Scheduled Commercial Banks Research Articles

Anomalies in Maturity GAP: Evidence from Scheduled Commercial Banks in India

Sound ALM practices ensure the stability and liquidity of banks, thus enhancing the profitability. ALM is a mechanism to address the risk faced by banks due to mismatch in assets and liabilities. In the context of India, banking industry is closely monitored and supervised by Reserve Bank of India (RBI). As a part of many norms to ensure the sound banking system, RBI also has come out with the comprehensive framework on ALM that the banks in India has to follow. It includes measures such as earnings and economic value approach, traditional gap analysis, earnings-at-risk method, duration gap analysis, simulation method and funds transfer pricing. The scheduled commercial banks (SCBs) in India are divided into five categories based on bank group by RBI. They are, State Bank of India (SBI) and Associates, Nationalised Banks, Old Private Sector Banks, New Private Sector Banks and Foreign Banks. There could be differences between the banks based on bank groups in ALM. Therefore this study attempts to find out the differences in ALM of Indian banks based on bank groups. The empirical result suggests that there is a significant difference in the gap ratio amongst the bank groups. The null hypothesis can be rejected.

Institutional Credit to Mountain Agriculture: Issues of Structural Changes and Impact in Jammu & Kashmir

The study has looked into the institutional credit in relation with agricultural productivity in Jammu & Kashmir. The results have revealed that although the credit deployment of scheduled commercial banks (SCBs) to agriculture has increased in absolute terms, its percentage share in the total credit outstanding has declined sharply. The intensity of agricultural credit has also declined over the years. Despite significant changes since 1980s, direct agricultural credit continued to contribute a higher proportion and had a spurt in late-2000s owing to the inception of banking reforms. The share of rural banks has declined due to a decline in the number of RRBs. Direct agricultural credit outstanding in different regions has revealed wide disparity across the state; Kashmir region alone received around 60 per cent while Ladakh region have a meagre proportion of it. The SCBs have been found advancing only 7.61 per cent of the credit requirement in the state and this gap is more pronounced in the Ladakh region. The estimates of simultaneous equation model have revealed a significant contribution of credit in enhancing agricultural productivity in the state. The study has given some policy suggestions for enhancement of growth and intensity of agricultural credit and revival of rural banks.

Strategic Human Resource Management (SHRM) Practices and Its Effect on Financial Performance: Evidence from Some Selected Scheduled Private Commercial Banks in Bangladesh

Formulation and execution of Strategic Human Resource Management (SHRM) practices and its effect on perceived financial performance of any organization is a burning issue in the globalized competitive business era. This study aims to find out the relationship between SHRM and financial performance to ensure the sustainability and competitive advantage of the selected scheduled private commercial banks in Bangladesh. The research has been conducted on managers as sample of some private commercial banks during the period of January to November 2012 to collect the primary data. To evaluate the financial performance researchers have used annual reports of 2011 and 2012, journals, web sites etc. as secondary source. Survey research findings indicate that strategic integration and development of HRM were practiced to a full extent in the sampled firms. From the cross sectional analysis, the financial performance indicators show that the capital adequacy was mostly at satisfactory level compared with eh industry average. The quality of assets loan varies from bank to bank but most of them are performing at the desired level. Management efficiency was out-performing the standard in most of the cases. The profitability indicators ratio was also better than the average of private commercial banks. The result presented in this study suggests practicing intensive SHRM so that improved financial performance can be asserted to sustain in the competitive environment.

