53 Oct. 2016 vol. 01 issue 10

Performance of Indian Banks Since 1990s: A Traditional Approach

Mr. Sanjoy De Research Scholar, Department of Economics, Burdwan University, West Bengal

Abstract

Since 1990s, Indian banking sector has embraced significant changes with respect

to banking conditions, technology, regulations etc. Given the massive changes in the banking

sector, an analysis of the performance of different categories of banks starting from pre-

reform era to the modern day banking, is very much pertinent. Our paper attempts to measure

the performance of Indian banking sector during the period 1992-2012, by adopting

traditional measures. We see that in all scores of performance evaluation such as

management efficiency, profitability, productivity and asset quality, foreign banks category

has outclassed its peers. It appears that the liberalization has crushed the dominance of the

public sector banks and we are moving towards a more convergence and a competitive regime.

Management of public sector banks has serious tasks before them to raise profit and business

with the help of huge labor force and existing infrastructure.

Introduction

Banks mobilize deposits by offering attractive

rates of interest. Also, banks use a part of the

deposit for lending purposes among different

types of borrowers such as individuals,

agriculture, industry, trade, institutions and even

government bodies and charge rate of interest.

This availability of formal credit facility with

inherent features of safety and trustworthiness,

in turn, helps in promoting development of

agriculture, trade and industry. However,

sometimes the disbursement of loans backfires

as the borrowers fail to repay the loan. Despite,

the risk of default, the importance of

institutionalized credit facility is undeniable as it

aids productive activities, which in turn spurs

economic growth. Given the huge importance of

banking system, particularly the credit

disbursement activities, it is very much pertinent

to analyze the performance of the banking sector

in the country.

A sound banking sector also safeguards an

economy from outside economic onslaughts. In

the aftermath of the East Asian financial crisis,

many economic observers started to view the

phenomenal economic success story of the East

Asian economies to have been built upon a

rather sloppy structure (Stiglitz, 1998). An

unprecedented crisis actually pointed out the

serious laxity in the fundamental financial

structure of those then well-performing nations.

Economists opine that this financial crisis could

have been avoided had there been greater

transparency and heightened supervision in

lending activities.

Given the huge importance of the financial

system, a revaluation of the banking

performance is very important. The smooth

functioning of the financial system has a strong

linkage with the functioning and performance of

Eduved International Journal of Interdisciplinary Research

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54 Oct. 2016 vol. 01 issue 10

the other sectors of the economy. Efficient

functioning of the banking system should help

in improving resource allocation thereby

promoting overall productivity growth.

In India, too, banking sector plays a key role in

the overall economic growth. Banking in India

is now concentrated not only in urban

metropolitan areas, but also in the remote areas

of the country. In fact, in recent times, the

banking space in India has witnessed meteoric

changes with the introduction of various

technology-embedded products such as Internet

banking, ATMs and mobile banking. Given the

vast changes embraced by the Indian banking

system since the 1990s, it should be very much

relevant and interesting to study the

performance of the different categories of banks

till the onset of so called modern banking, at

least on the basis of some traditional measures.

There is often a debate of using sophisticated

tools to analyze the performance of banking

sector. These tools are however built up on a

number of structural assumptions and

nomenclature. Hence, they often present a view

of the reality as peeped through their theoretical

telescope. While the importance of sophisticated

tools cannot be denied, it is also necessary to

look at the pattern of the banking performances

as evidenced from some simple measures.

Our paper seeks to analyze the performance of

the Indian banking sector during the period

1992-2012. This period of 21 years can be sub-

divided into two distinct phases–the phase of

early stage of liberalization (1992-2001) and the

phase with a radical change in the process of

market liberalization and reforms (2002-2012).

The banks have been categorized into four broad

categories– nationalized banks, SBI & its

associates, private banks (including both the old

private banks and the new private sector banks)

and foreign banks. There are substantial

differences in the structure and performance of

these different categories of banks. Therefore, it

becomes necessary to study them separately

under the two time periods. In section 2, we

provide the theoretical understanding on the

importance of the banks in the development

process. Section 3 provides an overview of the

banking sector in India. In section 4, we give

description of various indicators used to judge

the performance of banks. Section 5 deals with

the analytical evaluation of the performance of

banks on the basis of those indicators. And, in

section 6, we conclude.

Banks and the Development Process

In the standard mainstream economics, banks

play the cushioning role of diverting investible

funds to the investors who can use it

productively, creating employment and output.

In the pre-modern age, when there were no

banks, a huge amount of investible resources

were wasted or remained idle in the form of

conspicuous consumption, hoarding and various

types of traditional storages. As a result, this

huge investible surplus could not be diverted for

productive & profitable uses. Kings and nobles

lived in luxury but the country as a whole was

poor and stripped in poverty. The paradox of

poverty among plenty was explained by the lack

of machinery that could transfer the huge

investible surplus into a productive outlet.

When Francois Bernier, the French traveler,

came to India during the time of the Mughal

emperor Aurangazeb, he found this strange

phenomenon. Bernier noted that even peasant

women wore gold ornaments, while there were

insufficient funds for manufacturing and trading

activities. In medieval China, printing machine

was invented, but it could not be used in mass

scale due to lack of funds.

