CHAPTER VI

FINANCIAL PERFORMANCE ANALYSIS OF SIDBI

The financial position of a business concern is reflected on the basis of its

earnings. Like every institution, the health of development financial institution is also
reflected in its ability to earn profits. In the words of Keynes, “Profit is an engine that
regulates the business enterprise.” The major objective of every business is earning
profit. Profit is essential for the existence, survival, expansion and diversification of
every business concern. It is an indicator of business performance and measures the
efficiency and effectiveness of management in utilisation of funds. A bank, being a
financial institution, must earn surplus to meet business risks. Profit provides cushion
to a financial institution to meet unforeseen contingencies in future. Since profitability
is an index of efficiency of a banking enterprise, a profit making bank can infuse
confidence in public at large which is necessary for its survival and growth. Profit
constitutes the sinews of growth and contributes to inner strength (Srivastava, 1999: p.
365). However, business depends on society for needed inputs, for market to sell its
products etc. Being so much dependent, business has social obligations towards
society. These social obligations affect the profitability of a banking institution. These
social obligations cost money which reduces the economic efficiency of banks. Thus,
it is necessary that every financial institution must earn adequate return on its capital
to undertake social obligations. Every financial institution must make parity between
its economic and social goals.

PROFITABILITY ANALYSIS

The profit performance of SIDBI is measured on the basis of interest income,

interest expense, spread, non-interest income, non-interest expense, burden, total
income, total expense and net profit. In addition, profitability analysis has been made
by using various profitability and solvency ratios. The profitability ratios used are
interest income as percentage to total income, interest expense as percentage to total
expense, spread as percentage to working funds, non-interest income as percentage to

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total income, non-interest expense as percentage to total expense, burden as
percentage to working funds, operating expenses as percentage to total expenses,
return on advances, return on investments, return on funds, cost of funds, return on
assets and return on equity. Further, the solvency position of the bank has been
analysed by using ratios like long-term funds as percentage to total assets, net-worth
ratio, debt-equity ratio and credit-deposit ratio. The data has been compiled from the
annual reports of SIDBI. The profitability and solvency ratios of the bank are
presented in tables given below.

GROWTH OF INTEREST INCOME, INTEREST EXPENSE AND SPREAD

The interest income of SIDBI comprises of interest and discount on loans,

advances and bills. The bank incurs interest expenditure in the form of financial
charges every year. The difference between interest received and interest paid is
known as spread. A higher interest spread is a positive indicator for bank‟s
profitability. Table 6.1 presents interest income, interest expense and spread of SIDBI
for the period 1990-91 to 2012-13.

Table 6.1 depicts that the interest income of the bank has increased from Rs
401.79 crore in 1990-91 to Rs 4624.84 crore in 2012-13 and registered a growth rate
of 11.75 per cent during the period. The interest expenses of the bank also increased
from Rs 377.29 crore in 1990-91 to Rs 3039.25 crore in 2012-13 and the growth rate
was 9.95 per cent over the same period. The table further indicates that interest spread
of the bank increased from Rs 24.50 crore in 1990-91 to Rs 1585.58 crore in 2012-13
and recorded growth of 20.87 per cent over the period. The overall average interest
income was Rs 1507.72 crore, interest expense was Rs 1047.71 crore and spread was
Rs 460.01 crore respectively. Further, the interest spread showed greater degree of
variation (CV=100.9) as compared to interest income (CV=74.78) and interest
expense (CV=64.67) during the study period.

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 Table 6.1

Growth of Interest Income, Interest Expense and Spread in SIDBI

(Rs. in crore)

Year Interest Income Interest Expense Spread

1990-91 401.79 377.29 24.50
1991-92 485.11 421.41 63.69
1992-93 647.54 538.13 109.41
1993-94 803.98 693.86 110.11
1994-95 941.00 779.38 161.63
1995-96 1047.74 829.82 217.92
1996-97 1193.80 905.04 288.76
1997-98 1275.88 938.68 337.21
1998-99 1429.97 1047.59 382.38
1999-00 1496.27 1055.40 440.87
2000-01 1488.25 1042.38 445.86
2001-02 1369.05 1069.45 299.60
2002-03 1105.16 984.26 120.90
2003-04 825.44 660.92 164.52
2004-05 620.59 519.27 101.32
2005-06 720.79 475.56 245.22
2006-07 1014.65 584.87 429.78
2007-08 1458.06 872.55 585.51
2008-09 1724.19 1037.02 687.17
2009-10 2318.64 1476.82 841.83
2010-11 3565.87 2224.51 1341.36
2011-12 4118.94 2523.82 1595.11
2012-13 4624.84 3039.25 1585.58
EGR 11.75 9.95 20.87
Mean 1507.72 1047.71 460.01
CV 74.78 64.67 100.90

Source: Compiled from Annual Reports of SIDBI.

GROWTH OF NON-INTEREST INCOME, NON-INTEREST EXPENSE AND

BURDEN

The non-interest income of the bank constitutes income from investments,

bank balances, commission, brokerage, upfront and processing fees etc. The increase
in non-interest income of the bank is considered favourable. The bank incurred non-
interest expenses in the form of rent, printing, stationery, postage, etc. It is required
145
that bank must keep its non-interest expenses under control to utilise its fund properly.
Burden is the difference between non-interest expense and non-interest income of the
bank. It is thus necessary that every financial institution tries to reduce this margin so
as to ensure sound financial position. Table 6.2 presents non-interest income, non-
interest expense and burden of SIDBI for the period 1990-91 to 2012-13.

Table 6.2
Growth of Non-Interest Income, Non-Interest Expense and Burden in SIDBI
(Rs. in crore)
Year Non-Interest Non-Interest Burden
Income Expense
1990-91 23.34 12.24 -11.10
1991-92 20.96 12.46 -8.50
1992-93 27.16 28.28 1.11
1993-94 47.86 22.90 -24.96
1994-95 59.03 29.31 -29.72
1995-96 87.51 44.17 -43.34
1996-97 96.68 69.76 -26.92
1997-98 132.66 64.64 -68.03
1998-99 148.57 80.58 -67.99
1999-00 101.64 83.06 -18.58
2000-01 131.19 99.60 -31.58
2001-02 190.52 84.78 -105.74
2002-03 300.32 106.20 -194.11
2003-04 325.96 116.02 -209.94
2004-05 327.08 112.79 -214.29
2005-06 242.76 109.80 -132.95
2006-07 172.64 152.93 -19.71
2007-08 180.11 429.18 249.07
2008-09 358.11 216.08 -142.03
2009-10 221.17 198.06 -23.11
2010-11 300.99 271.65 -29.34
2011-12 487.69 272.39 -215.30
2012-13 776.38 322.07 -454.30
EGR 17.27 16.03 18.38
Mean 206.97 127.78 -79.19
CV 84.68 85.60 -162.42

Source: Compiled from Annual Reports of SIDBI.