Accelerated Role of Foreign Banks in India: Way Forward

Banking sector in India is well diversified. Banking sector in India, as a group is categorized as Scheduled Commercial Banks (SCBs). It comprises Public Sector Banks (PSBs) having 70 per cent market share of banking business, New generation Private Sector Banks (NPSBs)- 17 per cent, Old generation Private Sector Banks (OPSBs)- 5 percent, Foreign Banks (FBs) – 6 per cent and others 2 per cent. With financial inclusion on robust expansion mode, banks are set to play greater role in supporting reviving Indian economy. The key challenges in the banking industry revolve around (a) improvement in the asset quality, (b) dipping margins, (c) underused technology led delivery channels, (d) non-optimization of Financial Inclusion infrastructure (e) lack of product innovation (f) changing dynamics of regulatory and government guidelines (g) augmentation of capital to meet Basel –III norms (h) HR -Succession planning, nurturing leadership, Retention and talent management and so on. Recognizing the increased role of FBs in India, RBI released the “Road map for presence of foreign banks in India” in 2005 laying out a two track and gradualist approach aimed at increasing the efficiency and stability of the banking sector. One track was the consolidation of the domestic banking system, both in private and public sectors, and the second track was the gradual development of presence of foreign banks in a synchronized manner. It was followed by RBI issued a discussion paper released in Jan 2011 on the status of FBs and final guidelines were issued in November 2013. This paper brings to fore the role of FBs, performance track record, their business model, collaborative capabilities and projects their future role in the new RBI dispensation. The enhanced role of FBs foreseen by RBI in future due to their immense technological capabilities, capital and knowledge of international best practices earns them a ‘near national status’. The recent guidance of RBI to strengthen the role of FBs is in right direction. Hence, the current move to strengthen their presence in India through mergers/acquisitions, WOS and near National status is a right step that is well poised to develop the core values of Indian banking system.

Financial Literacy and Credit Counselling a Demand-side Solution to Financial Inclusion (A Study of Initiatives by Select Scheduled Commercial Banks in India)

Financial literacy plays a vital role in the efficient allocation of household savings and the ability of individuals to meet their financial goals and goes beyond the provision of financial information and advice. Financial Literacy and credit counselling would help the underprivileged practice parsimony and induce them to save, access credit, use the funds, timely repayment of debt, to find a better livelihood, earn income and thus join the mainstream from exclusion. This paper attempts to discuss the financial literacy initiatives in the Indian Banking Industry. In this context the researcher has attempted to analyse the Initiatives and data pertaining to FLCCs of select SCBs. The study reviews theoretical aspects of Financial Literacy and credit counselling initiatives in general and for scheduled commercial banks in particular.

Agricultural Credit in India – Innovations in Design and Delivery of Products and Services

The concept of bringing farmers together in a voluntary group was initiated in 1982 through the Farmers’ Club Programme. This institutional innovation has received a renewed focus from 2007–08 onwards. Nevertheless, access to farm credit sector has not been easy and adequate. In this paper, innovative approaches to improve agricultural credit flow have been captured from the secondary sources and analysed using compound annual growth rate and descriptive analytical tools. The share of private moneylenders has decreased with the institutional agencies making inroads into the rural scene. The structure of the sources of credit has witnessed a clear shift wherein the scheduled commercial banks and RRBs have emerged as the major sources of direct and indirect institutional credit to agriculture in recent years. The SHG-bank linkage programme, Kisan Credit Card, Farmers Clubs, Joint Liability Groups and Interest Subvention Scheme have been promoted to supplement rural credit delivery effectively and have also shown a significantly increasing growth rates over the years. In addition, there are a number of other small innovations that have taken place across the spectrum of agricultural credit markets. All these would eventually contribute to making sustainable access to agricultural finance leading towards a path for prosperity of farming community, especially the small and vulnerable farm households.

An Impact of Government's Agricultural Debt Waiver and Debt Relief (ADWDR) Scheme

In the Union Budget 2008–09, the Government of India announced a scheme of Agricultural Debt Waiver and Debt Relief Scheme (ADWDR-2008) for farmers. The total value of overdue loans being waived estimated at Rs. 50,000 crores and a one-time settlement (OTS) relief on the overdue loans at Rs. 10,000 crores for implementation by all scheduled commercial banks, besides RRBs and Cooperative credit institutions. The focus of this study was to assess the distribution of benefit of ADWDR scheme to farming community in India and to examine the impact on supply of agricultural credit in India by the banks. This study was based on information gathered through secondary sources. The compound growth rate was used for the analysis of data. The study found a) benefit amongst various regions was distributed disproportionately b) Credit disbursement to agricultural sector declined and c) Credit supply to the agricultural sector in terms of number of account holders and amount financed has taken reverse trends.

