express, The Economic Times, B i n e s s Standard, Business Line, The
Hindu and the like.

Sample Design

The universe of the present study consists of public sector banks (26), private
sector banks (21), foreign banks in India (33) and Regional Rural Banks (82). The
Regional Rural Banks and foreign banks are excluded from the scope of the present
study. The public sector and private sector banks are considered for the present shdy.
Therefore, the researcher has picked up one out of 26 fiom public sector banks and
one out of 21 &om private sector banks as per his convenience. This sample falls
under the convenience sampling technique.
PERIOD OF THE STUDY
The select time period for the present study is one decade starting from 2001 -
02 to 2010-11. Financial statements for the said period relating to all scheduled
commercial banks are procured from the RBI website and the financial statements
relating to Andhra Bank and ICICl Bank are procured from the websites of Andhra
Bank and ICICI
Bank.

TOOLS OF ANALYSIS

Data collected from the various sources have been analyse. with the help of
appropriate simple mathematical and statistical tools. Some important tools that ate
deployed for the present study are ratios, percentages, growth rates, mean, standard
deviation, co-efficient of variation, Linear Growth Rate (LGR), Compound Growth
Rate (CGR), '1' value and the like.

SCOPE AND LIMITATIONS OF THE STUDY

The scope of the present study is confined to specific pcriod of time i.e., fiom
2001-02 to 2010-1 1 and two commercial banks, namely viz., Andhra Bank and ICICI
Bank. Therefore, inferences drawn for the present study may not be extended to the
other banks of the other parts of the country and may not be extended to other time
periods. Because of time and money 'constraints, the researcher has confined his study
to only two banks, one from public sector banks and the other from private sector
banks.

CHAPTER SCHEME

The entire theme a f the study is divided into eight chapters. The plan of the
study is as follows.

Chapter-I: This chapter is introductory in nature. In this chapter the introductory

aspects such as concept and definition of banking, historical perspcctiva of
commercial banking, nationalization of banks, objectives of bank nationalization,
system of banking in the liberalization era, shvcture of commercial banks, functions
of commercial banks, role of commercial banks in socio-economic development,
banking sedot reforms and their impact, progress of commercial banks at a glance
and issues of banking industry in Indie:
66
Chapter-Il: This chapter presents the review of literature and design of the study.
Design of the study consists of the statement of the problem, need for the study,
objectives, hypotheses, methodology, data collection, sample design, tools of analysis,
scope and limitations of the study and plan of the study.

Chapter-111: The profile of the study units vii., Andhra Bank and lCIC1 Bank, is
presented in this chapter.

Chapter-IV: This chapter presents the analysis on the performance of scheduled

commercial banks.

Chapter-V: Analysis pertaining to deposit mobilization, loans and advances of

Andhra Bank and IClCI Bank is presented in this chapter.

Chapter-VI: The profitability management of Andhra Bank and IClCI Bank is

presented in this chapter.

Chapter-VII: This chapter presents management of non-performing assets (NPAs) in

Andhra Bank and IClCl Bank.

Chapter-VIII: This chapter presents summary of findings, suggestions and

conclusion.

CONCLUSION

This chapter concludes that the researcher has reviewed a sizable number of
studies. The statement of the problem reveals that the banking system in India is
strong, vigilant, vibrant and dynamic than else where in India. The need for the study
justifies that the studies of this nature are very much needed for alerting the banken, to
correct the distortions or weakness that may have crept in over a period of time. The
objectives that are set for the present study are relevant and appropriate. Resonable
sample design was adopted The period of the study is optimum. Tools used for the
analysis of data are relevant. The scope and limitations are justifiable and the chapter
scheme is sequential.
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