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 Table 6.2 highlights that non-interest income of SIDBI increased from Rs
23.34 crore in 1990-91 to Rs 776.38 crore in 2012-13 and growth rate was 17.27 per
cent during the study period. The table also depicts that non-interest expense of the
bank increased from Rs 12.24 crore in 1990-91 to Rs 322.07 crore in 2012-13 and
registered a growth of 16.03 per cent during the same period. The average non-
interest income was Rs 206.97 crore and non-interest expense was Rs 127.78 crore
during the period. It has been further revealed that the burden of the bank remained
negative throughout the period and the same declined from Rs -11.10 crore in 1990-
91 to Rs -454.30 crore in 2012-13 and the declining rate was 18.38 per cent over the
period. However, a high degree of variation (CV=85.60) has been observed in the
non-interest expense as compared to that of non-interest income (CV=84.68) and
burden (CV=-162.42) during the reference period.

GROWTH OF TOTAL INCOME, TOTAL EXPENSE AND NET-PROFIT

The total income of SIDBI is summation of interest and discount on loans,

advances, bills, income from investments, bank balances and other income. Other
income includes profit on sale of investments, commission, brokerage, upfront and
processing fees etc. The total expenses are the aggregation of interest and financial
charges and operating expenses incurred during the year. Operating expenses include
payment made for advertisement, rent, taxes, lighting, insurance etc. Net profit is the
excess of income over expenditure. It is an indicator of efficiency and financial
stability of a financial institution. Table 6.3 presents total income, total expense and
net profit of SIDBI for the period 1990-91 to 2012-13.

Table 6.3 highlights that the total income of the bank has increased from Rs
425.13 crore in 1990-91 to Rs 5401.21 crore in 2012-13 and registered a growth of
12.25 per cent over the period. It further shows that total expenses also increased from
Rs 389.53 crore in 1990-91 to Rs 3361.33 crore in 2012-13 and growth rate was 10.29
per cent during the same period. The bank‟s average interest income and interest
expense was Rs 1714.69 crore and Rs 1175.49 crore during the study period. The
table also illustrates that net profit of the bank increased from Rs 35.60 crore in 1990-
91 to Rs 1196.28 crore over the period. The net profit recorded a growth of 17.32 per
cent along with an average of Rs 447.73 crore during the period of study. Further, the
growth in total income showed lower degree of consistency (CV=73.96) as compared
to net profits (CV=69.59) and total expenses (CV=64.05) during the reference period.

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 Table 6.3
Growth of Total Income, Total Expense and Net-Profit in SIDBI
(Rs. in crore)
Year Total Income Total Expense Net Profit
1990-91 425.13 389.53 35.60
1991-92 506.06 433.87 72.19
1992-93 674.70 566.41 108.29
1993-94 851.84 716.76 135.08
1994-95 1000.03 808.68 191.35
1995-96 1135.25 873.99 261.26
1996-97 1290.48 974.80 315.68
1997-98 1408.54 1003.31 405.23
1998-99 1578.54 1128.17 450.37
1999-00 1597.90 1138.46 459.44
2000-01 1619.43 1141.99 477.45
2001-02 1559.57 1154.23 405.34
2002-03 1405.48 1090.47 315.01
2003-04 1151.40 776.94 374.46
2004-05 947.67 632.06 315.61
2005-06 963.54 585.36 378.18
2006-07 1187.29 737.79 449.49
2007-08 1638.17 1301.74 336.43
2008-09 2082.30 1253.10 829.20
2009-10 2539.81 1674.88 864.94
2010-11 3866.86 2496.16 846.68
2011-12 4606.63 2796.22 1074.14
2012-13 5401.21 3361.33 1196.28
EGR 12.25 10.29 17.32
Mean 1714.69 1175.49 447.73
CV 73.96 64.05 69.59

Source: Compiled from Annual Reports of SIDBI.

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PROFITABILITY RATIOS (BASED ON REVENUE)

The interest income as percentage to total income implies the relationship

between incomes received in the form of interest out of the total income of the bank.
The frequent changes in the interest rate affect the profitability of an institution. A
high ratio implies profitable position of a firm and adequate margin of safety for the
creditors of the firm. The interest expense as percentage to total expenses indicates the
proportion of interest expenditure incurred and its relationship with the total expenses
of the firm. The spread is the difference between interest received and interest paid
and indicates the margin left for the bank in interest transactions. An upward
movement in the margin is considered positive for the financial performance of the
bank. The spread as percentage to working funds implies the margin left out of the
total working funds. The working funds are the total resources of the bank. Here,
working funds implies total assets of the bank. The non-interest income as percentage
to total income implies the proportion of non-interest income received by the bank out
of the total income received during the year. The non-interest expense as percentage
to total expenses signifies the quantum of funds spent apart from interest out of the
total expenses incurred during the year. It is required to exercise proper control over
this expense to increase the volume of business. A downward movement in the ratio is
considered favourable for an institution. Burden is the difference between non-interest
expenditure and non-interest income of an institution. Every institution always tries to
reduce the amount of burden to ensure smooth conduct of its business. Operating
expenses as percentage to total expenses measures the operating efficiency of a firm.
A low ratio is considered as favourable for firm because it provides high margin to
meet other expenses of the business. Operating expenses of the bank includes
establishment expenses, directors and committee member‟s fees, stationery, printing,
etc. The interest income as percentage to total income, interest expense as percentage
to total expense, spread as percentage to working funds, non-interest expense as
percentage to total expense, burden as percentage to working funds and operating
expenses as percentage to total expenses ratios of SIDBI for the period 1990-91 to
2012-13 are presented in Table 6.4.

