Vol 1 Issue 1 Art 1

AP}RBN volume 1, Issue 1 (0CT.
2u1u) ISSN 2229-41u4
Sii Kiishna Inteinational Reseaich & Euucational Consoitium

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PERFORMANCE EVALUATION OF PUBLIC SECTOR BANKS IN INDIA

Dr. Vikas Choudhary

Dept of Humanities and Social Sciences
National Institute of Technology, Kurukshetra

vikas9291@yahoo.com

Suman Tandon
Research Scholar, National Institute of Technology, Kurukshetra
. Lecturer, MLUDAV College, Phagwara

standon_mludav@yahoo.com

Abstract
This paper attempts to analyze the financial performance of public sector banks in India.
Public sector banks form major part of total banking system in India so there is a need to
evaluate the performance of these banks. The study is based upon secondary data covering
the period from 1997-2007. For analyzing the performance Compound Annual Growth rate
and Coefficient of Variation of advances, deposits, total assets, return on assets, and return
on equity and spread ratio are calculated. Decline in growth of non performing assets ratio is
also considered for this evaluation. It is concluded the CAGR of various variables have
shown variation s from bank to bank. State Bank of Indore has shown maximum CAGR in
case of total advances, total deposits and total assets. Punjab & Sind Bank has shown least
growth of deposits and advances and State Bank of India has least growth of deposits. CAGR
of return on equity and return on assets was at peak of United Bank of India whereas Dena
Bank, Punjab& Sind Bank and Indian Bank have shown negative trend in these ratios.
Decline of NPAs ratio was highest in case of State Bank of Hyderabad and least in case of
Dena Bank.
Key words: Public sector banks, Compound Annual Growth rate, Coefficient of Variation
1. INTRODUCTION
Banking is major sector of the economy that has achieved renewed focus after financial
sector reforms and the entry of private sector banks. This sector is the foundation of modern
economic development and linchpin of development strategy .It forms the core of the
financial sector of an economy. Through mobilization of resources and their better allocation,
commercial banks play an important role in the development process of underdeveloped
countries (J. Paul, 2007). Commercial banks improve the allocation of resources by lending
AP}RBN volume 1, Issue 1 (0CT.2u1u) ISSN 2229-41u4

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money to priority sector of the economy. These banks provide a meeting ground for the
savers and investors (Niti Bhasin 2007).
In present times, banking in India is fairly mature in terms of supply, product range
and reach. But reach in rural India still remains a challenge for the private sector and foreign
banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies
in Asia. The Reserve Bank of India also mainly concerned with providing finance to weaker
section of society, development of priority sectors and providing credit under differential rate
of interest scheme.
Before liberalization there was a monopoly of Public Sector Banks (PSBs) after
reforms in 1991, the entry of many foreign and private players have been permitted. Post
liberalization demand PSBs to compete with well diversified and resource rich foreign banks
and to provide fine funded services and unique products to suit customers need. PSBs have
already sacrificed a lot of their profits for achievement of social objectives. Due to cut throat
competition and technology, the PSBs are thinking to improve productivity and profitability
which is essential to survive in a globalised economy.
The future of PSBs would be based on their capability to continuously build good
quality assets in an increasingly competitive environment and maintaining capital adequacy
and stringent prudential norms. Consolidation and competition may be key factors impacting
the nationalized banks in the future. Due to reforms, it has been felt that there is a need not
only to increase in profits but also reduction in non performing assets (NPAs) of banks.
The paper is organized into five sections: The next section deals with literature review
which focuses on the related work done in the same field. The third section covers the
objectives, the scope of study, various sources of data and research methodology adopted for
analysis of data. The fourth section reports the analysis and findings of the study. The fifth
section presents conclusions of the study.
2. LITERATURE REVIEW
There are numerous empirical studies conducted on the issue of profitability of
commercial banks in India as well as abroad. Present review deals with the empirical studies
conducted in Indian context on profitability of banking sector. Present section deals with
some of the notable studies in this field.

