Private Sector Banks In India Research Articles

A Model for Bank Performance Measurement Integrating Multivariate Factor Structure with Multi-Criteria PROMETHEE Methodology

The global financial crisis and the subsequent Euro-zone crises have resulted in widespread failure of banking systems worldwide. The Indian banking system, which was initially hailed to be unaffected by the crises, was affected indirectly, mainly on account of growing trade and financial integration with the global economy. Although Indian banks were not pushed to the point of insolvency, bank performance benchmarking and evaluation have become important in the dynamic banking environment in India in order to ensure sustained profitability and avoid undue risks.The CAMELS model is one of the most widely-used frameworks for bank performance evaluation (Sahajwala and van der Bergh, 2000). The CAMELS methodology provides a broader view of bank performance than single ratios such as return on equity, particularly as it takes account of both profitability and risk factors in representing bank performance. Several studies have proposed multi-criteria decision models for bank performance measurement (Doumpos and Zopounidis, 2011).The objective of the present study is to integrate multivariate and multi-criteria decision models in bank performance measurement. The study uses the factor structure of the CAMELS model to derive weights for the different criteria in the PROMETHEE methodology. The resulting PROMETHEE scores are used to rank banks under different dimensions, and to compare the performance of public sector and private sector banks in India.

A Comparative Statistical Approach towards NPA of PSU and Private Sector Banks in India

The present paper is to analyze the comparative study of the NPA factor and returns on assets of the PSU banks and private sector for the period of five years i.e., from 2011-12 to 2015-16. The study has considered various parameters for measuring the performance like as Gross NPA %, Net NPA %, return % on assets, growth % of Net NPA and growth % of return on assets. The data of State Bank of India; Punjab National Bank are using for PSU banks and HDFC Bank; ICICI Bank are using for private banks. It is to conclude that the results and trends show that NPAs are having a downward trend over the study period, but Non Performing Assets of public sector banks are still higher than private sector banks. The returns on the assets have also the downward trends but this is much lower in PSU banks as compared to private banks. Hence, the performances of PSU banks are not suitable as compared to private sector banks. The t-tests show that the results are not statistically significant at p < 0.05. Keywords: HDFC Bank, ICICI Bank, NPA, PSU Banks, PNB, Private Banks, SBI

Liquidity and Off-Balance Sheet Items: A Comparative Study of Public and Private Sector Banks in India

Liquidity is the life-line of every business. Banking business’ liquidity was the bone of contention during the economic crisis of Greece and the downfall of Finance Behemoth like Lehman Brothers. Banking Sector-Illiquidity was the epicentre of such crisis. Globally, the Off-Balance Sheet Exposure played a vital role in managing liquidity and solvency issues of commercial banks. This research paper explores the concepts, aspects, analysis of liquidity and the impact of Off-Balance Sheet Items on Liquidity and Solvency. Furthermore, this paper focuses on the liquidity aspects of Public and Private Sector banks towards scrutinizing whether the ownership has any influence on the liquidity and solvency aspects of the banking structure, under the backdrop of Off-Balance Sheet Exposure. Besides, it looks into the unpredictability of RBI’s policies on liquidity like Cash Reserve Ratio, Statutory Liquidity Ratio etc.

Analysis of Financial Parameters of Private Sector Banks in India through the Application of AHP Technique

Analysis of Financial Parameters of Private Sector Banks in India through the Application of AHP Technique

Credit Risk Capital Estimation Under IRB Approach for Banks in India

In this paper, an attempt is made to estimate credit risk capital charge for public sector and private sector banks in India for the period from 2007–2008 to 2013–2014 under advanced internal rating based (AIRB) approach using Basel risk weight formula. The analysis brings out that credit risk capital charges would be higher for the banks with high default risk and recovery risk and vice-versa. The inter-sector comparison indicates that a substantial proportion of the overall additional capital requirement for credit risk would falls on the public sector banks. Hence, banks in this sector requires improvement in appraisal system and loan recovery mechanism to reduce burden of additional credit risk capital charges and for better-quality performance on risk adjusted basis.

Segment reporting in a developing economy: the Indian banking sector

PurposeThe purpose of this paper is to investigate the value relevance of segment information for both public and private sector banks in India. In doing so, this paper examines a rapidly developing economy and perhaps its most critical sector during this period of strong economic growth.Design/methodology/approachIn this study uses the simplified Ohlson model, for a sample of 136 private sector and public sector banks for the period 2007-2010 in India.FindingsThe paper finds that public sector banks have higher share prices, higher earnings and more equity compared with private sector banks. Segment earnings data is highly value relevant for both sectors; however, segment equity data is only marginally value relevant for Indian banks. The number of segments is also value relevant and associated with higher share prices.Originality/valueThe results of this study contribute additional evidence to the literature on segment reporting by studying the effect of adoption of segment reporting in an emerging market. Findings from the paper are particularly relevant as India is currently in the process of changing its segment reporting requirements and moving to an IFRS-based segment standard.