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 Table 6.4
Profitability Ratios Based on Revenue
(per cent)
Year Interest Interest Spread to Non- Non- Burden to Operating
Income to Expense Working Interest Interest Working Expenses
Total to Total Funds Income to Expense Funds to Total
Income Expense Total to Total Expenses
Income Expense
1990-91 94.51 96.86 0.46 5.49 3.14 -0.21 3.14
1991-92 95.86 97.13 0.95 4.14 2.87 -0.13 2.79
1992-93 95.97 95.01 1.46 4.03 4.99 0.01 4.73
1993-94 94.38 96.81 1.16 5.62 3.19 -0.26 3.19
1994-95 94.10 96.38 1.56 5.90 3.62 -0.29 3.62
1995-96 92.29 94.95 1.88 7.71 5.05 -0.37 5.05
1996-97 92.51 92.84 2.21 7.49 7.16 -0.21 7.16
1997-98 90.58 93.56 2.42 9.42 6.44 -0.49 6.44
1998-99 90.59 92.86 2.50 9.41 7.14 -0.44 7.14
1999-00 93.64 92.70 2.66 6.36 7.30 -0.11 7.30
2000-01 91.90 91.28 2.61 8.10 8.72 -0.18 8.72
2001-02 87.78 92.65 1.70 12.22 7.35 -0.60 7.35
2002-03 78.63 90.26 0.69 21.37 9.74 -1.10 9.74
2003-04 71.69 85.07 0.85 28.31 14.93 -1.09 14.93
2004-05 65.49 82.16 0.56 34.51 17.84 -1.18 17.84
2005-06 74.81 81.24 1.20 25.19 18.76 -0.65 18.76
2006-07 85.46 79.27 2.02 14.54 20.73 -0.09 20.73
2007-08 89.01 67.03 2.45 10.99 32.97 1.04 32.97
2008-09 82.80 82.76 1.99 17.20 17.24 -0.41 17.24
2009-10 91.29 88.17 2.01 8.71 11.83 -0.06 11.83
2010-11 92.22 89.12 2.62 7.78 10.88 -0.06 10.88
2011-12 89.41 90.26 2.69 10.59 9.74 -0.36 8.58
2012-13 85.63 90.42 2.56 14.37 9.58 -0.73 9.58
Mean 87.85 89.51 1.79 12.15 10.49 -0.35 10.42
CV 9.24 8.03 41.50 66.81 68.51 -132.29 69.15

Source: Compiled from Annual Reports of SIDBI.

Table 6.4 displays that the interest income as percentage to total income fell
down from 94.51 per cent in 1990-91 to 85.63 per cent in 2012-13 along with an
average of 87.85 per cent during the period. The analysis of the ratio revealed a
fluctuating trend over the period. The table also depicts that interest expense as
percentage to total expenses remained fluctuating during the study period. The ratio
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declined from 96.86 per cent in 1990-91 to 90.42 per cent in 2012-13 and the mean
value remained at 89.51 per cent during the reference period. The interest spread as
percentage to working funds increased from 0.46 per cent in 1990-91 to 2.56 per cent
in 2012-13 along with an overall average of 1.79 per cent during the same period.
However, the interest spread as percentage to working funds showed greater degree of
variation (CV=41.50) as compared to that of interest income as percentage to total
income (CV=9.24) and interest expense as percentage to total expense (CV=8.03)
during the period of study. The table further depicts that non-interest income as
percentage to total income of the bank increased from 5.49 per cent in 1990-91 to
14.37 per cent in 2012-13 and the overall average rate was 12.15 per cent during the
same period. The non-interest expense as percentage to total expenses grew from 3.14
per cent to 9.58 per cent over the period and the mean value was 10.49 per cent during
the same period. However, the burden as percentage to working funds remained
negative throughout the period and the same declined from Rs -0.21 crore in 1990-91
to Rs -0.73 crore in 2012-13. The operating expenses as percentage to total expenses
also increased from 3.14 per cent in 1990-91 to 9.58 per cent along with mean value
of 10.42 per cent during the period of study. Further, the operating expenses as
percentage to total expenses showed lower degree of consistency (CV=69.15) as
compared to non-interest expense as percentage to total expenses (CV=68.51), non-
interest income as percentage to total income (CV=66.81) and burden as percentage to
working funds ratio (CV= -132.29) during the same period.

PROFITABILITY RATIOS (BASED ON INVESTMENTS)

These ratios measure the utilisation of funds by a financial institution. The

return on advances ratio indicates the return received by a firm in the form of interest
on loans and advances disbursed to its borrowers. The bank grants refinance to other
banks and financial institutions and direct assistance to its entrepreneurs for
establishment of their concerns. The ratio shows the proportion of amount received by
way of interest in return to loans and advances. The return on investments ratio shows
the income received in return of the total investments made by the bank during the
year. It is an item of income so the higher the ratio, the better it will be considered for
a financial institution. Return on funds depicts relationship between the income
received in the form of interest on advances and investments out of the loans and
advances and investments made during the year by the bank. An upward movement in
the ratio is a positive indicator for a firm. The cost of funds ratio indicates the
expenses incurred by the bank by way of interest and financial charges paid in return

151
of the deposits and borrowings made by the bank. It is an element of cost so lower the
ratio, better will be the efficiency of a bank. The return on equity ratio reveals how
well the resources of a firm are being used. This ratio interprets the relationship
between profits of a firm and its equity capital. Table 6.5 highlights return on
advances, return on investments, return on funds, cost of funds, return on assets and
return on equity.

Table 6.5
Profitability Ratios Based on Investments
(per cent)
Year Return Return on Return Cost of Return Return
on Investments on Funds on on
Advances Funds Assets Equity
1990-91 9.55 12.51 9.66 8.12 0.67 7
1991-92 9.88 10.52 9.90 7.26 1.08 13
1992-93 10.93 9.17 10.87 9.24 1.45 17
1993-94 12.10 3.90 11.26 9.89 1.43 18
1994-95 13.13 4.50 12.20 11.28 1.85 20
1995-96 12.94 7.58 12.43 11.37 2.25 22
1996-97 13.41 4.52 12.55 12.04 2.42 20
1997-98 13.14 6.90 12.44 11.96 2.91 16
1998-99 12.79 8.87 12.45 12.59 2.94 15
1999-00 12.11 9.84 11.95 12.69 2.77 13
2000-01 12.07 11.15 12.01 14.63 2.79 12
2001-02 11.96 6.69 11.11 22.01 2.30 9
2002-03 9.25 9.24 9.25 20.02 1.79 7
2003-04 9.05 6.30 8.24 12.94 1.94 8
2004-05 6.15 6.73 6.30 16.71 1.74 7
2005-06 5.52 6.59 5.72 15.83 1.86 8
2006-07 6.70 3.23 6.11 13.10 2.12 9
2007-08 7.64 2.85 7.35 9.21 1.41 6
2008-09 5.88 3.48 5.74 4.81 2.40 15
2009-10 6.49 3.94 6.37 5.77 2.07 15
2010-11 7.74 5.97 7.66 5.66 1.56 13
2011-12 7.66 11.10 7.82 5.47 1.81 16
2012-13 8.25 17.78 8.71 6.34 1.93 16
Mean 9.75 7.54 9.48 11.26 1.98 13.08
CV 27.65 47.76 26.18 40.72 29.39 36.15
Source: Compiled from Annual Reports of SIDBI.