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Luther (1976) chaired the committee appointed by Reserve Bank of India to study
the productivity, efficiency and profitability of commercial banks. The committee analyzed
the various issues related to the planning, budgeting and marketing in commercial banks.
Amandeep (1991) attempted to estimate profit and profitability of Indian
Nationalized banks and to study the impact of priority sector lending, credit policies,
geographical expansion, industrial sickness, competition, deposit composition, establishment
expenses, ancillary income, spread and burden on bank profitability. For this purpose, trend
analysis, ratio analysis and regression analysis were used.
Swamy (2001)

studied the comparative performance of different bank groups since
1995-96 to 1999-2000. An attempt was made by researcher to identify factors which could
have led to changes in the position of individual banks in terms of their share in the overall
banking industry. He analyzed the share of rural branches , average branch size, trends in
banks profitability, share of public sector assets, share of wages in expenditure, provision
and contingencies, net non performance assets in net advances, spread, has been calculated.
He concluded that in many respects nationalized public sectors banks much better than
private banks, even they are better than foreign banks.
Milind Sathya (2005) examined the effect of privatization of banks on performance
and efficiency. The data taken was for five years (1998-2002) and it was analyzed by using
difference of means test. The banking sector in India includes domestic banks (privately
owned, partially privatized banks, fully PSBs) 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 compared to fully PSBs in respect of
financial performance and efficiency. Partially privatized banks have continued to show
improved performance and efficiency in the year after privatization
Ved Pal and Malik (2007) in their empirical paper examined the difference in
financial characteristics of public, private and foreign sector banks based on factors such as
profitability, liquidity, risk and efficiency. Sample of 74 Indian commercial banks consisting
of 24 public sector, 24 private sector and 23 foreign banks was taken for the period of 2000-
2005. Multinomial regression analysis was used and results revealed that foreign banks
proved to be high performer in generating business with a given level of resources and they
are better equipped with managerial practices and in terms of skills and technology. Foreign
banks were more consistent with market system as reflected in terms of net interest margin.
The public banks emerged as the next best performer after foreign banks. There were giving a

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higher return on equity in comparison to foreign and private banks. It was high performer in
economizing their expenses which was reflected from expense rate and efficiency ratio. The
private sector banks emerged with a better utilizer of resources as compared to PSBs.
Most of the studies were concerned of commercial banks as a whole and were
covering very limited number of years. PSBs maintained its dominance in the banking
system. Keeping into consideration the research gaps an endeavor is made in the present
study to examine the performance of PSBs by calculating various ratios and their Compound
Annual Growth Rates (CAGRs) and Coefficient of Variation (CV).
3. OBJECTIVES OF STUDY:
The present study is based upon the macro approach to analyze performance of all
public sectors banks individually and group as a whole. Specifically the objectives of the
study are:
1. To analyze the financial performance of PSBs in India.
2. To determine average compound growth of various performance indicators of PSBs
in India.

4. DATA BASE AND RESEARCH METHODOLOGY
The study is based upon secondary data covering the period from 1997-2007.The
study is related to PSBs and it includes 19 nationalized banks and State Bank of India (SBI)
and its associates. The proposed study will aim at examining the performance of PSBs in
India. The data on the variables selected like total deposits, total advances ,total assets, return
on equity, return on assets, interest earned to total assets, interest expended to total assets
spread to total assets and non performing assets to net advances for analysis from RBI
website www.rbi.org.in and website of Indian Banker Association www.iba.org.in.
This study is designed for performance appraisal of PSBs in terms of variables like
total deposits, total advances and total assets and financial ratios. Ratio analysis is a technique
used for evaluating the financial performance of an organization. There are number of ratios
for measuring the performance of banks but in the present study the most popular ratios have
been used. We have computed Return on Equity, Return on Assets, Interest Expended to
Total Assets, Interest Earned to Total Assets, Spread Ratio and NPA Ratio.
These computed ratios were further analyzed by computing compound annual growth rates
(CAGRs) and coefficient of Variation (CV).
5. ANALYSIS AND RESULTS