It was the development of the banking system

that removed this anomaly. Industrial revolution

occurred in Britain solely because the early

innovators were financed by the flow of

investible surplus.

55 Oct. 2016 vol. 01 issue 10

Thus, it was the development of the banking

sector, that is, probably the key to the modern

world. In the developed society, the existence of

the well-functioning banks is almost axiomatic.

However, this is not so in an underdeveloped

economy. Underdevelopment, among other

factors, is a result of the absence of well-

functioning credit market, including banks. If

the performance of the banking sector can be

improved, it will have a direct impact on

enhancing output and employment. Thus the

analysis of banking performance, is at the core

of the development economics.

Overview of Indian Banking Sector

The Indian banking system is characterized by

the presence of mainly three different types of

banks in terms of ownership – public sector

banks (PSBs), privately owned banks and

foreign banks (FBs). In the public sector banks,

there are State Bank of India (SBI) and its

associates and nationalized banks and in the

privately owned banks category, there are old

private sector banks and new private sector

banks. Over the years, the public sector banks

achieved a place of importance in the financial

intermediation process. These banks were able

to expand geographical footprint, mobilize

savings and provide finance for investments in

agriculture/ small-scale industry.

During the period 2009-2012, nationalized

banks accounted around 60% of the total bank

offices. The PSBs accounted for more than 85%

of the bank offices both in 2009 and 2010,

whereas in 2011 and 2012, PSBs accounted for

84.1% and 83.3% of the bank offices

respectively. Foreign banks had the lowest

percentage of bank offices (0.4%) during the

period 2009-2012. New private sector banks,

which are the new entrants to the banking arena,

have witnessed an increasing trend in branch

expansion and have outpaced the old private

sector banks in terms of number of offices.

The present form of the PSBs has evolved over

the years. In 1955, pursuant to the provisions of

the State Bank of India Act of 1955, the

Government of India, acquired a controlling

interest in the Imperial Bank of India and formed

the State Bank of India. Later on, in 1959, the

government passed the State Bank of India

(Subsidiary Banks) Act, which enabled the State

Bank of India to make the eight former State-

associated banks as its subsidiaries. This

acquisition was in tune with the first Five Year

Plan, which prioritized the development of rural

India. The government integrated these banks

into the State Bank of India system to expand its

rural outreach. However, despite the

advancement made by these banks in terms of

geographical coverage and credit expansion, it

Table 1: Percentage of Bank Offices – Category Wise

2009 2010 2011 2012

SBI & Associates 25.1 25.2 24.7 23.8

Foreign Banks 0.4 0.4 0.4 0.4

Nationalized Banks 60.7 59.9 59.4 59.5

New Private Sector Banks 6.5 7.2 9.0 9.7

Old Private Sector Banks 7.3 7.3 6.5 6.6

Total 100 100 100 100

Source: RBI

56 Oct. 2016 vol. 01 issue 10

was felt that banking services were still mainly

concentrated in the metropolitan areas and

sectors such as small scale industries and

agriculture were being neglected. Further, the

findings of the All-India Rural Credit Survey

Committee (RBI, 1954) of the inequitable

distribution of bank credit raised doubts about

the ability of the markets to efficiently allocate

resources. In response, the Government

tightened its control over the credit allocation

process to ensure adequate flow of credit into

genuinely productive activities in conformity

with the Plan priorities. Towards this end,

controls on lending rates were introduced,

liquidity requirements were raised, and a system

of development banks, catering to various

segments of industry and agriculture were

established. The process culminated into the

nationalization of 14 major private banks in

1969. The banks which were nationalized were

Allahabad Bank, Bank of Baroda, Bank of India,

Bank of Maharashtra, Canara Bank, Central

Bank of India, Syndicate Bank, UCO Bank,

United Bank of India, Union Bank, Punjab

National Bank, Indian Overseas Bank, Indian

Bank and Dena Bank. A second round of

nationalization followed, with 6 more private

banks getting nationalized in 1980 which

included Andhra Bank, Corporation Bank, New

Bank of India, Oriental Bank of Commerce,

Punjab & Sindh Bank and Vijaya Bank.

The bank nationalization process was

undertaken in 1969 with an aim to ‘control the

commanding heights of the economy and to

meet progressively…the needs of development

of the economy in conformity with national

policy and objectives’ (Reserve Bank of India,

1983). Main objectives of nationalization were

(i) rapid branch expansion and to spread banking

services into the previously neglected suburban

and rural areas, (ii) to mobilize deposits and

direct funds towards investments in the public

sector and loans to the priority sectors such as

agriculture, small scale industries and export

sector, (iii) channeling of credit according to

plan priorities, (iv) to disentangle the

monopsony control of the large business houses

over the banks of the country. The objectives

behind the bank nationalization can be found in

Bhattacharyya (1993), Ghosh (1993), and

Rangarajan (1993).