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 Table 6.5 shows that return on advances ratio of the bank declined from 9.55
per cent in 1990-91 to 8.25 per cent in 2012-13 along with an average of 9.75 per cent
over the period. The return on investments ratio increased from 12.51 per cent in
1990-91 to 17.78 per cent in 2012-13 and the mean value is 7.54 per cent over the
period. The analysis of the ratio demonstrates a highly fluctuating trend during the
same period. Further, it has been analysed that return on funds ratio also declines from
9.66 per cent in 1990-91 to 8.71 per cent in 2012-13. The overall average of the ratio
is 9.48 per cent during the study period. The cost of funds ratio decreased from 8.12
per cent in 1990-91 to 6.34 per cent in 2012-13 and the mean value was 11.26 per
cent over the period. The table further shows that return on assets ratio increased from
0.67 per cent in 1990-91 to 1.93 per cent in 2012-13 along with an average of 1.98 per
cent during the reference period. The return on equity also increased from 7 per cent
in 1990-91 to 16 per cent in 2012-13 and the mean value was 13.08 per cent over the
period of study. It has been examined that return on equity ratio showed wider
fluctuations during the same period. However, a high degree of variation (CV=47.76)
has been observed in return on investments ratio, followed by cost of funds
(CV=40.72), return on equity (CV=36.15), return on assets (CV=29.39), return on
advances (CV=27.65) and return on funds (CV=26.18) respectively during the
reference period.

SOLVENCY RATIOS

These ratios are the indicator of long-term financial stability of the business.
Long term funds as percentage to total assets shows the relationship between long-
term outstanding funds and total assets of the firm. A high ratio implies sufficient
amount of assets available for providing margin of safety to investors or creditors of a
firm. The net worth ratio shows the relationship between net worth and total assets of
the business. The net worth of SIDBI constitutes its share capital, reserves, surplus
and funds. This ratio provides protection to investors against probable losses. The
debt-equity ratio indicates the relationship between long term loans and owners
capital in the business. This ratio shows the capability of a business firm to meet its
long term liabilities. It helps in determining the potential of the firm in managing its
financial policies. However, the financial institutions insist on a sound debt-equity
ratio because higher the proportion of equity, higher the stake of the investors in the
project and lower the risk for financiers (Desai, 2011: p.109). Neither a high debt to
equity ratio nor a low debt to equity ratio has been considered as ideal. It is required
that every firm should maintain balance between debt and equity to protect itself from

153
the undesirable risk of the business. The credit deposit ratio is another important
parameter to measure the performance of the bank with regard to its efficiency of
utilising their funds. It implies the relationship between the total loans and advances
to total deposits of the bank. SIDBI grants loans and advances to banks and financial
institutions and industrial concerns through its various schemes of assistance. An
upward movement in the ratio indicates better utilisation of resources by the bank at
its disposal. The solvency ratios are presented in Table 6.6.

Table 6.6
Solvency Ratios
(per cent)
Year Long-Term Net-Worth Debt-Equity Credit-
Funds to Ratio Ratio (no. of Deposit Ratio
Total Assets times)
Ratio
1990-91 87.50 9.32 9.39 -
1991-92 86.95 8.36 10.39 -
1992-93 84.58 8.63 9.81 -
1993-94 83.33 7.96 10.47 12.10
1994-95 80.25 9.12 8.80 23.12
1995-96 76.62 10.34 7.41 65.49
1996-97 72.91 12.00 6.08 25.09
1997-98 69.96 18.10 3.87 57.72
1998-99 67.52 20.08 3.36 37.40
1999-00 64.95 22.11 2.94 40.19
2000-01 60.98 23.77 2.57 42.19
2001-02 57.12 24.22 2.36 34.04
2002-03 54.55 25.16 2.17 27.38
2003-04 54.53 23.76 2.29 7.72
2004-05 51.46 26.20 1.96 13.63
2005-06 54.20 24.35 2.23 30.85
2006-07 51.48 24.22 2.13 8.96
2007-08 62.28 22.02 2.83 6.52
2008-09 72.47 16.19 4.48 3.94
2009-10 73.82 14.10 5.23 3.08
2010-11 91.39 11.65 7.42 3.18
2011-12 100.98 11.41 8.85 3.42
2012-13 97.74 12.13 8.06 3.10
Mean 72.07 16.75 5.44 22.46
CV 20.93 39.67 57.50 85.01
Source: Compiled from Annual Reports of SIDBI.

154
 Table 6.6 displays that long term funds as percentage to total assets of the
bank increased from 87.50 per cent in 1990-91 to 97.74 per cent in 2012-13 along
with overall average of 72.07 per cent during the period. The analysis of the ratio
revealed wider inter-year variations over the period. The table further shows that net
worth ratio has also increased from 9.32 per cent in 1990-91 to 12.13 per cent in
2012-13 and mean value was 16.75 per cent over the period. The table highlights that
debt-equity ratio of the bank was 9.39 times in 1990-91 and it declined to 8.06 times
in 2012-13 with an average of 5.44 times over the period of study. It has been further
analysed that credit-deposit ratio also fell down from 12.10 per cent in 1993-94 to
3.10 per cent in 2012-13 and the average was 22.46 per cent during the reference
period. However, credit-deposit ratio showed lower degree of consistency
(CV=85.01) followed by debt-equity ratio (CV=57.50), net-worth ratio (CV=39.67)
and long-term funds as percentage to total assets (CV=20.93) respectively during the
period of study.

MULTIVARIATE PROFITABILITY ANALYSIS OF SIDBI

An attempt has been made to evaluate the impact of different variables on the
financial performance of the bank. For this purpose, correlation analysis and step-wise
regression analysis have been applied.

CORRELATION ANALYSIS

The correlation analysis has been used to study the interdependence between
two or more variables. This relationship has been studied between the dependent
variable i.e. return on assets (Y) and sixteen independent variables, namely, interest
income as percentage to total income (X1), interest expense as percentage to total
expense (X2), spread as percentage to working funds (X3), non-interest income as
percentage to total income (X4), non-interest expense as percentage to total expense
(X5), burden as percentage to working funds (X6), operating expenses as percentage to
total expenses (X7), return on advances (X8), return on investments (X9), return on
funds (X10), cost of funds (X11), return on equity (X12), long term funds as percentage

155
to total assets (X13), net-worth ratio (X14), debt-equity ratio (X15) and credit-deposit
ratio (X16). The correlation coefficient matrix of SIDBI, for the period 1993-94 to
2012-13 has been given in Table 6.7.

It has been observed from the table the credit-deposit ratio (0.642) has positive
and statistically significant correlation with return on assets (Y) at 5 per cent level of
significance. The analysis also revealed that return on advances (0.502) and return on
funds (0.525) have also positive and statistically significant correlation with return on
assets (Y) at 1 per cent level of significance. Further, X1 (0.267), X2 (0.372), X3
(0.425), X9 (0.222), X11 (0.172), X12 (0.252) and X14 (0.21) have also shown positive
relationship with (Y). The other six variables, namely, non-interest income as
percentage to total income (-0.267), non-interest expense as percentage to total
expense (-0.372), burden as percentage to working funds (-0.077), operating expenses
as percentage to total expenses (-0.366), long term funds as percentage to total assets
(-0.191) and debt-equity ratio (-0.333) have negative correlation with return on assets
ratio of the bank.