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In order to evaluate the performance of PSBs the various variables like advances,
deposits, total assets, return on assets, return on equity, interest expended to total assets,
interest earned to total assets and non performing assets ratios are analyzed. The results are
explained in the following subheads.
5.1) Advances: The most important item on the assets side of balance sheet is advances
The advances represent the credit extended by the bank to its customers. They are also the
main source of income for the banks. Loans are given in the form of overdrafts, term loans
and demand loans (Niti Bhasin,2007 ) .Advances of various PSBs from 1997-2007 are
shown in table 1.
Table 1: Advances of Public Sector Banks in India (Rs. In Crores)
Sr. Name of the Bank Minimum Maximum C.V CAGR
1 Allahabad Bank 572392 4129004 70.66 22.91
2 Andhra Bank 329627 2788907 65.85 25.8
3 Bank of Baroda 1980349 8362087 51.57 15.65
4 Bank of India 2202072 8493590 46.29 15.79
5 Bank of Maharashtra 359261 2291939 60.02 22.04
6 Canara Bank 1682468 9850569 60.77 21.59
7 Central Bank of India 1067794 5179547 51.02 16.44
8 Corporation Bank 430279 2994965 60.19 21.9
9 Dena Bank 514724 1830339 42.84 13.11
10 Indian Bank 726043 2905812 51.9 16.74
11 Indian Overseas Bank 866718 4706028 60.24 19.37
12 Oriental Bank of Commerce 631846 4413847 65.82 23.34
13 Punjab & Sind Bank 318642 1173751 40.38 12.37
14 Punjab National Bank 1604264 9659652 59.81 21.67
15 Syndicate Bank 695998 5167044 66.85 22.12
16 UCO Bank 561054 4698891 74.02 27.81
17 Union Bank of India 1027619 6238643 62.83 22.79
18 United Bank of India 337145 2215632 67.03 21.66
19 Vijaya Bank 322510 2422355 69.57 24.65
20 State Bank of India 7423733 3.4E+07 53.57 17.39
21 State Bank of Bikaner & Jaipur 366048 2052622 65.84 21.51
22 State Bank of Hyderabad 463019 2810925 65.04 21.52
23 State Bank of Indore 190165 1535138 72.19 26.44
24 State Bank of Mysore 263199 1646553 66.32 21.35
25 State Bank of Patiala 410542 2876976 67.24 23.83
26 State Bank of Saurashtra 239875 1108114 53.27 17.54

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27 State Bank of Travancore 400082 2478628 65.3 22.9
Source; Statistical tables relating to banks in India 2007
5.2) Deposits: Deposits from the public are the main source of funds for commercial
banks. Therefore, the deposits constitute the main liability of a bank. These deposits are of
various types like current, savings and fixed deposits .Deposits of PSBs are shown in table 2.
Table 2: Deposits of Public Sector Banks in India (Rs.in crores)
S.NO
Name of the
Bank/Year
Minimum Maximum C.V. CAGR
1 Allahabad Bank 1354076 5954366 52.19265 17.75
2 Andhra Bank 792073 4145402 47.8898 17.9
3 Bank of Baroda 3912583 12491598 37.37487 12.15
4 Bank of India 3933862 11988173 37.23227 12.07
5 Bank of Maharashtra 913430 3391934 39.6975 15.25
6 Canara Bank 3804502 14238144 44.48293 15.52
7 Central Bank of India 2637349 8277628 34.80052 12.42
8 Corporation Bank 935156 4235689 45.85579 16.14
9 Dena Bank 1011528 2768991 31.91801 10.82
10 Indian Bank 1542273 4709091 37.80914 13.05
11 Indian Overseas Bank 1932864 6874042 41.4966 14.02
12
Oriental Bank of
Commerce
1305802 6399597 48.70089 17.76
13 Punjab & Sind Bank 760956 1931875 26.52196 9.1
14 Punjab National Bank 3517356 13985968 45.62733 16.61
15 Syndicate Bank 1681615 7863357 51.99544 16.95
16 UCO Bank 1446246 6486001 52.3066 19.14
17 Union Bank of India 2305563 8518023 43.45643 15.1
18 United Bank of India 1203756 3716666 34.17666 11.4
19 Vijaya Bank 821582 3760449 50.39961 17.55
20 State Bank of India 5878560 38004605 42.82223 1.51
21
State Bank of Bikaner &
Jaipur

652536 2848049 48.45709 16.75
22
State Bank of
Hyderabad
864862 4150267 50.52074 18.56
23 State Bank of Indore 336878 1997649 57.11345 21.71
24 State Bank of Mysore 476857 2202235 51.45311 17.12
25 State Bank of Patiala 773742 3918363 57.11313 20.67
26
State Bank of
Saurashtra
399470 1580488 44.38991 16.58
27
State Bank of
Travancore
746806 3098401 47.94648 17.49