In the next decade following bank

nationalization, Indian banking sector witnessed

unprecedented expansion of branch network of

public sector banks. Expansion of banking

network was not only aimed at mobilizing

potential savings but also to bring the wider

section of the economy into the ambit of

organized banking. In this direction, apart from

changing the sectoral composition of credit, the

RBI stipulated the lending targets to priority

sectors, set up credit guarantee schemes,

provided refinancing arrangements and directed

banks to open branches in rural and semi-urban

areas to cover a wider section of the population.

Further, several quantitative and functional

restrictions were imposed. During early 1991,

the cash reserve ratio (CRR) of commercial

banks was at the statutory maximum of 15%,

while investment in government debt

instruments in the form of statutory liquidity

ratio (SLR) was highest around 38.5%. Banks

had limited access to financial markets. Interest

rates on both sides of the balance sheet were

highly regulated. Also, competition was limited

due to strict entry barrier of new private banks.

However, compulsion of fulfillment of various

restrictions resulted into many public sector

creeping in the ails of unprofitability and under-

capitalization with a huge proportion of non-

performing assets (NPAs) and huge

administrative costs. Many banks had lower

capital adequacy ratio, earning less than

reasonable rate of return and offering poor

quality customer service. In recognition of these

growing illnesses, the Government of India set

up the Narasimham committee to evaluate the

functioning of the entire financial services

industry in the country. On the basis of the

recommendations of the committee (submitted

in November 1991), the RBI initiated major

reform programs which were aimed at creating

57 Oct. 2016 vol. 01 issue 10

a more profitable, efficient and sound banking

system. The reform measures aimed at

improving bank efficiency through entry

deregulation, deregulation of interest rates,

branch de-licensing and allowing public sector

banks to raise up to 49% equity in the capital

market. The reform measures also mandated

phased reduction in CRR and the SLR, and to

bolster the banking system through the

implementation of the Bank of International

Settlements (BIS) norms of a 8% capital

adequacy ratio, as well as stringent income

recognition and provisioning norms. These

changes were likely to create a competitive

ambience that, in the long-run, was expected to

fetch appreciable gains in efficiency,

profitability, and productivity.

Since 1992-93, the Indian banking system has

undergone radical changes with respect to scale,

opportunities and operational characteristics.

New banking services (ATM machines and

Internet banking) have been emerging due to

advancement of computers and information

technology. The performance of public banks

has become more market driven with growing

emphasis placed on profitability.

The commercial banks are now encountering a

heightened level of competition in the

intermediation process from a variety of

participants such as non-banking financial

intermediaries (like mutual funds and leasing

companies), term lending institutions, chit funds

and capital markets. Informal credit channels are

also operating on a parallel basis, belittling the

scope of formal credit facilities or indicating the

loopholes of the institutional credit to bring the

entire population under the formal credit

umbrella.

Description of Various Performance

Indicators of Banks

We now embark upon depicting the various

performance indicators of banks that we have

used in our study. Here, we have judged the

performance of banks on the basis of four broad

indicators–(a) management efficiency, (b)

profitability, (c) productivity and (d) asset

quality. Now, we provide a brief idea about

these key financial parameters.

a. Management Efficiency

In a business, involving the savings of people,

the role of the management is vital. Despite the

fact that all the banks have to follow certain

guidelines stipulated by the RBI, role played by

the management is crucial in smooth and

efficient functioning of the banks. In order to

judge the performance of the management, we

have used 2 indicators: credit deposit ratio (C-D

ratio) and return on advance adjusted to cost of

funds (ROADVCOF).

C-D ratio is simple to understand and it

measures the amount of credit disbursed as a

ratio of the amount of deposits generated, and

reflects how efficiently the management has

been able to channelize the savings into

productive uses. There is no minimum or

maximum level of C-D ratio that a bank has to

maintain. However, a very low C-D ratio

indicates bank’s inability to utilize its resources

to its fullest extent. On the hand, a very high C-

D ratio means pressures on the available

resources of a bank.

ROADVCOF is defined as the difference

between return on advances and cost of funds (

ROADVCOF =return on advance –cost of funds

Whereas, return on advance=IEA/advancers;

Cost of funds= (IPD+IPB)/

(Deposit+Borrowing)

Here, IEA=interest earned on advance & bills

IPD=interest paid on deposits

IPB=interest paid on borrowing from RBI &

other agencies

58 Oct. 2016 vol. 01 issue 10

ROADVCOF is a finer indicator to measure the

performance of banks, as it takes into

consideration the amount of borrowing the bank

has to make to stay in business. And,

nonetheless, the basic idea of banking business

to manage deposits for lending purposes with

differing deposits and lending rates, is also well

captured through this indicator. Importantly, it is

the management, which is primarily responsible

for the conduct of all these business of deposit

creation, lending and borrowing at varied rates.

b. Profitability

Despite some social obligations, like all other

business, banks also should aim at to raise profit.

To evaluate the profitability of banks, we have

employed 3 indicators-rate of net interest margin

to assets (or spread), return on assets (ROA) and

return on equity (ROE).