It has been also evident from the table, that some variables out of the sixteen
independent variables are significantly correlated with each other. Interest income as
percentage to total income has (X1) positive significant correlation with seven other
variables namely, X3, X4, X6, X8, X10, X12 and X14. Similarly, interest expense as
percentage to total expense (X2) has positively correlated with X12. Thus, it can be
concluded that although the variables are significantly correlated with each other,
none of the coefficients provides evidence of presence of multicollinearity between
the independent variables (X1 to X16).

156
 Table 6.7
Correlation Analysis

Y X1 X2 X3 X4 X5 X6 X7 X8 X9 X10 X11 X12 X13 X14 X15 X16

Y 1

0.267
X1 1
(0.255)
0.372 0.467(*)
X2 1
(0.106) (0.038)
0.425 0.702(**) 0.07
X3 1
(0.062) (0.001) (0.769)
-0.267 -1.000(**) -0.467(*) -0.702(**)
X4 1
(0.255) (0.000) (0.038) (0.001)
-0.372 -0.467(*) -1.000(**) -0.07 0.467(*)
X5 1
(0.106) (0.038) (0) (0.769) (0.038)
-0.077 0.648(**) -0.35 0.622(**) -0.648(**) 0.35
X6 1
(0.746) (0.002) (0.131) (0.003) (0.002) (0.131)
-0.366 -0.469(*) -0.999(**) -0.079 0.469(*) 0.999(**) 0.348
X7 1
(0.113) (0.037) (0) (0.74) (0.037) (0) (0.132)
0.502(*) 0.591(**) 0.719(**) 0.198 -0.591(**) -0.719(**) 0.046 -0.711(**)
X8 1
(0.024) (0.006) (0) (0.403) (0.006) (0) (0.848) (0)
0.222 -0.025 0.33 0.283 0.025 -0.33 -0.37 -0.339 0.108
X9 1
(0.347) (0.916) (0.156) (0.226) (0.916) (0.156) (0.108) (0.144) (0.649)
0.525(*) 0.592(**) 0.738(**) 0.24 -0.592(**) -0.738(**) 0.029 -0.731(**) 0.992(**) 0.21
X10 1
(0.017) (0.006) (0) (0.308) (0.006) (0) (0.905) (0) (0) (0.374)
0.172 -0.373 0.073 -0.527(*) 0.373 -0.073 -0.431 -0.061 0.267 0.013 0.256
X11 1
(0.468) (0.105) (0.76) (0.017) (0.105) (0.76) (0.058) (0.797) (0.254) (0.958) (0.276)
0.252 0.665(**) 0.694(**) 0.36 -.665(**) -0.694(**) 0.119 -0.696(**) 0.550(*) 0.074 0.554(*) -0.480(*)
X12 1
(0.283) (0.001) (0.001) (0.119) (0.001) (0.001) (0.618) (0.001) (0.012) (0.756) (0.011) (0.032)
-0.191 0.540(*) 0.409 0.508(*) -0.540(*) -0.409 0.194 -0.426 0.1 0.342 0.136 -0.752(**) 0.688(**)
X13 1
(0.420) (0.014) (0.073) (0.022) (0.014) (0.073) (0.412) (0.061) (0.676) (0.14) (0.566) (0) (0.001)
0.201 -0.616(**) -0.496(*) -0.304 0.616(**) 0.496(*) -0.238 0.504(*) -0.269 0.007 -0.266 0.685(**) -.0871(**) -0.875(**)
X14 1
(0.395) (0.004) (0.026) (0.192) (0.004) (0.026) (0.313) (0.024) (0.251) (0.977) (0.257) (0.001) (0) (0)

-0.333 0.542(*) 0.503(*) 0.223 -0.542(*) -0.503(*) 0.16 -0.514(*) 0.229 0.101 0.234 -0.618(**) 0.782(**) 0.896(**) -0.963(**)
X15 1
(0.151) (0.013) (0.024) (0.346) (0.013) (0.024) (0.501) (0.02) (0.331) (0.671) (0.32) (0.004 (0) (0) (0)

0.642(**) 0.241 0.455(*) 0.077 -0.241 -0.455(*) -0.11 -0.445(*) 0.691(**) 0.151 0.712(**) 0.487(*) 0.261 -0.256 0.132 -0.196
X16 1
(0.002) (0.306) (0.044) (0.748) (0.306) (0.044) (0.645) (0.049) (0.001) (0.524) (0) (0.03) (0.267) (0.276) (0.58) (0.407)

157
 Table 6.8
Step-Wise Regression Analysis of SIDBI

R Adjusted
Steps Constant X16 X3 X6 X13 X12 F Value
Square R Square
1.758 0.016*
I 0.412 0.379 12.610*
(13.477) (3.551)
1.284 0.015* 0.256*
II 0.554 0.502 10.565*
(5.468) (3.773) (2.328)
0.820 0.014* 0.435* -0.410*
III 0.657 0.592 10.197*
(2.733) (3.644) (3.376) (-2.185)
1.485 0.009* 0.672* -0.549* -0.015*
IV 0.802 0.750 15.218*
(4.811) (2.958) (5.437) (3.589) (-3.325)
1.916 0.001* 0.778* -0.645* -0.035* 0.065*
V 0.935 0.912 40.279*
(9.573) (0.267) (10.243) (-6.970) (-7.654) (5.347)
Note: The figures given in parentheses represent the t-values.
*Significant at 1 per cent level of significance level.

158
STEP-WISE REGRESSION ANALYSIS

The step-wise regression analysis has been applied to select those variables
from a large number of independent variables that accounts for maximum variation in
the dependent variable. In the present study, analysis has been made between the
dependent variable, return on advances (Y) and sixteen independent variables,
namely, interest income as percentage to total income (X1), interest expense as
percentage to total expense (X2), spread as percentage to working funds (X3), non-
interest income as percentage to total income (X4), non-interest expense as percentage
to total expense (X5), burden as percentage to working funds (X6), operating expenses
as percentage to total expenses (X7), return on advances (X8), return on investments
(X9), return on funds (X10), cost of funds (X11), return on equity (X12), long term
funds as percentage to total assets (X13), net-worth ratio (X14), debt-equity ratio (X15)
and credit-deposit ratio (X16). The results of step-wise regression analysis of the bank
have been shown in Table 6.8.