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Perusal of table 2 depicts the deposits of PSBs in India. All the PSBs have shown increase
in deposits over a period from 1997-2007. But growth rate of deposits were fluctuating from
bank to bank. CAGR was highest in case of State Bank of Indore (21.71 percent), while it
was least in case of State Bank of India (1.51percent). Overall growth rate of deposits of
nationalized Banks was 14.71 percent, while it was 9.09 percent of SBI group. This Study
showed the positive trend in performance of PSBs in terms of Deposits. When comparing
CV of deposits of PSBs CV was best in case of State Bank of Indore and State Bank of
Patiala where as minimum of Punjab & Sind Bank which was showing maximum consistency
in term of deposits. CV of Nationalized Banks excluding SBI group was 14.71 percent, SBI
group 9.09 percent and all PSBs was 13.34 percent.
5.3) Total Assets: The funds mobilized by various sources are deployed into the various
assets. Total assets depict the strength of a bank and assets portfolio of a bank is important as
it strikes a balance between liquidity and profitability of a bank. Total assets are analyzed in
table 3.

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Table 3: Total Assets of Public Sector Banks in India (Rs. In crores)
S.No Name of the Bank/Year Minimum Maximum C.V CAGR
1 Allahabad Bank 2E+06 7E+06 53.44 17.91
2 Andhra Bank 923086 5E+06 49.23 18.64
3 Bank of Baroda 5E+06 1E+07 37.36 12.23
4 Bank of India 5E+06 1E+07 37.47 12.19
5 Bank of Maharashtra 1E+06 4E+06 40.69 15.54
6 Canara Bank 4E+06 2E+07 45.40 15.74
7 Central Bank of India 3E+06 9E+06 33.99 12.03
8 Corporation Bank 1E+06 5E+06 47.38 16.85
9 Dena Bank 1E+06 3E+06 27.89 9.53
10 Indian Bank 2E+06 6E+06 35.63 12.58
11 Indian Overseas Bank 2E+06 8E+06 44.50 14.85
12 Oriental Bank of Commerce 1E+06 7E+06 50.13 18.31
13 Punjab & Sind Bank 903111 2E+06 26.39 8.77
14 Punjab National Bank 4E+06 2E+07 47.61 17.42
15 Syndicate Bank 2E+06 9E+06 52.39 16.9
16 UCO Bank 2E+06 7E+06 48.69 17
17 Union Bank of India 3E+06 1E+07 46.87 16.2
18 United Bank of India 1E+06 4E+06 32.81 10.81
19 Vijaya Bank 944014 4E+06 50.62 17.57
20 State Bank of India 2E+07 6E+07 33.88 12.6
21
Jaipur
852292 3E+06 44.27 15.62
22 State Bank of Hyderabad 1E+06 5E+06 48.28 18.08
23 State Bank of Indore 409321 2E+06 56.93 21.83
24 State Bank of Mysore 586296 3E+06 50.39 16.8
25 State Bank of Patiala 964057 5E+06 56.69 20.29
26 State Bank of Saurashtra 520368 2E+06 41.02 15.01
27 State Bank of Travancore 913310 4E+06 47.58 17.21
Table 3 depicts that total assets of all PSBs have shown acceleration over a period
from 1997-98 to 2007-08. But growth rate of assets varies from bank to bank. CAGR was
found maximum of State Bank of Indore while it was least of Punjab & Sind Bank (8.77
percent). Overall growth rate of total assets of nationalized Banks was 14.85 percent, while it
was decelerating in case of SBI group. This study shows the positive trend in performance of
PSBs in terms of total assets except SBI group i.e.-2.53 percent.
When comparing CV of total assets of PSBs CV reached maximum of 56.69 percent
in case of State Bank of Indore, where as minimum of Punjab & Sind Bank i.e. 26.39 percent
which was showing maximum consistency in term of total assets. CV of Nationalized Banks
was 42.76 percent, SBI group 43.33 percent and all PSBs was 34.85 percent. In this Study