Spread is the measure of bank profitability and

efficiency and it is defined as the difference

between interest charged and interest paid by

banks as a percentage of total assets of the

banks. ROA is defined as the net income divided

by total assets and is a proxy of bank’s

profitability. Another important indicator that

has been employed to capture the profitability of

banks is ROE, which measures the amount of net

income that a bank generates with the money

that the shareholders have invested.

c. Productivity

To calculate bank’s productivity, we have used

4 indicators–businesses per employee, profit per

employee, business per branch and profit per

branch. The first 2 indicators give idea about the

productivity of the employees of a bank,

whereas the last 2 indicators talk about the

productivity of a branch. Notably, the 2 main

business of a bank is creation of deposit and to

make advance. Businesses here are the sum of

these 2 activities. So, the productivity indicators

are defined as :

Business per employee=

(Deposit+Advance)/total employees

Profit per employee= Profit or loss/ total

employees

Business per branch= (Deposit+Advance)/ total

no. of branches

Profit per branch= Profit or loss/ total no. of

branches

d. Asset Quality

One important variable that determines the

quality of a bank’s asset is the non performing

asset (NPA). NPA is a loan or advance for which

the principal or the interest payment remained

overdue for a period of 60 days.

Types of NPA

Gross NPA: Gross NPAs are the sum total of all

loan assets that are classified as NPAs as per

RBI Guidelines. Gross NPA reflects the quality

of the loans made by banks. It consists of all the

non-standard assets like as sub-standard,

doubtful, and loss assets.

Gross NPAs Ratio = Gross NPAs / Gross

Advances

Net NPA: Net NPAs are those type of NPAs in

which the bank has deducted the provision

regarding NPAs. Net NPA shows the actual

burden of banks. Since in India, bank balance

sheets contain a huge amount of NPAs and the

process of recovery and write off of loans is very

time consuming, the banks have to make certain

provisions against the NPAs according to the

central bank guidelines. Net NPA ratio can be

calculated by following:

Net NPA Ratio = Net NPAs/ Net Advance=

(Gross NPAs – Provisions) / (Gross Advances –

Provisions)

59 Oct. 2016 vol. 01 issue 10

Analytical Evaluation of the Performance

of Bank

Our first variable is the C-D ratio. There is

sufficient temporal and categorical variation in

the performance of banks over the 21 years with

respect to C-D ratio. Standing in 1992, SBI & its

associates was the dominating category among

all other categories of banks. The C-D ratio of

the SBI & its associates group was 1.36 times

than that of the private sector banks and 1.31

times than that of the foreign banks. Over the 21

years period from 1992-2012, the C-D ratio of

all categories of banks have increased,

indicating discernible improvement in

management efficiency, but the increase was

uneven. The relative gap in C-D ratio between

SBI & its associates and other categories of

banks have changed rather dramatically. The

private sector banks and foreign banks have

surpassed the SBI & its associates group in 2012

and these two groups are enjoying higher C-D

ratio than the SBI & its associates group. In

majority of the years under study, C-D ratio of

the nationalized banks was lower than that of the

SBI & its associates group but the gap has fallen

down over the years. The C-D ratio of the SBI

& its associates was 1.26 times that of the

nationalized banks in 1992 and 1.18 times that

of all scheduled commercial banks. These ratios

have fallen to 1.08 and 1.04 in 2012. It appears

that the liberalization has crushed the dominance

of the SBI & its associates group and we are

moving towards a more convergence and a

competitive regime.

Looking at the C-D ratio, we find that during the

period (1992-2012), on an average, this ratio

was highest in case of foreign banks (71.56%)

and lowest in case of nationalized banks

(57.29%), with an overall average of 60.36%. In

phase 1, C-D ratios of all categories of banks

was lower than during phase 2, indicating a

marked improvement in management’s

efficiency in the banking sector over these two

distinct time periods. Like in the phase 1, during

2002-2012, the C-D ratio was highest in case of

the foreign banks and lowest in case of the

nationalized banks. Another metric that we have

used to measure the performance of the

management, (ROADVCOF ), also indicates

that the management of the foreign banks

emerged out as the best performer during the

period 1992-2012, which was followed

nationalized banks and the private sector banks.

SBI & its associates group came out as the worst

performer. The same trend was observed during

both the phases of our study.

If we glance through the profitability indicators,

we observe that foreign banks group has

outclassed all its peers with respect to all the

yardsticks such as spread, ROA and ROE that

we have used to measure profitability during

phase 1, phase 2 and during the entire period of

study. The nationalized banks group grabbed the

second spot with respect to spread during the

period 1992-2012, whereas private sector banks

got the last position. On the basis of ROA,

private sector banks grabbed the second spot,

followed by the SBI and its associates and the

nationalized banks during the period 1992-2012.

Again, with respect to ROE, nationalized banks

were relegated to the last position, whereas the

SBI & its associates emerged out as the second

best and the private sector banks grabbing the

third spot.

Now, coming to the productivity index of

business per employee, we find that an average

employee of a foreign bank generated highest

amount of business among all categories of

banks. Business generated by an average

employee of the SBI & its associates group was

the least. The same trend has been observed in

both the 2 phases of our study. But, business

generated by all the categories of banks

improved during 2002-2012 period from that of

1992-2001 period. This reflects to much better

performance by the banks’ employees over the

years.