Comparative Analysis of Top Private Sector Banks in India based on CAMEL Parameters

The CAMEL rating is a well-established technique to compare the performance of banks and financial institutions. The Compound Annual Growth Rate (CAGR) is a very useful growth measure. We compare the top five private sector banks in India, ranking them via the CAMEL rating based on the CAGR of CAMEL parameters. Of the banks chosen for the study, IndusInd bank ranked first in capital adequacy, asset quality and earnings quality. HDFC bank ranked first in management efficiency and Axis bank ranked first in liquidity. The bank with the best overall CAMEL rank proved to be IndusInd bank. By providing a basis of comparison for different banks, the CAMEL rating can yield valuable insight to several stake holders of banks such as top management, investors and regulators.

PROBLEM FACED BY CUSTOMERS USING TECHNOLOGICAL BANKING SERVICES- AN INFERENTIAL ANALYSIS

IT savvy customer is more empowered and left with many options of making payments, through his ATM and debit cards, credit cards, RTGS, NEFT transfer, ECS, or mobile payments. However, change in technological aspect is rapid and is evolving constantly and therefore what lies ahead in future cannot be predicted with conformity. The following objectives are focused in the study: i. To study the customers perception towards technological banking, ii. To find out the problems faced by the customers while availing technological banking iii. To analyse the relationship between types of bank with problems faced by the customers while availing technological banking. Primary Data was collected by using questionnaire under simple random sampling method. 600 samples were selected from various Public Sector Banks like State Bank of India, Indian Bank and Indian Overseas Bank and Private sector banks like ICICI, HDFC, Karur Vysya Bank in Tirunelveli district. In this paper, the major findings on challenges faced by the customers while availing technological banking and suggestions based on the findings are discussed.

DETERMINANTS OF GROWTH OF OFF BALANCE SHEET ACTIVITIES OF PRIVATE SECTOR BANKS: EMPIRICAL EVIDENCE FROM INDIA

Off-balance sheet activities play a probatory role in helping the banks to hedge their financial assets in the on-balance sheet and enhancing the profitability of the banks. These are mainly the fee based incomes of banks having no or a little investment. Off balance sheet activities are an intriguing part of the financial statements. Presented as footnotes to accounts, these contingent items have an important economic impact that affects the future as well as the current shape of an institution. Off-balance sheet activities also help to improve the commercial banks’ scope of operations, and diversification of product lines and earnings. The business of financial intermediaries has witnessed a large increase in the use of off balance sheet activities during the last 40 years. This growth that have come as a response to the need of corporate and firms for different types of guarantees did have a conflicting impact on financial stability and bank soundness. This study is designed to investigate the OBS exposure of Indian Private Sector banks. This study found that CRAR and LT positively affect the OBS activities where as NNPA negatively affects the OBS of private sector banks and there is a relationship of 89 % of net profit with OBS activities of private sector banks.

Analysis of relative productivity growth of selected public and private sector banks in India: A comparative study

This study attempts to measure the total factor productivity and the changes in its components of the selected public and private sector banks in India using Data Envelopment Analysis (DEA) during the period covering 2004–05 to 2015–16. In this study the input vector includes interest cost and operating cost and output vector includes interest income and non-interest income. We have measured the productivity growth and its components from a time series dataset obtained from RBI database. DEA method is used to measure Malmquist index of total factor productivity for a sample of top 20 commercial banks considering them within the two specified groups and among all the selected commercial banks’ performances comparisons have been carried out. A decomposition of Total Factor Productivity (TFP) measure is done to establish the source of changes in factor productivity. In performance measurement change in technical efficiency, technological change, change in pure technical efficiency, change in scale efficiency and change in total factor productivity indices are calculated based on Malmquist total factor productivity index method. Indices provide us the opportunity to compare the performance of selected public and private sector banks individually and group wise. While we consider all the selected banks taken together, the results found that there is no significant TFP growth during the sample period except in the year 2009–10. In terms of mean TFP growth private sector banks perform better than public sector banks, although in both cases negative growth is found. In terms of mean technical efficiency a negative growth is found in case of selected public sector banks. To enhance the productivity growth, inefficient banks should improve their technical efficiency, accept modern technological innovation, optimum utilisation of resources as well as government should minimise restrictions on banking activities.