Empirical Study of Level of Customer Service at Commercial Banks

In the contemporary customer centric scenario, the main driver of banks’ success and endurance is satisfying the ever increasing demands and expectations of the customers. To assess the customer service standards in banks, this paper is a study of the level of customer service attained by scheduled commercial banks with respect to the guidelines issued by the Reserve Bank of India. The objective is to find the key challenges and gaps in fulfilling the customer needs based on a comparison of initiatives taken by the public sector, private sector and foreign banks. Keeping in view the banker-customer interface on a regular basis, the authors have studied the customer (bank) attributes of satisfaction vis-à-vis the guidelines given by the regulator. Samples have been collected through questionnaires with respect to 16 attributes and the data has been interpolated in variant terms.

A Cyclical Structure on Non-Performing Assets of Scheduled Commercial Banks in India

The Indian banking sector is facing a serious problem of NPA. The magnitude of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability of banks the NPA need to be reduced and controlled. NPAs have been fighting cyclical movement or dieses on week patient and it is an underdevelopment feature like chronic poverty. This paper deals with understanding the concept of NPAs, its magnitude and major causes for an account becoming non-performing and strategies for managing NPA in Indian banks. The best indicator for the health of the banking industry in a country is its level of Non-performing assets (NPAs). NPAs are one of the major concerns for banks in India. It reflects the performance of banks. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years and growth in NPAs involves the necessity of provisions, which bring down the overalls profitability of banks.

Firm Value and Corporate Governance in the Indian Banking Sector: An Empirical Analysis

This research examines the effect of corporate governance on firm's value. The system of corporate governance is important for the banks in India because firstly, as India has a large banking sector, with over 90 scheduled commercial banks, majority of them being listed on the India's stock exchanges and secondly, majority of the banks are in the public sector, where they are not only competing with one another, but also with other players in the banking as well as the financial services systems, including financial institutions, mutual funds and other intermediaries. The research has been carried out on the sample of 40 listed banks, public as well as private sector and focused on the impact of key determinants of corporate governance on the firm value of the these banks. Panel data for 8 years (2005–2013) was analysed via the generalised method of moments (GMM) approach. There are several aspects and dimensions of corporate governance, which may influence a firm's value but this study focused on four aspects namely Ownership Concentration (OWNCON), Institutional Ownership (INOWN), Chief Executive Officer Duality (CEO) and Board's Independence (BOIN). Firm's value has been measured through Tobin's Q and market capitalisation. Strong and positive impact of corporate governance on firm's value has been seen.

English

Indian banking system consists of schedule commercial banks and cooperative banks, of which the Schedule Commercial Banks (SCBs) account for around 95 percent of banking system assets. SCBs are grouped into: 1) public sector banks comprising the State Bank of India and its associates, and nationalized banks, 2) private sector banks comprising old and new private sector banks, 3) regional rural banks and 4) foreign banks. The banking system in India underwent a metamorphic change with the introduction of the first phase of reform in 1991. The objective of the early phase of the reform was to create an efficient, productive and profitable financial service industry operating within the environment of operating flexibility and functional autonomy. The second phase of financial sector reforms in 1998 focused on the strengthening of the financial system and introduction of structural improvements with an aim to align Indian banking standards with the internationally recognized best practices.

Impact of Globalization on Scheduled Commercial Banks with Reference to Agriculture Sector

Globalization in India is generally taken to mean ‘integrating’ the economy of the country with the world economy. The real thrust to the globalization process was provided by the new economic policy introduced by the Government of India in July 1991. The Indian banking sector has emerged as one of the strongest drivers of India’s economic growth. The Indian banking industry (US$ 1.22 trillion) has made an outstanding advancement in last few years, even during the times when the rest of the world was struggling with financial meltdown. India's economic development and financial sector liberalization have led to a transformation of the Indian banking sector over the past two decades. The Indian banking sector plays a key role in the economic development of nation. It has Rs.82,994 billion as total assets/liabilities. It collected deposits Rs.64,537 billion and sanctioned loans and advances Rs.50,346 billion in the year march 2012. The scheduled commercial banks were playing a key role in the economic development of India. The objectives of the research paper are to assess the Impact of globalization on scheduled commercial banks with reference to agriculture sector. The period for the analysis of the data has been taken for three decades i.e., from 1981-81 to 2010-11. Based on the secondary information it is analysed and concluded with suggestions.

Credit Risk Management Operations and Systems: Does Ownership Matter?