On the basis of the profit per employee indicator

also, foreign banks group fared much better than

60 Oct. 2016 vol. 01 issue 10

other categories of banks during the period

1992-2012, which was followed by the private

sector banks, nationalized banks and SBI & its

associates. In terms of profit per employee, both

during phase 1 and phase 2, foreign banks

category was the best performer. In phase 1,

nationalized banks were the worst performer.

However, in phase 2, SBI & its associates were

relegated to the worst position. In both these

phases, private banks group consistently

grabbed the second spot. In fact, on the basis of

both these parameters’ related to employee

efficiency, SBI & its associates group were the

worst performer during 2002-2012 period,

whereas during 1992-2001, on the basis of both

these parameters, nationalized banks were the

worst performer. This indicates to relatively

poor performance of SBI & its associates with

respect to employee productivity.

Branch productivity wise, both with respect to

business per branch and profit per branch,

nationalized banks were the worst performer

both in phase 1 and phase 2, as well as in the

entire period of study. This implies that, for

nationalized banks, there is huge scope to raise

the productivity of branches to the benefit of the

customers as well as for the bank itself. Here

also, the foreign banks emerged out as the best

performer, followed by the private banks and

SBI & its associates during the period 1992-

2012.

Regarding asset quality indicators, we have

taken data on net NPA ratio during the period

1998-2012. During the period 1998-2012, on an

average, net NPA ratio was highest for old

private sector banks (3.66%). With an average

net NPA ratio of 3.60%, public sector banks

group was very close to the old private sector

banks. High prevalence of NPAs among these 2

categories of banks , points out to severe

problem of asset quality in the Indian banking

sector. In terms of this indicator too, foreign

banks group is positioned at the top on the basis

of the performance during the period 1998-

2012.

Conclusion

Foreign banks with their profit-oriented

business model, scripted superior performance

among all categories of banks on the basis of

different traditional banking performance

indicators. Management of public sector banks,

however, has huge scope to utilize its resources

such as huge labor force and existing

infrastructure to raise its productivity and

business. Another serious concern before both

the public sector banks and the old private sector

banks is the alarming levels of NPAs. Here also,

the question of efficiently raising business,

which comprises of both deposits and advances,

becomes pertinent. Scope of raising business is

huge, but it is also the prerogative of the

management to see whether any increase in

business is actually adding to NPAs or not.

61 Oct. 2016 vol. 01 issue 10

Appendix

Table 2- C-D Ratio (1992-2012)(In percentage)

STATE BANK

OF INDIA &

ITS

ASSOCIATES

NATIONALISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDU

LED

COMMER

CIAL

BANKS

(EXCL.

RRBS)

1992 71.06 56.31 52.41 54.05 60.2

1993 69.19 53.16 51.93 50.02 57.4

1994 53.83 45.8 48.83 44.83 48.2

1995 57.13 47.99 54.28 54.33 51.42

1996 60.95 49.28 61.83 73.52 55.16

1997 56.06 45.56 56.1 71.54 51.26

1998 56.2 45.32 50.95 68.32 50.39

1999 49.45 45.24 49.38 62.18 47.95

2000 50.35 46.38 49.04 72.21 49.26

2001 48.18 48.28 49.8 72.64 49.82

1992-

2001

57.24 48.332 52.455 62.364 52.106

2002 46.88 51.17 68.71 75.39 53.69

2003 48.39 52.32 66.55 75.27 54.53

2004 50.94 51.92 63.45 75.5 54.82

2005 56.31 61.17 70.34 87.18 62.63

2006 68.52 68.01 73.04 85.77 70.07

2007 76.13 70.39 75.14 83.81 73.46

2008 76.72 71.65 76.8 84.29 74.61

2009 73.43 72.17 78.13 77.25 73.83

2010 77.43 71.33 76.86 70.34 73.66

2011 79.8 73.89 79.53 81.24 76.52

2012 81.99 75.77 82.28 82.99 78.62

62 Oct. 2016 vol. 01 issue 10

2002-

2012

66.96 65.44 73.71 79.91 67.86

1992-

2012

62.33 57.29 63.59 71.56 60.36

Sources: RBI

Table 3:Return on Advance Adjusted to Cost of Funds (1992-2012)

STATE BANK OF

INDIA & ITS

ASSOCIATES

NATIONALISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

1992 3.09 5.95 0.76 12.91

1993 2.52 4.34 0.83 12.11

1994 2.18 5.68 1.15 8.69

1995 2.33 4.93 1.27 6.26

1996 2.89 6.33 1.87 6.75

1997 3.01 7.07 2.70 7.76

1998 2.18 5.11 2.06 6.65

1999 1.71 5.16 1.66 5.74

2000 1.57 4.69 1.53 4.32

2001 1.56 4.95 1.44 4.65

2002 0.96 4.43 0.99 2.82

2003 0.77 4.62 2.85 2.80

2004 0.82 4.49 2.82 2.44

2005 1.12 4.21 2.34 2.19

2006 2.93 3.86 4.39 4.9

2007 3.72 3.99 4.38 5.74

2008 3.65 3.69 4.88 6.60

2009 3.95 4.09 5.23 8.15

2010 3.60 3.82 5.06 7.16

2011 4.05 4.28 5.09 5.64

2012 4.62 4.10 5.22 5.72

Total 2.54 4.75 2.79 6.19

Sources: RBI

63 Oct. 2016 vol. 01 issue 10

Table 4: Spread (1992-2012)

STATE

BANK OF

INDIA &

ITS

ASSOCIAT

ES

NATIONALIS

ED BANKS

PRIVAT

E

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDULED

COMMERCI

AL BANKS

(EXCL.