Liquidity in Women-led Private Sector Banks in India: A Comparative Assessment on ICICI Bank and Axis Bank

Banking sector in India is supposed to be the most promising financial intermediary with effective assistance in promoting the deficit sector of society in different financial and non-financial dimensions. Among different variants, the Commercial Banks mainly the Public and Private can ensure special effort towards uplifting the socio-economic status of our society. Banking operation, in this very context, can add special significance in social upgradation if it includes the backward gender section of our society, women under its operational and managerial purview. It is very appraising condition that in market, the top level banks are having their chief executive positions from women community. Amongst which the Private Sector domain finds involvement of women minds in administration successfully for longer period like ICICI, Axis Bank etc. This adds special impact on gender development through economic upgradation in men-dominated financial world. In this very regard, question may arise on the financial performance of the said women-led banks which can specifically be reflected by the liquidity position as judged by financial ratios.

Determinants of Profitability of Private Sector Bank Old and New in India

Banking sector in India has under gone major transformation after the Liberalization, Privatization and Globalization polices of Government of India, in early nineties. These reforms have rationalized the banking system, by way of opening of new generation commercial banks, entry of foreign banks, prudential norms for quality of asset, deregulation of interest rates. The present study analyses profitability determinants of private sector banks in India as a whole, including new and old groups. Private sector new and old bank group profitability performance has been analyzed for evaluating respective peer group performance. The study focuses on selected eight private sector (4 new and 4old) banks in India for the period of fifteen years, from year 2000–01 to 2014–15. Study used the correlation and regression analysis to find out significance of relationship of bank specific variables with profitability measure ROA. The Global banking profitability measure ROA is considered as dependent variable and bank specific five variables were taken as independent variables. Correlation and regression analysis were made to examine the degree of relationship of determinants with profitability indicator ROA. The study concluded that new private sector banks have strong determinants of profitability namely net interest margin, non interest income and lower intermediation cost. The study proved that selected determinants were having significant influence on profitability of bank group.

Liquidity Supervision in Financially Viable Sector with Reference to Public and Private Sector Banks in India

Liquidity risk in Indian banking sector is strongly influenced by structural and business cycle factors over many years. Sudden change in technological development and market globalization has posed serious challenge to the Indian banks to manage liquidity. The deposit collections made were not able to keep up with the sudden loan growth. This paper summarizes the theoretical findings on the determinants of Liquidity Management by banks. The findings are summarized in a series of predictions.

Adopting analytic hierarchy process to prioritise banks based on CRM effectiveness - the customers perspective

Over the past few years, Indian private sector banks has placed stringent competition to public sector banks as the private sector banks pioneered in adopting newer technologies, broad product mix and, flexible offerings in products/services. To win the battle of competition, Indian banks today are focusing towards practicing customer relationship management effectiveness (CRME) to develop and maintain long-term customer relationships. This paper is an attempt to identify the most effective CRM bank with respect to varied CRM practices among the select banks. Sample of 42 retail bank customers were studied using analytic hierarchy process (AHP) for this purpose. The study findings set aside significant implications to each bank corresponding to each CRM practice (dimension).

Non-performing assets and profitability of Indian banks: an econometric study

The diminishing profitability of the Indian banking industry is owing to added stressed assets, wilful defaulters, and loss making assets depict massive bleeding of their balance sheets. The after effects can be now seen through the regulators implementing strictest vigilance, follow up with the banks, recovery measures such as Bankruptcy laws 2016, corporate debt restructuring (CDR), high provisioning, and heavy pecuniary penalties to the defaulters. The authors have estimated bank specific, macroeconomic determinants of the non-performing loans and their impact on the banking profitability. Multivariate panel data analysis for 35 Indian public and private sector banks over the period 2007-2016 has been done using panel data through fixed effect regression and modified ordinary least square and system GMM approach has been deliberated. Detailed estimation results in public vs. private sector banks have been given the conclusion. The NPA management in PSU banks needs attention as it affects the efficiency and profitability exponentially.