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empirically it was found that all the PSBs individually as well as a group showed growth in
terms of assets where SBI group has shown drop off in growth rate of assets.
5.4) Return on Equity Ratio: The return on equity ratio shows the percentage of net
income to total capital of bank. The higher the ratio the more efficiently a bank is using its
capital and free reserves. This ratio is shown in table 4.
Table 4: Return on Equity ratio
Sr.
No.
Name of the Bank Minimum Maximum C.V CAGR
1 Allahabad Bank 4.42 34.04 53.01 12.27
2 Andhra Bank 11.32 40.31 39.31 10.99
3 Bank of Baroda 8.33 20.32 23.91 -1.11
4 Bank of India 7.03 26.71 47.47 5.6
5 Bank of Maharashtra 3.26 26.46 56.97 0.65
6 Canara Bank 8.82 28.47 43.38 15.45
7
Central Bank of India 1.56 22.9 69.74 18.43
8
Corporation Bank 13.81 21.94 16.61 -4.89
9 Dena Bank -33.1 22.45 ##### ######
10 Indian Bank -27.3 24 ##### ######
11 Indian Overseas Bank 7.97 32.1 37.56 14.29
12 Oriental Bank of Commerce 10.78 28.67 28.82 0.39
13 Punjab & Sind Bank -15.7 16.63 ##### ######
14
Punjab National Bank 15.55 28.86 19.18 -2.45
15
Syndicate Bank 5.47 24.92 30.81 12.05
16 UCO Bank -3.91 29.14 ##### ######
17 Union Bank of India 8.65 25.19 36.43 9.81
18
United Bank of India 0.61 16.07 83.61 59.24
19 Vijaya Bank 3.23 38.32 67.35 23.17
20 State Bank of India 10.27 19.67 19.04 3.35
21
Jaipur
10.73 29.39 24.91 -6.61
22 State Bank of Hyderabad 15.03 26.99 15.21 -2.5
23 State Bank of Indore 14.48 40.21 39.47 1.06
24
State Bank of Mysore 8.97 34.83 33.84 8.88
25 State Bank of Patiala 14.17 27.39 24.25 -2.38
26 State Bank of Saurashtra 25.47 60.67 -4.13
27 State Bank of Travancore 11.81 29.68 23.65 7.2

Perusal of table 4 shows the return on equity ratio which measures efficiency or how
well an institution is using its Capital plus free reserves to generate income .CAGR of ROE
of some banks like Dena Bank, Indian Bank, Punjab & Sind Bank and UCO bank could not
be calculated as ROE ratio of these banks was negative. United Bank of India was showing

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maximum growth (83.61 percent) and State Bank of Hyderabad was the worst performers in
such case with growth rate (15.21 percent) Overall CAGR of Nationalized banks was
41.86percent and SBI group was 19.31percent.While Comparing CV of ROA of PSBs, it
was maximum in case of State Bank of Indore.
5.5) Return on Assets Ratio: The return on assets shows the proportion of net income to
total assets of a bank. This ratio also acts as productivity indicator. The higher the ratio, the
better is utilization of assets. Return on Assets (ROA) ratio is analyzed in table 5.
Table 5: Return on Assets Ratio
Sr.
No.
Name of the Bank Minimum Maximum C.V CAGR
1 Allahabad Bank 4.42 34.04 53.01 12.27
2 Andhra Bank 11.32 40.31 39.31 10.99
3 Bank of Baroda 8.33 20.32 23.91 -1.11
4 Bank of India 7.03 26.71 47.47 5.6
5 Bank of Maharashtra 3.26 26.46 56.97 0.65
6 Canara Bank 8.82 28.47 43.38 15.45
7 Central Bank of India 1.56 22.9 69.74 18.43
8 Corporation Bank 13.81 21.94 16.61 -4.89
9 Dena Bank -33.11 22.45 14.43 ######!
10 Indian Bank -27.31 24 37.4 #####
12
Oriental Bank of
Commerce
10.78 28.67 28.82 0.39
13 Punjab & Sind Bank -15.67 16.63 155.47 #####!
14 Punjab National Bank 15.55 28.86 19.18 -2.45
15 Syndicate Bank 5.47 24.92 30.81 12.05
16 UCO Bank -3.91 29.14 125.19 #####
18 United Bank of India 0.61 16.07 83.61 59.24
19 Vijaya Bank 3.23 38.32 67.35 23.17
21
Jaipur
10.73 29.39 24.91 -6.61
23 State Bank of Indore 14.48 40.21 39.47 1.06
24 State Bank of Mysore 8.97 34.83 33.84 8.88
26 State Bank of Saurashtra 2.7 25.47 60.67 -4.13