RRBS)

1992 1.94 3.54 0.57 4.98 6.44

1993 1.58 2.53 0.45 4.57 4.88

1994 1.41 2.73 0.53 4.99 4.94

1995 1.69 3.52 0.65 4.24 5.85

1996 1.74 3.72 0.78 3.83 6.10

1997 1.73 3.76 0.86 3.92 6.21

1998 1.57 3.57 0.79 3.50 5.68

1999 1.47 3.50 0.74 2.95 5.36

2000 1.40 3.32 0.84 2.91 5.24

2001 1.43 3.53 0.96 2.79 5.47

2002 1.36 3.35 0.87 1.92 4.96

2003 1.31 3.68 1.06 1.90 5.35

2004 1.35 3.83 1.24 1.87 5.52

2005 1.44 3.65 1.27 1.76 5.48

2006 3.22 2.92 2.74 4.05 3.04

2007 2.79 2.80 2.54 4.36 2.86

2008 2.49 2.28 2.67 4.33 2.58

2009 2.39 2.32 2.86 4.33 2.62

2010 2.36 2.26 2.90 3.96 2.54

2011 2.84 2.74 3.10 3.86 2.91

2012 3.25 2.55 3.09 3.89 2.90

Total 1.94 3.15 1.50 3.57 4.62

Sources: RBI

64 Oct. 2016 vol. 01 issue 10

Table 5 : Business Per Employee (1992-2012) (In Rs Crores)

STATE

BANK OF

INDIA &

ITS

ASSOCIAT

ES

NATIONA

LISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL SCHEDULED

COMMERCIAL

BANKS (EXCL.

RRBS)

1992 0.455494 0.444685 0.372571 2.034489 0.466915

1993 0.500573 0.488463 0.457075 2.375614 0.518119

1994 0.521971 0.522328 0.571843 2.873891 0.558098

1995 0.595381 0.615415 0.867714 3.262013 0.660777

1996 0.664229 0.68802 1.010225 4.130846 0.746466

1997 0.744312 0.769528 1.361934 4.839504 0.854381

1998 0.878091 0.91209 1.701576 4.699967 1.012825

1999 1.064445 1.075007 2.056193 4.963566 1.199904

2000 1.258407 1.266924 2.686135 5.817104 1.430119

2001 1.610152 1.627612 3.278855 7.722718 1.835083

2002 1.828927 1.973705 4.155324 9.460903 2.211566

2003 2.062044 2.223909 4.849056 10.30833 2.50666

2004 2.471785 2.602473 5.693119 12.7251 2.989282

2005 2.99637 3.18163 6.213068 12.2311 3.579629

2006 3.51919 3.906361 7.833253 12.58079 4.405096

2007 3.51919 3.906361 7.833253 12.58079 4.405096

2008 5.982358 6.611454 12.97889 19.32813 7.480509

2009 6.979321 8.327096 12.78602 22.82609 8.775889

2010 7.37 9.36 8.26 14.11 8.62

2011 7.90 11.53 8.62 15.55 9.90

2012 9.14 12.79 9.406 19.56 11.00

Total 2.955681 3.562483 4.904529 9.713899 3.578924

Sources: RBI

65 Oct. 2016 vol. 01 issue 10

Table 6 : Profit Per Employee (1992-2012) (In Rs Crores)

STATE

BANK OF

INDIA &

ITS

ASSOCIA

TES

NATIONA

LISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS ALL

SCHEDULED

COMMERCIAL

BANKS (EXCL.

RRBS)