The analysis reveals that in the first step credit-deposit ratio (X16) enter in the
regression model with regression coefficient 0.016 and explain 37.9 per cent variation
in the return on assets ratio (Y) of the bank. In the second step, spread as percentage
to working funds (X3) along with credit-deposit ratio (X16) enter in the regression
model and explain 50.2 per cent variation in the return on assets ratio (Y) of the bank.
In the third step, burden as percentage to working funds along with credit-deposit
ratio and spread as percentage to working funds enter in the regression model and
explain 59.2 per cent variation in the return on assets ratio of the bank. In the next
step, long term funds as percentage to total assets were also found to be significantly
affecting return on assets ratio of SIDBI. The long term funds as percentage to total
assets together with X16, X3 and X6 explained 75.0 per cent variation in the (Y). In the
fifth step, return on equity (X12) enter in the regression model and explain 91.2 per
cent variation in the (Y). Thus, one unit of increase in X16, X3 and X12 will lead to
increase in the return on assets ratio by 0.001 units, 0.778 units and 0.065 units
respectively. Further, one unit of increase in X6 and X13 will decrease the return on
assets by (-0.645) units and (-0.035) units. The F value of the model is also significant
at 1 per cent level of significance.

159
The multivariate analysis of SDIBI for the study period concludes:

Y = 1.916 + 0.001(X16) + 0.778(X3) – 0.645(X6) – 0.035(X13) + 0.065(X12) + ε

Where, ε = Error Term

After the fifth step, none of the variable enters the regression model
significantly affects the return on assets ratio of SIDBI. Thus, credit-deposit ratio,
spread as percentage to working funds, burden as percentage to working funds, long
term funds as percentage to total assets and return on equity have significant impact
on the return on assets ratio of the bank.

PRODUCTIVITY ANALYSIS

Productivity is the relationship between changes in output and per unit of

input. It is generally defined in terms of the efficiency with which inputs are
transformed into useful output within the production process (Singh, 1993: p. 21).
This relationship can be expressed as follows:

Productivity = Total Output/Total Input

The concept of productivity is much wider in scope as it comprises human

resources whose skills can be utilised differently for achieving desired results in the
process of production. The objective behind measuring productivity is to improve the
economic performance. As emphasised by PEP (Productivity, Efficiency and
Profitability) Committee states, “Banks being business organisations profit should
continue to remain an important consideration. At no time should their operations
result in a loss and act as a drag on the Government revenue. The net result of the
promotional activities which they are being called upon to undertake should not
partake the nature of subsidy grants” (Singh, 1993: p 29). Thus, in the context of
banking, productivity can be improved by improving profit.

The productivity of Small Industries Development Bank of India has been

studied under two aspects:

1. Branch Productivity Ratios

2. Employee Productivity Ratios

160
1. BRANCH PRODUCTIVITY RATIOS

Branch productivity implies output of various branches. The branch

productivity of SIDBI has been measured on the basis of six indicators namely net
profit per branch, total income per branch, total expenditure per branch, business per
branch, spread per branch and burden per branch for the period from 1990-91 to
2012-13. The total income per branch indicates the proportion of income managed by
each branch. The total income of the bank should be adequate to meet the expenses of
the business. The total expenditure per branch indicates the expenses incurred by each
branch of the bank in the form of interest, financial charges and operating expenses
comprising rent, advertisement, printing, stationery, auditor‟s fees etc. The net profit
per branch ratio establishes the relationship between the contributions of each branch
in generating net profit of the business. Net profit is the net result of all the
operational activities after considering all indirect expenses. The increase in the net
profit per branch ratio implies better efficiency of each management unit in earning
profits. Business per branch is also considered as an important indicator in measuring
the productivity of a bank. It implies the total volume of business in the form of its
deposits and loans and advances to priority sectors for capital formation and
strengthening the financial status of the borrower. An increase in the ratio indicates
proper utilisation of bank resources that in turn leads to increased management
productivity. Spread is an item of income. It is the difference between interest
received and interest paid. It is an important determinant of profitability. An increase
in the ratio depicts the more money left at disposal after meeting operational and
administrative expenses. The burden is related to expenditure of the business. It is the
difference between non-interest expenditure and non-interest income. The more the
amount of non-interest income of the bank the more will be the level of profitability
of the bank. The bank can easily meet its non-interest expenditure during the year.
Further, linear regression analysis has been also applied to study the relationship
between selected ratios on the basis of time. It helps in evaluating whether any
increase or decrease in the ratio is significant or not. In the present study, time has
been taken as an independent variable and the particular ratio as dependent variable.
The result highlights the impact of time period on the performance of the bank. The
branch productivity ratios and results of simple regression analysis of the bank have
been presented in Table 6.9.

161
 Table 6.9
Branch Productivity Ratios
(Rs in crore)
Year Total Total N.P Per Business Spread Burden
Income Expenditure Branch Per Per Per
Per Per Branch Branch Branch Branch
Branch
1990-91 20.24 18.55 1.70 200.42 1.17 -0.53
1991-92 24.10 20.66 3.44 233.78 3.03 -0.40
1992-93 29.33 24.63 4.71 257.62 4.76 0.05
1993-94 34.07 28.67 5.40 287.69 4.40 -1.00
1994-95 37.04 29.95 7.09 276.97 5.99 -1.10
1995-96 40.54 31.21 9.33 293.52 7.78 -1.55
1996-97 39.11 29.54 9.57 280.59 8.75 -0.82
1997-98 42.68 30.40 12.28 299.43 10.22 -2.06
1998-99 47.83 34.19 13.65 347.96 11.59 -2.06
1999-00 48.42 34.50 13.92 383.77 13.36 -0.56
2000-01 49.07 34.61 14.47 382.41 13.51 -0.96
2001-02 43.32 32.06 11.26 327.43 8.32 -2.94
2002-03 34.28 26.60 7.68 301.95 2.95 -4.73
2003-04 25.59 17.27 8.32 228.97 3.66 -4.67
2004-05 19.74 13.17 6.58 225.49 2.11 -4.46
2005-06 17.21 10.45 6.75 240.73 4.38 -2.37
2006-07 18.55 11.53 7.02 262.95 6.72 -0.31
2007-08 22.44 17.83 4.61 301.47 8.02 3.41
2008-09 20.82 12.53 8.29 367.72 6.87 -1.42
2009-10 24.66 16.26 8.40 459.27 8.17 -0.22
2010-11 37.54 24.23 8.22 587.71 13.02 -0.28
2011-12 54.20 32.90 12.64 817.95 18.77 -2.53
2012-13 65.87 40.99 14.59 904.45 19.34 -5.54
EGR 5.51 3.67 10.28 7.09 13.61 11.27
Mean 34.64 24.90 8.69 359.58 8.13 -1.61
CV 37.90 35.31 41.87 50.11 61.02 -122.04
β-value 0.117 -0.161 0.360 0.652 0.510 -0.216
t-value 5.548 7.159 4.256 2.517 1.940 -1.013
p-value 0.000* 0.000* 0.000* 0.020* 0.066 0.323
*Significant at 1per cent level of significance
Source: Compiled from Annual Reports of SIDBI.
162
 Table 6.9 shows that the income per branch of the bank has increased from Rs
20.24 crore in 1990-91 to Rs 65.87 crore in 2012-13 and recorded a growth rate of
5.51 per cent during the period. The income per branch increased up to 2000-01 and
afterwards declined to Rs 17.21 crore in 2005-06. During remaining years, the ratio
showed improvements and increased to Rs 65.87 crore in 2012-13. The expenditure
per branch of SIDBI has increased from Rs 18.55 crore in 1990-91 to Rs 40.99 crore
in 2012-13. The growth rate was 3.67 per cent with an overall average of Rs 24.90
crore over the period of study. The table also shows that the net profit per branch of
the bank has increased from Rs 1.70 crore in 1990-91 to Rs 14.59 crore in 2012-13
and registered a growth of 10.28 per cent during the period. The average ratio is Rs
8.69 crore over the period. However, the growth of expenditure per branch was more
consistent (CV=35.31) as compared to net profit per branch (CV=41.87) and total
income per branch (CV=37.90) during the reference period. The table further displays
that business per branch of the bank has increased from Rs 200.42 crore in 1990-91 to
Rs 904.45 crore in 2012-13 during the period. The growth rate was 7.09 per cent
along with an average of Rs 359.58 crore over the period. The spread per branch ratio
has increased from Rs 1.17 crore in 1990-91 to Rs 19.34 crore and registered growth
of 13.61 per cent during the period. The spread analysis revealed a highly fluctuating
trend during the reference period and so coefficient of variation (CV=61.02) was the
highest over the period. The burden per branch ratio of SIDBI shows that the non-
interest income of the bank was more than non-interest expenditure for the period of
study. The overall declining rate was 11.27 per cent and the coefficient of variation
was (CV=-122.04) during the period of study. The results of linear regression analysis
further revealed that total income, net profit and business per branch ratios of the bank
registered a significant increase during the period of study. It is evident from the table
that total expenditure ratio of SIDBI has shown a significant decline with the passage
of time. It has been also observed that increase in the spread per branch and the
decrease in burden per branch is not significant over the period of study.