The credit risk management (CRM) operations and systems provide the tools, procedures and techniques to effectively perform the CRM process. The underlying objectives of implementing CRM operations and systems, namely, measuring risks underlying credit risk in a timely manner; ensuring that actual risk positions match with the defined acceptable total risk; applying risk mitigation measures in time if there is any breach of guidelines, as defined by the CRM policy, etc. make a strong case for an empirical study on the CRM operations and systems at the transaction level and at the portfolio level. Various recent studies have shown that the Indian banking sector now compares favourably with banking sectors in the region on metrics like growth, profitability and non-performing assets. Increased competition, deregulation of interest rates, more functional autonomy and operational flexibility to commercial banks in India make a strong case for investigating closely their CRM operations and systems. The present study offers an empirical evidence regarding impact of ownership on practices of commercial banks in India relating to CRM operations and systems, both at the transaction level and at the portfolio level and lists down significant difference in their strategies, if any. Using primary data from 35 Indian scheduled commercial banks (24 public sector banks and 11 private sector banks) the present study further compares them with benchmark practices in this regard. It also identifies specific CRM operations and systems at the transaction level and at the portfolio level that the public sector banks and the private sector banks in India should improve upon in the near future. The study shall be useful for bank management, regulatory authority, policy makers, bank depositors and academicians in gaining insight into the impact of bank ownership, an important distinguishing bank characteristic, on the CRM operations and systems.

Characterization of Early and Late Adopters of ATM Card in Indian Banking Industry

The present study deals with affect of adoption pattern of the ATMs by banks on its characteristics. With the exploration of various characteristics of the banks like Size, Profi tability, Efficiency, Cost of Operations, Asset quality and Credit risk, Financing Pattern, Diversifi cation and Age etc.; the study has tried to differentiate between the early and late adopter category of the banks regarding ATM cards. The banks have been categorized into early and late adopters on the basis of their adoption period. For this purpose, 50 scheduled commercial banks consisting of 27 Public Sector Banks and 23 Private Sector Banks have been taken as sample to investigate the various aspects of and early adopter banks in comparison to late adopter banks. The time period of the study is 20 years i.e. from 1991 to 2010. It can be concluded that the initiators and fi rst movers take advantage over the late adopters and laggards. They have found to perform better in terms of various parameters. Overall, the early adopter banks are larger in size, more diversifi ed, having lesser branches, more market share and wide ATM network as compared to late adopter ones. Thus, the empirical results evidently reveal that the both the groups have their own different characteristics.

Efficiency and Productivity Growth in Indian Banking

This article attempts to examine technical efficiency and productivity performance of Indian scheduled commercial banks, for the period 1979–2008. We model a multiple output/multiple input technology production frontier using semi-parametric estimation methods. The endogeneity of multiple outputs is addressed by semi-parametric estimates in part by introducing multivariate kernel estimators for the joint distribution of the multiple outputs and correlated random effects. Output is measured as the rupee value of total loans and total investments at the end of the year. The estimates provide robust inferences about the productivity and efficiency gains due to economic reforms. JEL Classification: E23, G21, D24

Growth and Financing of MSMEs: A Case Study of Punjab and Haryana

Micro, small and medium Enterprises (MSMEs) play a significant role in social and economic development of a country. MSMEs constitute an important segment of the Indian economy in terms of their contribution to the country’s industrial production, exports, employment and entrepreneurial base. However, one of the greatest obstacles to the growth and development of MSMEs in industrialised and emerging economies is the access to formal finance. The Government of India has taken several measures to ensure continuous growth of MSMEs, but lack of finance has caused a lot of sickness in the sector. Therefore, an attempt has been made to study the relationship between Credit Flow by Scheduled Commercial Banks (SCBs) and Growth of MSME sector in India using Regression Analysis. The study proceeds with the comparative analysis of the Credit Flow to MSMEs by Domestic SCBs in two states of India, that is, Punjab and Haryana.