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Glance of table 5 depicts the return on assets ratio, which measures how well an
institution is using its assets to generate income. CAGR of ROA of some banks like Dena
Bank, Indian Bank, Punjab & Sind Bank could not be computed as ROA of these banks was
negative. United Bank of India was showing maximum growth of 23.17 percent and State
Bank of Bikaner & Jaipur was the nastiest performers in such case with growth rate i.e. -6.61
percent. Overall CAGR of Nationalized banks was13.56 percent and SBI group was 1.94
percent. CV of ROA of PSBs was at its upper limit in case of Dena Bank (14.44 percent).
5.6) Interest Expended to Total Assets: This ratio is calculated by dividing interest
expended to total assets. Since banks will have to mobilize funds to meet the credit
requirements so interest expanded on deposits and borrowings is the major expense of a bank
(J.Paul, 2007). This ratio is depicted in table 6.
Table 6: Interest Expended to Total Assets
1 Allahabad Bank 3.96 6.5 19.26 -5.68
2 Andhra Bank 3.7 6.95 23.82 -7.03
3 Bank of Baroda 3.42 6.22 22.83 -7.16
4 Bank of India 3.92 6.19 18.42 -5.5
5 Bank of Maharashtra 4.17 6.57 16.46 -4.43
6 Canara Bank 3.86 6.51 19.94 -5.94
7 Central Bank of India 4.02 6.32 18.27 -5.75
9 Dena Bank 3.91 7.09 22.55 -6.93
10 Indian Bank 3.57 6.95 24.38 -7.31
11 Indian Overseas Bank 3.94 7.09 23.02 -7.35
12 Oriental Bank of Commerce 3.79 7.27 22.62 -6.36
13 Punjab & Sind Bank 3.51 7.15 22.97 -7.02
15 Syndicate Bank 3.51 6.51 22.14 -6.26
16 UCO Bank 3.92 6.05 15.06 -4.1
17 Union Bank of India 3.92 6.73 20.26 -6.22
18 United Bank of India 3.96 6.6 20.35 -6.37
19 Vijaya Bank 3.78 6.52 19.61 -5.53
20 State Bank of India 4.02 5.95 15.83 -4.72
21 State Bank of Bikaner & Jaipur 3.54 6.3 20.96 -6.49
23 State Bank of Indore 3.6 6.09 18.85 -5.43
24 State Bank of Mysore 3.76 6.56 22.61 -6.91

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Table 6 shows interest expended on total assets of all PSBs. Interest expended to
total assets has shown sharp decline in all PSBs. This income had shown maximum decline
in case of Punjab National Bank which was 8.07 percent and decline in case of UCO Bank
4.1percent which was least .Overall decline of nationalized banks was 6.38 percent SBI group
was 5.04 percent and decline of all PSBs were 35.78 comparing CV maximum CV of Punjab
National Bank which was 25.9percent and minimum of State Bank of Saurashtra 15.57
percent. Overall CV of interest expended to total assets of Nationalised banks were 20.78
percent, SBI group was 16.63 percent and all PSBs were 18.94
5.7) Interest Earned to Total Assets Ratio: Interest earned is the main component of
total income of a bank. Interest includes interest on deposits, discount on advances and
interest from balance with RBI. The higher ratio of a bank shows a good position of bank in
the market. The trend of this ratio for PSBs from 1997-2007 is clarified in table 7.
Table 7 : Interest Earned to Total Assets
Sr.
No. Name of the Bank/Year Minimum Maximum C.V CAGR
1 Allahabad Bank 6.81 9.39 12.91 -3.78
2 Andhra Bank 6.58 9.92 14.35 -4.29
3 Bank of Baroda 6.22 9.23 14.79 -4.69
4 Bank of India 6.26 8.93 13.58 -4.08
6 Canara Bank 6.56 9.68 13.65 -4.13
9 Dena Bank 6.63 10.05 15.45 -4.95
10 Indian Bank 6.54 8.07 6.55 -1.18
11 Indian Overseas Bank 7.09 9.4 9.98 -3.18
13 Punjab & Sind Bank 6.82 9.5 10.05 -2.93
15 Syndicate Bank 6.53 9.89 15.46 -4.24
16 UCO Bank 6.5 8.39 8.64 -2.18
17 Union Bank of India 6.58 9.72 14.29 -4.37
18 United Bank of India 6.74 9.19 10.62 -3.12
19 Vijaya Bank 6.66 9.53 12.44 -3.37