CORRELATION ANALYSIS

In the present study, the degree of covariance has been studied between the
dependent variable, namely, business per branch (Y) and five independent variables,
namely, total income per branch (X1), total expenditure per branch (X2), net profit per
branch (X3), spread per branch (X4) and burden per branch (X5). The results of
correlation analysis used to study the branch productivity of the bank, have been
shown in Table 6.10.

163
 Table 6.10
Correlation Analysis

Y X1 X2 X3 X4 X5

Y 1

0.693(**)
X1 1
0.000

0.490(*) 0.952(**)
X2 1
0.017 0.000

0.571(**) 0.827(**) 0.689(**)

X3 1
0.004 0.000 0.000

0.863(**) 0.834(**) 0.664(**) 0.817(**)

X4 1
0.000 0.000 0.001 0.000

-0.259 -0.318 -0.209 -0.377 -0.075

X5 1
0.234 0.139 0.338 0.076 0.735

* Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed).

The table shows that X1 (0.693), X2 (0.490), X3 (0.571) and X4 (0.863) have
positive and statistically significant correlation with business per branch (Y) at 1 per
cent level of significance. It has been also observed that X5 (-0.259) has negative
correlation with (Y).

Further, the analysis revealed that some other variables are also correlated
with each other. Total income per branch (X1) has positive significant correlation with
other two variables namely, X3 and X4 respectively. Similarly, total expenditure per
branch (X2) has positively correlated with X4. Thus, over the period of study, both
(X1) and (X2) have positive significant association with other variables except burden
per branch (X5).

164
STEP-WISE REGRESSION ANALYSIS

The step-wise multiple regression analysis has been studied between the
dependent variable, business per branch (Y) and five independent variables, namely,
total income per branch (X1), total expenditure per branch (X2), net profit per branch
(X3), spread per branch (X4) and burden per branch (X5). The regression analysis
matrix of SIDBI has been shown in Table 6.11.

Table 6.11
Step-Wise Regression Analysis of SIDBI

R Adjusted
Steps Constant X4 F Value
Square R Square

104.805 31.354*
I 0.745 0.732 61.206*
(2.764) (7.823)

*Significant at 1 per cent level of significance.

The table depicts that in the first step, only single variable i.e. spread per
branch (X4) explained 73.2 per cent variation in the business per branch (Y) with
significant regression coefficient of 31.354. The F value is also significant at 1 per
cent level of significance. Thus, one unit increase in spread per branch will lead to
increase in 31.354 units of business per employee.

The multivariate analysis of SIDBI for the study period concludes:

Y = 104.805 + 31.354 (X4) + ε

Where, ε = Error Term

After the first step, no other variable has shown significant impact on the business per
branch of SIDBI.

165
2. EMPLOYEE PRODUCTIVITY RATIOS

In the service industry, the input is the services provided by the employees and
productivity implies the output generated by the employees. Thus, employee
productivity analysis of SIDBI reveals the results obtained on the basis of various
resources distributed over the number of employees. The employee productivity of the
bank has been measured on the basis of six parameters namely total income per
employee, total expenditure per employee, net profit per employee, business per
employee, spread per employee and burden per employee during the period 1990-91
to 2012-13. The total income per employee implies the contribution of each employee
in generating income to the bank. The total expenditure per employee indicates the
expenses incurred by the bank in giving training, skill and career development etc. to
their employees. Net profit is the net margin left after considering all expenses and
incomes. In other words, it is the excess of income over expenditure. The net profit
per employee indicates the output obtained in the form of net profit from per unit of
input i.e. employees of the bank. This ratio shows the contribution of employees in
the total profits of the bank, so an increase in the ratio has been considered as an
indicator of better productivity. Business per employee is another important indicator
of measuring employee productivity. It implies the total volume of business in the
form of total deposits and loans and advances utilised in the business in terms of each
employee. An increasing ratio signifies better employee productivity. Spread per
employee indicates the amount of spread available for each employee of the bank.
Further, the linear regression analysis has also been applied to study the effect of time
period on the employee productivity of the bank. The employee productivity ratios
and results of simple regression analysis of the bank are presented in Table 6.12.