Interest Rate Risk Management by Indian Scheduled Commercial Banks: Evidence Using Linear Programming Problem and Panel Data Analysis

This paper intends to explore one of the relatively less highlighted area viz. interest rate risk management by Indian banks with a view to providing an innovative edge to the specific area in the Indian context. Firstly, the paper aims at building empirical relationships between the average yields on assets and liabilities of Indian banks - taking one at a time on the one side - and short-term and long-term interest rates taken one at a time on the other side. Secondly, this paper estimates the impact of (i) slope of the yield curve and (ii) changes in market interest rates on the banks’ net interest margins. Thirdly, the paper attempted to optimise the level of net interest margins of Scheduled Commercial Banks of India with respect to (i) short-term interest rate and (ii) long-term interest rate. The panel data on average yields on assets and liabilities and net interest margins of 64 Scheduled Commercial Banks of India has been undertaken for the study period starting from March 2002 to March 2011. The time series on short and long-term interest rates are also collected for the same period. This paper uses the panel cointegration tests and shows that average yields on assets and liabilities of Indian banks are closely tied to long-term interest rate. The fixed-effects regression analysis highlights that change in long-term interest rate significantly impacts net interest margins of Indian SCBs, implying that Indian banks are exposed to interest rate risk. Finally the study achieves its main objective by solving a linear programming problem with the help of simplex method and determines the maximum level of net interest margin of Indian SCBs, which comes out to be 5.734 per cent over the studied period, if long-term interest rate would have been 11.781 per cent.

Financial Inclusion: A Saga of Indian Financial System

Financial inclusion means improving access to financial services for poor people through the safe and sound spread of new approaches based on principles. The present article attempts to explore the diffusion of financial inclusion in the Indian financial system. Financial access with market size and depth in India is compared with select Asian peer group and Organisation for Economic Co-operation and Development (OECD) countries. The article also explores competition scenarios among scheduled commercial banks operating in India. The results of entropy, exponential index, Herfindahl index, Gini coefficient and concentration coefficient of 76 scheduled commercial banks operating in India indicate a fair degree of competition and concentration among themselves. Improved regulations, innovation, growth and value creation in the sector make it a highly competitive sector. But this sector is dominated by public sector banks, followed by private sector banks. This study identifies lessons learnt from nine principles of innovative financial inclusion (namely, leadership, diversity, knowledge, empowerment, protection, proportionality, innovation, cooperation and framework) that were applied in providing financial services to vulnerable groups in India. The results show that commercial banks, cooperative banks, regional rural banks and microfinance programmes have been playing a vital role in removing financial exclusion in India. Financial inclusion in the Indian financial system is through the larger number of banks, competition and good governance, with diversified ownership.

An Empirical Approach to Deposit Mobilization of Commercial Banks in Tamilnadu

Deposit mobilization is an integral part of banking activity. Mobilization of savings through intensive deposit collection has been regarded as the major task of banking in India today. Acceptance of deposits is the primary function of commercial banks. As such, deposit mobilization is one of the basic innovations in current Indian banking activity. Hence, in this paper, an attempt is made to empirically evaluate the trend and growth in deposit mobilization of scheduled commercial banks in Tamil Nadu during the period from 1999-2000 to 2008-2009. Three different types of deposits, namely current deposit, savings deposit and term deposit is considered for the study. The total number of deposits accounts and total amount of deposits mobilized during the years from 1999-2000 to 2008-2009 in all scheduled commercial banks in Tamil Nadu is gathered from RBI bulletin. The collected time series data are subjected descriptive statistics. The Compound Growth Rate (CGR) and Linear Growth Rate (LGR) are calculated using simple regression analysis. From the results of the analysis, it is found that there has been a remarkable growth in mobilization of all kinds of

Bank Lending Under Priority Sector in Assam (Concept, Composition and Growth)

It was during the post-nationalisation period that priority sector lending and social banking concepts were crystalised and adopted for the purpose of credit deployment. The word “priority sector” is used for those activities that have national importance and have been assigned a priority for development, but which have not received due attention from the private sector commercial banks. Hence, in the scheme of social control, emphasis was laid on larger allocation of bank credit mainly to three important sectors, namely, agriculture, small-scale industries and exports, which were termed as ‘priority sector’. The scope of priority sector was subsequently broadened so as to include other sectors later and some target was fixed by the Reserve Bank of India. Since nationalisation, the scheduled commercial banks have been engaged in the task of bringing about the desired change in the attitude and approach of banks in regard to their priorities, vis-à-vis the services rendered by them. No doubt, the quantitative changes are perceptible in this regard, but the qualitative changes have not been assessed in terms of pronounced policies.