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Sr.
No. Name of the Bank/Year Minimum Maximum C.V CAGR
27 State Bank of Travancore 6.96 10.75 14.59 -4.36
Table 7 highlights interest earned to total assets. Interest income to total assets has
shown sharp decline in all PSBs. This income had shown maximum decline in case of State
Bank of Mysore which was 5.24 percent and least, decline in case of Indian Bank. Overall
decline of nationalized banks was 3.94percent, SBI group was 3.18 percent and decline of all
Public Sector bank was 3.57 percent. Empirical Analysis on the basis depicted that; in case of
State Bank of Patiala CV was 17.04 percent (highest in comparison with other banks) and
smallest in case of Indian Bank (6.55 percent). Overall CV of interest earned to total assets of
nationalized banks was 12.71 percent, SBI group was 10.12 percent and all PSBs were 14.46
percent.
5.8) Spread to Total Assets Ratio: Spread is the difference between interest earned and
interest paid. The higher the difference the better it will be for the bank. Thus spread ratio
measures the proportion of spread to total assets of a bank. The spread ratio of PSBs from
1997-2007 has been shown in table 8.
Table 8 : Spread to Total Assets Ratio

S.No Name of the Bank Minimum Maximum C.V CAGR
1 Allahabad Bank 2.69 3.24 5.42 -0.5
2 Andhra Bank 2.45 3.37 8.82 -0.73
3 Bank of Baroda 2.65 3.06 5.17 -0.36
4 Bank of India 2.33 3.13 8.38 1.02
6 Canara Bank 2.49 3.17 8.76 0.49
9 Dena Bank 2.35 3.48 12.21 -1.61
10 Indian Bank 0.57 3.46 46.28 18.81
13 Punjab & Sind Bank 2.3 3.33 13.09 3.6
14 Punjab National Bank 2.99 3.65 6.95 0.43
15 Syndicate Bank 2.29 3.87 15.49 -1.89
16 UCO Bank 1.89 3.64 22.88 7.37
18 United Bank of India 2 3.25 16.09 3
19 Vijaya Bank 2.26 3.37 11.85 -2.31

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S.No Name of the Bank Minimum Maximum C.V CAGR
Table 8 shows the total assets. Spread is the difference between interest earned and
interest paid. There was significant augment in CAGR by the tune of 18.81 percent, in case of
Indian Bank. There was decline in growth of spread ratio in many banks which was
maximum in case of State Bank of Patiala .CV of spread ratio was maximum in case of
Indian Bank (46.28 percent) and least in case of Bank of Baroda .Overall CV of Nationalized
Banks was 4.31 percent, SBI group had decline in spread ratio with 1.75 percent where as
overall increase in all PSBs was 0.1percent.
5.9) Non Performing Assets to Total Advances Ratio: This ratio is calculated by
dividing net NPA by net advances.
Table 9: Non Performing Assets to Net Advances Ratio

Sr.
No.
Name of the
Bank/Year Minimum Maximum C.V. CAGR
1 Allahabad Bank 0.84 10.55 70.27 -20.1
2 Andhra Bank 0.17 2.45 68.36 -21.3
3 Bank of Baroda 0.6 5.68 57.66 -15.6
4 Bank of India 0.74 6.01 45.68 -12.7
5
Bank of
Maharashtra 1.21 5.81 46.47 -6.86
6 Canara Bank 0.94 3.89 39.92 -10.5
7
Central Bank of
India 1.7 7.98 44.9 -7.18
9 Dena Bank 1.99 16.31 66.94 -4.79
10 Indian Bank 0.35 9.71 72.18 -28.5
11
Indian Overseas
Bank 0.55 6.32 64.36 -17.3
12
Oriental Bank of
Commerce 0.49 3.21 54.29 -13.5
13
Punjab and Sind
Bank 0.66 11.68 63.58 -9.48
14 Punjab National 0.2 5.27 71.41 -26.3

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Bank
15 Syndicate Bank 0.76 4.53 59.98 -7.98
16 UCO Bank 2.1 5.65 33.04 -4.89
17
Union Bank of
India 0.96 6.26 47.4 -10.1
18
United Bank of
India 1.5 7.94 53.25 -7.16
19 Vijaya Bank 0.59 6.02 75.47 -17.2
State Bank of
Bikaner and Jaipur 1.09 5.77 54.69 -13.3 21
22
State Bank of
Hyderabad 0.22 4.96 75.16 -28.4
23
State Bank of
Indore 1 5.09 49.99 -15.4
24
State Bank of
Mysore 0.45 7.36 65.28 -23.9
25
State Bank of
Patiala 0.83 3.65 47.97 -15.1
26
State Bank of
Saurashtra 0.7 4.95 50.07 -15
27
State Bank of
Travancore 1.08 5.72 54.06 -15.5