1992 0.000861 0.000994 0.001628 0.030073389 0.001405

1993 0.000973 -0.00645 0.001198 -0.06267808 -0.00452

1994 0.001212 -0.00828 0.002515 0.043968278 -0.00393

1995 0.002845 0.000474 0.007888 0.052624039 0.002388

1996 0.002553 -0.00204 0.009424 0.057941725 0.000968

1997 0.005385 0.002535 0.011774 0.050227084 0.004695

1998 0.007809 0.004499 0.013651 0.041029048 0.006744

1999 0.004761 0.003177 0.011277 0.044719123 0.004903

2000 0.008742 0.004385 0.019416 0.070884125 0.007847

2001 0.007735 0.004202 0.018614 0.077077539 0.007544

1992-2001 0.004288 0.00035 0.009738 0.040587 0.002805

2002 0.012234 0.010263 0.02586 0.124766285 0.01385

2003 0.016033 0.01651 0.040982 0.154198557 0.020372

2004 0.021255 0.023578 0.045156 0.202942188 0.027294

2005 0.021517 0.020687 0.040963 0.149937221 0.025091

2006 0.022932 0.02278 0.052557 0.182697071 0.029413

2007 0.024598 0.030278 0.064019 0.239947789 0.037333

2008 0.039395 0.04032 0.103553 0.362771784 0.055134

2009 0.047538 0.051626 0.105934 0.451736068 0.065541

2010 0.05 0.06 0.08 0.17 0.06

2011 0.04 0.07 0.09 0.28 0.07

2012 0.06 0.07 0.107 0.36 0.08

2002-2012 0.031727

0.037435

0.069002

0.24341

0.04383

Total 0.018661 0.019775 0.040781 0.146827667 0.024294

Sources: RBI

66 Oct. 2016 vol. 01 issue 10

Table 7 : Business Per Branch (1992-2012) (In Rs Crores)

STATE

BANK OF

INDIA & ITS

ASSOCIATE

S

NATIONALI

SED BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDULE

D

COMMERC

IAL BANKS

(EXCL.

RRBS)

1992 10.42453 8.112604 4.722086 177.421 8.971577

1993 11.41502 8.853773 5.778681 211.3668 9.90467

1994 11.95704 9.424298 7.200486 243.5529 10.6438

1995 13.68157 10.98684 10.67476 275.5466 12.51551

1996 15.72278 12.0912 12.99306 309.093 14.13804

1997 17.4342 13.40378 16.91157 346.7439 15.98974

1998 20.33669 15.64603 21.23785 368.1801 18.72468

1999 24.36809 18.00476 25.11065 400.8338 21.7333

2000 28.51067 20.84742 32.90828 444.7191 25.53347

2001 33.89579 23.87386 38.01061 500.9167 29.70196

2002 37.57951 27.60002 51.04816 448.9799 34.61114

2003 42.19596 30.67428 61.62862 573.0362 38.98349

2004 47.35172 34.99698 73.78278 627.9041 44.80705

2005 56.77778 42.8819 83.11616 660.0302 53.74619

2006 63.86421 50.59612 108.4895 815.8569 64.28086

2007 76.00445 61.92348 130.1829 1018.708 78.20285

2008 86.23476 73.40762 143.0978 1262.702 90.91761

2009 103.2632 88.40232 141.6375 1286.308 104.6699

2010 107.7863 101.4115 171.7846 1275.354 113.4175

2011 117.7283 117.2016 177.7493 1367.327 127.4539

2012 129.227 125.1273 183.0894 1564.187 136.4058

Total 50.27427 42.64131 71.48356 675.1794 50.25491

Source: RBI

67 Oct. 2016 vol. 01 issue 10

Table 8 : Profit Per Branch (1992-2012) (In Rs Crores)

STATE

BANK OF

INDIA & ITS

ASSOCIATE

S

NATIONALISE

D BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDULED

COMMERCIA

L BANKS

(EXCL. RRBS)

1992 0.0197 0.018132 0.02064 2.6226 0.026995

1993 0.022178 -0.11686 0.015148 -5.57669 -0.08638

1994 0.027758 -0.14938 0.031666 3.726169 -0.07492

1995 0.065381 0.008464 0.097038 4.445223 0.045234

1996 0.065381 0.008464 0.097038 4.445223 0.045234

1997 0.065381 0.008464 0.097038 4.445223 0.045234

1998 0.126144 0.044147 0.146196 3.598703 0.087863

1999 0.180853 0.077181 0.170387 3.214082 0.124688

2000 0.108987 0.05321 0.137717 3.611302 0.088812

2001 0.198067 0.072156 0.237863 5.41911 0.140105

2002 0.162833 0.061637 0.215791 4.999461 0.122104

2003 0.251384 0.143514 0.317693 5.920952 0.216755

2004 0.328087 0.22772 0.520853 8.57184 0.316827

2005 0.407177 0.317063 0.585221 10.01393 0.409112

2006 0.407721 0.278825 0.547989 8.091102 0.376734

2007 0.447687 0.362688 0.870625 16.85721 0.5216

2008 0.567867 0.447673 1.141716 23.69979 0.670094

2009 0.703347 0.548069 1.173483 25.45648 0.781711

2010 0.681613 0.614476 1.68456 15.27106 0.790526

2011 0.62348 0.712191 1.896399 24.17328 0.900961

2012 0.777758 0.67532 2.082758 29.1054 0.967796

Total 0.297085 0.21015 0.57561 9.624354 0.310337

Sources: RBI

68 Oct. 2016 vol. 01 issue 10

Table 9 : Net NPA Ratio (1998-2012)

Public

Sector

Banks

New private

sector banks

Old private

sector banks

FOREIGN

BANKS

ALL

SCHEDULED

COMMERCIAL

BANKS (EXCL.