ASSESSING BUSINESS PROCESS RE-ENGINEERING IN PUBLIC SECTOR BANKS THROUGH AN ANALYSIS OF ATM TRANSACTIONS

Business Process Re-engineering (BPR) technique implements organizational change based on the close coordination of a methodology for rapid change, employee empowerment and training and support through information technology. Alternate Delivery Channels are a part of BPR in public and private sector banks in India and includes ATMs, Automated Cheque Deposit Machines, Green Channel Counter Machines (GCCs), Cash Deposit Machines (CDMs) and Barcode Passbook Printers. ATM cash dispensing machines have revolutionised the very concept of money withdrawal. This research paper tries to compare the cost of routine manual banking transaction with the ATM transaction through cost-benefit analysis with the objective of finding out advantages of promoting ATM usage and migrating more and more customers to the ATM channel. ATM transactions have been on the rise easing the process of withdrawal and transfer of money for the common man. This has also been of help to the banking service providers, connected customers and efficient payment for the sellers of goods and services as ATM machines have come up close to markets.

Integration of Personalized Service Delivery with Information Technology : Future of CRM in Indian Banking

This study aimed to critically review the state of customer relationship management (CRM) in Indian banks on the basis of secondary data, information available, and our own experiences both as customers and a banker [first author of the paper has an experience of 17 years in the Banking sector]. With the advent of professionally managed private sector banks in India in 1993, the focus of CRM has shifted from personal relationship to technology driven module based relationship management with minimal personal touch. Notwithstanding all the noise about implementation of ambitious CRM plans by Indian banks, they have not been able to impress customers because of cross selling overdrive at the cost of customer delight. There is an urgent need to integrate information technology enabled solutions using big data analytics with tailor made personalized relationship management for which an integrated CRM Model has been proposed in this paper.

Effect of bank-specific and governance-specific variables on the productivity and profitability of banks

Purpose The purpose of this paper is to analyze the effect of bank-related variables and corporate governance-related variables on the productivity and profitability of public and private sector banks in India. Design/methodology/approach The Malmquist productivity index is applied to determine the productivity of different banks. Further, return on average assets is used as profitability of banks. The regression analysis is further used to assess the effect of different bank-related and governance-related variables on performance of banks. Findings Nearly all the bank-specific variables explain the productivity and profitability of banks but a weak relationship is observed between individual governance variables and performance variables. Two governance variables, i.e. board meetings and remuneration explicate the profitability of the public sector banks and only duality explains the profitability of the private sector banks. No significance is found between productivity and governance variables. Originality/value The study addresses the embryonic issue of corporate governance in the banking sector. The uniqueness of the paper lies in that no study has evaluated the effect of these variables on productivity and profitability of banks simultaneously.

Service Quality, Customer Satisfaction and Customer Loyalty: An Empirical Study on Banks in India

Service quality is one of the most important factors behind customer satisfaction in commercial banks. Various studies revealed that service quality plays a decisive role in satisfaction of customers and satisfaction of customers to a great extent lead to the customer loyalty vis-a-vis profitability of banks. Against such a backdrop, an attempt has been made to examine the impact of service quality of the bank on customer satisfaction and impact of customer satisfaction on the customer loyalty. This study points out that satisfaction and service quality relationship is critical for commercial banks. The broad objective of the study is to identify the determinants of customer satisfaction in the context of public sector and private sector banks in India and to examine the relationship between customer satisfactions, service quality and customer loyalty of banks. An attempt has also been made to study the impact of satisfaction on the loyalty of the customers. For this purpose responses have been elicited through a pre-tested structured questionnaire from 568 customers of public sector and private sector banks located in NCR.

Measuring intellectual capital performance of Indian banks

Purpose – The purpose of this paper is to measure the intellectual capital performance of Indian banks and established a relationship between intellectual capital and return on assets (ROA). The paper also compared the intellectual capital performance of public sector and private sector banks. Design/methodology/approach – This study is based on secondary data from the top 20 Indian banks. Ten banks were selected from each of the public and private sectors on the basis of paid-up equity capital. The analysis was made using the value added intellectual coefficient, the coefficient of variation, exponential growth rates, trend analysis, Yule’s coefficient, the coefficient of correlation, the F-test and the t-test. Findings – The study revealed that private sectors have performed relatively better regarding the creation of total information coefficient (IC). However, the ROA was still below the international benchmark of &gt; 1 percent. The major cause of the lower IC and the reduced ROA is disproportionate to the increase in capital employed and escalating non-performing assets in the Indian banking sector. Practical implications – The study focussed on managers and identified the causes of lower performance. It proposed numerous strategies to improve the aggregate score of IC, which is closely related to bank profitability. Originality/value – This is the first study to make a comparative analysis of intellectual capital performance in public and private sector banks in India and in addition to the traditional style of measuring sectoral performance. Further, the study employed new statistical tools, such as Yule’s coefficient of association, to establish the association between performance variables.