166
 Table 6.12
Employee Productivity Ratios
(Rs in crore)
Year Total Total N.P Per Business Spread Burden
Income Expenditure Employee Per Per Per
Per Per Employee Employee Employee
Employee Employee
1990-91 0.84 0.77 0.07 8.33 0.05 -0.02
1991-92 1.02 0.87 0.14 9.86 0.13 -0.02
1992-93 1.21 1.02 0.19 10.66 0.20 0.00
1993-94 1.47 1.23 0.23 12.38 0.19 -0.04
1994-95 1.56 1.26 0.30 11.68 0.25 -0.05
1995-96 1.60 1.23 0.37 11.56 0.31 -0.06
1996-97 1.58 1.19 0.39 11.33 0.35 -0.03
1997-98 1.64 1.17 0.47 11.48 0.39 -0.08
1998-99 1.75 1.25 0.50 12.76 0.42 -0.08
1999-00 1.74 1.24 0.50 13.80 0.48 -0.02
2000-01 1.81 1.28 0.53 14.13 0.50 -0.04
2001-02 1.70 1.25 0.44 12.81 0.33 -0.11
2002-03 1.51 1.17 0.34 13.27 0.13 -0.21
2003-04 1.30 0.88 0.42 11.63 0.19 -0.24
2004-05 1.10 0.73 0.37 12.56 0.12 -0.25
2005-06 1.18 0.71 0.46 16.44 0.30 -0.16
2006-07 1.45 0.90 0.55 20.52 0.52 -0.02
2007-08 1.80 1.43 0.37 24.16 0.64 0.27
2008-09 1.99 1.19 0.79 35.05 0.66 -0.14
2009-10 2.44 1.61 0.83 45.49 0.81 -0.02
2010-11 3.75 2.42 0.82 58.66 1.30 -0.03
2011-12 4.49 2.72 1.05 67.70 1.55 -0.21
2012-13 5.13 3.20 1.14 70.50 1.51 -0.43
EGR 8.57 6.67 13.47 10.19 16.90 14.50
Mean 1.91 1.34 0.49 22.47 -0.49 -0.09
CV 56.54 46.71 55.39 85.44 86.90 -152.51
β-value 0.688 0.599 0.856 0.788 0.763 -0.336
t-value 1.726 3.048 1.246 -0.828 -0.687 -0.161
p-value 0.099 0.006* 0.226 0.417 0.499 0.874
*Significant at 1 per cent level of significance.
Source: Compiled from Annual Reports of SIDBI.

167
 Table 6.13 highlights that income per employee of SIDBI has increased from
Rs 0.84 crore in 1990-91 to Rs 5.13 crore in 2012-13 during the period. The overall
growth rate was 8.57 per cent with an overall average of Rs 1.91 crore over the
period. In the initial years, the ratio increased but from the year 1996-97 to 2005-06,
the ratio reveals wider variations during the same period. From 2006-07, the ratio has
shown improvements over the previous years. The expenditure per employee also
increased from Rs 0.77 crore in 1990-91 to Rs 3.20 crore in 2012-13 and registered
growth of 6.67 per cent during the period. The table further brings out that the profit
per employee of the bank increased from Rs 0.07 crore in 1990-91 to Rs 1.14 crore in
2012-13. The analysis of net profit per employee ratio reveals fluctuations during the
reference period. The annual growth rate was 13.47 per cent along with an average of
Rs 0.49 crore over the period. Further, the growth in expenditure per employee
showed greater consistency (CV=46.71) as compared to net profit per employee
(CV=55.39) and income per employee (CV=56.54) during the same period. The
business per employee ratio of the bank has increased from Rs 8.33 crore in 1990-91
to Rs 70.50 crore in 2012-13 over the period. The annual growth rate was 10.19 per
cent along with average of Rs 22.47 crore during the same period. It has been further
observed that spread per employee ratio grew up from Rs 0.05 crore in 1990-91 to Rs
1.51 crore and registered growth of 16.90 per cent over the period. It is evident from
the table that both spread and burden ratios showed wider fluctuations during the
period. It has been observed that overall ratio decreased from Rs (-0.02) crore in
1990-91 to Rs (-0.43) crore in 2012-13 and the declining rate was 14.50 per cent
during the reference period. Further, spread ratio showed a high degree of variation
(CV=86.90) as compared to burden ratio (CV=-152.51) of the bank during the period
of study. The results of linear regression analysis depict that only total expenditure
ratio of the bank shows a significant increase over the period of study. It has been also
observed that total income, net profit, business per employee and spread per employee
ratios of the bank, have been increasing during the period but the increase is not
significant. Further, burden per employee ratio shows a declining trend over the
period of study.

168
CORRELATION ANALYSIS

The correlation analysis has also been applied for studying the degree of
association between employee productivity ratios of the bank. For this purpose,
business per employee (Y) is dependent variable and five other variables, namely,
total income per employee (X1), total expenditure per employee (X2), net profit per
employee (X3), spread per employee (X4) and burden per employee (X5) are
considered as independent variables. The results of correlation analysis used to study
the employee productivity of the bank, have been shown in Table 6.13.

Table 6.13
Correlation Analysis

Y X1 X2 X3 X4 X5

Y 1

X1 0.948(**) 1
0.000

X2 0.910(**) 0.986(**) 1
0.000 0.000

X3 0.908(**) 0.892 (**) 0.820(**) 1

0.000 0.000 0.000

X4 0.964(**) 0.965(**) 0.934(**) 0.921(**) 1

0.000 0.000 0.000 0.000

X5 -0.349 -0.415(*) -0.337 -0.454(*) -0.255 1

0.103 0.049 0.116 0.030 0.240

* Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed).

It is evident from the table that X1 (0.948), X2 (0.910), X3 (0.908) and X4

(0.964) have positive and statistically significant correlation with business per
employee (Y) at 1 per cent level of significance. The table also shows that X5 (-0.349)
has negative correlation with (Y). The analysis further revealed that over the period of

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study, all other variables except burden per employee (X5) have significant positive
correlations with other variables.

STEP-WISE REGRESSION ANALYSIS

The step-wise regression analysis has been studied between the five
independent variables, namely, total income per employee (X1), total expenditure per
employee (X2), net profit per employee (X3), spread per employee (X4) and burden
per employee (X5) and dependent variable, business per employee (Y). The regression
analysis matrix of SIDBI has been shown in Table 6.14.

Table 6.14
Step-wise Regression Analysis of SIDBI

R Adjusted
Steps Constant X4 F Value
Square R Square

1.121 43.334*
I 0.930 0.927 278.915*
(0.669) (16.701)

*Significant at 1 per cent level of significance.

It has been observed that only single variable i.e. spread per employee (X4)
explained 92.7 per cent variation in the business per branch (Y) with significant
regression coefficient of 43.334. The F value is also significant at 1 per cent level of
significance. Thus, one unit increase in spread per employee will lead to increase in
43.334 units of business per employee.

The multivariate analysis of SIDBI for the study period concludes:

Y = 1.121 + 43.334 (X4) + ε

Where, ε = Error Term

After the first step, no other variable has found significantly affecting the business per
employee of SIDBI.

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