RRBS)

1998 8.2 2.6 6.5 2.2 7.3

1999 8.1 4.5 9 2.9 7.6

2000 7.4 2.9 7.1 2.4 6.8

2001 6.7 3.1 7.3 1.8 6.2

2002 5.8 4.9 7.1 1.9 5.5

2003 4.5 1.5 5.2 1.7 4

2004 3.1 1.7 3.8 1.5 2.8

2005 2.1 1.9 2.7 0.8 2

2006 1.3 0.8 1.7 0.8 1.2

2007 1.1 1 1 0.7 1

2008 1 1.2 0.7 0.8 1

2009 0.9 1.4 0.9 1.8 1.1

2010 1.1 1.1 0.8 1.8 1.1

2011 1.2 0.6 0.5 0.6 1.1

2012 1.5 0.4 0.6 0.6 1.3

Total 3.6 1.973333 3.66 1.486667 3.333333

Source: RBI

Table 10 : Return on Asset (1992-2012)

roa

STATE

BANK OF

INDIA & ITS

ASSOCIATES

NATIONALISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDULED

COMMERCIAL

BANKS (EXCL.

RRBS)

1992 0.11 0.37 0.08 1.99 0.73

1993 0.12 -2.17 0.05 -3.40 -2.10

1994 0.13 -2.48 0.10 2.04 -1.63

1995 0.28 0.12 0.25 1.83 0.84

69 Oct. 2016 vol. 01 issue 10

1996 0.22 -0.46 0.30 1.60 0.30

1997 0.41 0.52 0.33 1.14 1.28

1998 0.52 0.79 0.34 0.86 1.56

1999 0.26 0.47 0.24 0.77 0.94

2000 0.40 0.55 0.35 0.94 1.28

2001 0.29 0.41 0.29 0.77 0.97

2002 0.38 0.84 0.37 0.79 1.45

2003 0.43 1.21 0.54 0.88 1.94

2004 0.49 1.49 0.54 0.89 2.18

2005 0.42 1.10 0.45 0.68 1.72

2006 0.87 0.89 1.07 2.08 1.01

2007 0.86 0.94 1.02 2.28 1.05

2008 0.97 1.01 1.13 2.09 1.12

2009 1.02 1.03 1.13 1.99 1.13

2010 0.91 1.00 1.28 1.26 1.05

2011 0.79 1.03 1.43 1.75 1.10

2012 0.89 0.88 1.53 1.76 1.08

0.5131519 0.45362 0.61078827 1.1905579 0.905056

Source: RBI

Table 11 : Return on Asset (1992-2012)

ROE

STATE

BANK OF

INDIA & ITS

ASSOCIATES

NATIONALISED

BANKS

PRIVATE

SECTOR

BANKS

FOREIGN

BANKS

ALL

SCHEDULED

COMMERCIAL

BANKS (EXCL.

RRBS)

1992 5.77 14.32 2.65 63.52 27.80

1993 4.90 -78.98 1.64 -74.57 -71.09

1994 4.33 -49.58 1.77 37.76 -32.85

1995 6.10 2.07 3.61 24.04 13.87

1996 4.05 -8.20 4.42 17.61 4.94

1997 7.09 8.69 4.99 12.67 20.01

1998 8.51 12.59 4.95 9.86 23.44

70 Oct. 2016 vol. 01 issue 10

1999 4.30 8.57 4.10 10.55 16.37

2000 7.39 10.58 6.30 12.63 22.58

2001 5.38 8.40 5.62 11.44 18.27

2002 7.56 16.76 6.54 10.91 25.92

2003 8.02 23.63 9.45 10.80 32.72

2004 8.52 27.59 9.41 12.01 36.53

2005 7.34 19.53 7.22 7.97 26.89

2006 16.92 14.65 13.34 14.18 14.77

2007 16.31 15.97 13.71 15.98 15.51

2008 17.21 17.09 13.43 16.05 15.98

2009 17.74 18.05 11.38 13.75 15.44

2010 15.92 18.30 11.94 7.34 14.31

2011 14.11 18.19 13.70 10.28 14.96

2012 16.00 15.05 15.25 10.79 14.60

9.688932 6.346121 7.877162 12.17060515 12.90307

Source: RBI

71 Oct. 2016 vol. 01 issue 10

References

• Reserve Bank of India — Functions and Working (4th ed.), Reserve Bank of India, Bombay, 1983, p.

167.

• Bhattacharyya, S.K. (1993), “The need for optimizing the banking industry structure”, in: D. Thakur

(ed.), Trends in Indian Economy, Vol. 5, Deep & Deep Publications, New Delhi, 205-228.

• Ghosh, D.N. (1993), “Commercial banking: Lessons from Indian experience”, in: D. Thakur (ed.),

Trends in Indian Economy, Vol. 5, Deep & Deep Publications, New Delhi, 1-16.

• Rangarajan, C. (1993), “Banking sector reform”, in: U. Kapila (ed.), Recent Developments in Indian

Economy - I11: The Ongoing Reforms, Academic Foundation, Delhi, 253-265.

• Stiglitz, J.E. (1998) “More Instruments and Broader Goals: Moving Toward the Post-Washington

Consensus,” the 1998 WIDER Annual Lecture, Helsinki, January 1998, reprinted Chapter 1 in The

Rebel Within, Ha-Joon Chang (ed.), London: Wimbledon Publishing Company, 2001, pp. 17-56.