Table 9 depicts the ratio of Non Performing Assets as a percentage of advances. NPA
of PSBs was showing steep decline which was indication of improvement in performance.
Decline in CAGR of NPA ratio was highest in case of State bank of Hyderabad which was
28.44 percent and least decline in case of Dena Bank which was 4.79 percent. Overall decline
in growth rate of NPA of nationalized Banks was 13.28 percent it was 7.17 percent of SBI
group. This Study showed the positive trend in performance of PSBs in terms of NPA. When
comparing CV of net NPAs to total advances of PSBs CV was the utmost of Vijaya Bank
(75.47 percent).
6) CONCLUSION
From the above analysis, it is concluded that in terms of growth of advances, deposits
and total assets, State Bank of Indore is showing maximum growth whereas from the point of
view of return and return on assets, United Bank of India is the best. Punjab and Sind Bank
has shown least growth of advances and total assets whereas State Bank of India has shown
least CAGR in case of deposits performer so SBI should concentrate for increase in deposits
by accelerating rate of interest and catering more and more customers with attractive saving

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schemes. State Bank of Hyderabad and State Bank of Bikaner has shown least CAGR of
return on equity and return on assets respectively and compound growth of return on equity
and return on assets could not be calculated in case of Dena Bank, Punjab& Sind Bank and
Indian Bank due to negative return on equity and return on assets. Spread ratio was highest
in case of Indian Bank and lowest in case of State Bank of Patiala. Decline in the ratio of Non
performing Assets was utmost in case of State of Hyderabad and least in case of Dena Bank.
It has been observed that the banking sector in India has responded very positively in
the field of enhancing the role of market forces regarding measures of prudential regulations
of accounting, income recognition, provisioning and exposure, introduction of CAMELS
supervisory rating system and reduction of NPAs and up gradation of technology. But at the
same time reforms failed to bring banking system at a par with international level and still the
Indian banking section is mainly controlled by government as PSBs being leaders in this
sphere. It is suggested that government should formulate bank specific policies and should
implement these policies through Reserve Bank of India for upliftment of Public Sector
Banks .Public sector banks should try to upgrade technology and should formulate customer
friendly policies to face competition at national and international level.
REFERENCES
Luther, J.C.1976. Report of JC Luther, Committee on Productivity, Efficiency &
Profitability in Commercial banks, Bombay 1976
Shah, S.G.1978, Bank Profitability a Real Issue. The Journal of the Indian Institute
of Banker, July-Sept 1978, pp. 130-144
Amandeep. 1991, Profit and Profitability of Indian Nationalized Banks, Ph.D. Thesis,
Punjab University, Chandigarh.
Swamy, B.N.A.2001, New Competition, Deregulation and Emerging Changes in
Indian Banking. Bank Quest The Journal of Indian Institute of Bankers, 729(3): 3-
22.
Milind Sathya .2005. Privatization, Performance, and Efficiency: A study of Indian
Banks. Vikalpa,( 1):23-28.
Pal Ved & Malik N.S .2007.A Multivariate Analysis of the financial characteristics of
Commercial Banks in India. The Icfai Journal of Bank Management .VI (3).
Mukherjee, A, Nath, P & Pal, MN .2002. Performance Benchmarking and Strategic
Homogeneity of Indian Banks. International Journal of Bank Marketing, 20( 3)
:122-139.
Janki, B. 2002.Unleashing employ productivity; A need for a paradigm shift.Indian
Banking association bulletin, XXIV (3): 7-9.
Ramanathan Ramakrishnan.2007.Performance of Banks in Countries of the Gulf
Cooperation Council. International Journal of Productivity and Performance
Management, 56(2): 137-154.
Justin.Paul & Padmalatha Suresh.2006. Management of Banking and Financial
Services, New Delhi, Pearson Education.

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Aggarwal, B.P.2005. Commercial Banking in India ,New Delhi, Classical Publishing
Company.
Bhasin, Niti (2008) Banking Developments in India 1947 to 2007 ,New Delhi,
Century Publications.
Desai,V (2007)Indian Banking-Nature and Problems, Himalaya Publishing House,
Bombay.
Chopra,K (2005) Managing Profitability and Productivity in Public Sector Banking,
ABS publications, Jalandhar.

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